IX Methods of Industrial Remuneration

§ 29. The central argument of Part III. Chapter VIII. can be brought into clear light by means of a diagram. Let us suppose the number of workpeople employed in any industry and the length of the working day to be given. It is then possible to construct a demand curve representing the employers' demand prices (in terms of product) for different amounts of exertion per unit time from a typical workman, and a supply curve representing the workman's supply prices (in terms of product) for different amounts of exertion. Units of exertion are marked off along Ox, and the demand and supply prices (in terms of product) of different amounts of it along Oy.

Since every increase of exertion on the part of workpeople enables employers to finish any given job more quickly, and so to start their machinery upon some other job, the demand curve DD' will slope upwards towards the right. Since, if a man is at work at all, neither public opinion nor his own comfort will allow him to do absolutely nothing, the supply curve SS' will start at a point some distance along Ox, and, thereafter, will slope upward somewhat steeply. Let it cut DD' in P. Through P draw PM perpendicular to Ox, and PR perpendicular to Oy. Then, apart from possible injurious reactions on capacity that are not here considered, the amount of exertion by a typical workman, which is most advantageous to the national dividend and economic welfare, is measured by OM, and the corresponding amount of his output by the rectangle OMPR. If the wage paid to him is wholly independent of his exertions and consequent output, the amount of his exertions will approximate to OS, and his output to OSQK. An amount of exertion OM, and consequent output OMPR, can be obtained either by the offer of a rate (in product) PM for each unit of exertion (which means each PM units of output); or by the offer of an aggregate wage (in product)—per day or whatever the time-unit may be—equal to OMPR, conditional upon the man producing OMPR units of output, any failure to reach this standard involving the payment of a considerably lower wage.