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
THROUGHOUT the foregoing discussions I have written under a constant sense of my accountability as a teacher of political economy. I have adduced no causes, recognized no objects, but such as I deemed to be strictly economical. No ethical or social considerations have moved me consciously in the composition of this work. Causes have, it is true, been here adduced which are not commonly recognized as economical, but it has only been where reasons could be shown sufficient, in my judgment, for attributing to these causes, which are perhaps primarily ethical or social, a clear potency within the field of industry, affecting either the production or the distribution of wealth; for I hold that it can not be questioned that whatever affects either of these is, in just so far, an economical cause. Thus, sympathy for labor (pp. 362-372), if it serves in any degree to make competition on the side of the laboring class more active and persistent; if it takes any thing from the activity and persistency with which the employing class use the means in their power to beat down wages, or lengthen the hours of work, or introduce young children into painful and protracted labor, becomes, in just so far as it has such an effect, a strictly economical cause, to be recognized, and, so far as may be, its force measured, by the writer on the distribution of wealth. The economist recognizes indolence (pp. 174, 175), the indisposition to labor, as an economical cause, holding men back from the acquisition of wealth which they might obtain but for the force of this principle. Why is not public opinion, restraining men, as it so largely does, from the acquisition of wealth by means held to be dishonorable or oppressive to the weaker classes of the community, also and equally to be recognized as an economical cause?
I regret that this treatise should be so strongly controversial in form; but the fact is, certain doctrines which I deem to be wholly unfounded have become so widely spread that one can make no progress, by so much as a step, towards a philosophy of wages without encountering them. These doctrines are:
1st (pp. 136-140). That there is a wage-fund irrespective of the numbers and industrial quality of the laboring population, constituting the sole source from which wages can at any time be drawn.
2d (pp. 161-165). That competition is so far perfect that the laborer, as producer, always realizes the highest wages which the employer can afford to pay, or else, as consumer, is recompensed in the lower price of commodities for any injury he may chance to suffer as producer.
3d (pp. 243-246). That, in the organization of modern industrial society, the laborer and the capitalist are together sufficient unto production, the actual employer of labor being regarded as the capitalist, or else as the mere stipendiary agent and creature of the capitalist, receiving a remuneration which can properly be treated like the wages of ordinary labor.
These doctrines I have found it necessary to controvert; and in so doing have not cared to mince matters or pick phrases. For any excess of controversial zeal I shall easily be justified, if I have substantiated the positions I have taken; on the other hand, if I have been unduly presumptuous in assailing doctrines sanctioned by such high authority, a little too much harshness in argument will not add appreciably to my offence.
It may, perhaps, be well to guard against misconstruction on a single point. In getting rid of the wage-fund, we have not reached the result that wages can be increased at any time or to any amount whatever. We have merely cast aside a false measure of wages. Wages still have their measure and their limits, and no increase can take place without a strictly economical cause.
Wages can not be larger than the product except by force of pre-existing contract. Wages must, in the long run, be less than the product by enough to give the capitalist his due returns, and the employer his living-profits.
What then has been effected by doing away with the wage-fund? We have shown (Chapter VIII.) that the remuneration of hired labor finds its measure not in a past whose accumulations have been plundered by class legislation and wasted by dynastic wars, but in the present and the future, always larger, freer, and more fortunate. If capital furnishes the measure of wages, then that measure is derived from the past, such as it has been, and no increase of energy, intelligence, and enterprise on the part of the laboring class can add to, as no failure on their part can take from, their present remuneration, which is determined wholly by the ratio existing between capital and population. If production furnishes the measure of wages, as is here maintained, then the wages class are entitled to the immediate benefit of every improvement in science and art, every discovery of resources in nature, every advance in their own industrial character (Chapter IX.). Surely it is not a small matter that the laborer should find the measure of his wages in the present and the future, rather than in the past!
But that portion of this treatise on which I should be disposed most strongly to insist, as of extended consequence in the philosophy of wages, is the doctrine that
if the wage laborer does not pursue his interest, he loses his interest (Chapter X.) in opposition to the view so generally maintained by economists, that if the wage laborer does not seek his interest, his interest will seek him; that economical forces are continually operating to relieve and repair the injuries of labor; and, specifically, that all sums taken in excessive profits, or for the excessive remuneration of capital, whether through combinations
of employers or capitalists or through the disabilities of the working class, are sure to be restored to wages. To the contrary, I have sought to show that, in a state of imperfect competition:
First, wages may be reduced without any enhancement of profits, the difference being, not gain to the employer, but loss to mankind through the industrial degradation of the laborer (Chapter IV.) Secondly, for so much of the sums taken from the laboring class by reduction of wages as the employers or capitalists may at the time secure in excessive profits or excessive interest, there exists no adequate security, under the operation of strictly economical forces, that it will be fully returned to the wages class in a quickened demand for their labor, inasmuch as luxuriousness and indolence (pp. 237-40, 251) will inevitably enter, among the majority of employers, to waste in self-indulgence a portion of the profits so acquired, or to take something from the activity and the carefulness with which future production will be pursued. Thirdly, in respect to such industrial injuries as have just been described, economical forces by themselves tend (pp. 165, 166) to perpetuate and continually to deepen the injury, putting the laborer at a constantly increasing disadvantage in the exchange of his services.
