XXI. Work and Wages

0:00CHAPTER XXI. WORK AND WAGES 1. INTROVERSIVE LABOR AND EXTROVERSIVE LABOR A man may overcome the disutility of labor, forego the enjoyment of leisure, for various reasons. 1. He may work in order to make his mind and body strong, vigorous and agile. The disutility of labor is not a price expended for the attainment of these goals. Overcoming it is inseparable from the contentment sought. The most conspicuous examples are genuine sport, practiced without any design for reward and social success, the search for truth and knowledge pursued for its own sake and not as a means of improving one's own efficiency and skill in the performance of other kinds Cognition does not aim at a goal beyond the act of knowing.

1:03What satisfies the thinker is thinking as such, not obtaining perfect knowledge, a goal inaccessible to man. 2. He may submit to the disutility of labor in order to serve God. He sacrifices leisure to please God, and to be rewarded in the beyond by eternal bliss, and in the earthly pilgrimage by the supreme delight which the certainty of having complied with all religious duties affords. If, however, he serves God in order to attain worldly ends, his daily bread and success in his secular affairs, his conduct does not differ substantially from other endeavors is to attain mundane advantages by expending labor.

1:52Whether the theory guiding his conduct is correct and whether his expectations will materialize is irrelevant to the catalactic qualification of his mode of acting. It is hardly necessary to remark that comparing the craving for knowledge and the conduct The fact of a pious life, with sport and play, does not imply any disparagement of either. 3. He may toil in order to avoid greater mischief. He submits to the disutility of labor in order to forget, to escape from depressing thoughts, and to vanish annoying moods. Work for him is, as it were, a perfected refinement of play.

2:38This refined playing must not be confused with the simple games of children which are merely pleasure producing. However, there are also other children's games. Children too are sophisticated enough to indulge in refined play. 4. He may work because he prefers the proceeds he can earn by working to the disutility of labor and the pleasures of leisure. The labor of the classes one, two and three is expended because the disutility of labor in itself and not its product satisfies. One toils and troubles not in order to reach a goal at the termination of the march, but for the very sake of marching.

3:26The mountain climber does not want simply to reach the peak, he wants to reach it by climbing. He disdains the rack railway which would bring him to the summit more quickly and without trouble, even though the fare is cheaper than the costs incurred by climbing, for example, the guide's fee. The toil of climbing does not gratify him immediately, it involves disutility of labor. But it is precisely overcoming the disutility of labor that satisfies him. A less exerting assent would please him not better, but less. We may call the labor of Classes I, II and III introversive labor, and distinguish it from the extroversive labor of Class IV.

4:16In some cases, introversive labor may bring about, as a byproduct, as it were, results for the attainment of which other people would submit to the disutility of labor. The devout may nurse sick people for a heavenly reward. The truth-seeker, exclusively devoted to the search for knowledge, may discover a practically useful device. To this extent, introversive labor may influence the supply on the market. But as a rule, catallactics is concerned only with extroversive labor. The psychological problems raised by introversive labor are catallactically irrelevant. Seen from the point of view of economics, introversive labor is to be qualified as consumption.

5:06Its performance as a rule requires not only the personal efforts of the individuals concerned, but also the expenditure of material factors of production and the produce of other people's Practice extroversive, not immediately gratifying labor, that must be bought by the payment of wages. The practice of religion requires places of worship and their equipment. Sport requires diverse utensils and apparatus, trainers and coaches. All these things belong in the orbit of consumption. 2. Joy and Tedium of Labor Only extroversive, not immediately gratifying labor, is a topic of catallactic disquisition.

5:56The characteristic mark of this kind of labor is that it is performed for the sake of an end which is beyond its performance and the disutility which it involves. People work because they want to reap the produce of labor. The labor itself causes disutility, but apart from this disutility, which is irksome and would enjoin upon man the urge to economize labor even if his power to work were not limited and he were able to perform unlimited work, special emotional phenomena sometimes appear, feelings of joy or tedium accompanying the execution of certain kinds of labor. Both the joy and the tedium of labor are in a domain other than the disutility of labor.

6:48The joy of labor, therefore, can neither alleviate nor remove the disutility of labor. Neither must the joy of labor be confused with the immediate gratification provided by certain kinds of work. It is an attendant phenomenon which proceeds either from labor's immediate gratification, from the produce or reward, or from some accessory circumstances. People do not submit to the disutility of labor for the sake of the joy which accompanies the labor, but for the sake of its immediate gratification. In fact, the joy of labor presupposes, for the most part, the disutility of the labor concerned.

