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

Popular Errors On the Causes Affecting Wages, (concluded.)

I stated in the last Lecture, that the quantity and quality of the commodities obtained by each labouring family during the 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; 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; and I observed, that this proposition is inconsistent with many opinions entitled to consideration. Three of those opinions I then examined; in the present Lecture I shall consider the remainder.

Fourthly. It is inconsistent with the doctrine that the general rate of wages can, except in two cases, be diminished by the introduction of machinery.

The two cases in which the introduction of machinery can produce such an effect, are first, when labour is employed in the construction of machinery, which labour would otherwise have been employed in the production of commodities for the use of labourers; and, secondly, when the machine itself consumes commodities which would otherwise have been consumed by labourers, and that to a greater extent than it produces them.

The first case is put by Mr. Ricardo, in his chapter on Machinery; but in so detailed a form, that, instead of reading it, I will extract its substance, with a slight variation of the terms. He supposes a capitalist to carry on the business of a manufacturer of commodities for the use of labourers; or, to use a more concise expression, the business of a manufacturer of wages. He supposes him to have been in the habit of commencing every year with a capital consisting of wages for a certain number of labourers, which we call twenty-six, and of employing that capital in hiring twenty men, to reproduce, during the year, wages for the whole twenty-six, and six to produce commodities for himself. He now supposes him to employ ten of his men during a year in producing, not wages, but a machine, which, with the aid of seven men to keep it in repair and work it, will produce every year wages for thirteen men. At the end of the year the capitalist’s situation would be unaltered: he would have wages for thirteen men, the produce of the labour of his other ten men during the year — and his machine, also the produce of the labour of ten men during the year, and therefore of equal value. And his situation would continue unaltered. Every year his machine would produce wages for thirteen men, of whom seven must be employed in repairing and working it, and six might, as before, be employed for the benefit of the capitalist. But we have seen that, during the year in which the machine was constructed, only ten men were employed in producing wages instead of twenty, and, consequently, that wages were produced for only thirteen men instead of for twenty-six. At the end of that year, therefore, the fund for the maintenance of labour was diminished, and wages must consequently, have fallen. It is of great importance to recollect, that the only reason for this fall was the diminution of the annual production. The twenty men produced wages for twenty-six men: the machine produces wages for only thirteen. The vulgar error on this subject supposes the evil to arise, not from. its true-cause, the expense of constructing the machine, but from the productive powers of that machine. So far is this from being true, that those productive powers are the specific benefit which is to be set against the evil of its expensiveness. If, instead of wages for thirteen men, the machine could produce wages for thirty, its use, as soon as it came into operation, would have increased instead of diminishing the fund for the maintenance of labour. The same effect would have been produced, if the machine could have been obtained without expense; or, if the capitalist, instead of building it out of his capital, had built it out of his profits — if, instead of withdrawing ten men for a year from the production of wages, he had employed in its construction, during two years, five of the men whom he is supposed to have employed in producing commodities for his own use. In either case, the additional produce obtained from the machine would have been an additional fund for the maintenance of labour; and wages must, according to my elementary proposition, have risen.(3)

I have thought it necessary to state this possible evil as a part of the theory of machinery, but I am far from attaching any practical importance to it. I do not believe that there exists upon record a single instance in which the whole annual produce has been diminished by the use of inanimate machinery. Partly in consequence of the expense of constructing the greater part of machinery being defrayed out of profits or rent, and partly in consequence of the great proportion which the productive powers of machinery bear to the expense of its construction, its use is uniformly accompanied by an enormous increase of production. The annual consumption of cotton wool in this country, before the introduction of the spinning jenny, did not amount to 100,000 lbs.; it now amounts to 190,000,000. Since the power-loom came into use, the quantity of cotton cloth manufactured for home consumption has increased from 227,000,000 of yards (the average annual amount between the years 1816 and 1820), to 400,000,000 of yards (the annual average from 1824 to 1828 (Huskisson’s Speech, 1830). The number of copies of books extant at any one period before the invention of the printing-press, was probably smaller than that which is now produced in a single day. Mr. Ricardo’s proposition, therefore (Princ. 474), that the use of machinery frequently diminishes the quantity of the gross produce of a country, is. erroneous, so far as it depends on the case which he has supposed, and of which I have stated the substance.

