Chapter XXII: Section CLXV: Wages.--The Demand for Labor

The demand for labor, as for every other commodity, depends, on the one hand, on the value in use of it, and on the other, on the purchaser's capacity to pay for it (his solvability), These two elements determine the maximum limit of wages, as the means of support considered indispensable by the workmen determine the minimum. There are circumstances conceivable under which the rise in wages might entirely eat up rents; but there must always be a portion of the national income reserved to reward capital (its profit). If wages were to absorb the latter also, the mere owner of capital would cease to have any interest in the progress of production. Capital would then be withdrawn from employment and consumed.[165-1] Obviously, no man engaged in any enterprise can give more as wages to his workmen than their work is worth to him.[165-2] Hence the additional product in any branch of industry, due to the labor of the workman last employed, has a controlling influence on the rate of the wages which can be paid to his fellow workmen. If the additional products of the workmen successively last employed constitute a diverging series,[165-3] the last term in the series is the natural expression of the unsurpassable maximum of wages; if they constitute a converging series, men the employer can pay the last workman higher wages than the additional product due to him; provided, however, that the reduction which is to be expected in the case of the workmen previously employed to the same level still leaves him a sufficiently high rate of profit.[165-4] Hence the growing skill of a workman, in and of itself, makes an increase of his wages possible;[165-5] while, conversely, if he can be replaced by capital, which always relatively decreases the value in use of his labor, there is a consequent pressure on his wages.

[Footnote 165-1: _Storch_, Handbuch, I, 205 seq.]

[Footnote 165-2: Higher wages promised, for instance, as a
reward for saving a human life or some other very precious
thing in great danger of being destroyed. In the case of
material production, labor is worth to the party engaged in
the enterprise, at most, as much as the price of the product
after the remaining cost of reproducing it is deducted.]

[Footnote 165-3: Possibly in consequence of a better
division of labor or of some other advance made in the
technic arts.]

[Footnote 165-4: Thus, for instance, in harvesting potatoes,
if, after they have been ploughed up, only those nearest the
surface are collected, a laborer can gather over thirty
Prussian _scheffels_ in a day. But the fuller and completer
the gathering of potatoes desired is, the smaller will be
the product of one workman and of one day's labor. If,
therefore, a man wants to gather even the last bushel in a
potato field of 100 square rods, so much labor would be
required to accomplish it that the workman would not gather
enough to feed him during his work, to say nothing of
supplying his other wants. Supposing that 100 _scheffels_ of
potatoes had grown on 100 square rods, and that of these
were harvested--

_When the number of _Then the additional yield
men employed in obtained by the
gathering them was_ last workman employed is_

4, 80 scheffels,
5, 86.6 " 6.6 scheffels.
6, 91 " 4.4 "
7, 94 " 3 "
8, 96 " 2 "

(_von Thünen_, Der isolirte Staat, II, 174 ff.)]

[Footnote 165-5: In Manchester, in 1828, the wages paid for
spinning one pound of cotton yarn, No. 200, was 4s. 1d.; in
1831, only from 2s. 5d. to 2s. 8d. But, in the former year,
the spinner worked with only 312 spools; in the latter, with
648; so that his wages increased in the ratio of 1274 to
1566. (_Senior_, Outlines.)]