This section is from the "Economics In Two Volumes: Volume I. Economic Principles" book, by Frank A. Fetter. Also available from Amazon: Economic
§ 4. Fees for temporary direct services. On the very borderline between the class of self-directing laborers and regular wage-employees is the class of laborers which is temporarily employed to do a definite service directly for others, receiving therefor a payment or fee. The barber shaves his patron, the ferryman takes the traveler across the river, the boy carries a message, the surgeon sets a broken arm. Of a like nature are the fees for services of bootblacks, messengers, porters, doctors, lawyers, etc., when there is no continuing contract of employment. Each performs a valuable service, which is sold to the beneficiary but produces no long-abiding material result, and no separable, saleable, material good. Little different is the case of custom-made production once very common, now infrequent, where the customer took his own cloth to the tailor to be made into a suit, leather to the cobbler to be made into shoes, and wheat to the miller to be ground into flour. The artisan owned his own tools, and stayed in his own shop, and was paid for the definite service of imparting new form-value to the materials. There, clearly, his earnings in the long run would be adjusted in a market for labor services.
When the buyer of labor is a merchant who supplies the materials and pays for the form-change made in the home or shop of the worker, the system of work is called domestic production, sometimes factor or commission work, sometimes, in cities, tenement-house work. This is still common in the weaving of silk in Europe, and in the manufacture of clothing in America, and in some other cases. The artisan has here less independent action, has no dealing directly with the ultimate consumer of his services, and is very near to being a piece-price wage-earner; but if he still owns his tools it is not a clear case of wage-payment. We hesitate to call any of these cases of wage-payment, tho they come very near to it. But when we come to the case of the artisan (e.g., a carpenter), even tho he may own his own tools, who works for an employer in a place chosen and controlled by the employer, we consider it a case of wage-payment. In these border cases we see very plainly how the services are valued and sold apart from the material to which they are applied.
§ 5. The continued wage contract for personal services. In ordinary domestic service the laborer is employed for a longer or shorter time to give a series of services, some personal and direct, and others more or less indirect. The wealthy man does not hire a coachman each time he wishes to take a ride, but having summed up the advantages of a coachman's services, he buys them by the month or the year. The price is determined in the market for coachmen of the needed ability, qualities ranging from stupid to bright, from weak to strong, and from drunk to sober. Instead of buying flowers from day to day, a wealthy man hires a gardener to cultivate them in a conservatory. The average market-price of flowers influences the wages paid to the gardener, his wages being but the sum of the values (or of his imputed part in the values) of flowers, well-kept lawn, and garden products. Of a like nature are the services of cooks, waiters, tutors, musicians, and teachers in private employment, etc. Between two and three million persons are employed in this way in America. According to the conditions of each household and of the general market, the one or the other mode of buying these services and products is the more advantageous to the consumer. The wages of gardeners in private employ must be in pretty close agreement with the wages of those working in commercial gardening, and with the labor-incomes of the simpler self-employing gardeners.
§ 6. Price of labor employed on products to sell. The payment of the laborer to produce goods for exchange is the most common modern case of wages. The relation of wages to the value of the product is in this case more complex, for the employer is directing the labor to meeting the desires of others, not his own desires. It is by rightly anticipating the desires of prospective customers for the product, and successfully exchanging or selling it, that the employer is enabled to recover the amounts paid to laborers. When industry becomes complex, the connection between the wages and the price ultimately realized in the product may be broken for a time, but rarely for a very long time. Because of miscalculations, labor is sometimes employed on things that prove to be quite valueless, and on other things that have a much greater value than was expected. When months or years intervene before the price of the labor is realized in the sale of the product, the employer must forecast the outcome as best he can, and employ labor only when the wages promise to be recovered. These are complicating facts, but in any logical view they do not falsify the principle that wages are but the commuted, or reflected price of the product (i.e., of that portion of the product which under market conditions, is reflected to the labor).5
Let us recall again that labor is only one of the elements entering into the product. (See last chapter, section 10.) Each agent in industry, whether it be a plow, a horse, or a man, is valued in connection with other agents, never apart or isolated. It is not the total service that any one of them performs that can be got at; all that can be got at is the value attributed to the marginal unit of supply, that is to every unit of like quality in the whole economic situation. Each agent is considered in combination with other things at a given moment under existing conditions. Within limits labor may be substituted for the other elements, fewer machines being used and more laborers, or vice versa. It is said that the price of mules at the Pennsylvania mines is affected by immigration, for a mule and a man may for some purposes be substituted. No more will be given for any labor than the employer expects it to add to the value of the product. The employer is constantly testing the value of each kind of labor in his own establishment with the value of other agents of production.6 In any state of the labor market the wages of any labor or class of labor tend to conform to the value of the services to the employer, and the value to the employer is determined by the price which the ultimate consumers will pay for the product.7
5 The place of the employer as midway between laborer and consumer, is more fully treated later, under enterprise, in Part V.