Part 6 (1/2)

--4. _The Supply of Labor in General_. The efficiency of labor may be regarded as affecting either the demand for labor on the one hand or the supply of it on the other, according as we look at the matter from the worker's or the employer's standpoint. The employer is concerned with the labor costs per unit of his output, the worker is concerned with the wages he receives. An increase in the efficiency of labor may, and usually will, mean both a decrease in labor costs to the employer and an increase in the earnings of the worker. It is thus wholly to the good. But the effects of an increase in the supply of labor in the sense of a growth in the numbers of the population are far more dubious. Unaccompanied by an increase in the _demand_ for labor, it _must_ result in a diminished remuneration for the individual worker. To some extent indeed the demand for labor would almost certainly be increased. The supply of Capital may expand, perhaps proportionately, perhaps more than proportionately to the increase in population. But one factor of production, as we have seen, is not capable of such expansion. This is the factor of Land, or Natural Resources. It is the limitation of this factor which gives rise to what we have most of us heard of as The Law of Diminis.h.i.+ng Returns. It is this that is the essence of the problem of Population, portrayed in somber hues more than a hundred years ago by Malthus.

This problem will form the subject of the sixth volume of the present series. In the meantime it may be suggested that we are easily credulous if we suppose that the problem has been finally disposed of by the peculiar progress of an abnormal century. But that experience has at least destroyed the view that there _need be_, or even is in fact in Western countries, a relation between real wages and the numbers of the people so close and direct that an improved standard of living must be temporary only, doomed to destroy itself by the increased population it engenders. One may perhaps go further and say that it is doubtful even in what direction changes in remuneration will influence the aggregate supply of labor. When we pa.s.s to ”what should be,” it is plain that there is nothing whatever to be said for the sort of relation indicated above. The view once widely held that the principle of population must inevitably keep the ma.s.s of people close to the verge of the bare means of subsistence was no statement of a desirable ideal. It was a nightmare; a nightmare none the less though it may haunt us yet. It is far from fanciful to suggest that it is because this relation is so obviously _not_ ”what should be” that it may be ceasing to hold true in fact. But it would be very fanciful indeed to maintain that as yet ”what should be” is represented by the actual population. Thus, just as with capital, so with labor, there is no reason to suppose that the aggregate supply is determined by any fundamental economic law, or corresponds in practice to what is socially desirable.

--5. _The Apportionment of Labor among Places_. Again, as with capital, it is when we turn to the _apportionment_ of labor between different employments that both economic law and social ideal make their appearance. It will be well, however, to consider briefly in the first instance the different question of its apportionment between places. This was hardly necessary in the case of capital, because the possibilities of foreign investment are very numerous and easy: the mobility of capital is thus sufficiently strong (once again it is only _marginal_ adjustment that is necessary) to establish over at least a large part of the world something near to a uniform rate of interest. But this is not the case with labor. People do indeed move from place to place within a country, and from one country to another, in response to economic opportunities. That even the latter movement may be a considerable thing, the present population of the United States is a striking testimony. But obviously the mobility is very incomplete. Here, then, we have what we might _loosely_ call an economic law that labor tends to ”flow” (as it is sometimes unhappily phrased) to those places where it can command the highest reward; we have this tendency in evidence, but it is far too weak to enable us to lay down what would deserve more strictly the t.i.tle of an economic law, that in the long run the reward of the same kind of labor is roughly equal in all places. Perhaps we can say this for many districts in a single country; but for few countries is this true as between all their districts. As between countries, it is not remotely true.

Here, however, the imperfection of economic law is balanced by an extreme uncertainty as to the ideal. Perfect mobility of labor may be _economically_ desirable in a very narrow sense of the term; but it opens out a vista of racial, national and cultural problems, into which it will be better for us not to enter here. We must take for granted the population of a country, like that of the world, as a given fact.

When we do this, the question of its remuneration is on all fours with the more general question discussed above. That the remuneration of the labor of a country is mainly governed by the relations between demand and supply is an inexorable fact. In view of the international mobility of capital, the main distinctive factor in the demand for the labor of a particular country is the supply of natural resources, which it knows how to use. Where the natural resources are great relatively to the population, there wages will rule high; where the converse is true, wages will rule low. This result of economic a.n.a.lysis is abundantly confirmed by experience. The relatively high wages in the new world, the low standard of living in the densely populated East; the economic history of Ireland are so many object-lessons of its truth.