The other exception, that where the machine itself consumes commodities which would otherwise have been consumed by labourers, and that to a greater extent than it produces them, applies only to the case of horses and working cattle, which may be termed animated machines. We will suppose a farmer to employ on his farm twenty men, who produce annually their own subsistence, and that of six other men producing commodities for the use of their master. if five horses, consuming, we will say, as much as eight men, could do the work of ten, it would be worth the farmer’s while to substitute them for eight of his men, as he would be able to increase the number of persons who work for his own benefit from six to eight. But after deducting the subsistence of the horses, the fund for the maintenance of labourers would be reduced from wages for twenty-six men to wages for eighteen. I cannot refuse to admit that such cases may exist, or to deplore the misery that must accompany them. They are, in fact, now occurring in Ireland, and are occasioning much of the distress of that country. They seem, indeed, to be the natural accompaniments of a certain period in the progress of national improvement. In the early stages of society, the rank and even the safety of the landed proprietor is principally determined by the number of his dependents. The best mode of increasing that number is to allow the land, which he does not occupy as his own demesne, to be subdivided into small tenements, each cultivated by one family, and just sufficient for their support. Such tenants can of course pay little rent, but they arc enabled by their abundant leisure, and forced by their absolute dependence, to swell the retinue, and aid the political influence, of their landlord in peace, and to follow his banner in public and private war. Cameron of Lochiel, whose rental did not exceed £500 a year, carried with him into the rebellion of 1745, eight hundred men raised from his own tenantry. But in the progress of civilization, as wealth becomes the principal means of distinction and influence, landowners prefer rent to dependents. To obtain rent, that. process of cultivation must be employed which will give, not absolutely the greatest amount of produce, but the greatest after deducting the expenses. For this purpose a tract of five hundred acres, from which fifty families produced their own subsistence, and produced scarcely anything more, may be converted into one farm, and with the labour of ten families, and as many horses, may produce the subsistence of only thirty families. Fortunately, however, the period at which these alterations take place is generally one of great social improvement; so that, after a short interval, the increased diligence and skill with which labour is applied, occasion an increase of even the gross produce. The fund for the maintenance of labourers now becomes increased from two different sources — partly from the increased efficiency of human labour. when aided by that of horses and cattle, and partly from the results of a part of the human labour set free by the substitution of brutes. The ultimate consequences of such a change are always beneficial; the change. itself must, in general, be accompanied by distress.

But with the exception of these two cases, one of which produces only temporary effects, and the other, though :apparently possible, seem never actually to occur, it. appears to me dear that the use. of machinery must either rase the general rate of wages, or leave it unaltered.

When machinery is applied to the production of commodities which are not intended, directly or indirectly, for the use of labourers, it occasions no alteration in the general rate of wages; — I say the general rate of wages; because it may diminish the rate of wages in some employments, — a diminution. always compensated by a corresponding increase in some others. I was shown at Birmingham a small screw, which, in the manufacture of corkscrews, performed the work of fifty-nine men; with its assistance one man could cut a spiral groove in as many corkscrew shanks as sixty men could have cut in the same time with the tools previously in use. As the use of corkscrews is limited, it is not probable that the demand for them has sufficiently increased to enable the whole number of labourers previously employed in their manufacture, to remain so employed after such an increase in their productive power. Some of the corkscrew-makers, therefore, must have been thrown out of work, and the rate of wages in that trade probably fell. But as the whole fund for the maintenance of labourers, and the whole number of labourers to be maintained, remained unaltered, that fall must have been balanced by a rise somewhere else — a rise which we may trace to its proximate cause, by recollecting that the fall in the price of corkscrews must have left every purchaser of a corkscrew a fund for the purchase of labour, rather larger than he would have possessed if he had paid the former price.

