What Are Wages? The Early Hypotheses

What Are Wages? The Early Hypotheses

Theory of Wages

The practical man of affairs has seldom troubled himself about the theory of what makes men work. If he paid his workers enough, he knew they would work. If he paid them enough!— here is a point at which businessmen and economists share a deep interest. Even more than rent, wages has been the battle ground of social reform. Laws of wages at various times in history have supplied the slogans for social upheavals and the placid justifica­tion for preserving the status quo.

Wage labor is a relatively new development in economic his­tory. In societies of the past, menial and laborious tasks were the work of slaves or serfs. Only the artisan in such societies had the dignity of freedom, and the privilege of selling the product of his labor for a price. Of course, special forms of contractual rela­tionship appeared frequently, but on the whole only a few per­sons participated in the system. Since the beginning of the 17th century in western Europe most men have been free to sell their labor to whoever would buy, at a price mutually agreeable to themselves. This system, combining freedom and wage labor, has been one of the most prominent characteristics of our economic order.
The use of the wage system is coincidental with that of modern capitalism. In the evolution from the legal and economic semi-bondage of Feudalism, the intellect, labor, business enterprise, and government all were freed from the stifling restriction set by custom, law, theology, and absolute monarchs. The change was not instantaneous. For a long time in England following the Black Death in the 14th century wages were regulated by law. Gradually these controls disappeared, and men assumed responsi­bility for determining their own wage scales. Under the new free­dom where men worked for others with someone else's tools and raw materials, the old wage formula of a just wage according, to one's social status, explained by Thomas Aquinas, no longer sufficed. The search for new explanations was on. The result was an array of theories of endless variety.

On most issues the Physiocrats and Mercantilists differed greatly, but they held the same views on wages. Both agreed that wages were set at the subsistence level of the laborer. It is an exaggeration to say that the Mercantilists formulated a definite theory of wages. That they accepted such a theory without ques­tion is inferred from their writings on taxation and foreign trade. For example Charles Davenant (1656-1714), in his discus­sion of foreign trade, pointed out how a rise in the price of food­stuffs would cause a rise in the wages of workers producing goods for export, thus shifting the advantage to England's competitors.

The Physiocrats stated the theory a little more positively. Quesnay believed the wage earners received only a subsistence wage because the pressure of competition reduced wages to a minimum. Turgot said that in all cases the industrial worker was paid only what was necessary in order for him to secure sub­sistence, although the worker on the soil was not so restricted. The low level was due, he believed, as Quesnay first had said, to the severe competition among workmen.