--6. _The Apportionment of Labor among Social Grades_. The question of the apportionment of the labor of a country among different employments falls under two heads. Some differences of occupation are a.s.sociated particularly in Great Britain with differences of what we know as cla.s.s. The movement of labor between different social grades is clearly a very different thing from its movement between different occupations in the same grade. The grades themselves are not easy to define: not a little ingenuity has been expended on the attempt, and perhaps the best brief cla.s.sification that has been put forward is one which divides labor into the following four grades:--

(1) Automatic manual labor.

(2) Responsible manual labor.

(3) Automatic brain workers.

(4) Responsible brain workers.

But the matter is one perhaps for the satirist of manners rather than the economist. It suffices for our purpose that the distinctions, however vague, are very real.

It is obvious the mobility of labor between the occupations of a platelayer and a barrister is not very great. It may seem perhaps to be even smaller than it is. For here it is important to bear in mind a general consideration which is equally applicable to horizontal movements within any social grade. There may be a considerable movement of labor between different employments without any individual worker having to change his occupation. The personnel of any industry is constantly changing. At one end, men die, retire, or are pensioned off; at the other end, young recruits are taken on. By a diversion of the new recruits from one employment to another, a radical change can be made in the occupational census in a comparatively short s.p.a.ce of time. It is in this manner that such movement as takes place is largely effected at the present time. Within the ranks of the professional cla.s.ses, a man does not commonly leave the profession to which he has been trained. But his _choice_ of profession is determined by him or his parents not solely on pecuniary grounds but usually with an anxious scanning of the general prospects, which include pecuniary advantages together with many other things. The same thing is true in no small measure of manual wage-earners. This general consideration must be borne in mind throughout the remainder of this chapter.

But even the sons of platelayers do not commonly practise at the bar. The obstacles in the way are various and subtle. Many of them are ideas, inherited from a bygone epoch, about keeping other people ”in their proper stations,” which the whole drift of circ.u.mstance, and the spirit of the age are rapidly wearing down. In the new world such obstacles are rare. But an obstacle of a more tangible and formidable kind arises from the fact that the liberal professions and many business careers require a long and expensive education and training, which the platelayer is quite unable to afford to give his son.

Now this expense of training is highly relevant not only to ”what is,”

but to ”what should be.” It includes, it should be observed, a negative as well as a positive element; a long period of waiting before income begins, as well as the actual outlay on educational and other charges. When the burden both of the waiting and the positive costs must be borne either by the individual or the family, there are few people who would seriously dispute that this goes to justify, on grounds of fairness as well as of expediency, a higher level of annual remuneration later on; though many people would doubtless argue that the amenities and dignities of the professions should be taken into account on the other side. But the same consideration makes it a matter of legitimate doubt whether it would be desirable, even as an ideal, that the community should provide so completely the costs of training and of maintenance in the waiting period, as to make it no longer ”fair” that the individual should be remunerated more highly than workers in less expensive occupations. For this would mean that more labor would be absorbed in the former employments than in principle would be socially desirable, for reasons which the argument of the next chapter will make plain. But the most desirable number of doctors, barristers, teachers, etc., is not a thing which can be settled on purely economic grounds, and it is unprofitable to carry further this particular line of thought. Few people would advocate, as an ultimate ideal, that the remuneration of the professional grades of labor should exceed that of lower grades by _more_ than the extra expense of training and waiting they involve. That the excess is usually greater than this at the present time seems very probable: though it is a matter on which it is very hard to generalize. But it would certainly be far greater than it is if the principle of _laissez-faire_ ruled supreme in these affairs. Fortunately it does not, and has never done so. Even before the days of free elementary education, the endowment of education was not unknown. The ancient public schools and universities, which have come down to us from the Middle Ages, are a standing witness to what in this field a far poorer community thought fit to do. Their systems of scholars.h.i.+ps and exhibitions, no less than their courts and towers, deserve our notice. For these were designed to form what we now call ”a ladder” by which talent could climb from the humblest origins to the callings which then seemed the summit either of spiritual or of worldly ambition.

