The Wages Question: A Treatise on Wages and the Wages Class
By Francis A. Walker
Francis A. Walker’s
The Wages Question is generally credited as having demolished the prior, antiquated “wages fund” theory of wages [see Book I, Chapters
IX]. In the process, Walker simultaneously laid the groundwork for
John Bates Clark’s definitive descriptions of the marginal products of labor and capital. His interest in the nature of the firm contributed to
Frank H. Knight’s work by clearly describing the factors of production and how to categorize their rewards into wages, rent, and profits.Walker’s work and influence served as models not only because he discussed production, labor, and wages with unusual clarity for his time, but also because his interest in monetary issues (influenced by his father, also an economist) enabled him to describe the
difference between nominal and real values. His clarifications of monetary issues coincided with concurrent national interests in
the gold/silver/bimetallism parity controversies of the late 1800s, and the meaning of money for an economy. Walker later wrote a textbook that was used in classrooms till the publication of
Principles of Economics.Walker became the first President of the
American Economic Association. His professorships at Yale and MIT changed the courses of their economics programs. His leadership abilities were evident in every realm of his life, including his stint as a General during the Civil War. His devotion to economics as a profession paved the way for many generations of U.S. economists.For all his contributions, Walker’s popularity may also have been one of the main sources of the promulgatation of many current misunderstandings. His views of
Thomas Robert Malthus’s writings may have been the source of the popular subsequent mis-association of Carlyle’s 1849 term, the
“dismal science,” with Malthus. (Walker’s interest in labor and wages naturally led him to consider population, but may also have caused him to emphasize pressures inherent in rapid population growth, race, and class distinctions over
Malthus’s original interest in the economic incentives that deter overpopulation.) Walker’s general views and influence may have led to other underlying divisions behind different strains in macro- and micro-economic research that persist to this day.Lauren F. Landsburg
First Pub. Date
London: Macmillan and Co.
The text of this edition is in the public domain. Picture of Young courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Front Matter
- Part I, Chapter 1
- Part I, Chapter 2
- Part I, Chapter 3
- Part I, Chapter 4
- Part I, Chapter 5
- Part I, Chapter 6
- Part I, Chapter 7
- Part I, Chapter 8
- Part I, Chapter 9
- Part II, Chapter 10
- Part II, Chapter 11
- Part II, Chapter 12
- Part II, Chapter 13
- Part II, Chapter 14
- Part II, Chapter 15
- Part II, Chapter 16
- Part II, Chapter 17
- Part II, Chapter 18
- Part II, Chapter 19
- Concluding Remarks
IT has been said that, by most systematic writers on political economy, the wages class is taken as coincident with the labor class. In the opening chapter I briefly indicated five important classes thus brought together under a single title. In the present chapter it is proposed to show that of the five, but two can with any propriety be said to receive wages; and of these two, it is proposed, though not with the same degree of assurance, to exclude one, leaving but a single class as really the recipient of wages. It is hoped that, by strictly defining the wages class, and setting the other classes thus distinguished in their true relations to it, something may be added to the understanding of the law of wages.
To begin: The wages class includes only
the employed. It is not necessary to spend time in proving that by etymology, at once, and popular usage, the word is restricted to the remuneration paid by one person to another. Those who give the word a wider significance in political economy are bound to justify themselves in doing so, by showing that something is gained, in clearness, thereby. But my reason for desiring to confine the word as has been proposed, in a treatise on wages, is better than a linguistic one. It is that the very object of the inquiry is to ascertain
the laws which govern the condition of those persons who, having no command of the agencies and instrumentalities of production, are obliged to seek
employment and the means of subsistence at the hands of others. It is the condition of this class that the philanthropist is especially interested in, because this is preeminently the dependent class. The economist should be equally interested because just here comes the real strain in the distribution of the products of industry. How, for example, if we group employer and employed in one great “wages” class, can we properly reach the subjects of strikes and trades unions? Are we not, most unnecessarily and in most undeserved contempt of popular speech, slurring over and obliterating the natural and obvious distinction which points us the way to the right discussion of some of the most important questions of distribution, when we speak of the wages of a cotton manufacturer; wages stipulated by no one, due from no one, and, if paid at all, paid by the accidental consumer of the product?
