Three Lectures on the Rate of Wages by Nassau Senior, 1830

Popular Errors on the Causes Affecting Wages.

Having in the last Lecture marked the distinction which really exists between the price of labour and the amount of wages, I shall for the future consider every labouring family as consisting of the same number of persons, and exerting the same degree of industry. On that supposition, the distinction between the price of labour and the amount of wages will be at an end; or rather, the only distinction will be, that the former expression designates the remuneration for each specific exertion: the latter, the aggregate of all those separate remunerations, as summed up at the end of each year. And the question to be answered will be, what are the causes which decide what in any given country, and at any given period, shall be the quantity and quality of the commodities obtained by a labouring family during a year? The proximate cause appears to me to be clear. The quantity and quality of the commodities obtained by each labouring family during a year, must depend on the quantity and quality of the commodities directly or indirectly appropriated during the year to the use of the labouring population, compared with the number of labouring families (including under that term all those who depend on their own labour for subsistence); or, to speak more concisely, on the extent of the fund for the maintenance of labourers, compared with the number of labourers to be maintained. This proposition is so nearly self-evident, that if political economy were a new science, I should assume it without further remark. But I must warn you, that this proposition is inconsistent with opinions which are entitled to consideration, some from the number and others from the authority of those who maintain them.

First. It is inconsistent with the doctrine, that the rate of wages depends on the proportion which the number of labourers beam to the amount of capital in a country. The word capital has been used in so many senses, that it is difficult to state this doctrine precisely; but I know of no definition. of: that term which will not include many things that are not used by the labouring classes; and if my proposition be correct, no increase or diminution of these things can directly affect wages. If a foreign merchant were to come to settle in this country, and bring with him a cargo of raw and manufactured silk, lace, and diamonds, that cargo would increase the capital of the country; silks, lace, and diamonds, would become more abundant, and the enjoyments of those who use them would be increased; but the enjoyments of the labourers-would not be directly increased: indirectly, and consequentially, they might be increased. The silk might be re-exported in a manufactured state, and commodities for the use of labourers imported in return; and then, and not till then, wages would rise; but that rise would be occasioned, not by the first addition to the capital of the country, which was made in the form of silk, but by the substituted addition made in the form of commodities used by the labourer.

Secondly. It is inconsistent with the doctrine, that wages depend on the proportion borne by the number of labourers to the revenue of the society of which they are members. In the example last suggested, of the introduction of a new supply of lace or diamonds, the revenues of those who use lace or diamonds would be in, creased; but as wages are not spent on those articles, they would remain unaltered. It is possible, indeed, to state cases in which the revenue of a large portion of a community might be increased, and yet the wages of the labourers might fall without an increase of their numbers. I will suppose the principal trade of Ireland to be the raising produce for the English market; and that for every two hundred acres ten families were employed in raising, on half the land, their own subsistence, and on the remainder corn and other exportable crops requiring equal labour. Under such circumstances, if a demand should arise in the English market for cattle, butchers’-meat, and wool, instead of corn, it would be the interest of the Irish landlords and farmers to convert their estates from arable into pasture. Instead of ten families for every two hundred acres, two might be sufficient: one to raise the subsistence of the two, and the other to tend the cattle and sheep. The revenue of the landlords and the farmers would be increased, but a large portion of the labourers would be thrown out of employment; a large portion of the land formerly employed in producing commodities for their use would be de. voted to the production of commodities for the use of England; and the fund for the maintenance of Irish labour would fall, notwithstanding the increase of the revenue of the landlords and farmers.

Thirdly. It is inconsistent with the prevalent opinion, that the non-residence of landlords, funded proprietors, mortgagees, and other unproductive consumers, can be detrimental to the labouring inhabitants of a country that does not export raw produce.

In a country which exports raw produce, wages may be lowered by such non-residence. If an Irish landlord resides on his estate, he requires the services of certain persons, who must also be resident there, to minister to his daily wants. He must have servants, gardeners, and perhaps gamekeepers. If he build a house, he must employ resident masons and carpenters; part of his furniture he may import, but the greater part of it must be made in his neighbourhood; a portion of his land, or, what comes to the same thing, a portion of his rent, must be employed in producing food, clothing, and shelter for all these persons, and for those who produce that food, clothing and shelter. If he were to remove to England, all these wants would be supplied by Englishmen. The land and capital which was formerly employed in providing the maintenance of Irish labourers, would be employed in producing corn and cattle to be exported to England to provide the subsistence of English labourers. The whole quantity of commodities appropriated to the use of Irish labourers would be diminished, and that appropriated to the use of English labourers increased, and wages would, consequently, rise in England, and fall in Ireland.

