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CHAPTER IX.

THERE IS NO WAGE-FUND IRRESPECTIVE OF THE NUMBER

AND INDUSTRIAL QUALITY OF LABORERS.

We can not well go farther in our discussion without considering a theory of wages which has been very generally accepted by the political economists of the English school, namely, that of a Wage-Fund.

The doctrine is in substance as follows:

There is, for any country, at any time, a sum of wealth set apart for the payment of wages. This fund is a portion of the aggregate capital of the country. The ratio between the aggregate capital and the portion devoted to the payment of wages is not necessarily always the same. It may vary, from time to time, with the conditions of industry and the habits of the people; but at any given time the amount of the wage-fund, under the conditions existing, is determined in the amount of capital.

The wage-fund, therefore, may be greater or less at another time, but at the time taken it is definite. The amount of it can not be increased by force of law or of public opinion, or through sympathy and compassion on the part of employers, or as the result of appeals or efforts on the part of the working classes.'

1 " That which pays for labor in every country is a certain portion of actually-accumulated capital, which can not be increased by the proposed action of government, nor by the influence of public opinion, nor by combinations among the workmen themselves. There is also

The sum so destined to the payment of wages is distributed by competition. If one obtains more, another must, for that reason, receive less, or be kept out of employment altogether. Laborers are paid out of this sum, and out of this alone. The whole of that sum is distributed without loss; and the average amount received by each laborer is, therefore, precisely determined by the ratio existing between the wage-fund and the number of laborers, or, as some writers have preferred to call it, between capital and population.'

The wage-fund having at any given time been determined for that time, the rate of wages will be according to the number of persons then applying for employment.' If they be more, wages will be low; if they be fewer, wages will be high.

I have stated this doctrine minutely, with something of iteration, and with full quotations, in order to avoid all suspicion of misrepresenting that which I propose to assail. An excellent summary of the doctrine is that given by Mr. John Stuart Mill, in the Fortnightly Review for May, 1869, as follows:

“ There is supposed to be, at any given instant, a sum of wealth which is unconditionally devoted to the payment of wages of labor. This sum is not regarded as unalterable, for it is augmented by saving, and increases with the pro

in every country a certain number of laborers, and this number can not be diminished by the proposed action of government, nor by public opinion, nor by combinations among themselves. There is to be a di-! vision now among all these laborers of the portion of capital actually there present."--A. L. Perry, Pol. Econ., p. 122.

1" The circulating capital of a country is its wage-fund. Hence it we desire to calculate the average money-wages received by each laborer, we have simply to divide the amount of this capital by the number of the laboring population.”-H. Fawcett, Economic Position of the British Laborer, p. 120.

?" The demand for labor consists of the whole circulating capital of the country, # # # # The supply is the whole laboring popula tion." -J. S. Mill, Fortnightly Review, May, 1869.

gress of wealth ; but it is reasoned upon as at any given moment a predetermined amount. More than that amount it is assumed the wages-receiving class can not possibly divide among them; that amount, and no less, they can not but obtain. So that the sum to be divided being fixed, the wages of each depend solely on the divisor, the number of participants.”

The doctrine of the wage-fund has found wide acceptance on both sides of the Atlantic. The natural history of the notion on which it rests is not obscure. It grew out of the condition of affairs which existed in England during and immediately subsequent to the Napoleonic wars. Two things were then noted. First, capital had become accumulated in the island to such an extent that employers found no (financial) difficulty in paying their laborers by the month, the week, or the day, instead of requiring them to await the fruition of their labor in the harvested or marketed product. Secondly, the wages were, in fact, generally so low that they furnished no more than a bare subsistence, while the employment offered was so restricted that an increase in the number of laborers had the effect to throw some out of employment or to reduce the rate of wages for all. Out of these things the wage-fund theory was put together. Wages are paid out of capital, and the rate is determined by the ratio between capital and population.

