Book I, Chapter VIII, 1

ON THE WAGES OF LABOR.

The produce of labor is labor’s natural reward or wages. In that original state of affairs before both the appropriation of land and the accumulation of stock, the whole produce of labor belongs to the laborer. He has neither landlord nor master to share it with him.

Had this state continued, labor’s wages would have risen with every improvement in its productive powers brought about by the division of labor. Everything would gradually have grown cheaper. Goods would have been produced with less labor; and since commodities produced by equal quantities of labor would naturally, in this state, be exchanged for one another, they would also have been bought with the produce of less labor.

But though everything would really have grown cheaper, many things might have appeared dearer than before, or exchanged for a greater quantity of other goods. Suppose, for example, that in most employments labor’s productive powers had increased tenfold, so that a day’s labor produced ten times as much work as at first, but in one particular employment they had only doubled, so that a day’s labor produced just twice as much as before. In exchanging the produce of a day’s labor in most employments for that of a day’s labor in this one, ten times the former quantity of work would purchase only twice the former quantity in the latter. A given quantity of the latter product—a pound weight, for example—would thus appear five times dearer than before. In reality, however, it would be twice as cheap. Though it would take five times as many other goods to buy it, it would take only half as much labor either to buy or produce it. It would therefore be twice as easy to acquire.

But this original state, in which the laborer enjoyed all the produce of his own labor, could not survive the first appropriation of land and accumulation of stock. It ended, therefore, long before the greatest improvements in labor’s productive powers; there is no purpose in pursuing further what its effects on the reward or wages of labor might have been.

As soon as land becomes private property, the landlord demands a share of almost everything the laborer can raise or gather from it. His rent is the first deduction from the produce of labor employed on the land.

The person tilling the ground seldom has the means to support himself until the harvest. His support is generally advanced from the stock of a master, the farmer who employs him, and who would have no reason to do so unless he shared in the produce of the labor or recovered his stock with a profit. That profit is a second deduction from the produce of labor employed on the land.

The produce of almost every other kind of labor is subject to a similar deduction for profit. In every art and manufacture most workers need a master to advance the materials for their work and their wages and support until it is finished. He shares in the produce of their labor, or in the value it adds to the materials on which it is spent; this share is his profit.

Sometimes, indeed, an independent worker has enough stock both to buy his materials and to support himself until the work is finished. He is both master and worker, and enjoys the whole produce of his own labor, or all the value it adds to the materials on which it is spent. It includes what are usually two distinct revenues belonging to two distinct people: the profits of stock and the wages of labor.

Such cases, however, are uncommon. In every part of Europe twenty workers serve a master for every one who is independent, and the wages of labor are everywhere understood in their usual sense, when the laborer is one person and the owner of the stock employing him another.

The usual wages of labor everywhere depend on the contract ordinarily made between these two parties, whose interests are far from identical. Workers want to receive as much as possible, masters to pay as little as possible. The former are inclined to combine to raise wages, the latter to lower them.

It is not difficult, however, to foresee which side must ordinarily have the advantage in this contest and force the other to accept its terms. Being fewer, masters can combine much more easily; besides, the law authorizes, or at least does not prohibit, their combinations while prohibiting those of workers. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In every such dispute, masters can hold out far longer. A landlord, farmer, master manufacturer, or merchant could generally live for a year or two on stocks already acquired even if he employed no workers at all. Without employment, many workers could not live a week, few a month, and scarcely any a year. In the long run, a worker may be as necessary to his master as the master is to him; but the need is not equally immediate.

