Protectionism: The -ism Which Teaches That Waste Makes Wealth
3: Protection Lowers Wages.
19th Century William Graham Sumner EnglishOn a pure wages system, that is, where there is a class who have no capital and no land, wages are determined by supply and demand of labor. The demand for labor is measured by the capital in hand to pay for it just as the demand for any thing else is measured by the supply of goods offered in exchange for it. In Cobden's language: “When two men are after one boss, wages are low: when two bosses are after one man, wages are high.”
The United States, however, have never yet been on a pure wages system because there is no class which has no land or can not get any. In fact, the cheapening of transportation which is going on is making the land of this continent, Australia, and Africa, available for the laborers of Europe, and is breaking down the wages system there. This is the real reason for the rise of the proletariat and the expansion of democracy which are generally attributed to metaphysical, sentimental, or political causes. A man who has no capital and no land can not live from day to day except by getting a share in the capital of others in return for services rendered. In an old society or dense population, such a class comes into existence. It has no reserves; no other chances; no other resource. In a new country no such class exists. The land is to be had forgoing to it. On the stage of agriculture which is there existing very little capital and very little division of labor are necessary. Hence he who has only unskilled manual strength can get at and use the land, and he can get out of it an abundant supply of the rude primary comforts of existence for himself and his family, If it is made so cheap and easy to get from the old centers of population to the new land that the lowest class of laborers can save enough to pay the passage, then the effect will reach the labor market of the old countries also. Such is now the fact.
The weakness of a true wages class is in the fact that they have no other chance. Obviously, however, a man is well off in this world in proportion to the chances which he can command . The advantage of education is that it multiplies a man's chances. Our non-capitalists have another chance on the land, and the chance is near and easy to grasp and use. It is not necessary that all or any number should use it. Every one who uses it leaves more room behind, lessens the supply and competition of labor, and helps his class as a class. The other chance which the laborer possesses is also a good one, and consequently sets the minimum of unskilled wages high. Here we have the reason for high wages in a new country.
The relation of things was distinctly visible in the early colonial days. Winthrop tells how the General Court in Massachusetts Bay tried to fix the wages of artisans by law. It is obvious that artisans were in great demand to build houses, and that they would not work at their trades unless the wages would buy as good or better living than the farmers could get out of the ground, for these artisans could go and take up land and be farmers too. The only effect of the law was that the artisans “went West” to the valley of the Connecticut, and the law became a dead letter. The same equilibration between the gains from the new land and the wages of artisans and laborers has been kept up ever since.
In 1884 an attempt was made to unite the Eastern and Western Iron Associations for common effort in behalf of higher wages. The union could not be formed because the Eastern and Western Associations never had had the same rate of wages. The latter being further west, where the supply of labor is smaller, and the land nearer, have obtained higher wages. It may be well to anticipate a little right here in order to point out that this difference in wages has not prevented the growth of the industry in the West, and has not made competition in a common market impossible. The fact is of the first importance to controvert the current assumption of the protectionists. They say that an industry can not be carried on in one place if the wages there are higher than must be paid by somebody in the same industry in another place. This proposition has no foundation in fact at all. Farm laborers in Iowa get three times the wages of farm laborers in England. The products of the former pay 5,000 miles transportation, and then drive out the products of the latter. Wages are only one element, and often they are far from being the most important element in the economy of production. The wages which are paid to the men who make an article have nothing to do with the price or value of that article. This proposition, I know, has a startling effect on the people who hold to the monkish notions of political economy, but it is only a special case of the theorem that “Labor which is past has no effect on vlaue,” which is the true corner-stone of any sound political economy. Wages are determined by the supply and demand of labor. Value is determined by the supply and demand of the commodity. These two things have no connection. Wages are one element in the capitalist's outlay for production. If the total outlay in one line of production, when compared with the return obtained in that line, is not as advantageous as the total outlay in another line when compared with the return available in the second line, then the capital is withdrawn from the first line and put into the second, but the rate of wages in either case or any case is the market rate, determined by the supply and demand of labor, for that is what the employers must pay if they want the men, whether they are making any profits or not.
