by each will vary in general according to the demands of the others for its services. Thus, if capital, both fixed and circulating, is scanty, whilst labour and land are both abundant, the reward of capital will be high relatively to rent and wages. This is well illustrated in the high rate of profits obtained in early societies. According to this view of the question the aggregate amount paid in wages depends partly on the general productiveness of all the productive agents and partly on the relative power of the labourers as compared with the owners of land and capital (the amount taken by government and individuals for taxes, charity, &c., being omitted). Under a system of perfect industrial competition the general rate of wages would be so adjusted that the demand for labour would be just equal to the supply at that rate. (Compare Marshall's Principles of Economics, bk. vi. ch. ii.)
If all labour and capital were perfectly uniform it would not be necessary to carry the analysis further, but as a matter of fact, Relative wages. instead of two great groups of labourers and capitalists, we have a multitude of subdivisions all under the influence of reciprocal demand. Every subgroup tries to obtain as much as possible of the general product, which is practically always measured in money. The determination of relative wages depends on the constitution of these groups and their relations to one another. Under any given social conditions there must be differences of wages in different employments, which may be regarded as permanent until some change occurs in the conditions; in other words, certain differences of wages are stable or normal, whilst others depend simply on temporary fluctuations in demand and supply. A celebrated chapter in the Wealth of Nations (bk. i. ch. x.) is still the best basis for the investigation of these normal differences—which, as stated above, is the second principal problem of the wages question. First of all, a broad distinction may be drawn between the natural and artificial causes of difference, or, in Adam Smith's phraseology, between those due to the nature of the employments and those Natural causes of difference. due to the policy of Europe. In the former division we have (1) the agreeableness or disagreeableness of the employment, illustrated by two classical examples—“honour makes a great part of the reward of all honourable professions,” and “the most detestable of all employments—that of public executioner—is, in proportion to the work done, better paid than any common trade whatever.” There is, however, much truth in Mill's criticism, that in many cases the worst paid of all employments are at the same time the most disagreeable, simply because those engaged in them have practically no other choice. (2) The easiness and cheapness or the reverse of learning the business. This factor operates in two ways. A difficult business implies to some extent peculiar natural qualifications, and it also involves the command of a certain amount of capital to subsist on during the process of learning, and thus in both respects the natural supply of labour is limited. (3) The constancy or inconstancy in the employment—a point already noticed under real wages. (4) The great or small trust reposed in the workmen, an important consideration in all the higher grades of labour, e.g. bankers, lawyers, doctors, &c. (5) The chance of success or the reverse. Here it is to be observed that, owing to the hopefulness of human nature and its influence on the gambling spirit, the chance of success is generally overestimated, and therefore that the wages in employments where the chance of success is really small are lower than they ought to be. The most striking instance is furnished by the labour in gold mines, diamond fields, and the like, and the same cause also operates in many of the professions.
All these causes of differences of wages in different employments may be explained by showing the way in which they operate on the demand and supply of labour in the particular group. If the “net advantages,” to adopt Marshall's phraseology, of any group are relatively high, then labour will be directly attracted to that group, and the children born in it will be brought up to the same occupation, and thus in both ways the supply of labour will be increased. But the “net advantages” embrace the conditions just enumerated. Again, if the other members of the community require certain forms of labour to a greater extent, there is an increase in the demand and a rise in their price.
In addition to these so-called natural causes of difference, there are those arising from law, custom, or other so-called Artificial causes of difference. artificial causes. They may be classified under four headings. (1) Certain causes artificially restrain industrial competition by limiting the number of any particular group. Up to the close of the 18th century, and in many instances to a much later date, the regulations of gilds and corporations limited the numbers in each trade (cf. Brentano, Gilds and Trade Unions). This they did by making a long apprenticeship compulsory on those wishing to learn the craft, by restricting the number of apprentices to be taken by any master, by exacting certain qualifications as to birth or wealth, by imposing heavy entrance fees, either in money or in the shape of a useless but expensive masterpiece. Some of these regulations were originally passed in the interests of the general public and of those employed in the craft, but in the course of time their effect was, as is stated by Adam Smith, simply to unduly restrain competition. The history of the craft-gilds is full of instructive examples of the principles governing wages. No doubt the regulations tended to raise wages above the natural rate, but as a natural consequence industry migrated to places where the oppressive regulations did not exist. In the time of the Tudors the decay of many towns during a period of rapid national progress was largely due to those “fraternities in evil,” as Bacon called the gilds. At present one of the best examples of the survival of this species of artificial restriction is the limitation of the number of teachers qualifying for degrees in certain universities. (2) In some employments, however, law and custom tend unduly to increase the amount of competition. This was to a great extent the case in the church and the scholastic professions owing to the large amount of charitable education. Adam Smith points out that even in his day a curate was “passing rich on forty pounds a year,” whilst many only obtained £20—below the wages earned by a journeyman shoemaker. In the same way state-aided education of a commercial and technical kind may result in lowering the rates (relatively) of the educated business classes. It is said that one reason why the Germans replace Englishmen in many branches is that, having obtained their education at a low rate, there are more of them qualified, and consequently they accept lower wages. The customary idea that the position of a clerk is more genteel than that of an artisan accounts largely for the excessive competition in the former class, especially now that education is practically universal. (3) In some cases law and custom may impede or promote the circulation of labour. At the time Adam Smith wrote the laws of settlement were still in full operation. “There is not a man of forty who has not felt most cruelly oppressed by this ill-contrived law of settlement.” Differences in wages in different parts of the same country and in different occupations are still largely due to impediments in the way of the movement of labour, which might be removed or lessened by the government making provisions for migration or emigration. (4) On many occasions in the past the law often directly interfered to regulate wages. The Statute of Labourers, passed immediately after the Black Death, was an attempt in this direction, but it appears to have failed, according to the investigations of Thorold Rogers. The same writer, however, ascribes to the celebrated Statute of Apprentices (5th of Elizabeth) the degradation of the English labourer for nearly three centuries (Agriculture and Prices, vol. v.). This, he asserts, was due to the wages being fixed by the justices of the peace. It is, however, worth noting that Brentano, who is equally sympathetic with the claims of labour, asserts that so long as this statute was actually enforced, or the customs founded upon ii were observed, the condition of the labourers was prosperous, and that the degradation only began when the statute fell into disuse (Origin of Gilds and Trade Unions. For a full account of the effect of the Statute of Apprentices see W. Cunningham's Growth of English Industry and Commerce, vol. ii.).