7:34The sources from which the joy of labor springs are 1. The expectation of the labor's immediate gratification, the anticipation of the enjoyment of its success and yield. The toiler looks at his work as a means for the attainment of an end sought, and the progress of his work delights him as an approach toward his goal. His joy is a foretaste of the satisfaction conveyed by the mediate gratification. In the frame of social cooperation, this joy manifests itself in the contentment of being capable of holding one's ground in the social organism, and of rendering services which one's fellow men appreciate either in buying the product or in remunerating the labor expended.

8:25The worker rejoices because he gets self-respect and the consciousness of supporting himself and his family and not being dependent on other people's mercy. 2. In the pursuit of his work, the worker enjoys the aesthetic appreciation of his skill and its product. This is not merely the contemplative pleasure of the man who views things performed by other people. It is the pride of a man who is in a position to say, I know how to make such things, this is my work. Having completed a task, the worker enjoys the feeling of having successfully overcome all the toil and trouble involved.

9:11He is happy in being rid of something difficult, unpleasant and painful, in being relieved for a certain time of the disutility of labor. This is the feeling of, I have done it. 4. Some kinds of work satisfy particular wishes. There are, for example, occupations which meet erotic desires, either conscious or subconscious ones. These desires may be normal or perverse. Also, fetishists, homosexuals, sadists and other perverts can sometimes find in their In their work, an opportunity to satisfy their strange appetites. There are occupations which are especially attractive to such people.

9:58Cruelty and bloodthirstiness luxuriantly thrive under various occupational cloaks. The various kinds of work offer different conditions for the appearance of the joy of labor. These conditions may be, by and large, more homogeneous in Classes I and III than in Class II. It is obvious that they are more rarely present for Class IV. The joy of labor can be entirely absent. Psychical factors may eliminate it altogether. On the other hand, one can purposely aim at increasing the joy of labor. Even discerners of the human soul have always been intent upon enhancing the joy of labor.

10:45A great part of the achievements of the organizers and leaders of armies of mercenaries belong to this field. Their task was easy as far as the profession of arms provides the satisfactions of class four. However, these satisfactions do not depend on the arms bearer's loyalty. They also come to the soldier who leaves his warlord in the lurch and turns against him in the service of new leaders. Thus the particular task of the employers of mercenaries was to promote an esprit de corps and loyalty that could render their hirelings proof against temptations. There were also, of course, chiefs who did not bother about such impalpable matters.

11:32In the armies and navies of the 18th century, the only means of securing obedience and preventing desertion were barbarous punishments. Modern industrialism was not intent upon designedly increasing the joy of labor. It relied upon the material improvement that it brought to its employees in their capacity as wage earners, as well as in their capacity as consumers and buyers of the product. In view of the fact that job seekers thronged to the plants and everyone scrambled for the manufacturers, there seemed to be no need to resort to special devices. The benefits which the masses derived from the capitalist system were so obvious that no entrepreneur considered it necessary to harangue the workers with pro-capitalist propaganda.

12:26Human Capitalism is essentially mass production for the needs of the masses. The buyers of the products are, by and large, the same people who, as wage earners, cooperate in their manufacturing. Rising sales provided dependable information to the employer about the improvement of the masses' standard of living. He did not bother about the feelings of his employees as workers. He was exclusively intent upon serving them as consumers. Even today, in the face of the most persistent and fanatical anti-capitalist propaganda, there is hardly any counter-propaganda. This anti-capitalist propaganda is a systematic scheme for the substitution of tedium for the joy of labor.

13:17The joy of labor of classes one and two depends to some extent on ideological factors. The worker rejoices in his place in society and his active cooperation in its productive effort. If one disparages this ideology and replaces it by another which represents the wage earner as the distressed victim of ruthless exploiters, one turns the joy of labor into a feeling of Disgust and Tedium. No ideology, however impressively emphasized and taught, can affect the disutility of labor. It is impossible to remove or to alleviate it by persuasion or hypnotic suggestion.

14:02On the other hand, it cannot be increased by words and doctrines. The disutility of labor is a phenomenon unconditionally given. The spontaneous and carefree discharge of one's own energies and vital functions in aimless freedom suits everybody better than the stern restraint of purposive effort. The disutility of labor also pains a man who with heart and soul and even with self-denial is devoted to his work. He too is eager to reduce the lump of labor if it can be done without prejudice to the The Worker begins to hate his work if he becomes convinced that what makes him submit to the The Disutility of Labor is not his own higher valuation of the stipulated compensation, but merely an unfair social system.