We rarely hear, it is said, of masters combining, though we often hear of workers doing so. But anyone who imagines on that account that masters rarely combine knows as little of the world as of this subject. Masters are always and everywhere in a sort of tacit but constant and uniform combination not to raise wages above their current rate. Breaking this combination is everywhere deeply unpopular and brings a kind of reproach on a master from his neighbors and equals. We seldom hear of the combination precisely because it is the usual, one might say natural, state of things, which no one thinks worth reporting. Masters also sometimes form particular combinations to push wages even below that rate. These are always conducted in the greatest silence and secrecy until they are put into effect; and when workers give way, as sometimes happens without resistance, the hardship they feel is never heard of by others. Such combinations are often met, however, by a defensive combination of workers, who also sometimes combine on their own initiative, without such provocation, to raise the price of their labor. Their usual grounds are sometimes the high price of provisions, sometimes the great profit their masters make from their work. But whether these combinations are offensive or defensive, everyone hears of them. To settle the matter quickly, workers invariably resort to the loudest outcry, and sometimes to shocking violence and outrage. They are desperate, and act with the folly and excess of desperate men who must either starve or frighten their masters into immediately meeting their demands. The masters on these occasions are just as loud on the other side, calling incessantly for the help of the civil magistrate and for strict enforcement of the severe laws enacted against combinations of servants, laborers, and journeymen. Workers accordingly very seldom gain anything from the violence of these tumultuous combinations. Partly because the civil magistrate intervenes, partly because masters stand firmer, and partly because most workers must submit in order to survive for the present, such combinations usually end only in punishment or ruin for their leaders.

Though masters must generally prevail in disputes with their workers, there is nevertheless a certain rate below which the ordinary wages of even the lowest kind of labor seem impossible to reduce for any considerable time.

A man must live by his work, and his wages must at least maintain him. Usually they must be somewhat more; otherwise he could not raise a family, and the line of such workers would end with the first generation. Mr Cantillon therefore seems to suppose that the lowest class of common laborers must everywhere earn at least twice what is needed for their own support, so that on average they can raise two children; the wife’s labor, because she must attend to the children, is assumed to provide no more than her own support. But it is calculated that one half of children born die before adulthood. On this account the poorest workers must, on average, try to raise at least four children so that two have an equal chance of reaching that age. The necessary support of four children, it is supposed, may nearly equal that of one man. The same author adds that the labor of an able-bodied slave is reckoned worth twice the cost of his support, and thinks that the labor of the humblest worker cannot be worth less than an able-bodied slave’s. At least this much seems certain: to raise a family, a husband and wife together must be able to earn, even in the lowest kind of common labor, something more than precisely what their own support requires. In what proportion—whether the one just mentioned or another—I will not presume to decide.

Certain circumstances, however, sometimes give laborers an advantage, enabling them to raise their wages considerably above this rate, plainly the lowest compatible with ordinary humanity.

When a country’s demand for people who live on wages—laborers, journeymen, and servants of every kind—is constantly growing; when every year provides employment for more people than the year before, workers need not combine to raise their wages. A shortage of hands makes masters compete, bidding against one another for workers and thus voluntarily breaking the masters’ natural combination against wage increases. Clearly, demand for wage earners can grow only in proportion to growth in the funds set aside to pay wages. These funds are of two kinds: first, revenue beyond what is needed for their masters’ support; and second, stock beyond what is needed for their masters’ employment.

When a landlord, annuitant, or man of money has more revenue than he judges necessary to support his own family, he spends all or part of the surplus supporting one or more domestic servants. Increase the surplus and he will naturally employ more servants.

When an independent worker, such as a weaver or shoemaker, has more stock than he needs to buy his own materials and support himself until he can sell his work, he naturally employs one or more journeymen with the surplus to profit from their work. Increase that surplus and he will naturally employ more journeymen.

Demand for wage earners therefore necessarily grows with the revenue and stock of every country and cannot possibly grow without them. Growth in revenue and stock is growth in national wealth. Demand for wage earners therefore naturally grows with national wealth and cannot possibly grow without it.

It is not the existing magnitude of national wealth, but its continual growth, that raises wages. Accordingly, wages are highest not in the richest countries but in those most prosperous, or growing rich most rapidly. England at present is certainly much richer than any part of North America. Yet wages are much higher in North America than anywhere in England. In the province of New York, in 1773, before the late disturbances began, common laborers earned three shillings and sixpence currency, equal to two shillings sterling, a day; ship-carpenters, ten shillings and sixpence currency, with a pint of rum worth sixpence sterling, equal in all to six shillings and sixpence sterling; house-carpenters and bricklayers, eight shillings currency, equal to four shillings and sixpence sterling; journeymen tailors, five shillings currency, equal to about two shillings and tenpence sterling. All these prices exceed London’s, and wages are said to be as high in the other colonies as in New York. Provisions everywhere in North America cost much less than in England. A dearth has never been known there. Even in the worst seasons they have always had enough for themselves, though less to export. If the money price of labor is higher than anywhere in the mother country, then its real price—the real command over life’s necessities and comforts that it gives the laborer—must be higher by an even greater proportion.