If employers do not belong in the wages class, no more do those who are neither employers nor employed; who having command of the agencies and instrumentalities of production sufficient for their own labor, take a most important part, indeed, in the production of wealth; but, owning the entire product, have no concern whatever with the distribution of wealth, and hence nothing to do with wages.
We thus exclude the whole body of peasant proprietors, who in many countries constitute the bulk of the population, and are, taking the whole world together, undoubtedly more numerous than any other single class which we shall have occasion to characterize. These persons, cultivating their own land with their own labor only, or perhaps with that of their wives and minor children (having no separate rights or interests recognized by the law of the land, and hence capable of making no demand, as laborers, for any portion of the product), create in the aggregate a vast amount of wealth, but it is wealth not distributed. Each such peasant proprietor owns the entire product of his land (subject only to the claims of the government for
contribution, which claims, being legal and not economica in their nature, cannot be recognized in an economical treatise), to be consumed for the subsistence of himself and family and the increase of his own stock, or to be exchanged at his pleasure for the products of others. Such wealth, therefore, is not subject to distribution, and hence we clearly must exclude this body of laborers from the wages class.
In England the peasant proprietor does not exist. Forty years ago Prof. Jones
*56 wrote “In parts of England and Wales, though the race is fast vanishing, there may be seen specimens of our first division of laborers, unhired by any one, occupiers of the soil, tilling it with their own hands.”
The “specimens” have by this time all disappeared except possibly from Westmoreland and Cumberland, counties characterized by comparatively small estates. But while the condition of large landed properties, cultivated by hired agricultural laborers, is almost universal in England and Scotland, one cannot cross the narrow seas in any direction without coming upon a condition very different.
*58 To the west, Ireland furnishes an example of which we shall speak in connection with another class of producers; while, before one reaches the coast of France, he finds in the “Channel Islands,” a part of the British empire but retaining their own laws regulating the descent of landed property, a body of peasant proprietors who have furnished the advocates of that system of cultivation with some of their most valued illustrations. In France
the principle of “partible succession,” introduced by the Revolution, has created a vast number of small properties, estimated at between four and five and a half millions.
“In Germany a revolution of the same nature, though not of the same magnitude, has been effected in a more regular manner. The benefits of landed property have been imparted progressively to a numerous and prosperous class of cultivators by the abolition of feudal superiorities, by the restriction of entails and special destination of property, by the deliberate division of estates between the landlord and the occupier, on a basis, if not always equitable to the former, at least patriotic in its motives and happy in its results, and by the operation of rules of succession reproducing in some instances and in others adopting with various modifications, the maxims of the French Code.
In Italy, under the principle of partible succession, somewhat modified, and through sale of church lands and the dismemberment of feudal estates subject to communal rights; and in Russia, through the emancipation of the serfs and their investiture with portions of the estates to which they formerly belonged, we have a large and increasing portion of the soil cultivated by its owners, working for themselves and by themselves, receiving the whole produce of the soil, subject only to deduction through taxation.
But it is not only the peasant proprietor of Europe, the “farmer” of America, who must be excluded from the wages class on the ground that he is not dependent on another for employment. In the same class economically, so far as the principles of distribution are concerned, are large bodies of mechanical laborers, artisans, who having possession of the agencies and instrumentalities of
production, are enabled to produce wealth by their own labor, without the consent of any person, the product being all their own and hence not subject to distribution, though presumably in great part exchanged for the products, especially the agricultural products, of others. These persons, again, receive no wages, are not hired. They are no more the employed than they are the employers; indeed they are neither. Distribution has nothing to do with them.
Adam Smith recognized this class. “It sometimes happens,” he says, “that a single independent workman has stock enough both to purchase the materials of his work and to maintain himself till it be completed. He is both master and workman, and enjoys the whole produce of his labor.
I do not, for the present, say that the condition of this class is better or worse than that of the wages class, but only that the two classes stand in different economical relations, and should be treated separately. The self-employed laborer has still to seek his market, and if the market fail him he may suffer or starve like the wage laborer; but it is a market for his product that he seeks, not for his labor; and in the pregnant fact that he has possession of the agencies and instrumentalities of production, and may work in his place without the leave or help of any, is found an abundant reason for preserving the distinction expressed above.
