Of the Wages of Labour
- As Smith mentioned in an earlier chapter, we live in a world where bosses pay wages to workers and earn a profit on whatever money they make beyond the cost of those wages. It's true that some people are self-employed, but the vast majority of workers have some kind of boss.
- Smith is quick to note that it's easy for a bunch of company bosses to get together and agree to drive the price of wages down.
- But we never hear about this in the papers. We only hear about it when workers organize to drive wages up.
- Smith doesn't agree with either tactic, but he admits that the public is more biased against unions than it is against corrupt business people. He even talks about how some people are run out of business just for paying their workers too much and making other companies look bad.
- Smith also makes a point of saying that workers' strikes tend not to make any long-term gains for workers. There are many who'd disagree with that, though.
- For Smith, there is a certain price that wages can't go below, and that's the price necessary to keep a worker alive. If wages ever went lower than the price of staying alive, then workers would begin to die off and they wouldn't bother working anymore because they'd know they couldn't continue living.
- But wages need to actually be higher than this because the workforce would die out if they didn't have the money to raise families.
- One time when the workers are in the driver's seat is when the economy is growing. The growing economy means that companies have a growing need for workers. And if this demand is constantly going up, then the bosses will have to pay more and more to attract the workers they need.
- Smith points to the example of America, which in 1776 is growing so quickly that people's wages are doubling and tripling every five years. Even though England is a richer country, wages aren't growing because the economy has a consistent size from year to year. So it's not about whether a country is rich, but whether it's growing. That's why you hear people obsessing so much about growth when they talk about companies or the economy.
- On the whole, Smith feels that the wages paid to workers in England have increased in value, not because people are getting paid more but because the cost of life's necessities (like food) has gone down.
- Adam Smith takes a moment here to talk about how wage laborers are far superior to slaves because wage laborers are cheaper. For example, a master has to make up for lost profits when a slave gets sick.
- But when a wage laborer gets sick, he needs to pay for his own expenses. Plus, slaves have no incentive to work hard, while laborers want to make more money and get promoted.
- Obviously, there are a bunch of better reasons for why slavery shouldn't exist, but Smith takes a moment here to say that it doesn't make sense even on an economic level.
- Adam Smith also makes an argument for a standard workweek (with weekends off) so that laborers will have a chance to rest and be better at work.