3: Nominal and Real Cost of Labor
Whereas the worker considers the costs of necessities and conveniences he needs to purchase with his wage, the perspective of the employer is quite different and rather more specific: wages are a cost, which is both necessary to earning revenue and a subtraction from his profit.
The profit made from labor is to be considered in considering its real cost: it is not that a worker's wage is high or low in terms of its money price, but in proportion to the profit that he creates for his employer. A worker whose wage is five pence a day, and who creates fifty pence worth of product is cheaper than a worker whose wage is four pence and who creates only thirty-five pence of revenue.
One of the main problems in pricing labor fairly is in the demand for fairness - as in the first case being "fair" means compensating a worker according to what he produces, and the second "fair" means ignoring productivity and paying all workers the same wage. "A fair day's work for a fair day's pay" does not consider that "a day's work" is not constant between workers and professions.
Many disastrous decisions have been made by employers who relocated their production facilities overseas because of the cheaper cost of labor in foreign countries - only to find that the quality of laborer was also significantly worse. A worker who charges a quarter as much, but only does a tenth as much work, is a terrible investment. This lesson has been learned repeatedly.
This notion is often dismissed as nationalism, or in some instances ethnic prejudice, but there is ample evidence of its truth in terms of the number of men it requires to do a similar task, or the number hour hours to complete it, in various nations. Walker refers to reader to "Work and Wages (Brassey, 1872) for extensive statistics on the differences in the productivity of labor in various nations.
He also speaks at length about railway construction, a major undertaking in his time, and the differences in the number of laborers and the miles of track they laid in various countries. Particularly in America, companies took to the practice of scaling wages by nationality, on the assumption that workers of a given ethnic group could be expected to do more or less than that of others.
Walker list six reasons that correlate to differences in the efficiency of labor:
- Peculiarities of stock and breading
- Meagerness or liberality of diet
- Habitat and environment
- Intelligence
- Education
- Attitude and Ambition
Peculiarities of stock and breeding
While politics and religion may speak of the equality of all men, this is in pointed ignorance of the inequalities that may be seen among various races and ethnicities. There are significant differences in the size, strength, manual dexterity, and stamina of various groups of men.
He delves into some of the details of the differences in the height and weight of various ethnic groups, and speculates that this likely has a great deal to do with the climate and their diet during childhood years, as one can see less differences in the ethnic groups in America than in their native countries.
He also mentions the difference in the stock of war-torn countries, where the men of superior qualities are "shut up in barracks or torn to pieces on the battlefield" and feebler males are left to propagate the stock. He mentions the struggles in France, where "the principle of natural selection ahs been violently reversed" over multiple generations.
A similar problem can be seen, though to a lesser degree, in countries where women work and the strongest and healthiest females are removed from the breeding stock. It's likewise suggested that children who enter the workplace at too young and age are often stunted and weakened, and "lower the average vitality of the population."
Meagerness or liberality of diet
Another reason one group of laborers is more productive than another is, quite simply, that they are better nourished. Food is the fuel that powers human beings, and just as low-grade fuel weakens (and can even damage) an engine, so does a poor diet sap human productivity. Productive workers have a higher quality and higher quantity of food, on a more regular schedule.
Naturally, there is an economic maximum, at which point the increase in food degrades rather than improves performance, and men who routinely gorge beyond their needs become slower and weaker - and likewise there is the economic minimum required to sustain life, but which does not provide ample energy to labor strenuously for a sustained period of time.
Walker does not provide precise guidance, but does point to the differences in productivity in various locations and compares it to the nourishment of the people. It seems unfortunate that, in the name of efficiency, that the largest portions of the laboring classes are kept at mere subsistence, as scrawny men produce far less.
He also compares the economic conditions in Devon, where workers "seldom more than sees or smells butcher's meat" and those of the Lothian who eat a hearty diet and produce much. There is something of a vicious cycle here, as the more a man produces, the more he can be paid, and the better his diet - so those on the poorest level, the least productive workers, are unable to afford the food they need to make them capable of being more productive.
Walker mentions that there are other necessities that also lead to efficiencies in production, of which much the same can be said. A well-clothed worker, appropriate to his environment, remains better focused on his tasks - and it is again rather obvious that those who are not protected against the cold spend more time shivering than shoveling, and suffer greater absenteeism due to excessive sickness and mortality for exposure to the elements.
It seems senseless that employers would not provide sufficient wages for men to take good care of themselves, but he finds it in the nature of mankind to be "foolish to the point of stupidity." He also mentions that there remains in Europe the sentiments of serfdom and slavery, and a contempt for the working classes that make employers reluctant to "spoil" employees. The desire to make profit or maintain competitive pricing are also convenient excuses for neglect. And as such many employers treat their workers, who should be revered as the source of profit, far worse than farmers treat their livestock.
(EN: There have been multiple arguments over "fairness" of wages - whether workers are due a fixed share of the profits they generate, they are due a certain level of income regardless of productivity, whether wages are set by the market and employers merely offer what is demanded, etc. It would stand to reason that this would be sorted out, in that any employer or industry that offers insufficient compensation would lose its workforce to others - but where there is a surplus of labor, this is not the case.)
(EN: another point, which I expected the author to raise later, is that giving men adequate wages to provide for themselves ensures they can do so - but not that they will do so. Some spend money wastefully, as is their wont and when wages are paid in money this is quite inevitable.)