Closely allied to the peasant proprietor in many respect economically, though differing widely in others, and not the less distinctly to be excluded from the wages class, are those tenants, whether known as ryots in Asia or metayers in Europe, who have, whether by law or by imperative custom, a recognized right to the cultivation of soil which they do not own, upon the payment of a fixed share
of the produce. The wealth thus produced is, indeed, unlike that produced by the classes previously described, subject to distribution, inasmuch as the owner of the soil is here entitled to participate in the results of the industry; but the tenant’s share is still in no sense wages. He is not of the employed class; he is not dependent on the will of another for the opportunity to labor; he has a right to work on that particular body of land and to enjoy the fruits of his labor, subject only to the due payment of the share of the product going to the landlord—be the same an individual or the state. And this is equally true whether the right of the tenant to remain in occupancy is one fixed by law, or only by a custom which is so distinct and imperative as to give a practical assurance of permanency. And it is equally true whether the amount of rent be fixed by law, or by a custom which the owner so far respects as to put it out of his disposition to undertake to raise it.
The metayer system, under which the landowner receives a definite share of the produce, originally one-half, as the term implies, but varying in present usage from one-half to two-thirds, according to local law or custom, once prevailed throughout the western division of Continental Europe, Italy, France, and Spain.
*62 In France,
since the Revolution, it has been largely superseded by peasant proprietorship; and in Italy, since the unification of the kingdom, the same process has been going on, though more slowly. A large portion of the soil of these three countries is, however, still cultivated under this tenure.
The ryot system of Asia and Turkey in Europe is held by some economists to be substantially equivalent to personal proprietorship; by others to be the Oriental equivalent of the metayer system, the taxes, varying from fifty upwards to perhaps seventy per cent., which the government levies on the produce, being regarded as virtually the rent of the land. The question need not be discussed here, for it is evident that, whichever way it might be decided, the ryot is not a wage laborer.
In a very different economical position is the cottar tenant, who is liable, on the expiry of his longer or shorter lease, or at the will of the landlord in the absence of a lease, to have his rent raised; and on his inability to resist or to satisfy such a demand, or even from the personal prejudices or preferences of the landlord, to be ejected from his occupancy; yet we cannot designate his share of the product of the soil, after deducting rent, by the term wages. The condition of the cottar may be better than that of the wage laborer, or it may easily be worse; but worse or better, it is certainly different, and results from wholly different economical relations. As we go forward the unfitness of such a designation, if, indeed, there should be any question concerning it, will be made to appear more clearly than could be done at present
without an extensive excursion from the path of our discussion; but it will perhaps be sufficient at this point, waiving objections from etymology and popular use, to say that it is of the essence of wages that they are at stipulated rates, and therefore certain in amount, while the produce of the cottar tenant is never certain, since nature declines to make any stipulation, and the quantity and quality of the crop must always remain, up to the moment of harvesting, a matter of conjecture.
We have thus far insisted that only the employed shall be included in the wages class. Applying this test of dependence on others for the opportunity to labor, we have successively excluded several large bodies of laborers, constituting in the aggregate the vast majority
*65 of the human race. In respect to the production of most of these, the principles of distribution do not apply. In contemplating their condition and prospects, we have only to consider the law of production taken in connection with the law of population. Masters of their own fate, economically, whether they shall be happy or miserable will depend [assuming their own industry, frugality and sobriety], first, upon their habits in respect to procreation;
second, upon the acts of their government, protecting them or robbing them, as the case may be, with which political economy has nothing to do; and third, on the kindness or unkindness of nature in affording sun and shower in due order and proportion, and with this, again, political economy has nothing to do.
We have applied the test of employment. We must now apply other tests, still further to reduce the range of our investigation.