It is true that these effects would not be coextensive with the landlord’s income. While, in Ireland, he must have consumed many foreign commodities. He must have purchased tea, wine, and sugar, and other things which the climate and the manufactures of Ireland do not afford, and he must have paid for them by sending corn and cattle to England. It is true, also, that while in Ireland he probably employed a portion of his land and of his rents for other purposes, from which the labouring population received no benefit, as a deer park, or a pleasure garden, or in the maintenance of horses or hounds. On his removal, that portion of his land which was a. park would be employed, partly in producing exportable commodities, and partly in producing subsistence for its cultivators; and that portion which fed horses for his use might be employed in feeding horses for exportation. The first of these alterations would do good; the second could do no harm. Nor must we forget that, through the cheapness of conveyance between England and Ireland, a portion, or perhaps all, of those whom he employed in Ireland might follow him to England and, in that case, wages in neither country would be affected. The fund for the maintenance of labourers in Ireland, and the number of labourers to be maintained, would both be equally diminished, and the fund for the maintenance of labourers in England, and the number of labourers to be maintained, would both be equally increased.

But after making all these deductions, and they are very great, from the supposed effect of the absenteeism of the Irish proprietors on the labouring classes in Ireland, I cannot agree with Mr. McCulloch that it is immaterial. I cannot but join in the general opinion that their return, though it would not affect the prosperity of the British empire, considered as a whole, would be immediately beneficial to Ireland, though perhaps too much importance is attached to it.

In Mr. McCulloch’s celebrated examination before the committee on the state of Ireland, (4th Report, 814, Sess. 1825,)he was asked, ‘Supposing the largest export of Ireland were in live cattle, and that a considerable portion of rent had been remitted in that manner, does not such a mode of producing the means of paying rent contribute less to the improvement of the poor than any extensive employment Of them in labour would produce?’ — He replies, ‘Unless the means of paying rent are changed when the landlord goes home, his residence can have no effect whatever.

‘Would not,’ he is asked, ‘the population of the country be benefited by the expenditure among them of a certain portion of the rent which (if he had been absent) has (would have) been remitted (to England)?’ ‘No,’ he replies, ‘I do not see how it could be benefited in the least. If you have a certain value laid out against Irish commodities in the one case, you will have a certain value laid out against them in the other. The cattle are either exported to England, or they stay at home. If they are exported, the landlord will obtain an equivalent for them in English commodities; if they are not, he will obtain an equivalent for them in Irish commodities; so that in both cases the landlord lives on the cattle, or on the value of the cattle: and whether he lives in Ireland or in England, there is obviously just the very same amount of commodities for the people of Ireland to subsist upon.’

This reasoning assumes that the landlord, while resident in Ireland, himself personally devours all the cattle produced on his estates; for on no other supposition can there be the very same amount of commodities for the people of Ireland to subsist upon, whether their cattle are retained in Ireland or exported.

But when a country does not export raw produce, the consequences of absenteeism are very different. Those who derive their incomes from such a country cannot possibly spend them abroad until they have previously spent them at home.

When a Leicestershire landlord is resident on his estate, he employs a certain portion of his land, or, what is the same, of his rent, in maintaining the persons who provide for him those commodities and services, which must be produced on the spot where they are consumed. If he should remove to London, he would want the services of Londoners, and the produce of land and capital which previously maintained labourers resident in Leicester, would be sent away to maintain labourers resident in London. The labourers would probably follow, and wages in Leicestershire and London would then be unaltered; but until they did so, wages would rise in the one district and fall in the other. At the same time, as the rise and fall would compensate one another, as the fund for the maintenance of labour, and the number of labourers to be maintained, would each remain the same, the same amount of wages would be distributed among the same number of persons, though not precisely in the same proportion as before.

