Law
of Wages
Henry George: The
Land Question (1881)
The Civilization that is Possible.
IN the effects upon the distribution of wealth, of making land private
property, we may thus see an explanation of that paradox presented by modern
progress. The perplexing phenomena of deepening want with increasing wealth,
of labor rendered more dependent and helpless by the very introduction of labor-saving
machinery, are the inevitable result of natural laws as fixed and certain as
the law of gravitation. Private property in land is the primary cause of the
monstrous inequalities which are developing in modern society. It is this,
and not any miscalculation of Nature in bringing into the world more mouths
than she can feed, that gives rise to that tendency of wages to a minimum – that "iron
law of wages," as the Germans call it -- that, in spite of all advances in
productive power, compels the laboring-classes to the least return on which
they will consent to live. It is this that produces all those phenomena that
are so often attributed to the conflict of labor and capital. It is this that
condemns Irish peasants to rags and hunger, that produces the pauperism of
England and the tramps of America. It is this that makes the almshouse and
the penitentiary the marks of what we call high civilization; that in the midst
of schools and churches degrades and brutalizes men, crushes the sweetness
out of womanhood and the joy out of childhood. It is this that makes lives
that might be a blessing a pain and a curse, and every year drives more and
more to seek unbidden refuge in the gates of death. For, a permanent tendency
to inequality once set up, all the forces of progress tend to greater and greater
inequality. ... read the whole article
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty, Chapter 5: The Basic
Cause of Poverty (in the unabridged: Book
V: The Problem Solved)
In all our long investigation we have been advancing to this simple truth:
That as land is necessary to the exertion of labor in the production of wealth,
to command the land which is necessary to labor, is to command
all the fruits of labor save enough to enable labor to exist. ...
The great cause of inequality in the distribution of wealth is inequality
in the ownership of land. The ownership of land is the great fundamental
fact which ultimately determines the social, the political, and consequently
the
intellectual and moral condition of a people. And it must be so. For land
is the habitation of man, the storehouse upon which he must draw for all
his needs,
the material to which his labor must be applied for the supply of all his
desires; for even the products of the sea cannot be taken, the light of the
sun enjoyed,
or any of the forces of nature utilized, without the use of land or its
products. On the land we are born, from it we live, to it we return again — children
of the soil as truly as is the blade of grass or the flower of the field.
Take away from man all that belongs to land, and he is but a disembodied
spirit.
Material progress cannot rid us of our dependence upon land; it can but
add to the power of producing wealth from land; and hence, when land is monopolized,
it might go on to infinity without increasing wages or improving the condition
of those who have but their labor. It can but add to the value of land
and
the power which its possession gives. Everywhere, in all times, among all
peoples, the possession of land is the base of aristocracy, the foundation
of great
fortunes, the source of power. ... read the whole chapter
Rev. A. C. Auchmuty: Gems from George, a
themed collection of
excerpts from the writings of Henry George (with links to sources)
WHEREVER land has an exchange value there is rent in the economic meaning
of the term. Wherever land having a value is used, either by owner or hirer,
there is rent actual; wherever it is not used, but still has a value, there
is rent potential. It is this capacity of yielding rent which gives value
to land. . . . No matter what are its capabilities, land can yield no rent
and have no value until some one is willing to give labor or the results
of labor for the privilege of using it; and what anyone will thus give, depends
not upon the capacity of the land, but upon its capacity as compared with
that of land that can be had for nothing. — Progress & Poverty Book
III, Chapter 2 — The Laws of Distribution: Rent and the Law of Rent
STATED reversely, the law of rent is necessarily the law of wages and interest
taken together, for it is the assertion, that no matter what be the production
which results from the application of labor and capital, these two factors will
only receive in wages and interest such part of the produce as they could have
produced on land free to them without the payment of rent — that is the
least productive land or point in use. — Progress & Poverty Book
III, Chapter 2 — The Laws of Distribution: Rent and the Law of Rent
... go to "Gems from George"
Fred Foldvary: See the Cat
Picture an unpopulated island where we're going to produce one good,
corn, and there are eleven grades of land. On the best land, we can grow
ten bushels of corn per week; the second land grows nine bushels, and so
on to the worst land that grows zero bushels. We'll ignore capital goods
at first. The first settlers go the best land. While there is free ten-bushel
land, rent is zero, so wages are 10. When the 10-bushel land is all settled,
immigrants go to the 9-bushel
land.
Wages in the 9-bushel land equal 9 while free land is available. What
then are wages in the 10-bushel land? They must also be 9, since labor is
mobile. If you offer less, nobody will come, and if you offer a bit more
than 9, everybody in the 9-bushel land will want to work for you. Competition
among workers makes wages the same all over (we assume all workers are alike).
So that extra bushel in the 10-bushel land, after paying 9 for labor, is
rent.
That border line where the best free land is being settled is called
the "margin of production." When the margin moves to the 8-bushel land, wages
drop to 8. Rent is now 1 on the 9-bushel land and 2 on the 10-bushel land.
Do you see what the trend is? As the margin moves to less productive lands, wages
are going down and rent is going up. We can also now see that wages are determined
at the margin of production. That is the "law of wages." The wage at the
margin sets the wage for all lands. The production in the better lands
left after paying wages goes to rent. That is the "law of rent." If you understand
the law of wages and the law of rent, you see the cat! To complete our cat
story, suppose folks can get land to rent and sell for higher prices later
rather than using it now. This land speculation will hog up lands and make
the margin move further out than without speculation, lowering wages and
raising rent even more.
Now we have good news and bad news. The good news is that when we
put in the capital goods we
first left out from the example above, the tools and technology increase
the productivity of all the lands. If production doubles, rent doubles, and
wages go up. Wages won't double, because workers have to pay for the tools,
but even if wages go up 50 percent, that's good news, and why industrialized
economies have a high standard of living. Also, high skills enable educated
workers to have a wage premium above the basic wage level. The bad news is
that the technology enables us to extend the margin to less productive land,
which lowers wages again. So there is this constant race between technology
raising wages and lower margins reducing wages. ... Read the whole article
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