First, we count out all those who, though employed, are employed on shares. It is, as has been said, of the essence of wages, that they are stipulated in amount. In the case of laborers working on shares, no definite amount is stipulated; but only the proportion of an uncertain product which shall go to the laborer. His remuneration, therefore, becomes greater with good luck and favorable weather, or smaller with the reverse. He shares with the employer the risk of bad seasons and accidental loss; and is entitled to participate in all the advantage of every fortunate venture. In other words, he is the partner of his employer, dependent indeed, with no voice in the management, and perhaps on hard terms, but a partner still in the distribution of the product; a condition which is strongly contrasted with that of the wage-laborers proper, who have their remuneration at fixed rates, receiving no less if the business be unsuccessful (except in the rare and not anticipated event of bankruptcy); and receiving no more, however great the returns of the industry.
The class of hired laborers working on shares is not large, but it is desirable that it should be clearly separated and excluded from the wage class for scientific precision. The share principle is applied somewhat extensively in mining, but its chief application is on the sea, where it becomes of great importance to interest all hands in the success of the enterprise. In fishing vessels and whalers of almost all nationalities, and with the Greeks even in
the general merchant service, the crews take shares in the venture.
Secondly, it is my view that another and a very large body of laborers should be excluded from the wages class in treating the questions of distribution, though the term wages is applied, and with entire propriety, to the remuneration of this class of persons, and its exclusion may not meet the general assent which I trust will be accorded to the exclusions previously effected.
What, then, is the class thus to be excluded against common usage? It includes those persons who are defined by Prof. Jones
*66 as paid, or supported, out of the revenues of their employers. I deem the difference between this class, which it is proposed throughout the further course of this work to call the SALARY or STIPEND class, and that which I shall call the WAGES class, to be not only sufficiently clear to justify the economist in giving to the former a distinctive name, but so important in its bearings on the relation of persons of that class to their employers, and on their claim to a share of distributed wealth, as to render it imperative to treat them separately.
The domestic servant affords, perhaps, the best illustration, for present purposes, of the salary or stipend class. He is not employed as a means to his master’s profit. His master’s income is not due in any part to his employment; on the contrary, that income is first acquired, or its acquisition reasonably assured; and in the amount of the income is determined whether the servant shall be employed or not, while to the full extent of that employment the income is diminished. As Adam Smith expresses it, “a man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants.”
The case of the wage laborer is different. He is employed with a view to his master’s profit; the master’s income is the result of such employment of labor; and, with the exercise of due judgment, that income will be greater by reason of the employment, within the limits of his productive capacity, of each additional man. “Though the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the whole value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labor is bestowed. But the maintenance of a menial servant is never restored.”
The expectation of profits, be it observed, furnishes the test for discriminating the wages class from the stipend or salary class. It is not necessary that the profit expected in the employment of persons of the former class should always be realized; nay, in a given case, actual loss may result without changing the character of the service. But unless the reason for the employment is found in the expectation of a profit to the employer out of the production in which the laborer is to be engaged, we do not find in such employment the true sign of the wages class. Hence we may broadly say, No profits, no wages.
Let us recapitulate. We have, first, excluded the employing class; second, all who, having possession of the agencies and instrumentalities of production, whether agricultural or mechanical, are not dependent on others for the opportunity to produce; third, those who, though not owning land, lease it, whether under the protection of law or subject to all the hardships of competition. These successive exclusions leave us the employed class, whether in agriculture or manufactures. From this we further
exclude all who produce on shares, and all who are paid or subsisted out of the revenues of their employers. We have left the wages class proper, including all persons who are employed in production with a view to the profit of their employers, and are paid at stipulated rates. This is the class whose economical position and interests it is proposed here to discuss. With such limitations as have been imposed, the wages question is not of that wide interest which is given to it when pretty much the whole human race is brought within its scope; but it may be that by this limitation our inquiries will become more fruitful.
But though the wage class includes but a fraction of humanity, it is perhaps as large as can be comfortably treated in a work of a single volume. Of the eighty millions of English-speaking people, three-fourths probably, two-thirds certainly, subsist on wages.
It may be well here to anticipate a hostile criticism. It may be said that we have made our analysis of the laboring population an essential part of our theory of wages, while yet, in fact, no inconsiderable number of persons sustain economical relations which refuse to submit to such a classification. Thus there are persons belonging alternately to the wages and to the stipend class, now employed for profit, now paid out of revenue. In like manner there are persons in every community who are employed as hired laborers during portions of the year, while at other seasons they are engaged in production on their own account in their own shops or on their own small holdings of land.
