The Wealth of Nations · Chapter
VIII: Of the Wages of Labour explained
Smith examines the determination of wages, arguing that in an original state of nature the labourer would receive the whole produce, but with the appropriation of land and accumulation of stock, wages are reduced by rent and profit.
What happens
Smith examines the determination of wages, arguing that in an original state of nature the labourer would receive the whole produce, but with the appropriation of land and accumulation of stock, wages are reduced by rent and profit. He discusses the bargaining power between masters and workmen, the effect of demand for labour on wages, and the relationship between wages, population growth, and child mortality. He also considers the impact of cheap versus dear years on the industriousness and independence of workers, citing examples from French and British manufactures.
Themes in this chapter
Social Class and Inequality
Smith contrasts the conditions of the labouring poor with those of masters and landlords, discussing how poverty affects marriage, child rearing, and population.
Self-Interest and the Invisible Hand
The bargaining over wages between masters and workmen is driven by self-interest; masters combine to lower wages, while the market adjusts wages through supply and demand of labour.
Labor Theory of Value
Smith explains that in the original state, the whole produce belongs to the labourer, and wages are the natural recompense of labour; later deductions for rent and profit are introduced.
Wealth and Money
Discusses the real vs. money price of labour, and how the liberal reward of labour contributes to the wealth and happiness of society.
Characters to notice
- Adam Smith
Author and narrator; presents the analysis of wages, population, and labour markets.
- The Master
The employer who advances stock and shares in the produce; represents the interests of masters in wage negotiations.
- A Workman
The labourer whose wages are determined by contract; also the independent workman who owns his own stock.
- The Employer
The party in wage negotiations who seeks to lower wages; includes masters, landlords, and farmers.
- Servants
Labourers who serve under masters; their wages and conditions are discussed in relation to cheap and dear years.
- Menial Servants
Domestic servants whose wages and maintenance are fixed regardless of output; contrasted with independent workmen.
- Mr. Meggens
Mentioned as 'Mr. Messance', a French author whose data on manufactures is cited to argue about work in cheap vs. dear years.
- The French
Reference to the French author and the manufactures of Elbeuf and Rouen used as evidence.
Key passages
“Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole.”
The majority of society consists of workers, so any improvement in their well-being benefits the entire society.
Smith argues that the welfare of the common people is essential to the flourishing of the whole society.
“Poverty, though it no doubt discourages, does not always prevent marriage. It seems even to be favourable to generation. A half-starved Highland woman frequently bears more than twenty children, while a pampered fine lady is often incapable of bearing any...”
Poverty does not stop people from having many children, but it leads to high infant mortality, whereas wealthier women have fewer children.
Smith contrasts fertility and child survival between the poor and the rich, linking it to subsistence.
“The liberal reward of labour, by enabling them to provide better for their children, and consequently to bring up a greater number, naturally tends to widen and extend those limits.”
Higher wages allow workers to raise more children, increasing the population in line with labour demand.
Smith connects wages to population growth, suggesting that higher wages enable more children to survive.
“What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same.”
Wages are determined by the agreement between workers and employers, who have conflicting interests.
Smith highlights the inherent conflict in wage bargaining between labourers and masters.
“A poor independent workman will generally be more industrious than even a journeyman who works by the piece. The one enjoys the whole produce of his own industry; the other shares it with his master.”
Self-employed workers are more industrious than wage workers because they keep all the fruits of their labour.
Smith argues that ownership of one's output incentivizes greater effort.