This reference to ”talent” makes it well to consider here a factor which necessarily complicates, though it does not substantially affect, the whole argument of the present chapter. There are differences of natural ability, which no education or training can obliterate, which it should rather be their business to excite. These differences are a.s.sociated to a great extent with differences of occupation; they _should be_ so a.s.sociated far more closely than in fact they are. They are also a.s.sociated with differences of remuneration even within the same occupation; ”what should be” here is a question which we may excuse ourselves from discussing. The principle which, however vague, is sufficient for our present purpose is that the same _natural ability_ should command the same reward in all occupations, subject to differences which should not exceed the differences of educational cost and initial waiting they involve. We cannot a.s.sert, as an economic law, that this is generally true in fact. If ever it becomes true, it will be due not to ”_laissez-faire_,” or ”free compet.i.tion,” but to social arrangements, which express a sense of what is right.

--7. _The Apportionment of Labor among Occupations_. When we pa.s.s to the apportionment of labor among different occupations in the same social grade, the same principle as to ”what should be” applies in a simpler form. Equal natural ability should command an equal reward in all occupations; a.s.suming that differences in cost of training can be ignored. The reward must, of course, be interpreted not in terms of money only but of ”real wages,” with allowance for the varying amenities of different tasks. Now it was here that the extreme advocates of _laissez-faire_ made one of their cardinal mistakes. They a.s.sumed that this ideal would be best secured by ”perfect compet.i.tion.” The employer would choose the worker who would come for the lowest wage; the worker would choose the employer who would pay him the highest wage; and so, by a process similar to the higgling of a commodity market, the desirable uniform wage-level would become established. But in fact the conditions of the labor market differ greatly from those of a commodity market. People are ignorant, do not look ahead, cannot afford to risk the loss of a job, however wretched, which they happen to have got. For reasons such as these, a considerable departure from _laissez-faire_ is necessary in order to realize the theoretical results of _laissez-faire_. To prevent the putting of boys in large numbers into ”blind alley” occupations, you must supplement the foresight of parents with Juvenile Employment Exchanges and After-Care Committees. To secure a proper uniformity of wages within the same occupation, you must have trade unions. To secure a proper uniformity between different occupations, you must have again trade unions, or, failing them, Trade Boards.

That the actions of trade unions are very largely of this type is a fact insufficiently appreciated by the middle-cla.s.s public. The elaborate system of piece-rate lists which has been evolved in the Lancas.h.i.+re cotton industry is primarily designed to secure the same wage for workers of equal efficiency in all mills, irrespective of the degree to which the machinery is antiquated or up to date. This result is wholly to the good: not only does it secure ”fairness” for the worker, it stimulates the employer wonderfully to efficiency. The same result could never be secured so effectively by the free play of compet.i.tion. But this tendency, which is easily the predominant element in the trade union regulations of the cotton trade, is at least an important element in the policy of ”The Common Rule” of all trade unions, though it may often be mixed up with the more questionable tendency to eliminate differences of pay for differences of natural ability, and the unquestionably bad tendency to discourage output. As between different occupations, the insistence of a trade union that wages must be leveled up towards the wages obtaining in similar trades acts again as a far more powerful force than compet.i.tion.

But the actions of trade unions are by no means wholly of this type. They often serve rather to secure still higher wages for workers who, comparatively speaking, are already highly paid. It makes little difference whether this effect is secured directly by wage demands, or indirectly by restricting the right of the entry to the trade. In either case the consequences are the same, and there should be no ambiguity as to their nature. They are certainly bad for the community, certainly bad for the _other_ workers of the grade, almost certainly bad for the workers of the grade regarded as a whole. The higher wages must raise the money costs of production, and result, sooner or later, in fewer workpeople being employed in that occupation; larger numbers must accordingly seek employment elsewhere; and this cannot but depress the wage rates of less strongly organized trades. Thus the effect is twofold: a larger proportion of workpeople will be employed in badly paid occupations; and the wages there will be lessened.