On the Wages of Labor.

What labor produces is naturally the worker’s reward, or wages. In the original state of society, before land became private property and before stock accumulated, workers kept everything their labor produced. There was no landlord or employer to take a share.

If that state had continued, wages would have risen with every increase in the productivity of labor brought about by the division of labor. Everything would gradually have become cheaper. Each item would take less labor to produce. Goods made with equal amounts of labor would naturally be exchanged for one another in that state, so each could also be bought with the product of less labor than before.

Even though everything would really have become cheaper, many things might have appeared to become more expensive. They might have exchanged for larger quantities of other goods. Suppose, for example, that labor in most occupations became ten times as productive, so a day’s work produced ten times its former output. But in one particular occupation, productivity only doubled, so a day’s work produced twice its former output. When the product of a day’s work in most occupations was traded for the product of a day’s work in that one, ten times the original output of the first group would buy only twice the original output of the second. A given quantity of the second product, a pound weight for example, would therefore appear five times as expensive. In reality, it would be twice as cheap. It would take five times as much of other goods to buy, but only half as much labor to buy or make. Obtaining it would be twice as easy as before.

But the original situation, in which workers kept everything they produced, could not continue after land became private property and stock began to accumulate. It ended long before the most important improvements in labor productivity. There is therefore no point in examining further what it might have meant for workers’ pay.

Once land becomes private property, the landlord demands a share of nearly everything a worker grows or gathers from it. Rent is the first deduction from what labor on the land produces.

The person who tills the ground seldom has enough to live on until the harvest. A farmer who employs that person usually provides support in advance from the farmer’s stock. The farmer would have no reason to employ the worker without either a share of the product or repayment of that stock with a profit. This profit is a second deduction from the product of work on the land.

Profit is similarly deducted from what almost every other kind of labor produces. In crafts and manufacturing, most workers need an employer to provide materials, wages, and support until the work is finished. That employer takes a share of what they produce, or of the value their work adds to the materials. This share is the employer’s profit.

Sometimes an independent worker has enough stock to buy materials and to live on until the work is finished. That person is both employer and worker, and keeps the entire product of the work, or all the value the work adds to the materials. The proceeds include what are normally two separate forms of income belonging to two separate people: profit on stock and wages for labor.

Such cases are not common. Everywhere in Europe there are twenty workers employed by someone else for every independent worker. Wages are therefore understood everywhere as the payment made when a worker and the owner of the stock employing that worker are different people.

The usual wage everywhere depends on the agreement ordinarily reached between those two parties. Their interests are not at all the same. Workers want to receive as much as possible, and employers want to pay as little as possible. Workers tend to join together to raise wages; employers join together to lower them.

It is easy to see which side generally has the advantage in such a dispute and can force the other to accept its terms. Employers are fewer, so they can join together more easily. The law also authorizes, or at least does not forbid, their combinations, while forbidding workers’ combinations. We have no acts of parliament against joining together to lower pay for work, but many against joining together to raise it. In any such dispute, employers can hold out much longer. A landlord, farmer, manufacturer, or merchant can generally live for a year or two on accumulated stock without employing a single worker. Many workers cannot survive a week without work; few can survive a month, and hardly any can survive a year. In the long run, workers may be as necessary to their employers as employers are to them. But their need is not as immediate.