Both the facts observed were accidental, not essential. Wages in England were paid out of capital because capital had become abundant, and employers could just as well as not pay their laborers as soon as the service was rendered. In the United States,' at the same time, employers were

1 " The spread of this doctrine in the United States is not to be explained in the same way. It would seem to have been accepted, so far as it has been accepted, upon the authority of the English economists. Certainly the conditions which have been noted as prevailing in Eng. land during the period when the laborer's subsistence came to be identified with his wages, have at no time been known in the United States. Here the people have not been shut out from the land ; the

paying their laborers larger wages, but obliging them to wait for the whole or a considerable part till the product should be harvested or marketed. In the United States, therefore, the industrial conditions were more favorable to the payment of wages, while in England the financial conditions were more favorable. But it is the industrial conditions which determine the amount of wages, the necessaries, comforts, and luxuries which the laborer receives; the financial conditions only determine the manner and time of payment, whether at once or at a future day, whether in money or in goods, etc.

Again, the fact that in England, at the time this doctrine sprang up, an increase of the number of laborers

laboring classes have been able to make and have made vast accumulations, and the great bulk of wages have, since the first settlement of the country, been paid, not out of capital, but out of the completed product when harvested or marketed.

“The wage-fund seems to have been considered, we know not why, a pillar in the temple of free-trade. Certainly the line drawn in the United States between those who have accepted it and those who have combated it, or let it severely alone, appears to intimate a general sense of some such relation between the doctrines. We find no trace of it among the writers known as protectionists. Professor Bowen distinctly rejects it. Messrs. Daniel Raymond and Peshine Smith omit all allusion to it, so far as we have observed. Mr. Carey, it is true, gave it countenance in his Essay on Wages; but then Mr. Carey was a free-trader in 1835. On the other hand, Professors Vethake, Bascom, and Perry, who take strong ground against governmental interference with the methods and courses of industry, all strongly pronounce the wage-fund theory.

“Dr. Wayland, whose treatise on Political Economy, though published in 1837, would appear (see Preface) to have been mainly composed prior to the emergence in distinct form of the wage-fund theory, fol. lowed Malthus in his statement of the law of wages. (Wayland's Pol. Econ., p. 312.) Excepting Dr. Wayland, Mr. Amasa Walker is the only American writer on systematic political economy, of the freetrade school, whom we remember as giving no countenance to the wage-fund theory. It can scarcely need to be said that we regard the idea of an essential connection between the two doctrines as wholly mistaken. Free-trade rose without this theory of wages, and will sure, ly not fall with it."-North-American Review, cxx., pp. 93, 94, note.

applying for employment involved, as it doubtless did, a reduction in the rate of wages, was due to the circumstance that English agriculture, in the then existing state of chemical and mechanical knowledge, had reached the condition of “ diminishing returns.” But at the same time in the United States, the accession of vast bodies of laborers was accompanied with a steadily-increasing remuneration of labor, and States and counties were to be seen bidding eagerly against each other for these industrial recruits.

That English writers should have been misled, by what they saw going on around them, into converting a generalization of insular experiences into a universal law of wages, is not greatly to be wondered at; but that American writers should have adopted this doctrine, in simple contempt of what they saw going on around them, is indeed surprising.'

I would not impeach the scientific impartiality of those who first put forward in distinct form this theory of wages; but it may fairly be assumed that its progress towards general acceptance was not a little favored by the fact that it afforded a complete justification for the existing order of things respecting wages. If there was, in truth, a definite fund out of which wages were paid ; if competition unerringly distributed the whole of that sim; and if no more could be paid to the wages class, as a whole, without impairing capital, diminishing employment, and thus in the end injuring the laborers themselves, then surely it was an easy task to answer the complaints or remon

We have had a right to do better than this in political economy, in the United States. “The Americans are Englishmen whose intelli. gence is not intimidated and whose conduct is not controlled by many of the influences derived from tradition and authority, which govern the beliefs and actions of the mother country. From the course taken by the United States, we may often correctly interpret the bent which oug nation will follow as they gradually escape, for good or evil, from the domination of the past."- Address of Lord Napier and Ettrick as President of the British Social Science Association, 1872. (Transactions, p. 17.)

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