17: Disadvantages of the Wages Class
In previous chapters, it has been shown that there are many fictitious disadvantages of the wages class which are based on misconceptions about the nature of labor. In this chapter, Walker considers situations in which the laborer may justly claim to be placed at an unfair disadvantage.
Of note: there are situations that are unfavorable to a business in general, to which the profits of financier, employer, and laborer are all diminished. What he means to focus on in this chapter are the situations in which the wage-earner is disadvantaged compared to his partners and receives a lesser share of the revenue of the operation.
Laws that Restrain Movement
Any interference in the flow of labor to the locations and profession where it is demanded is a disadvantage to labor.
For the individual worker, such restrictions prevent him from changing his location or profession to one that would compensate him better. For the labor market, such restrictions prevent the shortages and surpluses of labor from being sorted out as men, in numbers, move toward the places where they are most needed - encouraging employers to raise or lower wages in response to the supply.
This has been attempted in history by rulers who thought themselves better able than the people to decide what goods were wanted and in what quantities, and so decided to use force of law to implement their design. It has also been used as a means to compete economically - such as England's prohibition for skilled workers to emigrate to the American colonies. In other instances, prohibiting men from changing professions was an attempt to promote stability in times of crisis - or merely to preserve stability by requiring sons to follow in their fathers' professions.
(EN: Walker provides a multitude of examples of laws in England, over a long period of time, that attempted to interfere in the free movement of labor. The list is quite extensive, but the details seem incidental.)
Unstable Currency
An unstable currency is problematic for all who trade in that currency, but particularly for the laborer who agrees to work for a specified wage. While he may be paid the amount to which he agreed, he will find that the currency he gets has less value in trade than he had originally expected - and whether by sudden catastrophe or slow attrition, find his wage incapable for sustaining his house.
It's also mentioned that wages are customarily negotiated for a length of time - a year, in many instances - whereas prices may fluctuate by the day. As such, the suppliers of goods raise prices immediately when they learns that currency is debased, but may stall in increasing the wages of its workers for an extended period of time.
This problem is insidious, and quite invisible to the average worker, who knows nothing of the economics of money and perceives only that prices are rising. His ire is misdirected at merchants rather than his employer, whom he perceives to be paying the agreed-upon wage.
Taxation
Taxation of any kind is ultimately paid by consumers in a market. When the tax is placed directly on personal income, it decreases the worker's wages from what was agreed upon. When the tax is placed upon producers or sellers, it increases the prices of goods, which diminishes the purchasing power of wages. In all instances, it means that the worker receives less in terms of the goods he is able to purchase for his wage without seeming to affect the wage itself.
Walker considers this in a bit more detail, as it is often assumed that taxation is borne by all consumers in a market - but this takes time. The burden of taxation will eventually diffuse itself, but when it is initially imposed it influences some in the market to a greater degree than others. That is, if a tax is placed on construction workers, it first affects only those workers. Then it affects the sellers of goods in the market because the workers have less money to purchase things. Then it affects anyone who hires construction workers to build something. Then it affects anyone who purchases the product from a supplier who paid the tax to build a new workshop. Then it affects anyone who needs to borrow money from the same bank from which the supplier borrowed to built the shop, etc.
In this sense, price controls may also be seen as a form of taxation, as those who produce a good must generate profit to cover their costs, and the inability to raise a price is essentially the same as taxing away any amount over a given price. And, or course, the fastest way to strangle an industry is to implement a tax while at the same time prohibiting producers from raising the prices to pay that tax.
Poor Laws
The notion of poor laws is a significant topic, and one that covers many different kinds of laws meant to provide for those who are unable to sustain themselves.
Walker goes back to a fundamental concept: people must undertake effort to produce what they need to survive. In the primitive societies, if you do not hunt, fish, or gather food you will starve - and the worker in modern times faces the same issue: you may produce your own food, or you may produce something to trade for food, or you may help to produce something for a share of the food someone else will trade to obtain. The necessity of producing for one's own consumption gets lost in a society, in which some may consume what is produced by others while undertaking no effort.