If, however, machinery be applied to the production of any commodity used by the labouring population, the general rate of wages will rise. That it cannot fall is clear, on the grounds which I have just stated. If the improvement be great, and the commodity not subject to a corresponding increase of demand, some of the labourers formerly employed in its production will be thrown out of employment, and wages, in that trade, will fall — a fall which, as the whole fund for the maintenance of labour is not diminished, must be met by a corresponding rise in some other trade. But the fund will be increased by the additional quantity produced of the commodity to which the improvement has been applied: estimated in that commodity, therefore, the general rate of wages, or, in other words, the quantity of commodities obtained by the labouring population, will be increased by the introduction of machinery; estimated in all others, it will be stationary.

The example taken from the manufacture of corkscrews is as unfavourable to the effects of machinery as can be proposed; for the use of the commodity is supposed to be unable to keep up with the increased production, and the whole number of labourers employed on it is, consequently, diminished. This, however, is a very rare occurrence. The usual effect of an increase in the facility of producing a commodity is so to increase its consumption as to occasion the employment of more, not less, labour than before.

I have already called your attention to the effects of machinery in the manufacture of cotton and in printing. Each of these trades probably employs ten times as many labourers as it would have employed if spinning-jennies and types had not been invented. Under such circumstances (and they are the usual ones), the benefits of machinery are not alloyed by even partial inconvenience.

Fifthly. Closely connected with this mistake, and occasioned by the same habit of attending only to what is temporary and partial, and neglecting what is permanent and general; of dwelling on the evil that is concentrated, and being insensible of the benefit that is diffused, is the common error of supposing that the general rate of wages can be reduced by the importation of foreign commodities. In fact the opening of a new market is precisely analogous to the introduction of a new machine, except that it is a machine which it costs nothing to construct or to keep up. If the foreign commodity be not consumed by the labouring population, its introduction leaves the general rate of wages unaffected; if it be used by them, their wages are raised as estimated in that commodity. If the absurd laws which favour the wines of Portugal to the exclusion of those of France were repealed, more labourers would be employed in producing commodities for the French market, and fewer for the Portuguese. Wages would temporarily fall in the one trade, and rise in the other. The clear benefit would be derived by the drinkers of wine, who, at the same expense, would obtain more and better wine. So if what arc called the protecting duties on French silks were removed, fewer labourers would be employed in the direct production of silk, and more in its indirect production, by the production of the cottons, or hardware, with which it would be purchased. The wearers of silk would be the only class ultimately benefited; and as the labouring population neither wear silk nor drink wine, the general rate of wages would, in both cases, remain unaltered. But if the laws which prohibit our obtaining on the most advantageous terms tea, and sugar, and corn, were altered, that portion of the. fund for the maintenance of labour, which consists of corn, sugar, and tea, would be increased. And the general rate of wages, as estimated in the three most important articles of food, would be raised.

Sixthly. The views which I have been endeavouring to explain, are inconsistent with the common opinion, that the unproductive consumption of landlords and capitalists is beneficial to the labouring classes, because it furnishes them with employment. The maintainers of this theory must forget that it is not employment, but food, clothing, shelter, and fuel — in short, the materials of subsistence and comfort, that the labouring classes require. The word employment is merely a concise form of designating toil, trouble, exposure, and fatigue. All these, per se, are evils, and the less of them that is required for obtaining a given amount of subsistence and comfort, — or, in other words, the greater the facility of obtaining that given amount, — the better, caeteris paribus, will be the condition of the labouring classes; indeed, of all classes in the community. What occasions the prosperity of a colony? Not the dearness of subsistence, but its cheapness; not the difficulty of obtaining food, clothing; shelter, and fuel, but the facility. Now how can unproductive consumption increase this facility? How can the fund from which all are to be maintained be augmented by the destruction of a portion of it? If the higher orders were to return to the customs of a century ago, and cover their coats with gold lace, they might enjoy their own finery; but how would that benefit their inferiors? The theory which I am considering, replies that they would be benefited by being employed in making the lace. It is true that a coat, instead of costing £5, would cost £55 But what becomes now of the extra £50? for it cannot be said that because it is not spent on a laced coat, it does not exist. If a landlord with £10,000 a year spends it unproductively, he pays it away to those who furnish the embellishments of his house and grounds, and supply his stable, his equipage, and his clothes. Suppose him now to abandon all unproductive expenditure, to confine himself to bare necessaries, and to earn them by his own labour, the first consequence would be, that those among whom he previously spent his £10,000 a year would lose him as an employer; and beyond this the theory in question sees nothing. But what would he do with the £10,000 which he would still annually receive? No one supposes that he would lock it up in a box, or bury it in his garden. Whether productively or unproductively, it still must be spent. If spent by himself, as by the supposition it would be spent productively, it must increase, and every year still further increase the whole fund applicable to the use of the rest of the community. If not spent by himself, it must be lent to some other person, and by that person it must be spent productively or unproductively. He might, perhaps, buy with it property in the English funds; but what becomes of it in the hands of the person who sells to him that funded property? He might buy with it French rentes; but in what form would the price of those rentes go to Paris? — In the form, as we have seen, of manufactured commodities. Quacunque via data, every man must spend his income; and the less he spends on himself, the more remains for the rest of the world.