96 . The facts and economic principles just stated above show plainly why wages are high, and put in strong light the assertion of the protectionists that their device makes wages high (§ 47), that is, higher than they would be otherwise, or higher here than they are in Europe. Wages are not arbitrary. They can not be shifted up and down at any body's whim. They are controlled by ultimate causes. If not, then what has made them fall during the last eighteen months, ten to forty per cent., most in the most protected industries (§ 26)? Why are they highest in the least protected and unprotected industries, e.g.. the building trades? Hod carriers recently struck in New York for $3 for nine hours' work. Where did the tariff touch their case? Why does not the tariff prevent the fall in wages? It is all there, and now is the time for it to come into operation, if it can keep wages up. Now it is needed. When wages were high in the market, and it was not needed, it claimed the credit. Now when they fall and it is needed, it is powerless.
Wages are capital. If I promise to pay wages I must find capital somewhere with which to fulfill my contract. If the tariff makes me pay more than I otherwise would, where does the surplus come from? Disregarding money as only an intermediate term, a man's wages are his means of subsistence—food, clothing, house rent, fuel, lights, furniture, etc. If the tariff system makes him get more of these for ten hours' work in a shop than he would get without tariff, where does the “more” come from? Nothing but labor and capital can produce food, clothing, etc. Either the tax must make these out of nothing, or it can only get them by taking them from those who have made them, that is by subtracting them from the wages of somebody else. Taking all the wages class into account then the tax can not possibly increase, but is sure by waste and loss to decrease wages.
If taxes are to raise wages they must be laid not on goods but on men. Let the goods be abundant and the men scarce. Then the average wages will be high, for the supply of labor will be small and the demand great. If we tax goods and not men, the supply of labor will be great, the demand will be limited, and the wages will be low. Here we see why employers of labor want a tariff. For it is an obvious inconsistency and a most grotesque satire that the same men should tell the workmen at home that the tariff makes wages high, and should go to Washington and tell Congress that they want a tariff because the wages are too high. We have found that the high wages of American laborers have independent causes and guarantees, outside of legislation. They are provided and maintained by the economic circumstances of the country. This is against the interest of those who want to hire the laborers. No device can serve their interest unless it lowers wages. From the standpoint of an employer the fortunate circumstances of the laborer become an obstacle to be overcome (§ 65). The laborer is too well off. Nothing can do any good which does not make him less well off. The competition which troubles the employer is not the “pauper labor” of Europe.
“Pauper labor” had a meaning in the first half of this century, in England, when the overseers of the poor turned over the younger portion of the occupants of the poor-houses to the owners of the new cotton factories, under contracts to teach them the trade and pay them a pittance. Of course the arrangement had shocking evils connected with it, but it was a transition arrangement. The “pauper laborers'” children, after a generation, became independent laborers: the system expired of itself, and “pauper laborer” is now a senseless jingle.
The competition which the employers fear is the competition of those industries in America which can pay the high wages and which keep the wages high because they do pay them. These draw the laborer away. These offer him another chance. If he had no other way of earning more than he is earning, it would be idle for him to demand more. The reason why he demands more and gets it is because he knows where he can get it, if he can not get it where he is. If then he is to be brought down, the only way to do it is to destroy, or lessen the value of, his other chance. This is just what the tariff does.
The taxes which are laid for protection must come out of somebody. As I have shown (§ 32, fg.) the protected interests give and take from each other, but, if they as a group win any thing, they must win from another group, and that other group must be the industries which are not and can not be protected. In England these were formerly manufactures and they were taxed, under the corn laws, for the benefit of agriculture. In the United States, of course, the case must be complementary and opposite. We tax agriculture and commerce to benefit manufactures. Commerce, i. e. the ship building and carrying trade, has been crushed out of existence by the burden (§ 86). But the burden thus thrown on agriculture and commerce lowers the gains of those industries, lessens the attractiveness of them to the laborer, lessens the value of the laborer's other chance, lessens the competition of other American industries with manufacturing, and so, by taking away from the blessing which God and nature have given to the American laborer, enable the man who wants to hire his services to get them at a lower rate. The effect of the taxes is just the same as such a percentage taken from the fertility of the soil, the excellence of the climate, the power of tools, or the industrious habits of the people. Hence it reduces the average comfort and welfare of the population, and with that average comfort it carries down the wages of such persons as work for wages.