This section is from the "The Science Of Wealth" book, by Amasa Walker.
Since labor and capital join together in production, each may rightfully claim, and in the nature of things must receive, a share of whatever is produced.
The share which labor receives is called "wages;" and by this general term is meant that compensation which the employer pays to the employed for his personal services. The law of value is the law of wages. Wages confer value, and are measured by it. They depend essentially on the conditions of cost, supply, and demand. Competition comes in to influence their rate, as it does the price of other commodities.
Wages vary greatly in different countries, and in different parts of the same country; they vary, too, in all the employments and occupations of society. These differences, however, are neither accidental nor arbitrary, but depend on certain laws which it is our purpose to point out.*
* A part of this chapter appeared in the "Merchant's Magazine" in 1857.
The joint instrumentality of labor and capital being necessary to the production of wealth, it follows that the interests of the two parties are closely connected; that capital is as dependent on labor as labor is upon capital.
If this is so, the probabilities of an equitable division will depend on the freedom with which both parties are able to act, and the equality on which they stand when the contract or copartnership is formed.
Whatever, in social arrangements or civil institutions, destroys the natural freedom and equality of the parties, gives one an advantage over the other; and the party having the advantage will profit by it.
Wherever, by class legislation, capital is allowed to tyrannize over its copartner, or concentrate itself in vast aggregations, and thus increase its natural power over labor, which cannot be thus brought into powerful and permanent combination, the latter will be compelled, in one form or another, to take up with less than its just reward.
But, however unjust or arbitrary laws or institutions may be, it is evident there are certain limits beyond which the wages of labor cannot be reduced.
The cost of labor is identical with the cost of maintaining the laborer in such circumstances that he can not only support himself, but rear a family of children sufficiently numerous at least to keep the supply of laborers good.
Hence he must receive what has been properly denominated necessary wages; that is, to use in part the definition of Adam Smith, "such wages as will enable him, not only to obtain the commodities absolutely necessary to the support of life, but whatever else the customs of society render it indecent for persons in his rank in life to be without."
There being, then, no uniform and established standard of wages, they vary according to the expenses of subsistence in different countries, and the condition in which the laboring classes are willing to live.
The cost of labor, or the current rate of wages that can permanently exist, depends on the necessary expenses of living; and these expenses, in turn, depend upon the condition of the laboring classes. Hence, other things equal, the more educated and morally and intellectually elevated any community of laborers may be, the higher will be their standard of wages.
Wages are not high in proportion to the wealth of a community, but rather to the disposition that exists amongst those possessing wealth to pay it out for labor; and this disposition will depend much upon the security and profitableness with which capital can be employed in production, and the enterprise and aspirations of the people.
We make the following divisions of our subject: —