In this sense, the connection between consumption and production is lost, and laws meant to be kind to provide for the "disadvantaged" members of society merely support the unproductive members of society - and give them no incentive ever to become productive.
Walker strolls through some of the various economic programs of the English government, detailing the manner in which they created "voluntary pauperism" among people who eventually lost their will to work and accepted that it was easier to get by on hand-outs. In other instances, creating temporary relief for displaced workers or refugees resulted in them becoming permanently displaced - getting what they needed as charity gave them no incentive to make the changes necessary to become self-sustaining (in essence, to move to a place where labor was wanted or learn a trade that was valued).
(EN: This seems to depart from economics and get into politics, so I'm skipping much of the incidental details - except to say that it's interesting to see history repeating. The social programs, and resulting social problems, of 18th and 19th century England are very reminiscent of the programs and problems of modern-day America in terms of good intentions and bad consequences.)
In all, it is clearly to be taken as principle that providing for those who cannot provide for themselves leads to a great deal of abuse, and is in any case highly detrimental to the health of a nations economy when pauperism is "made inviting" and the normal incentives to be productive are removed in the name of charity. "The situation of the pauper ... should always be made less agreeable than that of the independent laborer: or pauperism will become more appealing as a means of achieving prosperity.
Non-Monetary Wages
Payment of wages in goods dates back to the periods in history in which money did not exist or was not in common use, and is in common use to the present day. Farm hands will work in exchange for certain goods (a cabin, fuel, foodstuffs, and a share of the produce when it is harvested), and workers in some cooperative workshops are rewarded with some amount of product that they may consume (a butcher's apprentice may receive meat) or sell (a weaver may receive a few bolts of cloth).
Because the barter system pre-dates currency, in is sometimes seen as a more natural form of exchange or payment (to be given a portion of the goods one has helped someone else to produce), and it is often seen as entirely benign. Walker seems a few serious problems with it that disadvantage the laborer.
The main problem is that it places on the laborer the necessity of also becoming a salesman. If he is given bolts of cloth for his work at a weaving facility, he must then carry the cloth to the market to sell it or trade it for the things his family needs. Laborers are not experienced as merchants: they have no place of business, no experience in trade, no network of customers and suppliers, and so on - so their trades are often haphazard and disadvantageous to themselves.
Particularly for large operations, the result is often a surplus of goods in the local market which further devalues them. In the same example, if a hundred workers in a textile plant are all given two bolts of cloth as their wage, then they will all try to sell them in the local market where they are not needed, and the will fetch a lower price. The workers have no means, and insufficient quantity of goods, to send them to more remote locations where the goods are wanted.
In other instances, an employer may furnish the necessities of life for his laborers. It is well documented that agricultural workers would be given quarters, a certain amount of food and fuel, the keep of a cow, and other things to sustain themselves and their families. The essential problem with this form of remuneration is that the free laborer becomes an indentured servant - he may not leave his work without leaving behind the things he needs the very next day to survive, and thus become immediately destitute.
This is sometimes seen in non-agricultural situations, in which factory workers or miners are paid in scrip that is used to pay rent or purchase goods from a company store. In essence, the scrip is an advance on wages, such that it is a loan that must be repaid. Because scrip is not accepted in the general market, it cannot be saved or used for other things and the worker has no negotiation power as a consumer (if the company store's prices are exorbitant, he cannot shop at another merchant), which leads to a form of indentured servitude into which desperate people aer drawn and from which many cannot escape.
Walker acknowledges that this situation is often the perversion of convenience. Particularly in the United States, where a work camp may be remote from society (such as workers laying rail across uninhabited expanses of land), the company store was a great convenience and even a necessity for the workers who could not travel to an existing town to trade. Employers often ran such operations at a loss when independent merchants found serving work crews unprofitable. But it was quickly discovered that the company store could be used to the company's advantage, and to the disadvantage of the workers.
