Page:The New International Encyclopædia 1st ed. v. 20.djvu/291

WAGES. •j;!9 WAGES. and has served as one of the chief arfjiimentu against the eontiniianoe of the present order. .James Mill. MeC'iiUocb, Senior, and .John Stuart Mill, the followers of Kieardo and Jlal- tlius. develo])ed a theory of wa^'es which is known as the icajirs fund theory. It emphasizes the de- pendence of labor upon capital. Assuming that present wages are paid out of past aeeiunula- tions, these writers argued that total wages must be limited by capital, or (in the completed theory) by that part of caiiital which is de- voted to the subsistence of labor. Given the magnitude of the wages fund, the average rate of wages may be found by an arithmetical division, tile number of laborers being the divisor. In order to increase wages, it was held to be neces- sary eitiier to increase the wages fund or to de- crease the number of laborers. According to this theory, atteiiijits of the laborers to raise wages through combination would necessarily be un- availing, since such combination could affect neither dividend nor divisor. If some laborers succeeded in raising their wages, it would neces- sarily be at the expense of other laborers. From about 1820 to 1870 the wages fund theory was generally accepted by English econo- mists. In 1809 the theory was abandoned by .John •Stuart Mill as a result of Thornton's attacks ujion it. The ide.a that a definite portion of capital is set apart for the support of labor was seen to be fallacious. To a considerable extent modern economists have adopted the so-called productivitij theory, the ablest of the earlier ex- ponents of which was Francis A. Walker. Wages are not paid out of capital at all ; the product of labor is the natural reward of labor, and the money wage represents not an advance, but a price paid for a product already created. The same idea was ably defended by Henry George. Recent discussions of the wages question have largely turned upon the significance of the term 'productivity of labor.' Von Thiincn demon- strated that it is the jiroduct of the laborer who is in the least advantageous situation that really determines wages. This theory has been still further developed by Professor J. B. Clark, whose work makes it clear that under free com- petition it is possible to discover units of labor which are virtually unaided by capital or land, and that the pure product of such units sets the standard for all units of labor. Adherents of the productivity theory are un- der no necessity of believing that the wages of labor are incapable of substantial and indefinite rise. An increase in wages naturally increases the eflieiency of labor, and hence its natural re- ward. High wages may thus be more economical from every point of view than low. A revival of the old idea that wages depend on the cost of subsistence of the laborer appears in the modern theory of the dependence of wages upon the standard of living. As expounded by Gimton, this theory teaches that wages tend to- ward a standard which just covers the needs of labor; to raise wages, it is essential that needs should be increased. Labor of women and chil- dren is regarded as having a depressing influence on the wages of men, since the needs of the husband and father are reduced through the pos- sibility of an income earned by other members of the family. Savings of laborers, resulting in an income through interest, result in a pro- jjortional decline of wages. If laborers esihew comforts and luxuries, with the hope of having a surplus of income above needs, the only re- sult in the long run will be a fall in wages un- til they cover necessaries only. Critics of this tlicory point out that it would be true only if the Malthusian doctrine that ]iopulation tends to outrun subsistence were correct ; and at pres- ent no one would hold to that doctrine in its un- (|ualilied form. Employment of women and children nui}', indeed, depress wages of men, but that fact is due partly to the decline in eflieiency of the population, and partly to the fact that an increase in labor sujiply renders necessary the resort to poorer opportunities of employment, and a consequent lowered standard of wages. C-usES Dkterminixo thk Kate of Wages. If the standard of wages is set by the productivity of the laborer whose position is least satis- factory (as appears to be apjiroximately true), the causes determining the productivity of labor must determine the rate of wages. An increase in the quantity of land available for cultivation through inii)roveiiients in transportation will make it possible for labor to abandon employ- ments which produce little, and devote itself to the cultivation of new lands of unimpaired fertility. The product of the laborer in the least advantageous position rises, and with it w'ages. On tlu! other hand, an increase in population, attended by no other change, must forces labor to poorer and poorer positions, with a universal lowering of wages. An increase in capital, again, will give each laborer a more complete outfit of tools, etc.j and thus increase his ])roductivity, raising wages. Labor-saving inventions, it is generally believed, while they lower wages of certain classes of labor, increase in the long run the productivity of labor. But while productivity determines what the laborer will, in the long run, secure, it is not always the case that a laborer is able to secure his whole product. The laborer may be able to sell his labor to only one em- ployer, who thereby is enabled to fix his own price. It is only when competition is active, or when labor and capital meet on equal terms, that the laborer is sure of getting exactly what he produces. Tk.de LTnions and WAGE.S. A trade union, by preventing an employer from taking ad- vantage of the weakness in bargaining of the in- dividual workman, may raise the rate of w'ages to the level of productivity. By excluding labor from a certain occupation it may artificially raise productivity within that occupation, and so in- crease wages for its own members. The excluded labor, of course, is compelled to accept employ- ment less remunerative than that of other labor, and so low'ers the standard of wages for all out- side of the union. For a general discussion of the effect of trade unions upon wages, see Trade Unions. The Tariff and Wages. It has long been a disputed point whether a protective tariff (see Protection) raises wages in the nation as a whole. If the tariff withdraws labor from a liighly productive industry and places it in a less productive one, it appears to be clear that the standard of waiges is lowered. If. on the other hand, the protected industry, when once estab- lished, will be more producth'e than the average of other industries, the ultimate result of the