Habitat and environment
Aside of food and clothing, a worker's habitat (housing) and environment also have a significant impact on his health, hence his ability to be fully productive.
In general, where population becomes concentrated, filth abounds. The garbage and waste accumulates and is not property disposed of, and the streets are heaped with filth. There is also the tendency of manufacturing operations to generate filth of their own - refuse and smog - which degrade the sanitation of the surrounding areas. It's also noted that the demand for housing cause overcrowding - too many people crammed into close quarters, which facilitates the spread of disease and sickness.
Walker presents a number of accounts, descriptions, and statistics that demonstrate that the great manufacturing cities of England are also very crowded, unsanitary, and unhealthy places. He likewise presents statistics on loss of work due to sickness and the increased mortality rates in unsanitary (urban) environments.
He then turns to the sanitation and healthiness of the workplace environment, which is often abominable as well. In the agricultural trades, there is likely no avoiding exposing workers to the elements. In manufacturing, the size of the factory remains fixed while the workforce grows, and management think it efficient to pack as many bodies into a space as possible.
Intelligence
Walker provides a quick list of the benefits of an intelligent laborer:
- He knows how to apply himself to his work with the greatest effect, and can find ways to be efficient in his work
- He learns more quickly, requires less time to train, and often can maintain and improve his performance more rapidly
- He requires less supervision while he works, decreasing the cost of foremen, managers, and overseers
- He is less wasteful in his work, making more efficient use of materials, which decreases his employer's expenses
- He is able of using more delicate and intricate machinery without damaging it, and is in general more gentle with his tools, which also decreases expenses
Some examples are provided, primarily from the cotton industry in India, in which it is suggested that the workers are unobservant and wasteful, preferring brute force over precision in their work. The equipment and machinery they are given is less productive and in disrepair far more often than in other locations, and less product is created from the same amount of raw materials. It is for this reason that firms often import only raw materials from such locations, as manufacturing operations are seldom successful.
Education
Technical education is a critical factor, and is particularly important to being able to work in industry. A general knowledge of machinery and the practices by which men are able to work together are critical to success in a wide field of endeavors. The skills necessary to perform a specific task for a specific job are easily apprehended when there is a general basis of knowledge about industrial production.
(EN: Walker continues to describe the productivity of certain workplaces, but it is not clearly tied back to the topic of education. As near as I can tell, it is more about the culture of cooperative work that is adopted in manufacturing - particularly in instances where a task is broken into parts, such that the employees are conscious and attentive to the needs to the person who will perform the next step.)
Attitude and Ambition
The last reason for the difference in the productivity of workers is one of their "cheerfulness and hopefulness" in their labor, which cause them to take a personal interest in performing their work well. While the previous qualities had much to do with a person's ability to work, this has to do with their willingness to do so - as it is frequently observed that workers do less than they are capable of doing.
The inferiority of slave labor had been much discussed in the author's time, as it was a popular argument among abolitionists - but politics aside it had been routinely demonstrated that slave labor is always ineffective and wasteful because there was no incentive to work any harder than was necessary to avoid a whipping. The individual slave will receive no reward from harder or more diligent work, and as a gang their incentive is to maintain as slow and leisurely a pace as possible while avoiding irritating their maters and overseers. The free laborer, who works for a reward, is inclined to work harder to achieve greater reward, particularly when his compensation is closely tied to his productivity.
It is also observed that slaves are capable of doing basic tasks, and generally do them poorly, as a man can be forced to work but he cannot be forced to think. Thinking is necessary to work effectively and efficiently - and it also requires a level of independence. To think is to decide what to do, which requires a worker to have options to choose between. The slave seeks only to comply, to do what he is told as he is told, and to exercise any discretion is to accept the blame for making the wrong choice.
(EN: Much of this is being echoed in the analysis of modern day corporate cultures. While the workers are free men, the constant threats made by management of lesser punishments are sufficient to keep them from thinking, avoid risks, and otherwise adopt the mentality of the obedient slave who seeks to avoid punishment rather than achieve reward.)
Workers apply themselves with the greatest diligence when their reward is most directly and clearly contingent on their output. The farmer who works his own land, for his own profit, is more productive than the hired laborer who earns a fixed wage regardless of his output - the latter is inclined to work only as much as necessary to retain his employment. Even workers paid by the unit of work are more productive than those who are paid a fixed wage.
While the wage-laborer may recognize that his income will be increased if he increases the value of his labor to his employer, he must also recognize that it is not guaranteed. The employer may not be motivated to increase the wage. Just as the wage-laborer works only as much as necessary to retain his employment, his employer is inclined to pay only as much as is necessary to retain his laborers. It is a system that, by design, is geared to driver both labor and wages to their lowest sustainable levels.
Laziness
Walker mentions that he has purposefully avoided the negative qualities of character that diminish its efficiency: dishonestly and laziness do exist, and sometimes seem widespread, but are in most places unusual, as society would fail to prosper and the human race would likely not have survived at all if indolence were the character of the better part of men.
(EN: How much a person should wish to work is also subject to argument. One of the chief flaws of British Economics, of which Walker is a representative, is the sense that "more is better" and that a person should constantly attempt to increase their productivity, whereas in other schools of theory suggest workers seek a more modest level of income, and work "just enough" to cover their necessities and their desired level of comforts and entertainments. Ultimately, it is subjective and philosophical.)