If these three propositions have been substantiated, it follows with absolute certainty that the doctrine of the schools, that in a state of imperfect competition the employer and the capitalist are the guardians of the laborer’s interests and the trustees of his wages, is most fallacious, those interests being, in truth, only secured when placed in his own keeping (pp. 241, 242), those wages being only his own when paid into his hands, and that, to enable him thus to maintain his rights in the distribution of the product of industry, he must be qualified by an education which is wholly extra-economical, for which the community, through either its social or its political agencies, must make provision.
This brings us face to face with the doctrine of
Laissez faire, which teaches that the spontaneous action of individuals, each seeking his own interest on his own instance, guided and helped at most by the purely social forces of the community, will achieve the best possible industrial-results; and that the interference of government, operating by constraint and compulsion, under the sanction of law, can only be mischievous. Reasons have been shown for believing that
Laissez faire, so long and loudly proclaimed a principle of universal application, is nothing but a rule of conduct (pp. 162-4) applicable in certain conditions; a rule very useful, indeed, when duly subordinated to higher considerations, but mischievous when allowed to bar the way to clear, practical opportunities for advancing the industrial condition of mankind; a rule, in short, which, like fire or water, is a good servant but a bad master.
Yet, in reducing
Laissez faire from the rank assigned it in most economical treatises, to its true grade of a practical rule, good in certain conditions only, we have not reached the result that State interference is therefore desirable at any and every point where the spontaneous action of individuals shall be seen to be inadequate to achieve the highest good of all classes. We have merely put the objection to paternal government on grounds which will bear examination. State interference, however well intended, however clear the occasion, is certain in some degree to miss its mark, and to work more or less of positive mischief in any attempt to remove the evils incident to individual action. Legislation is always more or less unwise; administration always falls in some degree short of its intent (pp. 172, 173). Certainly no one can entertain a stronger sense of the evils of the regulation by law of the industrial concerns of the people than the writer of this treatise. State interference with industry is only justified where the admitted mischiefs of restriction are heavily overborne by an urgent occasion for preventing the permanent
degradation of the laboring classes through the operation of economical forces which the individual is powerless to resist.
Admitting, then, that it is eminently desirable to reduce the action of the organized public force to the minimum consistent with the above object, shall we not say that government can not relieve itself from the necessity of frequent and minute interferences with industry in any other way to so great an extent as by, 1st, insisting on the thorough primary education of the whole population; 2d, providing a strict system of sanitary administration; 3d, securing by special precautions the integrity of banks of savings for the encouragement of the instincts of frugality, sobriety, and industry?
Each of these things is contrary to the doctrine of
Laissez faire; yet I, for one, can not find room to doubt that, on purely economical grounds, the action of the State herein is not only justifiable but a matter of elementary duty. A little interference with the freedom of individual action here will save the necessity of a great deal of interference elsewhere. If the State will see to it that the whole body of the people can read and write and cipher; that the common air and common water, which no individual vigilance can protect, yet on which depends, in a degree which few even of intelligent persons comprehend, the public health and the laboring-power of a population, are kept pure; and that the first feeble efforts of the poor at bettering their condition and saving “for a rainy day” are guarded against official frauds and speculative risks, it may take its hands off at a hundred other points, and trust its citizens, in the main, to do and care for themselves. These things therefore are demanded by the true
economy of State action.
But, even so, I find to my own satisfaction at least a present necessity for legislation and administration in the interest of health, in the case of all industries where large numbers of laborers of differing sexes, ages, and degrees
are aggregated, especially where other than manual power is employed. Factory acts prohibiting labor for all classes beyond the term which physiological science accepts as consistent with soundness and vigor; restricting within limits carefully adapted to the average capability of effort and endurance the employment of children and of women also, so long at least as women are denied suffrage on the ground either of mental inferiority or sexual unfitness for contact with what is rough and vile; and providing a full and frequent sanitary inspection of air and water, from garret to cellar, in all buildings thus occupied: acts like these seem, at least in the present, to be justified and demanded, not more by social and moral than by economical considerations (pp. 357-9). For it must ever be borne in mind, in such discussions, that those things are economically justified which can reasonably be shown to contribute, on the whole and in the long run, to a larger production, or, production remaining the same, to a more equable distribution of wealth.