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3. Owing to the law of diminishing returns, a larger number of people cannot, in any given state of civilization and the industrial arts, be so well provided for from the produce of a restricted area as a smaller number can.

4. There is a strong natural instinct which inclines the members of our species to the multiplication of numbers, and unless this is counteracted by other motives, it will lead to an increase of population beyond the limits where comfortable subsistence is possible.

5. This natural instinct is, however, opposed and held in check by several contrary motives, not the least important of which is the desire for the goods which one has been accustomed to consume, coupled with the perception on the part of each head, or would-be head, of a family that a larger number of children means a smaller share of the necessaries, comforts, and luxuries of life for each one, and this keeps the rate of increase far below that which is physiologically possible.

6. How rigidly the increase of numbers is held in check by this motive depends upon the ideas of the people as to what is essential, in the way of incomes, to their happiness, — in other words, upon their standard of living. It is the standard of living, therefore, which determines the rate of increase of population, given the amount of wealth and the possibilities of production. It plays the same part in determining the supply of labor which the cost of producing commodities plays in determining their supply.

Refinement of the law of population. While this general law has never been successfully refuted, and is accepted by every economist of any standing, some refinements have been found necessary. For example, it makes a great deal of difference in what stratum of society the increase in population takes place. There might be such a thing as a considerable increase in the total population which would result in a considerable increase in the rate of wages of unskilled labor. If we could double or treble or quadruple the number of people

in what are known as the employing classes (that is, the professional men and, more particularly, the successful entrepreneurs and independent business men), the competition among these business men would take several forms. In order to equip and man their establishments they would have to bid against one another to get labor and also to sell their products. This would tend to bring up the price of labor and to bring down the price of products, -in other words, to leave a narrower margin of profits on which business men would have to live. For example, recent immigrants into the Philippine Islands from America have not been unskilled laborers but skilled laborers, engineers, technicians, and business men. This has added somewhat to the population of the Philippines, but at the same time it has increased the demand for unskilled laborers and has therefore tended to improve their condition. Whether the increase in the higher economic grades comes through immigration or higher birth rate or better systems of education, they all produce much the same result.

Effect of immigration. We began our discussion of the effect of the standard of living by assuming a community to which no immigrants came. However high the standard of living of the native laborers, or however strong the tendency of the educational and social system to raise the standard of living, if large numbers of immigrants with a low standard kept coming in, it would keep the standard down to a low level. At any rate the oversupply of unskilled labor would tend to keep wages down. Their coming tends to make business conditions easier for men who need to employ unskilled labor, but to make conditions very much harder for the unskilled laborers who are already there. If, however, the immigrants resemble those Americans who go to the Philippine Islands (that is, if they belong to the skilled, the professional, and the employing classes), they tend to make conditions easier for the unskilled laborers but harder for the skilled, the professional, and the employing classes who are already there.

Noncompeting groups. This brings in the principle known by various names, such as the principle of noncompeting groups or the principle of joint demand. In the case of material commodities it sometimes happens that two or more articles have to be combined to supply the same demand, such as sugar and cranberries, bread and butter, etc. If sugar is so scarce and so high that people cannot afford to buy it, there will be less demand for cranberries; but if sugar is abundant and cheap, so that everybody can afford to buy it, there will be an increased demand for cranberries. In the field of production we get much better illustrations than in the field of consumption. It frequently happens that several different kinds of material have to be combined in the making of a single product,1- coal and iron ore, for example, in the making of steel. If coal were scarce and very expensive, and other kinds of fuel likewise, the best iron ore in the world would be of very little use and would have to sell, if it sold at all, at a very low price. With cheap and abundant coal the value of ore beds tends to rise. The same principle applies to different types of labor. Managerial skill, technical skill, and manual labor have to be combined in the production of many manufactures. If there were no manual labor to be had, managerial skill and technical skill would be of very little use; with an abundant and cheap supply of manual labor these other forms of skill become enormously valuable to their possessors. Conversely, with no managerial and technical skill to go with it, manual labor would be worth very little in our industries; with an abundance of managerial labor and technical skill large quantities of manual labor can be utilized so that many industries can start. The first and most important refinement to be made in the doctrine of population, therefore, is to point out that the question of absolute number is not the only question involved, but the question of the occupational distribution of numbers. When the increase in numbers takes place among the unskilled

1 Compare the law of variable proportions as presented in a previous chapter.

laborers, it works to their disadvantage but to the advantage of those who belong in noncompeting groups, say the technically skilled and those possessing managing ability; but when the increase in numbers takes place in the higher economic classes, it works to the advantage of the unskilled laborer.

Summary. The discussion thus far may be summarized as follows:

1. The wages of any person will depend upon how much his labor is desired. The wages of any class will depend upon how important it is thought to be that there should be more laborers of that class, or that there should not be any less. High wages indicate a strong desire and low wages indicate a weak desire to have more of a certain kind of work done.

2. Different kinds of labor usually have to be combined in fairly definite but somewhat variable proportions. If there happens to be more of a certain kind than will combine satisfactorily with the existing supply of the other necessary kinds, the oversupplied kind will not be strongly desired. There will be no great need for more of it, and therefore no strong reason for paying high wages. The kind of labor, however, which is undersupplied will be much more needed. There will be a strong reason for desiring more of it, and the only way, in a free society, to get more of it is to offer high wages.

3. Labor which requires a kind of skill that is difficult to acquire will usually be scarce, relatively to the need for it. Wages must be high enough to induce men to make the necessary effort in order to fit themselves for the work.

4. Unskilled labor is usually abundant, being limited only by the disinclination to work and the standard of living or the cost of bringing up children. Where the cost is high, or the unwillingness great, wages must be high enough to induce men to marry and bring up children. When the cost is low and there is very little unwillingness to overcome, wages may be low because men will bring up children on very low wages and thus keep the supply of labor intact.

CHAPTER XXXIII

THE ORGANIZATION OF LABORERS

Comparative advantages in bargaining. It has long been recognized that in the ordinary bargaining process between laborers and their employers, the laborers are at a disadvantage. The reasons why they are at a disadvantage have been variously stated. It is argued, for example, that the capitalist can wait longer than the laboring man, and thus wear the laboring man out and force him to give in and accept the capitalist's terms. The capitalist, it is said, having an accumulation of wealth, can live on that accumulation. There is doubtless something in this argument, though it is easy to exaggerate it. If the capitalist's accumulation is in the form of buildings and machinery, it is difficult to see how he can live on these things. He might borrow money on the basis of the security which they furnish, and with this borrowed money buy consumers' goods.

It is not so much the fact that he is a capitalist as it is the fact that he has greater borrowing facility that gives him this advantage. If, instead of owning capital, he owned consumers' goods in considerable quantities, if he owned, for example, his own house, if he had insurance policies or deposits in the savings bank, he would have the same or even greater waiting power than he has when he owns capital of equal commercial value. It is therefore frequently argued that one remedy for this situation is for the laborer himself, as far as possible, to acquire his own home, life-insurance policies, and deposits in savings banks. This would help, at any rate, to give him the power to wait, and would thus help to even up the advantages in bargaining. But the objection to this is the simple

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