I'd like to begin by apologizing for my brief absence. I've been a bit busy in other things, and this project had to be shelved. But I am back.
This chapter is a large one and covers a grand scope of topics. I think he might have served himself well to spin off the topics into subchapters, but the topics covered are so interwoven that breaks aren't natural in the subject so you end up with a rather large chunk of text to digest.
First let's review the nature of wages. Wages in Smith's time are often framed in the master vs journeyman setting. So for examples in this blog I will assume the role of master furniture maker and you the reader are a journeyman (among many) who are in my employ. We have competing goals. I want to maximize my profits and so have reason to want to pay you as little as I can get away with. You having no stock of goods or savings in some form by which to rely upon want to secure the highest wage you can get. Thus the cycle of "can I have a raise boss?" begins. Smith makes some observations on the bargaining tactics of how the wage is determined. Should wages be insufficient, you would strike. The tactics for how each party responds is pretty much the same as it was in the 1700s. I as the master craftsman would whine and bemoan how I can't afford to pay you more, and lock you out of the workshop and live off the supply of goods you produced for me before. This puts me in a strong position because I can wait longer than you given my stock of goods I am still selling. You as the worker don't have the luxury of a stock and probably don't have a savings of great size allowing a strike to continue on for some great amount of time, so public disruption and advocacy of boycotts might be employed to raise alarm and attempt towards a quick resolution by means bordering on outright intimidation. Smith even hints at the formation of worker unions to even the odds by having the workers in mass counter the power of the masters. Smith also notes that master craftsmen are fewer in number and control most relevant capital and workshops have an oligarchical power to control wages by collective understanding.
Smith does go on to say that there is a floor for how low wages can go. Specifically he says the amount needed for a man to provide for his family. At this point he takes a sort of morbid calculus on childhood mortality.
Mr. Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that one with another they may be enabled to bring up two children; the labour of the wife, on account of her necessary attendance on the children, being supposed no more than sufficient to provide for herself. But one half the children born, it is computed, die before the age of manhood. The poorest labourers, therefore, according to this account, must, one with another, attempt to rear at least four children, in order that two may have an equal chance of living to that age.
And in a sense this makes sense. If the lowest wage a person could get is to provide only for his own food and subsistence, then we would die out pretty quick. Smith also later in the chapter notes that the lower classes tend to have more kids than the upper classes, but the rate of childhood death is much higher in the lower classes.
Poverty, though it no doubt discourages, does not always prevent marriage. It seems even to be favourable to generation. A half-starved Highland woman frequently bears more than twenty children, while a pampered fine lady is often incapable of bearing any, and is generally exhausted by two or three. Barrenness, so frequent among women of fashion, is very rare among those of inferior station. Luxury in the fair sex, while it inflames perhaps the passion for enjoyment, seems always to weaken, and frequently to destroy altogether, the powers of generation.
I guess somethings never change.
Geography does play a role in wages, and often works to the journeymen's advantage. Smith did a comparison of a few economies. The American Colonies had much higher wages than England for comparable work, and this was in large part due to the high demand of labor. China was viewed as a stagnate economy, not growing, nor shrinking so much. Compared to England where people with services would set up shops, and customers would come to them, China apparently had skilled laborers traveling with their tools begging for work. He also noted that descriptions of China in Marco Polo's time are almost identical to contemporary (ie 1770s) descriptions of China. Shrinking economies would see starvation as he noted was readily available in places like Bengal. Clearly a sign of economic regression. But in that description of Bengal he also gives us a preview perhaps of what to expect later when talking of corporations and regulations.
This perhaps is nearly the present state of Bengal, and of some other of the English settlements in the East Indies. In a fertile country which had before been much depopulated, where subsistence, consequently, should not be very difficult, and where, notwithstanding, three or four hundred thousand people die of hunger in one year, we may be assured that the funds destined for the maintenance of the labouring poor are fast decaying. The difference between the genius of the British constitution which protects and governs North America, and that of the mercantile company which oppresses and domineers in the East Indies, cannot perhaps be better illustrated than by the different state of those countries.
(emphasis mine)
The geography doesn't even have to be across the globe. Smith also describes the variety of wages in England, and the net result on how the wage differences affects the diet based on wheat and oatmeal prices. Commodities tend to fetch the same price over an area, whereas wages can differ greatly. For example compare the wage difference between New York City and Scranton PA. Probably a pretty big gap for the same kind of work, but if you went to a Denny's in NYC versus Scranton, the prices would be almost identical. One lesson to take away from this, though not spelled out, is that the market for goods does vary. Just because the Denny's Grand Slam is the same price, don't expect the rent for a 900 square foot apartment to be the same. But that lesson isn't the focus of the chapter so we press on.
The business cycle is also covered in this chapter. It is pretty straightforward stuff. As the economy rises, wages rise as more labor is needed to meet growing demand. This rise in demand encourages journeymen to strike out on their own instead of working for a master craftsmen. This in turn decreases the pool of available journeymen forcing each master to bid for workers services breaking the oligarchy mentioned in the top of this blog. Wages rise as a result of this bidding. But as the cycle turns and we enter recession, some of the now independent journeymen come back to the masters looking for work, and compete with other journeymen by underbidding labor costs driving wages down. Fewer jobs, abundance of labor, low wages. He spends a good deal spelling this out by citing various industries as examples.
I want to end on a note about wages and what is probably known today as a fair wage. Smith's time had two kinds of labor in common use, slaves and free men. Each had a different role and in terms had different sense of responsibility of control over his wage. Slaves obviously had no choice, and relied on the slaveholder to care for his well being. Freemen on the other hand were expected, as we see at the beginning of this blog, to look out for their best interest in terms of wage. Smith did see a morally responsible role for a shop master to look after his employees.
The wear and tear of a slave, it has been said, is at the expense of his master; but that of a free servant is at his own expense. The wear and tear of the latter, however, is, in reality, as much at the expense of his master as that of the former. The wages paid to journeymen and servants of every kind must be such as may enable them, one with another, to continue the race of journeymen and servants, according as the increasing, diminishing, or stationary demand of the society may happen to require. But though the wear and tear of a free servant be equally at the expense of his master, it generally costs him much less than that of a slave. The fund destined for replacing or repairing, if I may say so, the wear and tear of the slave, is commonly managed by a negligent master or careless overseer. That destined for performing the same office with regard to the free man, is managed by the free man himself. The disorders which generally prevail in the economy of the rich, naturally introduce themselves into the management of the former: the strict frugality and parsimonious attention of the poor as naturally establish themselves in that of the latter. Under such different management, the same purpose must require very different degrees of expense to execute it. It appears, accordingly, from the experience of all ages and nations, I believe, that the work done by freemen comes cheaper in the end than that performed by slaves.
Well paid people he says are happier and more productive, have families and continue promoting the nation's wealth by pumping up the economy. So while wages aimed to be controlled by government fiat might be a disaster, it is ultimately in the shop master's best interests to pay his workers well for the greater good. This might be one of the lost lessons of capitalism. It isn't about getting all you can for you, but rather working towards a better tomorrow for everyone.