The last theory, inconsistent with my own views, to which I shall call your attention, is that proposed by Mr. Ricardo in the following passage: —

‘The labouring class have no small interest in the manner in which the net income of the country is expended, although it should, in all cases, be expended for the gratification and enjoyment of those who are fairly entitled to it.

‘If a landlord, or a capitalist, expends his revenue in the manner of an ancient baron, in the support of a great number of retainers or menial servants, he will give employment to much more labour than if he expended it on fine clothes or costly furniture.

‘In both cases the net revenue would be the same, and so would be the gross revenue, but the former would be realized in different commodities. If my revenue were £10,000, the same quantity nearly of productive labour would be employed, whether I realized it in fine clothes and costly furniture, etc. etc., or in a quantity of food and clothing of the same value. If, however, I realized my revenue in the first set of commodities, no more labour would be consequently employed: I should enjoy my furniture and my clothes, and there would be an end of them; but if I realized my revenue in food and clothing, and my desire was to employ menial servants, all those whom I could so employ with my revenue of £10,000, or with the food and clothing which it would purchase, would be to be added to the former demand for labourers, and this addition would take place only because I chose this mode of expending my revenue. As the labourers, then, are interested in the demand for labour, they must naturally desire that as much as possible should be diverted from expenditure on luxuries, to be expended in the support of menial servants.

In the same manner a country engaged in war, and which is under the necessity of main mining large fleets and armies, employs a great many more men than will be employed when the war terminates, and the annual expenses which it brings with it cease.

If I were not called upon for a tax of £500 during the war, which is expended on men in the situations of soldiers and sailors, I might probably spend that portion of my income on furniture, clothes, books, etc. etc., and whether it was expended in the one way or the other, there would be the same quantity of labour employed in production; for the food and clothing of the soldier and sailor would require the same amount of industry to produce them as the more luxurious commodities: but, in the case of war, there would be the additional demand for men as soldiers and sailors; and, consequently, a war which is supported out of the revenue, and not from the capital of a country, is favourable to an increase of population.

At the termination of the war, when part of my revenue reverts to me, and is employed as before in the purchase of wine, furniture, or other luxuries, the population which it before supported, and which the war called into existence, will become redundant, and by its effect on the rest of the population, and its competition with it for employment, will sink the value of wages, and very materially deteriorate the condition of the labouring classes.’(4)

Mr. Ricardo’s theory is, that it is more beneficial to the labouring classes to be employed in the production of services than in the production of commodities; that it is better for them to be employed in standing behind chairs than in making chairs; as soldiers or sailors than as manufacturers. Now as it is clear that the whole quantity of commodities provided for the use of labourers is not increased by the conversion of an artisan into a footman or a soldier, either Mr. Ricardo must be wrong, or my elementary proposition is false.

