WAGES THE REMUNERATION OF LABOR 1. Claimants to the product.—The discussion of value hasydisclosed the fact that there are various claimants to the product of industry under modern conditions. Each must be remunerated and each must receive a compensation which will insure his continued cooperation in the work of production.
The laborer receives wages, the capitalist interest, -- the land owner rent and the manager profits. How this division is made forms the subject of the re maining chapters of the book.
Each of :these shares is ultimately paid out of th6 product, but some are more urgent than others and must be advanced by the manager during the proc ess of production. In presenting the subject of eco nomics it is unavoidable that topics are treated in sequence. They could not be considered simultane ously. It is, however, important to note that the eco nomic processes are continuous and that the processes of consumption, production, exchange and distribu tion are in business life going on simultaneously. From the standpoint of the manager of an enterprise the most urgent of all the claims upon him are those for wages, and this subject will first engage our at tention. Payments for interest and rent tho in any given case fixed in advance are often paid after the lapse of definite intervals. All these claims must, however, be satisfied before the manager can com pute his profits.
2. Theory of general theory of wage payment must not be confused with plans of payment. To put it in another way, the latter are but the inci dental and convenient methods by which employers agree to turn over a claim upon the social -dividend to the men and women in their employ, for services rendered. The theory of wages must explain why and how such payments are made. A brief review of some of the most prominent of these theories will remove a few of the stumbling blocks in the way of an understanding of the more important elements in the wage problem.
The old political economy talked much of the Iron Law of Wages. Since population tends to increase faster than the food supply, -the numbers in a com munity are held in check by the rate of wages. But
even a minimum of subsistence, which the law said determines the wage rate is found to be associated in the minds of the people with the concept of living and comforts which they propose to maintain. Hence, any increase of population that might follow upon temporary increase in the food supply would be checked immediately by adherence to the standard of comfort as soon as it was encroached upon by the in crease of population. From this point of view it was concluded that there could be no permanent rise of wages.
The wage-fund theory was an advance upon this way of looking at the wage problem. It assumed that a fixed amount of capital was destined for the remuneration of labor. By the rough process of dividing the fund by the number of laborers, one could come to an approximation of the average wage. Without question, there is a fund, but it is variable in amount; arid therefore it is like a stream from which the laborer takes his wage, or in other words, the money payment made to him. Just as in the case of' the Iron Law of Wages, there is an element of truth in the theory, but not enough to explain the modern conditions.
The American economist, General Francis A. Walker, insisted that the wage-earner was the last claimant in the process of distribution and that, be cause of' the fixed nature of the other payments, the laborer constantly moved toward a wage as great as the product that he created. Thus in a competitive society he was bound to receive the full value of his product. The modern productivity theory of wages accepts the Walker view, that the laborer will receive the value of his product; but modifies that theorY somewhat by stating that it is the efficiency of the marginal man that determines the wages of all the laborers in any industry. The employer is forced to pay this amount because the marginal worker can earn that return anywhere by his own efforts.