It may be granted that in certain economic inquiries it is extremely useful to bring out the points of resemblance between “workers” at the various stages of the social scale, and it is especially serviceable in showing that the opposition between “employer” and the “employed,” and the “classes” and the “masses,” is often exaggerated. At the same time the differences, if not in kind at any rate in degree, are so great that if the analogy is carried very far it becomes misleading. Accordingly it seems natural to adopt as the preliminary definition of “wages” something equivalent to that of Francis Walker in his standard work on the Wages Question, viz. “the reward of those who are employed in production with a view to the profit of their employers and are paid at stipulated rates.”
It may be observed that by extending the meaning of production, as is now done by most economists, to include all kinds of labour, and by substituting benefit for profit, this definition will include all grades of wages.
Having thus limited the class of those who earn “wages,” the next point is to consider the way in which the wages ought to be Nominal and real wages. measured. The most obvious method is to take as the rate of time-wages the amount of money earned in a certain time, and as the rate of task-wages the amount of money obtained for a given amount of work of a given quality; and in many inquiries this rough mode of measurement is sufficient. But the introduction of money as the measure at once makes it necessary to assume that for purposes of comparison the value of the money to the wage-earners may be considered constant. This supposition does not hold good even between different places in the same country at the same time, and still less with variations in time as well as place. To the labourers, however, the amount of money they obtain is only a means to an end, and accordingly economists have drawn a sharp distinction between nominal and real wages. “Labour, like commodities,” says Adam Smith, “may be said to have a real and a nominal price. Its real price may be said to consist in the quantity of the necessaries and conveniences of life which are given for it; its nominal price in the quantity of money. The labourer is rich or poor, is well or ill rewarded, in proportion to the real not to the nominal price of his labour.”
Walker (op. cit. pp. 12 sqq.) has given a full analysis of the principal elements which ought to be taken into account in Variations in real wages. estimating the real wages of labour. They may be classified as follows. (1) Variations in the purchasing power of money may be due in the first place to causes affecting the general level of prices in a country. Such, for instance, is a debasement of the coinage, of which a good example is furnished in English history in the reigns of Henry VIII. and Edward VI. Thorold Rogers has ascribed much of the degradation of labour which ensued to this fact; and Macaulay has given a graphic account of the evils suffered by the labouring classes prior to the recoinage of 1696. The issues of in convertible paper notes in excess have frequently caused a disturbance of real wages, and it is generally asserted that in this case wages as a rule do not rise so quickly as commodities. A general rise in prices due to great discoveries of the precious metals would, if nominal wages remained the same, of course cause a fall in real wages. There are, however, good grounds for supposing that the stimulus given to trade in this case would raise wages at least in proportion; and certainly the great gold discoveries in Australia and California raised wages in England, as is shown in Tooke's History of Prices, vol. v. p. 284. Similarly it is possible that a general fall in prices, owing to a relative scarcity of the precious metals, may lower the prices of commodities before it lowers the price of labour, in which case there is a rise in real wages. In the controversy as to the possible advantages of bimetallism this was one of the points most frequently discussed. It is impossible to say a priori whether a rise or fall in general prices, or a change in the value of money, will raise or lower real wages, since the result is effected principally by indirect influences. But, apart from these general movements in prices, we must, in order to find the real value of nominal wages, consider variations in local prices, and in making this estimate we must notice the principal items in the expenditure of the labourers. Much attention has been given recently by statisticians to this subject, with the view of finding a good “index number” for real wages. (2) Varieties in the form of payment require careful attention. Sometimes the payment is only partly in money, especially in agriculture in some places. In many parts of Scotland the labourers receive meal, peats, potatoes, &c. (3) Opportunities for extra earnings are sometimes of much importance, especially if we take as the wage-earning unit the family and not the individual. At the end of the 18th century Arthur Young, in his celebrated tours, often calls attention to this fact. In Northumberland and other counties a “hind” (i.e. agricultural labourer) is more valued if he has a large working family, and the family earnings are relatively large. (4) Regularity of employment is always, especially in modern times, one of the most important points to be considered. Apart from such obvious causes of fluctuation as the nature of the employment, e.g. in the case of fishermen, guides, &c., there are various social and industrial causes (for a particular and able investigation of which the reader may consult Professor Foxwell's essay on the subject). Under the system of production on a large scale for foreign markets, with widely extended division of labour, it seems impossible to adjust accurately the supply to the demand, and there are in consequence constant fluctuations in the employment of labour. A striking example, happily rare, is furnished by the cotton famine during the American Civil War. (5) In forming a scientific conception of real wages we ought to take into account the longer or the shorter duration of the power to labour: the man whose employment is healthy and who lives more comfortably and longer at the same nominal rate of wages may be held lo obtain a higher real wage than his less fortunate competitor. It is worth noting, in this respect, that in nearly every special industry there is a liability to some special form of disease: e.g. lace-workers often suffer from diseases of the eyes, miners from diseases of the lungs, &c. Thus, in attempting to estimate real wages, we have to consider all the various discomforts involved in the “quantity of labour” as well as all the conveniences which the nominal wages will purchase and all the supplements in kind.
In a systematic treatment of the wages question it would be natural to examine next the causes which determine the General rate of wages in any country at any time. general rate of wages in any country at any time. This is a problem to which economists have given much attention, and is one of great complexity. It is difficult, when we consider the immense variety of “occupations” in any civilized country and the constant changes which are taking place, even to form an adequate conception of the general rate of wages. There are thousands of occupations of various kinds, and at first sight it may seem impossible to determine, in a manner sufficiently accurate for any useful purpose, an average or general rate of wages, especially if we attempt to take real and not merely nominal wages. At the same time, in estimating the progress of the working-classes, or in comparing their relative positions in different countries, it is necessary to use this conception of a general rate of wages in a practical manner. The difficulties presented are of the same kind as those met with in the determination of the value of money or the general level of prices, and may be overcome to some extent by the same methods. An “index number” may be formed by taking various kinds of labour as fair samples, and the nominal wages thus obtained may be corrected by a consideration of the elements in the real wages to which they correspond. Care must be taken, however, that the quantity and quality of labour taken at different times and places are the same, just as in the case of commodities similar precautions are necessary. Practically, for example, errors are constantly made by taking the rate of wages for a short time (say an hour), and then, without regard to regularity of employment, constructing the annual rate on this basis; and again, insufficient attention is paid to Adam Smith's pithy caution that “there may be more labour in an hour's hard work than in two hours' easy business.” But, however difficult it may be to obtain