15:20Deluded by the slogans of the socialist propagandists, he fails to realize that the disutility of labor is an inexorable fact of human conditions, something ultimately given that cannot be removed by devices or methods of social organization. He falls prey to the Marxian fallacy that in a socialist commonwealth work will arouse not pain but pleasure. The fact that the tedium of labor is substituted for the joy of labor affects the valuation neither of the disutility of labor nor of the produce of labor. Both the demand for labor and the supply of labor remain unchanged, for people do not work for the sake of labor's joy, but for the sake of the immediate gratification.

16:13What is altered is merely the worker's emotional attitude. His work, his position in the complex of the social division of labor, his relations to other members of society and to the whole of society, appear to him in a new light. He pities himself as the defenseless victim of an absurd and unjust system. He becomes an ill-humored grumbler, an unbalanced personality, an easy prey to all sorts of quacks and cranks. To be joyful in the performance of one's tasks and in overcoming the disutility of labor makes people cheerful and strengthens their energies and vital forces. To feel tedium in working makes people morose and neurotic.

17:02A commonwealth in which the tedium of labor prevails is an assemblage of rancorous, quarrelsome and wrathful malcontents. However, with regard to the volitional springs for overcoming the disutility of labor, the role played by the joy and the tedium of labor is merely accidental and supererogatory. There cannot be any question of making people work for the mere sake of the joy of labor. The joy of labor is no substitute for the immediate gratification of labor. The only means of inducing a man to work more and better is to offer him a higher reward. It is vain to bait him with the joy of labor.

17:49When the dictators of Soviet Russia, Nazi Germany and Fascist Italy tried to assign to the joy of labor a definite function in their system of production, they saw their Their Expectations Blighted Neither the joy nor the tedium of labor can influence the amount of labor offered on the market. As far as these feelings are present with the same intensity in all kinds of work, the case is obvious. But it is the same with regard to joy and tedium which are conditioned by the particular features of the work concerned, or the particular character of the worker. Let us look, for example, at the joy of Class IV. The eagerness of certain people to get jobs which offer an opportunity for the enjoyment of these particular satisfactions tends to lower wage rates in this field.

18:45But it is precisely this effect that makes other people less responsive to these questionable pleasures, prefer other sectors of the labor market in which they can earn more. Thus, an opposite tendency develops, which neutralizes the first one. The joy and the tedium of labor are psychological phenomena, which influence neither the individual's subjective valuation of the disutility and the immediate gratification of labor, nor the price paid for labor on the market. 3. Wages Labor is a scarce factor of production. As such it is sold and bought on the market.

19:33The price paid for labor is included in the price allowed for the product or the services if the performer of the work is the seller of the product or the services. If bare labor is sold and bought as such, either by an entrepreneur engaged in production For acting man, his own labor is not merely a factor of production, but also the source of disutility. He values it not only with regard to the immediate gratification expected, but also with regard to the Disutility it Causes.

20:18But for him, as for everyone, other people's labor as offered for sale on the market is nothing but a factor of production. Man deals with other people's labor in the same way that he deals with all scarce material factors of production. He appraises it according to the principles he applies in the appraisal of all other goods. The height of wage rates is determined on the market in the same way in which the prices of all commodities are determined. In this sense we may say that labor is a commodity. The emotional associations which people under the influence of Marxism attach to this term do not matter. It suffices to observe incidentally that the employers deal with labor as they do with with Commodities because the conduct of the consumers forces them to proceed in this way.

21:15It is not permissible to speak of labor and wages in general without resorting to certain restrictions. A uniform type of labor, or a general rate of wages, do not exist. Labor is very different in quality, and each kind of labor renders specific services. Each is appraised as a complementary factor for turning out definite consumers' goods and services. Between the appraisal of the performance of a surgeon and that of a stevedore, there is no direct connection. But indirectly, each sector of the labor market is connected with all other sectors. An increase in the demand for surgical services, however great, will not make stevedores flock back into the practice of surgery. Yet the lines between the various sectors of the labor market are not sharply drawn. There prevails a continuous tendency for workers to shift from their branch to other similar occupations in which conditions seem to offer better opportunities.

