The Wealth of Nations · Chapter
X: Of Wages and Profit in the Different Employments of Labour and Stock explained
Smith examines why wages and profits vary across different employments, arguing that in a free market they would tend toward equality but are distorted by policy and inherent job characteristics.
What happens
Smith examines why wages and profits vary across different employments, arguing that in a free market they would tend toward equality but are distorted by policy and inherent job characteristics. He identifies five key circumstances that offset pecuniary differences: agreeableness, cost of learning, constancy of employment, trust required, and probability of success. He also discusses how town industries gain advantages over country agriculture through regulations and combination, and how secondary employments (like knitting or spinning) can depress wages when workers derive main subsistence elsewhere.
Themes in this chapter
Self-Interest and the Invisible Hand
Every man's interest prompts him to seek advantageous employment and shun disadvantageous ones, naturally tending toward equality if left free.
Social Class and Inequality
Regulations give towns an advantage over the country, breaking the natural equality and distributing a greater share of annual produce to urban inhabitants.
Free Trade and Market Competition
Smith argues that perfect liberty and free choice of occupation would equalize advantages; but combinations, incorporations, and apprenticeship restrictions prevent free competition.
Characters to notice
- The Masters
Immediate employers of workmen; their profits are part of the price of manufactured goods sent to the country.
- The Employer
Merchants who employ carriers or sailors; their profits augment the price of imported goods.
- A Workman
Journeymen in various trades (tailor, weaver, smith, collier) whose wages vary by ease, cleanliness, and danger of work.
- The Proprietors
Landlords and farmers in the country; they are disadvantaged relative to townsmen by regulations that favor urban industry.
- The Teacher
Implied as the observer noting that in Scotland, cotters and servants knit stockings or spin linen as secondary employments, earning very little.
Key passages
“The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality.”
In any given area, the net benefits of various jobs and investments will either be exactly equal or always moving toward equality.
Smith's foundational principle for wage and profit variation.
“The wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness of the employment.”
Pay differs based on how pleasant, clean, or respectable a job is.
First of five circumstances affecting wages.
“The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.”
The executioner, though doing a hated job, earns more per task than typical workers.
Example of disagreeableness raising wages.
“In the advanced state of society, therefore, they are all very poor people who follow as a trade, what other people pursue as a pastime.”
In developed societies, those who work at activities others do for fun (like hunting or fishing) end up poor.
Illustrates how oversupply of labor depresses wages in pleasant employments.
“The produce of such labour comes frequently cheaper to market than would otherwise be suitable to its nature.”
Goods made by workers who have other main sources of income are often sold more cheaply than they should be.
Describes effect of secondary employments on market prices.