To this it may be replied that while the recognition of
vast bodies of undistributed wealth which are yet subject to exchange, is here asserted to be necessary to a right understanding of some of the phenomena of wages, the validity of this position does not depend on the possibility of an exact enumeration of the several classes defined. On this point I cannot do better than quote from the admirable chapter on Economic Definition, which Prof. Cairnes, just before his lamented death, added to his treatise on the Logical Method of Political Economy.
“In controversies about definitions, nothing is more common than to meet objections founded on the assumption that the attribute on which a definition turns, ought to be one which does not admit of degrees. This being assumed, the objector goes on to show that the facts or objects placed within the boundary line of some definition to which objection is taken, cannot, in their extreme instances be clearly discriminated from those which lie without. Some equivocal example is then taken, and the framer of the definition is challenged to say in which category it is to be placed. Now it seems to me that an objection of this kind ignores the inevitable conditions under which a scientific nomenclature is constructed, alike in political economy and in all the positive sciences. In such sciences, nomenclature, and therefore definition, is based on classification, and to admit of degrees is the character of all natural facts. As has been said, there are no hard lines in nature. Between the animal and vegetable kingdoms, for example, where is the line to be drawn?… It is, therefore, no valid objection to a classification, nor consequently, to the definition founded upon it, that instances may be found which fall, or seem to fall, on our lines of demarcation. This is inevitable in the nature of things. But this notwithstanding, the classification, and therefore the definition, is a good one, if, in those instances which do
not fall on the line,
the distinctions marked by the definition are such as it is important to mark, such
that the recognition of them will help the inquirer for ward toward the desiderated goal.”
THE EXCHANGE OF DISTRIBUTED FOR UNDISTRIBUTED
BUT it may be asked, what avails it to show that the wages classes, instead of being co-extensive with the labor class, as is assumed in the current theories respecting wages, is only a small fraction of it, communicating with those other great masses of labor, only in the exchange of its completed and marketed products? How can this fact bear on the question, whether wages may be increased actually and permanently? Are not wages governed by exactly the same principles as if the wages class constituted the whole of the labor class, instead of one-fifth, one-sixth, or one-seventh?
I answer, in the first place, that if the wages class is only a fraction of the labor class, that fact should be clearly set forth in discussions of the wages question, and the extent of the interests involved should be, as nearly as possible, indicated. The reader has a right to know whether the principles laid down govern the fortunes of substantially the whole human race, or of only one-fifth or one-seventh of it. The confusion of the labor question with the wages question, is as unnecessary as it is unscientific.
But secondly, I answer that the fact of the production of a vast body of undistributed wealth, portions of which are subject to exchange with distributed wealth, may, and does, powerfully affect the condition of the wages class.
Let us discriminate. So far as undistributed wealth, that is, wealth which is produced entire by one person,
*72who owns the whole product, is not exchanged but is consumed by the producer, as is the case with probably the major part of such wealth, the world over, no effect on the wages class can be wrought thereby. That wealth, being neither distributed nor exchanged, neither its production nor its consumption concerns other classes of producers. But so far as undistributed wealth is exchanged against distributed wealth, there is a distinct possibility, therein, of gain or loss to the wages class.
It was remarked in our first chapter, that it is as truly impossible to explain all the phenomena of wages, without reference to this outside body of undistributed wealth, as it would be to account for the Gulf Stream, without reference to the colder waters between which, and over which, it flows. We are now in a position to justify this remark. We have seen (chap. x,) that the theory that all burdens are divided and all benefits diffused equally throughout industrial society, rests on the assumption of perfect competition. Industrial society is taken, for the purposes of this reasoning, as composed of economical atoms, absolutely equivalent, possessing complete mobility and elasticity. Given this condition, all that Bastiat has claimed for the economical harmonies, is happily true. The laborer and the employer feel the force of competition equally, and neither has a natural advantage over the other. The laborer feels the force of competition alike as seller of labor and as buyer of commodities. Labor and capital flow freely to their best market. The highest price which any employer can afford to give will be the lowest which any laborer will consent to receive; while, as between any two departments of production, the advantages enjoyed by the laborers, capitalists and employees engaged will be absolutely equalized.