It has been said that we often hear of workers joining forces but rarely hear of employers doing so. Anyone who takes this to mean employers rarely combine understands neither the world nor the subject. Employers everywhere have a quiet, steady, shared understanding that they will not raise wages above the current rate. An employer who breaks with this practice is unpopular and earns the disapproval of neighboring employers and peers. We rarely hear of the practice because it is the usual, almost natural condition, which attracts no notice. Employers sometimes form special agreements to push wages even below the current rate. They keep these arrangements completely secret until they act. When workers give in, as they sometimes do without resistance, outsiders never hear of it, though the workers suffer badly. Workers often respond with their own defensive combinations. Sometimes, without any such provocation, they also combine on their own initiative to raise their pay. They generally cite either expensive food or the large profits their employers make from their work. But whether workers join forces to attack or defend, everyone hears about it. To get a quick decision, they resort to the loudest protests and sometimes to appalling violence and outrage. In desperation they act recklessly and extravagantly: they must either starve or scare their employers into immediately meeting their demands. On the other side, employers are just as loud. They constantly call for help from civil authorities and for strict enforcement of the severe laws against combinations of servants, laborers, and journeymen. Workers thus very rarely gain from the violence of these disorderly combinations. Intervention by the authorities, the greater ability of employers to hold firm, and most workers’ need to submit so they can live now generally mean that the leaders are punished or ruined, with no other result.

Even though employers generally win disputes with workers, there is a certain level below which the usual wages of even the lowest kind of labor cannot, it seems, be reduced for long.

People must be able to live by their work, so their wages must at least support them. In most cases wages must be somewhat higher. Otherwise workers could not raise families, and that group of workers could not last beyond its first generation. For this reason Mr Cantillon seems to think that the lowest-paid ordinary workers everywhere must earn at least twice what they need for their own support. On average, this would allow them to raise two children. He assumes that a wife’s labor only covers her own support because she must care for the children. It is estimated, however, that half of children born die before adulthood. On this account, the poorest workers must on average try to raise at least four children so that two have an equal chance of reaching adulthood. The support needed by four children is thought to be nearly equal to that needed by one man. The same author adds that the labor of an able-bodied slave is reckoned to be worth twice the cost of supporting that slave. He thinks even the lowest-paid worker’s labor cannot be worth less than the slave’s. At least this much seems clear: to raise a family, a husband and wife together must earn somewhat more than exactly what they need to support themselves, even in the lowest-paid ordinary work. I will not try to decide whether the necessary increase is the amount just mentioned or some other amount.

Certain circumstances do sometimes give workers an advantage and let them raise wages considerably above this level, which is clearly the lowest that ordinary human decency allows.

When demand for people who earn wages—laborers, journeymen, and servants of every kind—is constantly growing in a country, more people find work each year than in the last. Workers then need not join forces to raise wages. A shortage of workers makes employers compete and bid against one another to hire them. Employers thus voluntarily break their usual shared practice of keeping wages down. Demand for wage earners can grow only as the funds set aside to pay them grow. There are two kinds of these funds: first, revenue beyond what employers need for their own support; second, stock beyond what they need for their own work.

When a landlord, someone receiving an annuity, or a wealthy person has more income than seems necessary to support the family, that person uses some or all of the surplus to support one or more household servants. A larger surplus naturally means hiring more servants.

When an independent worker, such as a weaver or shoemaker, has more stock than is needed to buy materials and live until the work can be sold, that worker naturally uses the surplus to hire one or more journeymen and profit from their work. A larger surplus naturally means hiring more journeymen.

Demand for wage earners therefore necessarily grows as a country’s revenue and stock grow, and cannot grow without that growth. Growing revenue and stock mean growing national wealth. Demand for wage earners thus naturally grows with national wealth, and cannot grow without it.

It is not how wealthy a country already is that raises wages, but how steadily its wealth is increasing. Wages are therefore highest not in the richest countries but in the most prosperous, those growing rich most quickly. England today is certainly much richer than any part of North America. Yet wages in North America are much higher than anywhere in England. In the province of New York, before the recent disturbances began, ordinary laborers in 1773 earned three shillings and sixpence currency a day, equal to two shillings sterling. Ship-carpenters earned ten shillings and sixpence currency plus a pint of rum worth sixpence sterling, together equal to six shillings and sixpence sterling. House-carpenters and bricklayers earned eight shillings currency, equal to four shillings and sixpence sterling. Journeymen tailors earned five shillings currency, equal to about two shillings and tenpence sterling. These rates are all higher than London’s, and wages are said to be as high in the other colonies as in New York. Food costs much less everywhere in North America than in England. No food shortage has ever been known there. Even in the worst seasons, people have always had enough for themselves, though less to export. Since the money price of labor is higher there than anywhere in the mother country, its real price—the quantity of life’s necessities and comforts that workers can buy—must be higher by an even greater proportion.