1. Wage in the broad sense is the income due to labor, in distinction from that due to the control of material agents. The uses of material agents, studied under the subject of rent, are sometimes called "material services." The adjective refers to the source or bearer of the use, and does not imply that the service is to be thought of as a material thing. In its last analysis a service is never a material thing, but a psychic effect on men and their wants. Material services and human services are merely specific kinds of the genus services (or utilities), and it would doubtless be a better usage to speak of labor's services and wealth's uses. Wages bear the same relation to man's services that rent does to the material uses of wealth. Wages are more like rent than like interest in that neither wages nor rent are expressed as a percentage. While rent is the value of the uses of things, wages is the value of the services of men. In discussing interest, wealth is capitalized; but, in discussing wages, men are thought of as affording utilities for a time, as is wealth under the renting contract. The resemblance thus is very close between rent and wages, but not so close between wages and interest.

Despite this interesting analogy, it is not well to speak, as some do, of "the rent of labor" - as well might one speak of the wages of wealth. Such a usage only beclouds the distinction between two concepts, suggesting identity where there are important differences. The aim of scientific classification is missed when contrasts are thus concealed under a single term.

Wages and rent compared and contrasted.

Nature of the law of wages.

2. A law of wages is a statement of the relation of the general causes of value to the value of human services. In real life no one agent is valued independently of other goods. The felt importance of a good depends on the degree to which other wants are gratified. If men are starving, they attach less importance to ornaments; if cold, more importance to clothing and fuel, being willing to part even with some needed food to secure them. That is, man's desire for each thing is affected by his general condition and by the existence of other goods and wants. A similar relation exists between the values of indirect agents, and must exist between wages and rent.

We are to discuss the law of wages. An economic law / does not state a command; it is not a political law; it states merely an observed relation. Things do not need to happen actually according to any law of wages that can be formulated, but they will happen in the measure that the assumed conditions exist. The law states a tendency of wages, just as the law of gravitation states a tendency and does not predict positively whether a given object will fall at a given moment. The "law of wages," therefore, is to be understood as a hypothetical statement of the value that will be attributed to labor under a given set of conditions..

Economic wages and contract wages.

3. Economic wages are the value of human services in the broad sense; contract wages are the goods paid by one man to another according to an agreement. In discussing rent and interest, we have become familiar with this important distinction between economic and contract values. Economic wages are fundamental, the primary subject of theoretical study. Contract wages are the wages paid by one man to another in accordance with an agreement, and may not at this moment coincide with economic wages.

When the contract was made, one party may have been ignorant or helpless, and have failed to get all he now could; or meantime the conditions may have changed. But contract wages are based on economic wages and tend to conform to them. If one person performs services for another without expecting to receive economic goods or services in return, it is a gift, not wages. A workman can get as contract wages the amount of his economic wage if free competition exists and he acts intelligently. Of course, these are important conditions.

Real and nominal wages must be distinguished: real wages are the reward of labor as measured in goods and enjoyments; nominal wages are the reward expressed in terms of money, whose purchasing power varies from time to time and from place to place.

4. Human services, being one of the conditions of psychic income, bear the same relation to wants that material goods bear. As the material agents that are fitted to gratify wants are scarce, labor is applied to the outer world to change and adapt it, thus making it answer desire better. Labor, thus, in many of its applications merely supplements the bounty of nature. Men have a use to and for each other; they have a relation to other men's welfare similar to that borne by material things. The different human actions have all grades of relation to gratification, from harmful to helpful, just as things have. According to their relation to this scale services therefore become ranked either high or low in the estimation of men. Some acts are negative services, to use the term service in a paradoxical sense; they are things to be avoided and escaped. Value then is attributed to the services of men according to their rank in this scale, just as it is to the uses of agents in the case of rent.

Scarcity is the condition of value in labor, as it is of value in any good; but scarcity is a relative term. The commonest kinds of labor would not ordinarily be called scarce, but compared with their possible desirable uses, they are scarce, and this fact is the key to a large part of the wage problem. The question is: how and in what degree does this scarcity cause value to attach to labor?

Scarce services gratify wants.

The simplest case of economic wages.