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strances of the working classes, and to demonstrate the futility of trades-unions and strikes as means of increasing wages. If an individual workman complained for himself, he could be answered that it was wholly a matter between himself and his own class. If he received more, another must, on that account, receive less, or none at all.' If a workman complained on account of his class, he could be told, in the language of Prof. Perry, that “there is no use in arguing against any one of the four fundamental rules of arithmetic. The question of wages is a question of division. It is complained that the quotient is too small. Well, then, how many ways are there to make a quotient larger? Two ways. Enlarge your dividend, the divisor remaining the same, and the quotient will be larger; lessen your divisor, the dividend remaining the same, and the quotient will be larger.” (Pol. Econ., p. 123.)
A most comfortable doctrine surely,' and one which made it a positive pleasure to conduct a quarterly review in times when the laboring classes were discontented or mutinous. If the workman would not give up when told to enlarge his dividend, he was struck dumb on being informed that his only alternative was to lessen his divisor. The divisor aforesaid being flesh and blood, with certain
1“ If law or opinion succeeds in fixing wages above this rate, some laborers are kept out of employment.”_J. S, Mill, Pol. Econ., i. 432.
? The writer has been sharply criticised for having said in a public address at Amherst College, in 1874, that “ by the wage-fund theory, whatever is in wages, is right.” This has been referred to as an instance of misrepresenting an opponent's position, the more easily to refute him. I confess myself so dull of apprehension as now, notwithstanding the effect of this castigation in sharpening my wits, to be unable to understand wherein my proposition is objectionable, even on the ground of my critics. If the wage-fund comprises all that can be paid in wages; if that fund is unfailingly distributed by competition ; if farther to increase wages would be to trench on capital, and thus diminish future employment, and thus work permanent injury to the laboring classes, together with the rest of the community, why is it not right that the employer should pay just such wages as he does ? Why would it not be wrong were he to pay more?
attachments to home and life, and with a variety of incon. venient affections, was not to be lessened so easily. If the workman turned him from words to blows, and went out “ on strike” with a view to better his condition, it was regarded as the act of an irrational animal whose instincts, unfortunately, were not politico-economical. Strikes could not increase the wage-fund; strikes did not diminish the number of applicants for employment; therefore, it was plain as a pikestaff that strikes could not raise wages.
Now, it may seem wanton to break such a pretty toy as this; but the fact is that the wage-fund theory is demonstrably false, contrary alike to the reason of the case and to the course of history.
1st. As has been shown in a former chapter, wages are really paid out of current production, and not out of capital, as the wage-fund theory assumes.
(a) Granting, for the moment, that wages are wholly advanced out of capital to supply the immediate necessities of the laborer, I have, I think, abundantly proved that the two questions, whether labor shall be employed at all, and, secondly, what wages shall be paid to laborers if employed, are decided by reference to production and not to capital. It is the prospect of a profit in production which determines the employer to hire laborers ; it is the anticipated value of the product which determines how much he can pay them. The product, then, and not capital, furnishes at once the motive to employment and the measure of wages. If this be so, the whole wage-fund theory falls, for it is built on the assumption that capital furnishes the measure of wages; that the wage-fund is no larger because capital is no larger,' and that the only way to
1" It thus appears that if population increases without any increase of capital, wages fall; and that if capital increases without an increase of population, wages rise. It is evident, also, that if both increase, but one faster than the other, the effect will be the same as if the one hnd not increased at all, and the other had made an increase equal to the difference."-James Mill, Pol. Econ., p. 43.
increase the aggregate amount which can be paid in wages is to increase capital.
6) But as matter of fact, wages are not wholly advanced by capital, but are paid out of the product of the labor for which wages are due, as has been shown in the preceding chapter. This alone, which is indisputable, invalidates the theory we are considering.
2d. But there is more and worse to be said against the wage-fund. It will be noted that by every statement of this doctrine which we have quoted, the amount that can be paid in wages is taken as fixed irrespective of the number and quality of laborers seeking employment. If, then, the laborers be few, wages will be high; if they be many, wages will be low, for the number of laborers is taken as the divisor of a predetermined dividend. Let us consider this.