Walker returns to this notion a few different times - in all, there is the sense he does not favor a barter arrangement of goods for labor, but can find no categorical objection to the practice if both employer and worker are amenable.
Equipment Rental
Another disadvantageous arrangement comes from the attempt to "rent" the tools and machines necessary to production to the workers who used them to produce. This largely stems from the agricultural arrangement (a landlord renting land to a farmer, who uses it to farm), and which also became perverted by certain unscrupulous employers.
The problem in this system was that the employer was the sole consumer of the good produced by workers and the sole provider of the materials and equipment that could be used to produce them. (EN: I'm reminded of work-at-home scams in which companies require people to buy supplies from them to produce goods which the company would pay a piece-rate for - though it seems to me that if a person is aware of both the cost and the revenue, it should be simple for them to work out whether it is a good deal for them to enter into.)
By controlling both the revenue and expenses of the workers, an employer could set rent to a level that made production unprofitable for the worker. In situations where the empnmloyer controls one but not the other - rents equipment and sells supplies but workers can sell their product on the market, or pays a piece-rate for production but does not rent equipment or sell supplies - avoids this squeeze on the workers.
Walker details the various ways in which employers abused the system in the textile industry: aside of the squeeze between cost and rent, there was a fixed rent but a variable income, the ability to control the among of work given to each worker, making employees pay for equipment maintenance and repairs, giving workers antiquated equipment that hindered production, etc.
Ignorance
Of all impediments that are disadvantageous to the worker, ignorance is perhaps the worst. There is no system or practice that can prevent a person from suffering the consequences of their own folly.
Some ignorance may be addressed by information: where a worker is unaware of the wages that are on offer, or where work is offered, he is unable to perceive his full range of options and choose what is most advantageous. Fortunately, it is in the interest of employers to make their needs known - though many prefer that their workers remain ignorant of better opportunities.
There is also the need for workers to be aware of their own interests. There are many who, ignorant of the long-term consequences, will take an option with immediate advantages. Where the terms of the exchange are clear and detailed, this can be minimized - but there is only so much that can be done to address an individual's own ignorance and short-sightedness.
What cannot be (rightly) dismissed as ignorance are the consequences of a worker's own choices. An individual may prefer to live in one town and accept lower wages rather than relocate himself to another town (or continent) to pursue a higher wage. This is a matter of choice, in the context of a lifestyle in which there are other concerns that matter more than money to an individual.
Concluding Remarks
The problem with many of the disadvantages listed in this chapter is that they are not necessarily disadvantageous to the worker and in some instances may be advantageous or at least benign. For example, the rental of equipment is not an issue if the worker can earn a living wage between the cost of rent and the profit of production. It is not inherently a bad system, but subject to abuses. As such, those who are taken advantage of appeal to parliament for the abolition of a system that others have found to be highly lucrative.
The goal of a productive operation is to satisfy the needs of all stakeholders: the capitalists receive acceptable return on their investment, the employers receive an acceptable profit for their risk, and the workers receive an acceptable wage for their labor.
In a free market, it is the responsibility of each person involved in a cooperative arrangement to determine what he deems to be "acceptable" and to associate or dissociate himself accordingly. A firm that is unable to offer an acceptable deal will find itself without the participation of those parties necessary to operate - and it will inevitably cease to be able to sustain itself.
The laissez-faire principles maintain that the only place of law is to ensure that these associations are voluntary, and that none are deceived or compelled against their will to participate - beyond any naturally occurring impediments to association or disassociation. To intervene on the behalf of any party is ultimately harmful to the entire system.
For labor specifically, a firm that does not offer a fair deal to its workers will cease to have the workers it needs to perform its function. It will also earn for itself a reputation as a poor employer - and these are punishments occur by virtue of the course of events, as decisions have their natural consequences in a free market.