Besides originating the theory of population which bears his name,Malthus was the founder of that doctrine of wages which,under the name of the wage-fund theory,was accepted for fifty years in England.To ascertain what the theory is we may take Mill's statement of it,as given in his review of Thornton On Labour in 1869.'There is supposed to be,'he says,'at any given instant,a sum of wealth which is unconditionally devoted to the payment of wages of labour.This sum is not regarded as unalterable,for it is augmented by saving,and increases with the progress of wealth;but it is reasoned upon as at any given moment a predetermined amount.More than that amount it is assumed that the wages-receiving class cannot possibly divide among them;that amount,and no less,they cannot possibly fail to obtain.So that the sum to be divided being fixed,the wages of each depend solely on the divisor,the number of participants.'This theory was implicitly believed from Malthus's time to about 1870;we see it accepted,for instance,in Miss Martineau's Tales.And from the theory several conclusions were deduced which,owing to their practical importance,it is well to put in the forefront of our inquiry as to its truth.It is these conclusions which have made the theory itself and the science to which it belongs an offence to the whole working class.It was said in the first place that according to the wage-fund theory,Trades-Unions could not at any given time effect a general rise in wages.It was,indeed,sometimes admitted that in a particular trade the workmen could obtain a rise by combination,but this could only be,it was alleged,at the expense of workmen in other trades.If,for instance,the men in the building trade got higher wages through their Union,those in the iron foundries or in some other industry must suffer to an equivalent extent.In the next place it was argued that combinations of workmen could not in the long-run increase the fund out of which wages were paid.Capital might be increased by saving,and,if this saving Was more rapid than the increase in the number of labourers,wages would rise,but it was denied that Unions could have any effect in forcing such an increase of saving.And hence it followed that the only real remedy for low wages was a limitation of the number of the labourers.The rate of wages,it was said,depended entirely on the efficacy of checks to population.
The error lay in the premisses.The old economists,it may be observed,very seldom examined their premisses.For this theory assumes -(1)that either the capital of a particular individual available for the payment of wages is fixed,or,at any rate,the total capital of the community so available is fixed;and (2)that wages are always paid out of capital.Now it is plainly not true that a particular employer makes up his mind to spend a fixed quantity of money on labour;the amount spent varies with a number of circumstances affecting the prospect of profit on the part of the capitalist,such,for instance,as the price of labour.Take the instance of a strike of agricultural labourers in Ireland,given by Mr Trench to Nassau Senior.He was employing one hundred men at 10d.a day,thus spending on wages *25a week.
The men struck for higher pay -a minimum of 1s.2d.,and the more capable men to have more.Trench offered to give the wages asked for,but greatly reduced his total expenditure,as it would not pay to employ so many men at the higher rate.Thus only seventeen were employed;the other eighty-three objected,and it ended in all going back to work at the old rate.The fact is,that no individual has a fixed wage-fund,which it is not in his power either to diminish or increase.Just as he may reduce the total amount which he spends on labour,rather than pay a rate of wages which seems incompatible with an adequate profit,so he may increase that total amount,in order to augment the wages of his labourers,by diminishing the sum he spends upon himself or by employing capital which is lying idle,if he thinks that even with the higher rate of wages he can secure a sufficiently remunerative return upon his investment.Thus the workman may,according to circumstances,get higher or lower wages than the current rate,without any alteration in the quantity of employment given.When wages in Dorset and Wilts were 7s.,the labourers,if they had had sufficient intelligence and power of combination,might have forced the farmers to pay them 8s.or 9s.,for the latter were making very high profits.As a matter of fact,where the workmen have been strong,and the profits made by the employers large,the former have often forced the employers to give higher wages.
Neither is it true that there is in the hands of the community as a whole,at any given time,a fixed quantity of capital for supplying the wants of the labourers,so much food,boots,hats,clothes,etc.,which neither employers nor workmen can increase.It used to be said that a rise in money wages would simply mean that the price of all the commodities purchased by the labourers would rise proportionately,owing to the increase of demand,and that their real wages,i.e.the number of things they could purchase with their money,would be no greater than before.But,as a matter of fact,the supply can be increased as fast as the demand.It is true that between two harvests the available quantity of corn is fixed,but that of most other commodities can be increased at a short notice.For commodities are not stored up for consumption in great masses,but are being continually produced as the demand for them arises.