Mr. Ricardo seems to have been led to his conclusions by observing that the wages of servants, sailors, and soldiers are principally paid in kind — those of artisans in money. He correctly states, that if a man with £10,000-a-year spends his income in the purchase of commodities for his own use, he retains, after having made those purchases, no further fund for the maintenance of labour; but that if he spends it in the purchase of commodities to be employed in maintaining menial servants, he has, in those purchased commodities, a new fund with which he can maintain a certain number of menial servants. It appeared to him, therefore, that the landlord would, in the latter case, be able to spend his income twice over; to subsist twice as many persons as before. It did not occur to him that the landlord, by purchasing himself the subsistence of his servants, merely does for them what they would be able to do better for themselves; that, instead of spending his own income twice over, he merely takes on himself the business of spending theirs for them;(5) and that if he were to give to his servants the value of their whole subsistence in money, the whole body of labourers would be just as well maintained as in the supposed case of his purchasing their subsistence, and then giving it to them in exchange for their services. No one would maintain that if it were the practice, in this country, as it is in India, to give to servants board wages, the demand for labour would be lessened; or that if it were the practice, as it is in semi-barbarous countries, to maintain servants to produce within their masters walls the commodities which we are accustomed to purchase from shops, the demand for labour would be increased. Still less could it be. maintained, that if those servants, instead of producing commodities, were employed in following their master’s person, or mounting guard before his door, such a change would create an additional demand for men, and be favourable to an increase of population.

So far am I from concurring in Mr. Ricardo’s opinion, that it is the interest of the labourers that revenue should be spent rather on service s than on commodities, that I believe their interest to be precisely opposite. In the first place, the labourer can generally manage better his own income than it can be managed for him by his master. If a domestic servant could earn as wages the whole sum which he costs his master, even if he were to spend it as he received it, he would probably spend it with more enjoyment. Secondly, the income spent on services is spent in the purchase of what perishes at the instant of its creation; that spent on commodities often leaves results which, when their first purchaser has done with them, are serviceable to others. In this country the poor are, to a great extent, clothed with garments originally provided for their superiors. In all the better class of cottages may be found articles of furniture which never could have been made for their present possessors. A large portion of the commodities which now contribute to the comfort of the labouring classes would never have existed, if it had been the fashion in this country, during the last fifty years, to prefer retinue and attendance to durable commodities. And, thirdly, the income employed on commodities is favourable to the creation of both material and immaterial capital; that employed on services is not. The duties of a servant are so easily learned, that he can scarcely be termed a skilled labourer: his accumulations are small in amount, and seldom turned to much advantage. The artisan learns a trade, in which every year adds to his skill, and is taught mechanical and chemical processes, often susceptible of indefinite improvement, and in which a single invention may raise the author to wealth, and diffuse prosperity over a whole district, or even a whole nation. An industrious artisan can often save a large portion of his income, and invest it with great and immediate profit. He purchases with his savings a small stock of tools and materials, and by the vigilance and activity which can be applied only to a small capital, renders every portion of it efficient. The ancestors, and not the remote ancestors, of some of our richest and our proudest families, the authors of some of our most valuable discoveries, were common mechanics. What menial servant has in this country, and in modern times, been a public benefactor, or even raised himself to affluence? Both history and observation show that those countries in which expenditure is chiefly employed in the purchase of services are poor, and those in which it is employed on commodities are rich.

Mr. Ricardo’s theory as to the effects of war is still more strikingly erroneous. It is, in the first place, open to all the objections which I have already opposed to his views respecting menial servants. The revenue which is employed in maintaining soldiers and sailors would, even if unproductively consumed, maintain at least an equal number of servants and artisans; and that portion of it which would have been employed in the maintenance of artisans would (as we have seen) have been far more beneficially employed. The demand for soldiers and sailors is not, as he terms it, an additional, it is merely a substituted demand. But a great part of that revenue would have been productively consumed. Instead of employing some labourers in converting suburbs into fortifications, and forests into navies, to perish by dry rot in harbour, or by exposure, at sea, and others in walking the deck and parading on the rampart, it would have employed them in adding more and more every year to the fund from which their subsistence is derived. War is mischievous to every class in the community; but to none is it such. a curse as to the labourers.



3. And yet it appears now to be thought, that wages may be raised by the destruction or (what is the same in immediate effect) the disuse of machines already constructed.

4. Principles, etc., p. 475.

5. He did not perceive that all that the landlord spends in purchasing the subsistence and clothing of his servants is so much deducted from what he would otherwise have to pay them in money.