§ 1. Exchange and money make no Difference in the law of Wages.

The division of the produce among the three classes, laborers, capitalists, and landlords, when considered without any reference to exchange, appeared to depend on certain general laws. It is fit that we should now consider whether these same laws still operate, when the distribution takes place through the complex mechanism of exchange and money; or whether the properties of the mechanism interfere with and modify the presiding principles.

The primary division of the produce of human exertion and frugality is, as we have seen, into three shares—wages, profits, and rents; and these shares are portioned out, to the persons entitled to them, in the form of money and by a process of exchange; or, rather, the capitalist, with whom in the usual arrangements of society the produce remains, pays in money, to the other two sharers, the market value of their labor and land. If we examine on what the pecuniary value of labor and the pecuniary value of the use of land depend, we shall find that it is on the very same causes by which we found that wages and rent would be regulated if there were no money and no exchange of commodities.

It is evident, in the first place, that the law of wages is not affected by the existence or non-existence of exchange or money. Wages depend on the ratio between population and capital [taking into account the nature of a country's industries]; and would do so if all the capital in the world were the property of one association, or if the capitalists among [pg 466] whom it is shared maintained each an establishment for the production of every article consumed in the community, exchange of commodities having no existence. As the ratio between capital and population, everywhere but in new colonies, depends on the strength of the checks by which the too rapid increase of population is restrained, it may be said, popularly speaking, that wages depend on the checks to population; that, when the check is not death by starvation or disease, wages depend on the prudence of the laboring people; and that wages in any country are habitually at the lowest rate to which in that country the laborer will suffer them to be depressed rather than put a restraint upon multiplication.

What is here meant, however, by wages, is the laborer's real scale of comfort; the quantity he obtains of the things which nature or habit has made necessary or agreeable to him: wages in the sense in which they are of importance to the receiver. In the sense in which they are of importance to the payer, they do not depend exclusively on such simple principles. Wages in the first sense, the wages on which the laborer's comfort depends, we will call real wages, or wages in kind. Wages in the second sense we may be permitted to call, for the present, money wages; assuming, as it is allowable to do, that money remains for the time an invariable standard, no alteration taking place in the conditions under which the circulating medium itself is produced or obtained. If money itself undergoes no variation in cost, the money price of labor is an exact measure of the cost of labor, and may be made use of as a convenient symbol to express it [if the efficiency of labor also be supposed to remain the same].

The money wages of labor are a compound result of two elements: first, real wages, or wages in kind, or, in other words, the quantity which the laborer obtains of the ordinary articles of consumption; and, secondly, the money prices of those articles. In all old countries—all countries in which the increase of population is in any degree checked by the [pg 467] difficulty of obtaining subsistence—the habitual money price of labor is that which will just enable the laborers, one with another, to purchase the commodities without which they either can not or will not keep up the population at its customary rate of increase. Their standard of comfort being given (and by the standard of comfort in a laboring class is meant that rather than forego which they will abstain from multiplication), money wages depend on the money price, and therefore on the cost of production, of the various articles which the laborers habitually consume: because, if their wages can not procure them a given quantity of these, their increase will slacken and their wages rise. Of these articles, food and other agricultural produce are so much the principal as to leave little influence to anything else.

It is at this point that we are enabled to invoke the aid of the principles which have been laid down in this Third Part. The cost of production of food and agricultural produce has been analyzed in a preceding chapter. It depends on the productiveness of the least fertile land, or of the least productively employed portion of capital, which the necessities of society have as yet put in requisition for agricultural purposes. The cost of production of the food grown in these least advantageous circumstances determines, as we have seen, the exchange value and money price of the whole. In any given state, therefore, of the laborers' habits, their money wages depend on the productiveness of the least fertile land, or least productive agricultural capital: on the point which cultivation has reached in its downward progress—in its encroachments on the barren lands, and its gradually increased strain upon the powers of the more fertile. Now, the force which urges cultivation in this downward course is the increase of people; while the counter-force, which checks the descent, is the improvement of agricultural science and practice, enabling the same soil to yield to the same labor more ample returns. The costliness of the most costly part of the produce of cultivation is an exact expression of the state, at any given moment, of the race which population [pg 468] and agricultural skill are always running against each other.

It will be noted, in this exposition, that Mr. Mill has in view an old country, with a population so dense that numbers are always pressing close upon subsistence; that their wages are so low as to give the laborers little more than the necessary wants of life. That these are not the economic conditions in the United States goes without saying. First of all, the margin of cultivation is high: only soils of high productiveness are in cultivation, and the returns to labor and capital are, consequently, very large. High wages are found together with low prices of food. The existing population is not so numerous as to require for the cultivation of food any but lands of a very high grade of fertility. The ability to command a high reward for labor (as compared with European industries), owing to the general prevalence of high returns in the United States, has resulted in the establishment of a higher standard for our laborers. The standard being relatively so high, there is no intimate connection between the increase of population here and the price of food; for, as a rule, wages are not so low that any change in the cost of producing food would require checks upon population. There is a considerable margin above necessaries, in the laborer's real wages in the United States, which may go for comforts, decencies, and amusements.