If he were now to remove to Paris, a new distribution must take place. As the price of raw produce is lower in France than in England, and the difference in habits and language between the two countries prevents the transfer of labourers from the one to the other, neither the labourers nor the produce of his estates could follow him. He must employ French labourers, and he must convert his share of the produce of his estates, or, what is the same thing, his rent into some exportable form in order to receive it abroad. It may be supposed that he would receive his rent in money. Even if he were to do so, the English labourers would not be injured, for as they do not eat or drink money, provided the same amount of commodities remained for their use, they would be unaffected by the export of money. But it is impossible that he could receive his rent in money unless tie chose to suffer a gratuitous loss. The rate of exchange between London and Paris is generally rather in favour of London, and scarcely ever so deviates from par between any two countries, as to cover the expense of transferring the precious metals from the one to the other, excepting between the countries which do, and those which do not possess mines. The remittances from England to France must be sent, therefore, in the form of manufactures, either directly to France, or to some country with which France has commercial relations. And how would these manufactures be obtained? Of course in exchange for the landlord’s rent. His share of the produce of his estates would now go to Birmingham or Sheffield, or Manchester or London, to maintain the labourers employed in producing manufactures, to be sent and sold abroad for his profit. An English absentee employs his income precisely as if he were to remain at home and consume nothing but hardware and cottons. Instead of the services of gardeners and servants, upholsterers and tailors, he purchases those of spinners, and weavers, and cutlers. In either case his income is employed in maintaining labourers, though the class of labourers is different; and in either case, the whole fund for the maintenance of labourers, and the number of labourers to be maintained, remaining unaltered, the wages of labour would not be affected.

But, in fact, that fund would be rather increased in quantity and rather improved in quality. It would be increased, because land previously employed as a park, or in feeding dog’s and horses, br hares and pheasants, would now be employed in producing food or clothing for men. It would be improved, because the increased production of manufactured commodities would occasion an increased division of labour, the use of more and better machinery, and the other improvements which we long ago ascertained to be its necessary accompaniments.

One disadvantage, and one only, it appears to me would be the result. The absentee in a great measure escapes domestic taxation. I say in a great measure, because he still remains liable, if a proprietor of houses or of land, to those taxes which fall upon rent: he pays, too, a part of the taxes on the materials of manufactures; and if it were our policy to tax income or exported commodities, he might be forced to pay to the public revenue even more than his former proportion. But, under our present system, which throws the bulk of taxation on commodities produced for internal consumption, he receives the greater part of his revenue without deduction, and. instead of contributing to the support of the British Government, contributes to support that. of France or Italy. This inconvenience, perhaps, about balances the advantages which I have just mentioned, and leaves a community which exports only manufactures, neither impoverished nor enriched by the residence abroad of its unproductive members.

I ought, perhaps, on this occasion again to remind you, that it is to wealth and poverty that my attention is confined. The moral effects of absenteeism must never be neglected by a writer who inquires into the causes which promote the happiness of nations, but are without the province of a political economist. Nor do I regret that, they are so, for they form a subject on which it is far more difficult to obtain satisfactory results. In one respect, indeed, the moral question is the more simple, as it is not complicated by the consideration whether raw produce or manufactures are exported, or whether the non-resident landlord is abroad, or in some town within his own country. If his presence is to be morally beneficial it must be his presence on his own estate. To the inhabitants of that estate, the place to which he absents himself is indifferent. Adam Smith believed his residence to be morally injurious. The residence of a court, he observes (book ii. chap. 3), ‘in general makes the inferior sort of people dissolute and poor. The inhabitants of a large village, after having made considerable progress in manufactures, have become idle in consequence of a great lord having taken up his residence in their neighbourhood.’ And Mr. M’Culloch, whose fidelity and intelligence as an observer may be relied on, states, as the result of his own experience, that in Scotland the estates of absentees are almost always the best managed. Much, of coarse, depends on individual character; but I am inclined to believe that in general the presence of men of large fortune is morally detrimental, and that of men of moderate fortune morally beneficial, to their immediate neighbourhood. The habits of expense and indulgence which, in different gradations, prevail among all the. members of a great establishment, are mischievous as. examples, and perhaps still more so as sources of repining and discontent.. The drawing room and stable do harm to the neighbouring gentry, and the housekeeper’s room and servants’ hall to their. inferiors. But families of moderate income, including under that term incomes between 500 l, and 2000 l, a year, appear to be placed in the station most favourable to the acquisition of moral anal intellectual excellence, and to its diffusion among their associates and dependents. I have no doubt that a well-regulated gentleman’s family, removing. the prejudices, soothing the quarrels, directing and stimulating the exertions, and awarding praise or blame to the conduct of the villagers round them, is among the most efficient means by which the character of a neighbourhood can be improved.. It is the happiness of this country, that. almost every parish has a resident fitted by fortune and, education for these services; and bound, not merely by feelings of propriety, but as a matter of express and professional duty, to their performance. The dispersion throughout the country of so many thousand clerical families, each acting in its own district as a small centre of civilization, is an advantage to which, perhaps, we have been too long accustomed to be able to appreciate its extent.