(a) This assumption disregards all those elements, brought out to view in Chapter III., which go to make up the efficiency of the laborer. Thus, granted a certain store of provisions, of tools, and of materials for production, sufficient, say, for 1000 laborers, those who hold the wage-fund assert that the same rate of wages (meaning thereby the actual amounts of necessaries, comforts, and luxuries received by the laborer) would prevail whether those 1000 laborers be Englishmen or East-Indians; or, if Englishmen, whether they be, as a body, drunken, ignorant, wasteful and indolent, or possessed of all the economical virtues. Ultimately, it is held, the former state of things would reduce capital, and hence reduce wages ; but, in the exact present, the rate of wages is fixed by the ratio between the predetermined wage-fund and the number of laborers applying for employment, and employers can and will pay the rate so fixed.
On the contrary, is it not true that the present economical quality of the laborers, as a whole, is an element in ascertaining the aggregate amount that can now be paid in wages; that as wages are paid out of the product, and as
for an a
the product will be greater or smaller by reason of the workman's sobriety, industry, and intelligence, or his want of those qualities, so wages may and should be higher or lower accordingly?
(6) But, again, since wages are paid out of and measured by the product of industry, and since productive power may be increased by the invention of machinery, the discovery of arts, and the improvement of processes, without any immediate increase of capital, ought it not to be possible that wages should be enhanced by such causes, population and capital being assumed, for purposes of argument, to stand still ? Now, the wage-fund advocate concedes that such inventions and improvements will increase capital, and hence become the reason for an advance in a more or less distant future; but only as they first increase capital can they increase the wage-fund.
Let us discuss this point.
We will take a community having a capital represented by 100,000, a population represented by 1000, and an annual product represented by 10,000, of which labor receives 7000. Let it be supposed that the productive power of this community is increased at once 10 per cent by improvements in tools, implements, and machinery through all the departments of its industry. The new machinery is brought into use. The capital of the community has not been thereby increased ; on the contrary, all such inventions involve a temporary diminution of capital. The old machinery becomes useless, while a portion of the previously-circulating capital has to be taken for the new.
· The view here taken of the relation of the latorer's efficiency to his wages substantially coincides with that presented by Prof. Stanley Jevons in his Theory of Political Economy, pp. 256–262, and by Prof. Hearn, of Melbourne, in his Plutology. Mr. Jevons styles his own views “ somewhat heretical.” Mr. J. L. Shadwell, writing in the " Independent Section" of the Westminster Review (January, 1872), advances " the efficiency of labor" as one great cause for the variations of wages, wholly independent of increase of population or of capital.
The capital, whether we consider the aggregate capital or circulating capital only, being certainly no larger, wages can not at present, the wage-fund advocate declares, be increased, although the productive power of the community is greater, by 10 per cent, from the moment the new machinery begins to move. The product is now 11,000; but as capital is now something less than 100,000, wages must even be something less than before. The additional 1000 of product will therefore go to the share of capital, although there is less. capital than before. And it is only as the capitalists, in their uncontrolled discretion, decide to save this addition to their income, or a portion of it, for future reproductive investment, instead of spending it upon their own pleasure, that capital will be increased, and, with that increase, increase of wages be realized.
Now, to the contrary, I hold that the moment the aggregate product of labor and capital is increased by inventions, which are a clear gain of power for the benefit of all,' that moment a sufficient economical reason exists for an advance of wages in some degree corresponding. In the case supposed, the share of the laborers in the 1000 gained might be found to be 700, or it might be but 690, or it might rise to 710.
(©) But the most signal fallacy of the wage-fund doctrine remains to be noted. Waiving now. all consideration of the economical quality of the laborers in any given community, and of the possible gain in production through improvements and inventions, irrespective of any increase of capital, let us inquire what foundation there is for the assumption that an increase in the number of laborers involves a proportionate reduction in the amount of wages going to each.
Let us take, first, a community which has not reached the condition of " diminishing returns.” The number of
'I omit purposely all consideration of the limited monopoly of inventions created by law for the encouragement of ingenuity.