The power of a strong trade union to secure wage advances of this type is considerable, but it must not be exaggerated. Trade unions employ as a matter of course devices which, in the case of trusts, we regard as the extremest weapons of monopoly. To say, ”If you buy from anyone except us, you must not buy at a lower price than ours,” which Messrs. J. & P. Coats are represented as having done, is a.n.a.logous to insisting that if non-unionists are employed, it shall be at the trade union rate, as every trade union very properly insists. To say, ”You must buy _only_ from us,” the method of the boycott, as it is called, is a.n.a.logous to the very common refusal to work with non-unionists at all. But in one important respect the tactical position of a trade union is weaker than that of an ordinary combination. It has usually got a buyers' combination up against it, in the shape of an a.s.sociation of employers. The latter will be governed in their att.i.tude towards the workpeople's demands, not only by immediate expediency, but also by their own sense of ”what should be”; and they will usually resist demands for wages greatly in excess of those obtaining in comparable trades. In this way, the tendency for workers of the same efficiency to receive the same real wages in all employments is far stronger than might at first sight appear.

If we had to rely for this result upon trade unions alone, it would be highly problematical. For here a psychological curiosity emerges, which, familiar and intelligible as it is, is none the less a curiosity. So far from still higher wages for well-paid workpeople being regarded in the world of manual labor as detrimental to the interests of other workpeople, it has become almost a point of honor to believe the contrary. A wage dispute in a particular trade is conceived as an engagement in a far-flung battle between Capital and Labor, in which success at any part of the line will facilitate the victory of the whole army. This conception contains a measure of truth, as regards immediate and purely temporary effects; though, even here, it is made to seem unduly plausible by the recurrence of trade cycles, which cause wages at any time to move in the same direction all along the line. But, if the foregoing a.n.a.lysis has been appreciated, the essential falsity of this notion should be evident.

It is an illusion, which should receive no endors.e.m.e.nt, either tacit or express, in any work on economics. The general wage level of a country cannot be regarded (except temporarily, and within narrow limits) as a function of the efficiency of labor organization; it depends on the far deeper economic facts set out in --3 above.

Let us now try to summarize the conclusions of this section. There _is_ a tendency towards a uniformity of real wages for workers of the same grade and of the same efficiency. This tendency is not due to compet.i.tion alone. It is helped by many acts of a collective kind, arising from a sense of ”what should be”; it is obstructed by other acts of a like kind, where the sense of ”what should be” is based on imperfect understanding. The more people act in accordance with ”what should be,” and the better their understanding, the more will this tendency approximate to an accurate economic law.

--8. _Women's Wages_. The wages of women represent a problem of great public interest, upon which the principles laid down in this chapter have a most important bearing, and which in its turn serves to ill.u.s.trate these principles further. It has been suggested that male and female labor can be regarded as a strong case of Joint Supply, and the suggestion is not merely facetious. The essential point, that the proportions of available male and female labor are fairly constant (not that they may not alter with time and circ.u.mstances, but that they are essentially independent of the conditions of demand) holds true not only of a country as a whole, but hardly less of a particular district. If men and women are to be regarded as separate grades, they are grades between which immobility is complete. Now men and women differ in many ways which affect both the demand for and the supply of their services. On the one hand, far fewer women wish to enter business employments of any kind, as women have plenty of work that must be done at home. On the other hand, though women can do many kinds of work as well as or better than men, it so happens that for much the greater number of services, which are in large demand in the business world, men are the more efficient. Incidentally, it happens that many occupations which women _might_ do as well as men are closed to them by exclusive regulations. The resultant of these forces is that men and women are for the most part employed in different occupations, and the scale of payment in women's occupations is far lower than that in men's. Of this last fact singularly small complaint is made.

It is otherwise, however, when we come to occupations where men are either wholly or partially employed, where women are at least approximately as efficient as men, and where the barriers to their entry are at least formally removed. There a ferocious controversy rages over what is known as the principle of ”equal pay for equal work.” It is easy to understand why the male trade unionists in, let us say, the engineering trades, should support this claim. It is also, indeed, _intelligible_ why the enthusiasts for Women's Rights should urge it; but it is much more doubtful whether they are wise. Possibly they are wise enough in their generation, since it might not serve them on this matter to get across the men. But it is clearly not prudential considerations of this kind by which they are mainly actuated. They make the demand, with extreme intensity of feeling, as a demand for fundamental justice. They are also very obviously inspired with the belief (similar to the illusion which is a point of honor with the male trade unionist) that high wages for women in well-paid occupations will help to raise the wages of sweated women workers in other trades.