22:24Thus, finally, every change in demand or supply in one sector affects all other sectors indirectly. All groups indirectly compete with one another. If more people enter the medical profession, men are withdrawn from kindred occupations, who again are replaced by an inflow of people from other branches, and so on. In this sense, there exists a connexity between all occupational groups, however different the requirements in each of them may be. There again we are faced with the fact that the disparity in the quality of work needed for the satisfaction of wants is greater than the diversity in men's inborn ability to perform work.

23:14Conexity exists not only between different types of labor and the prices paid for them, but no less between labor and the material factors of production. Within certain limits, labor can be substituted for material factors of production, and vice versa. The extent that such substitutions are resorted to depends on the height of wage rates and the prices of material factors. The determination of wage rates, like that of the prices of material factors of production, can be achieved only on the market. There is no such thing as non-market wage rates, just as there are no non-market prices.

24:01As far as there are wages, labor is dealt with like any material factor of production and sold and bought on the market. It is usual to call the sector of the market of producers' goods on which labor is hired the labor market. As with all other sectors of the market, the labor market is actuated by the entrepreneurs intent upon making profits. Each entrepreneur is eager to buy all the kinds of specific labor he needs for the realization of his plans at the cheapest price. But the wages he offers must be high enough to take the workers away from competing entrepreneurs. The upper limit of his bidding is determined by anticipation of the price he can obtain for the increment in saleable goods he expects from the employment of the worker concerned.

24:58The lower limit is determined by the bids of competing entrepreneurs who themselves are guided by analogous considerations. It is this that economists have in mind in asserting that the height of wage rates for for each kind of labor is determined by its marginal productivity. Another way to express the same truth is to say that wage rates are determined by the supply of labor and of material factors of production on the one hand, and by the anticipated future prices of the consumer's goods. This catallactic explanation of the determination of wage rates has been the target of passionate but entirely erroneous attacks.

25:44It has been asserted that there is a monopoly of the demand for labor. Most of the supporters of this doctrine think that they have sufficiently proved their case by referring to some incidental remarks of Adam Smith concerning a sort of tacit but constant and uniform combination among employers to keep wages down. Entrepreneurs refer in vague terms to the existence of trade associations of various groups of businessmen. The emptiness of all this talk is evident. However, the fact that these garbled ideas are the main ideological foundation of labor unionism and the labor policy of all contemporary governments makes it necessary to analyze them with the utmost care.

26:34The entrepreneurs are in the same position with regard to the sellers of labor as they are with regard to the sellers of the material factors of production. They are under the necessity of acquiring all factors of production at the cheapest price. But if in the pursuit of this endeavor some entrepreneurs, certain groups of entrepreneurs, For all entrepreneurs, offer prices or wage rates which are too low, that is, do not agree with the state of the unhampered market. They will succeed in acquiring what they want to acquire only if entrance into the ranks of entrepreneurship is blocked through institutional barriers.

27:19If the emergence of new entrepreneurs, or the expansion of the activities of already The operating entrepreneurs is not prevented. Any drop in the prices of factors of production not consonant with the structure of the market must open new chances for the earning of profits. There will be people eager to take advantage of the margin between the prevailing wage rate and the marginal productivity of labor. Their demand for labor will bring wage rates back to the height conditioned by labor's The tacit combination among the employers to which Adam Smith referred, even if it existed, could not lower wages below the competitive market rate unless access to entrepreneurship required not only brains and capital, the latter always available to enterprises promising It has been asserted that a job seeker must sell his labor at any price, however low, as he depends exclusively on his capacity to work and has no other source of income.

28:43He cannot wait, and is forced to content himself with any reward the employers are kind enough to offer him. This inherent weakness makes it easy for the concerted action of the masters to lower wage rates. They can, if need be, wait longer, as their demand for labor is not so urgent as the workers' demand for subsistence. The argument is defective. It takes it for granted that the employers pocket the difference between the marginal productivity wage rate and the lower monopoly rate as an extra monopoly gain, and do not pass it on to the consumers in the form of a reduction in prices. For if they were to reduce prices according to the drop in costs of production, they, in their capacity of entrepreneurs and sellers of the products, would derive no advantage from Cutting Wages.

29:42The whole gain would go to the consumers, and thereby also to the wage earners in their capacity as buyers. The entrepreneurs themselves would be benefited only as consumers. However, to retain the extra profit resulting from the exploitation of the workers' poor bargaining power would require concerted action on the part of employers in their capacity as Sellers of the Products. It would require a universal monopoly of all kinds of production activities which can be created only by an institutional restriction of access to entrepreneurship. The essential point of the matter is that the alleged monopolistic combination of the employers about which Adam Smith and a great part of public opinion speak would be a monopoly of Demand.

