A FAIR DAY'S PAY: A HISTORY OF SOCIAL IMPROVEMENT
The following is the prospectus for a short book entitled "A Fair Day's
Pay: A History of Social Improvement," a revisionist treatment of theories
of wages since Adam Smith, and of the controversies over how high (or low)
they should (and can) be. The proposed volume reviews the theories and
policies of both mainstream economists and policy makers as well as those
of various reformers. It will be of interest to policy makers,
philanthropists, journalists and academics, as well as to civic
associations, NGOs, and community- and labor-based organizations currently
working to raise the wages of the least well-paid and to close the growing
gap between the bottom rungs of the income ladder and the top. Recovering
the history of these ideas, as well as the policies they inspired, and
renewing our faith in their intellectual credibility, will do much to
strengthen on-going contemporary efforts to ensure "a fair day's pay for a
fair day's work."
"A Fair Day's Pay" summarizes and evaluates the labor market theories of
Smith and Ricardo; the population-subsistence theories of Malthus; the
fixed wage-fund theories of the early Mills and McCulloch; and the marginal
productivity theories of John Bates Clark and the modern neoclassical
tradition. It also details several alternative points of view, today
largely forgotten, which sharply challenged the mainstream notions. From
the standpoint of the critics, the mainstream theories functioned largely
to justify keeping wages lower than they might have been. The advocates of
the alternative theories, principally social and labor reformers with a
few professional economists at their side, rejected the mainstream
arguments as biased and self-serving. They emphasized the right of wage
earners to share with profit-takers equitably (though by no means equally)
in the fruits of their joint labor. They also championed many positive
actions to ensure that all wage earners had the opportunity and the power
to take both individual and collective steps to improve their social and
living conditions, including higher wages and better working conditions.
A conversation with Barbara Solow at the Russell Sage Foundation in 2011
first inspired me to explore this issue in depth. We were discussing the
effect of 19th-century Irish land tenure on the welfare of Irish peasants
nd Ireland, when I mentioned my research on the history of the slogan "a
fair day's wages for a fair day's work," or varieties thereof. I had been
able to identify its first use (Bradford, Yorkshire, England, 1834) and to
trace its subsequent course down to the present day through the continuing
debates between and among English and American trade unionists, employers,
politicians and economists. Upon hearing me describe some of my findings,
Professor Solow remarked, with her usual delightful candor, "I have never
understood what a 'fair wage' was." By which she meant, of course, in
contrast to just a plain old wage. (A wage is a wage is a wage, as
Gertrude Stein might have said.) What has fairness to do with it? If we
talk about a "fair wage," why not also talk about a just price? Doesn't
the latter make as much sense as the former?
The proposed book will address such questions through a history of various
theories of wages, which I divide into two general categories. The
"production school" treats labor as if it were a produced commodity like
any other, the price of which—i.e., its wage—is determined by supply and
demand in the market, which are in turn governed in the long term by how
much it costs to produce labor, and by its productivity. The "distribution
school," in contrast, believes wages determined by relations of
distribution rather than of production. In this view, labor is not a
commodity or factor of production: it (!) is a person; and a wage is not a
price paid to purchase a service but a share given those who participate in
its provision. Supply and demand are still matter, as does productivity,
but they matter in different ways.
"A Fair Day's Pay" will explicate these differences and explores their
implications. It takes and defends the view that, if we want to provide
everyone with higher wages, it is not enough simply to encourage employers
to be more innovative and wage-earners to be more educated. We need also
to support policies that give all wage earners more bargaining leverage,
including unionization, minimum income guarantees, and employment
transition programs, to help ensure that they are paid and treated well.
Nor can this support be merely formal. Even if government must become the
employer of last resort, or a living wage the standard upon which the
dollar is based (as Randall Wray once proposed), we need policies that give
all wage earners who are willing and able to work real options to earn
decent wages, whatever their job.
Chapter 1 focuses on Adam Smith, from whom all theories of wages, as indeed
all modern economics, in some sense descend, and on Thomas Hodgskin, the
latter day Smithian who was the first fully to develop the distributionist
implications of "The Wealth of Nations." On the one hand, Smith held wages
to be "everywhere regulated by … the demand for labor and the ordinary or
average price of provisions." In this way, he was a pioneer of the
production school. On the other hand, he also insisted that wages had to
be high enough to provide even "the lowest rank of people" with "those
things which the established rules of decency have rendered necessary"—a
standard that varied with "the custom of the country." In this way he was
a pioneer of the distribution school. Emma Rothschild, building on the
work of earlier historians, has recently done much to bring this other
Smith into view. Reconsidering Smith from the standpoint of his theory of
wages is another opportunity to underscore that he did not defend freedom
in order that a hard-working people might starve, but that they might
prosper.