Still, however, I think that even the moral effects of absenteeism have been exaggerated. Those who declaim against the 12,000 English families supposed to be resident abroad, seem to forget that not one-half, probably not onequarter, of them, if they were to return, would dwell anywhere but in towns, where their influence would be wasted, or probably not even exerted. What does it signify to the Connaught, or Northumbrian, or Devonshire peasant, whether his landlord lives in Dublin, or London, or Cheltenham, or Rome? And even of those who would reside in the country, how many would exercise that influence beneficially? How many would be fox-hunters or game-preservers, or surround themselves with dependents whose example would more than compensate for the virtues of their masters? Nothing can be more rash than to predict that good would be the result of causes which are quite as capable of producing evil.

The economical effects have been still more generally misunderstood; and I have often been tempted to wonder that doctrines so clear as those which I have been submitting to you, should be admitted with reluctance even by those who feel the proofs to be unanswerable, and should be rejected at once by others, as involving a paradox too monstrous to be worth examination.

Much of this, probably, arises from a confusion of the economical with the moral part of the question. Many writers and readers of political economy forget that wealth only is within the province of that science; and that the clearest proof that absenteeism diminishes the virtue or the happiness of the remaining members of a community is no answer to arguments which aim only at proving that it does not diminish their wealth.

Another source of error arises from the circumstance, that when the landlord is present, the gain is concentrated, and the loss diffused; when he is absent, the gain is diffused, and the loss concentrated. When he quits his estate, we can put our finger on the village tradesman and labourer who lose his custom and employment. We cannot trace the increase of custom and employment that is consequently scattered among millions of manufacturers. When he returns, we see that the expenditure of £2000 or £3000 a year in a small circle gives wealth and spirit to its inhabitants. We do not see, however clearly we may infer it, that so much the less is expended in Manchester, Birmingham, or Leeds. The inhabitants of his village attribute their gain and their loss to its causes; and their complaints and acknowledgments are loud in proportion to the degree in which they feel their interests to be affected. No single manufacturer is conscious that the average annual export of more than forty millions sterling has been increased or diminished to the amount of two or three thousand pounds. And even if aware of that increase or diminution, he would not attribute it to the residence in Yorkshire or Paris of a given individual, of whose existence he probably is not aware. When to obvious and palpable effects nothing is to be opposed but inferences deduced by a long, though perfectly demonstrative reasoning process, no one can doubt which will prevail, both with the uneducated and the educated vulgar.

Many persons, also, are perplexed by the consideration, that all the commodities which are exported as remittances of the absentee’s income are exports for which no return is obtained; that they are as much lost to this country as if they were a tribute paid to a: foreign state, or even as if they were thrown periodically into the sea. This is unquestionably true; but it must be recollected, that whatever is unproductively consumed, is, by the very terms of the proposition, destroyed, without producing any return. The only difference between the two cases is, that the resident landlord performs that destruction here; the absentee performs it abroad. In either case, he first purchases the services of those Who produce the things which he for his benefit, not for theirs, is to consume. If he stays here, lie pays a man to brush a coat, or clean a pair of boots, or arrange a table — all which in an hour after are in their former condition. When abroad, he pays an equal sum for the production of needles, or calicoes, which are sent abroad, and equally consumed without further benefit to those who produced them. The income of unproductive consumers, however paid. is a tribute; and whether they enjoy it here or elsewhere, is their own concern. We know that a man cannot eat his cake and have it; and itis equally true that he cannot sell a-cake :to another and keep it for himself.

The last cause to which I attribute the slow progress of correct opinions on this subject, is their distastefulness to the most influential members of the community. Nothing can be more flattering to landlords, annuitants, mortgagees, and fundholders, than to be told that their residence is of vital importance to the country. Nothing can be more humiliating than to be assured that it is utterly immaterial to the rest of the community whether they live in Brighton, or London, or Paris. Those who are aware how much our judgment, even in matters of science, is influenced by our wishes, will not be surprised at the prejudices against a doctrine which forbids the bulk of the educated class to believe that they are benefactors to their country. by the mere act of residing within its shores.

I may appear, perhaps, to have dwelt too much on a single subject; but no prevalent error can be effectually exposed until its prevalence has been accounted for. And these arc errors which are to be heard in every society, and often from those whose general views in polltical economy are correct. They may be called harmless errors, but no error is, in fact, harmless; and when there is so much in our habits that really requires alteration, we may lose sight of the real and the remediable causes of evil, while our attention is misdirected to absenteeism.