But, on the other hand, it is evident that
the least viscosity of material, the slightest idiosyncrasy of structure must, in a degree, defer, if not entirely defeat, the
tendency to the propagation, through economic media, of any economic impulse. Just so far as men differ in their industrial quality, or are diversely organized in natural or artificial groups, just so far there is the possibility that one person or class of persons may be disproportionately affected by an economic force; may receive more or receive less of the benefit, may suffer less or suffer more of the burden, than his or their just distributive share.
Now the division of the body of laborers into the employed and the non-employed, or independent workmen, is a great structural fact which cannot but profoundly influence the propagation of economic impulses. Doubtless there are compensations in the condition of the wages class; while nothing could exceed the misery of whole nations of peasant proprietors or tenant occupiers, where the government fails to render the protection to which the subject is entitled, or where, as too often happens, the government becomes the plunderer of the people. Yet, through all, we discern in the fact that the wages class are dependent on others for the opportunity and the means to labor, not having, in their own right, possession of the agencies and instrumentalities of production, the possibility of deep and lasting detriment.
I have already expressed the opinion, in criticism of Prof. Cairnes’ doctrine of non-competing groups, that competition never becomes
nil, for practical purposes. But let us for the moment inquire what would be the effects, did the employed and the non-employed constitute two great non-competing groups; that is, did not the employed ever become an independent workman; or the independent workman ever seek employment. We will also suppose competition to be perfect within the employed class.
It is evident that upon these assumptions any economical impulse, for good or for evil, which should be experienced anywhere in the latter class, would extend at once and without loss through the whole body of the employed,
that the burden would be divided or the benefit diffused among the entire mass, action and reaction continuing until equilibrium was everywhere restored. But this impulse would not be propagated across the dividing line between the employed and the non-employed. The economical movement would cease in this direction as abruptly as a vein of gold stops at a new geologic formation. For good or for evil, the non-employed would feel no economical sympathy with the employed. Each group would meet its own fate, individually, by itself. Certain “exchanging proportions” would be established for the surplus products of the two groups; a scale of relative prices would be reached by trade between them; but so long as labor was not free to flow across the line of demarcation there would not be even a tendency to the equalization of the wages of the employed to the average production of the independent workman.
Now, as has been said, there is no such utter failure of competition as is here assumed for the purposes of illustration. The employed do come, in greater or less degree, to be independent workmen; independent workmen do come under employment. The facility with which these interchanges are made depends much upon the nature of special industries, much upon the character of the individual workman, much upon the state of legislation and the social condition of the country. In some lands the movement across the line dividing the employed and the nonemployed is very free, many laborers alternating between their own little farms or shops, where they work for themselves by themselves, receiving all advantages and suffering all losses, and the larger estates or factories where they come under direction and control, and receive wages at stipulated rates. In other lands the transition is slow and painful; in some it can scarcely be said to be effected at all.
*73 On the whole, it is notorious that interchanges
between the two groups are comparatively rare; the great mass of the employed never have the choice whether they will set up for themselves; they abide in their lot and share, because they have no resource, the fortune of their class, be that good or evil. The division we have indicated remains incontestibly the greatest structural fact in modern industrial society, telling powerfully upon the rate and direction in which economic impulses shall be propagated.
If this be so, and I do not look to see it questioned by any one, then there clearly is the possibility that one of these groups may profit at the expense of the other, since the only security which could exist for their sharing equally the benefits and burdens of production would be found in the unimpeded interchange of labor. Which of the two is more likely to be the gainer in the exchange of its marketed products, whether it be the independent workman who has possession of the means and materials of production, who can create wealth in his own name and right, and has to ask no man’s leave to labor, or the employed workman, will more clearly appear the further we carry our discussion of the conditions of the wages class in modern industrial society.
“In this country (England) the cultivator of the soil and the owner of the soil are, as a rule, different persons;
in other countries they are, as a rule, the same; or where they are not the same the owner of the soil rather occupies the position of
a perpetual lessor or mortgagee than that of a landlord whose contracts with his tenants are constantly liable to revision.”—Prof. Rogers’ Pol. Econ., p. 151.
l. a year each, 527,000 are tenancies at will.—Statistical Journal, xxxiii, 152.
Part II, Chapter XIII