As for the unduly neglected Thomas Hodgskin, his "Labour Defended against
the Claims of Capital" (1825) fleshed out the implications of Smith's
distribution theory of wages. Initially prepared for delivery as popular
lectures at the Mechanics Institute in London, his agitations coincided
with the ultimately successful effort to secure Parliamentary repeal of the
Combination Acts of 1799 and 1800. Ostensibly intended to prevent
treasonous collaborations with revolutionary France, with which England was
at war, the acts also served to repress rebellious associations of
agricultural laborers and urban journeymen, among other combinations.
Hodgkins' lectures were banned mid-course by Institute officials because
they were not sufficiently deferential to the reigning Malthusian
orthodoxy, which held that wages were low because the working classes were
too numerous; and they also prompted William Thompson, one of Robert Owen's
wealthiest and most influential followers, to pen a long rebuttal, "Labor
Rewarded. The Claims of Labor and Capital Conciliated: or, How to Secure to
Labor the Whole Products of Its Exertions" (1827), one of the most
important early contributions to the theories of both trade unionism and
cooperation. Hodgkins' views are worthy in themselves, however, for their
contributions to the theory of trade unionism and collective bargainig,
both of which are key tenets of most distribution theories of wages.
Smith's contemporaries and acolytes generally neglected the distributionist
import of his theories, preferring instead to enlist him in their own
causes, which was all the easier after his death in 1790. The persons most
responsible for this diversion were Edmund Burke, about whom Rothschild had
much to say; Thomas Malthus, whose influential warnings about
over-population lent a patina of theory to the notion that, if there were
too many wage earners chasing too few jobs, the wage earners had only
themselves to blame; David Ricardo, the stock-broker turned economist,
whose "Principles of Political Economy and Taxation" was little more than a
critical gloss on Smith, albeit from the standpoint of capital; and John R.
McCulloch, who energetically campaigned on behalf of a "wages-fund
theory"—the most widely held mainstream theory of wages in the nineteenth
century, according to which the capital available to pay wages was a fixed
amount and therefore any wage increase came at the expense of other, less
powerful wage-earners.
Chapter 2 outlines the contributions and influence of Malthus, Ricardo and
McCulloch by tracing the career of their best known supporter, John Stuart
Mill. An earnest Malthusian in his youth, Mill was arrested in 1824 for
passing out literature about contraceptive techniques in a working-class
neighborhood, for which offense he reportedly served several days in jail.
The first edition of his "Principles of Political Economy" (1848), written
during the great Chartist agitations that convulsed England for nearly a
decade, appeared in the midst of the democratic and socialist revolutions
on the European continent. Initially a strict Ricardian and wages-fund
man, the first edition of "Principles" was an erudite summary of the
prevailing orthodoxy. As he aged, however, Mill moved in an increasingly
distributionist direction, in no small part due to the influence of his
beloved companion, Harriet Taylor. He thus repudiated the wages-fund
doctrine in 1869 and was prepared toward the end of his life even to
declare himself, at least to his friends, a socialist. The various
editions of Mill's "Principles" and his other writing provide a convenient
path through the twisted history of mid-nineteenth century theories of
wages.
"A Fair Day's Pay" next tells the story of the wages-fund theory from the
point of view of both its defenders and detractors in the United States.
Since at least the seminal work of H. J. Habakkuk, economic historians have
agreed with the many 19th-century observers who noted that unskilled and
semi-skilled labor was relatively more scarce, and thus relatively more
highly paid, in the US than in England. In this view, try as they might in
the first half of the nineteenth century to lower wages, American employers
faced daunting labor supply constraints that no amount of jaw-boning about
a fixed wages-fund could overcome. They had to pay more or go wanting.
That the economy did not therefore falter was not lost on American
economists, however, and one of their number, Francis Amasa Walker, the
first president of the American Economics Association, issued one of the
most authoritative critiques of the wages-fund, "The Wages Question: A
Treatise on Wages and the Wages Class," in 1876.
Chapter 3 reviews Walker's arguments, as well as the emergent new orthodoxy
of marginal productivity, as codified by the influential arguments of
Stanley Jevons, John Bates Clark and Philip Henry Wicksteed, among others.
According to Adam Smith and most nineteenth-century economists, labor was
the source of all value. Clark felt impelled by the labor upheavals that
followed the Civil War, especially the national general strike on behalf of
the 8-hour day that began May 1, 1886, to state as clearly as possible what
a "fair wage" was. For the labor movement, the labor theory of value
entailed the equally true, for it, corollary that "to labor belongs the
whole of its product." Clark accepted both propositions as true and in
his "Philosophy of Wealth" (1886) asked, "What is labor's product?" His
answer, inspired in part by the marginalist methods of Stanley Jevons'
"Theory of Political Economy" (1871) and others, which held that each
individual participant in the productive process made a measurable
contribution to output and is justly owed at least the amount of that
contribution in return. A few years later, Wicksteed popularized these
conclusions in his "The Common Sense of Political Economy" (1910).
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