30:38But we have already seen that such alleged monopolies of demand are in fact monopolies of supply of a particular character. The employers would be in a position enabling them to lower wage rates by concerted action only if they were to monopolize a factor indispensable for every kind of production, and to restrict and the employment of this factor in a monopolistic way. As there is no single material factor indispensable for every kind of production, they would have to monopolize all material factors of production. This condition would be present only in a socialist community, in which there is neither a market nor prices and wage rates.

31:29Here would it be possible for the proprietors of the material factors of production, the capitalists and the landowners, to combine in a universal cartel against the interests of the workers. The characteristic mark of production activities in the past and in the foreseeable future is that the scarcity of labor exceeds the scarcity of most of the primary, nature-given material factors of production. The comparatively greater scarcity of labor determines the extent to which the comparatively abundant primary natural factors can be utilized. There is unused soil, there are unused mineral deposits, and so on, because there is not enough labor available for their utilization.

32:20If the owners of the soil that is tilled today were to form a cartel in order to reap monopoly Various other objections have been advanced against the doctrine of the monopolistic exploitation of Labor by a tacit or avowed combine of the employers. It has been demonstrated that at no time and at no place in the unhampered market economy can the existence of such cartels be discovered.

33:08It has been shown that it is not true that the jobseekers cannot wait and are therefore under the necessity of accepting any wage rates, however low, offered to them by the employers. It is not true that every unemployed worker is faced with starvation. The workers, too, have reserves and can wait. The proof is that they really do wait. On the other hand, waiting can be financially ruinous to the entrepreneurs and capitalists, too. If they cannot employ their capital, they suffer losses. Thus, all the disquisitions about an alleged employer's advantage and worker's disadvantage in bargaining are without substance.

33:55But these are secondary and accidental considerations. The central fact is that a monopoly of the demand for labor cannot and does not exist in an unhampered market economy. It could originate only as an outgrowth of institutional restrictions of access to entrepreneurship. Yet one point must be stressed. The doctrine of the monopolistic manipulation of wage rates by the employers speaks of labor as if it were a homogeneous entity. It deals with such concepts as demand for labor in general and supply of labor in general. But such notions have, as has been pointed out already, no counterpart in reality.

34:44What is sold and bought on the labor market is not labor in general, but definite, specific labor suitable to render definite services. Each entrepreneur is in search of workers who are fitted to accomplish those specific tasks which he needs for the execution of his plans. He must withdraw these specialists from the employments in which they happen to work at the moment. The only means he has to achieve this is to offer them higher pay. Every innovation which an entrepreneur plans, the production of a new article, the application of a new process of production, the choice of a new location for a specific branch, or or simply the expansion of production already in existence, either in his own enterprise or in other enterprises, requires the employment of workers hitherto engaged somewhere else.

35:44The entrepreneurs are not merely faced with a shortage of labor in general, but with a shortage of those specific types of labor they need for their plants. The competition among the entrepreneurs in bidding for the most suitable hands is no less keen than their competition in bidding for the required raw materials, tools and machines, and in their bidding for capital on the capital and loan market. The expansion of the activities of the individual firms as well as of the whole society is not only limited by the amount of capital goods available and of the supply of labor in general. In each branch of production, it is also limited by the available supply of specialists.

36:34This is, of course, only a temporary obstacle, which vanishes in the long run when more workers, attracted by the higher pay of the specialists in comparatively undermanned branches, will will have trained themselves for the special tasks concerned. But in the changing economy, such a scarcity of specialists emerges anew daily and determines the conduct of employers in their search for workers. Every employer must aim at buying the factors of production needed, inclusive of labor, at the cheapest price. An employer who paid more than agrees with the market price of the services his employees render him would be soon removed from his entrepreneurial position.

37:23On the other hand, an employer who tried to reduce wage rates below the height consonant with the marginal productivity of labor would not recruit the type of men that the most efficient utilization of his equipment requires. There prevails an inevitable tendency for wage rates to reach the point at which they are equal to the price of the marginal product of the kind of labor in question. If wage rates drop below this point, the gain derived from the employment of every additional worker will increase the demand for labor and thus make wage rates rise again. If wage rates rise above this point, the loss incurred from the employment of every worker will force the employers to discharge workers.

38:14The competition of the unemployed for jobs will create a tendency for wage rates to drop.