theory is that labor is inherently and intrinsically repulsive. Theology at one time viewed labor as a curse visited upon man as a penalty for sin, and economics has often incorporated a similar thought in its doctrines on the pain-cost view of labor. But modern psychology has pretty well exploded this conception of labor as a curse. The psychological view is that labor is naturally active, creative, and industrious. Useful and constructive labor is required to satisfy the demands of human nature. Labor may be inherently and intrinsically pleasureable. It may be done for the pure joy of the work. The only reason why so much. of modern labor is unpleasant is because factory institutions make of toil an offensive and repelling activity. The institutional environment of the worker is at fault. Man is not naturally lazy but naturally active and creative. If he seems at times to shun work, it is because the organization of his work is crude and hateful. If labor finds no joy in work itself, the fault is not in the human nature of the worker, but in the institutional surroundings under which his work is carried on. We must not, therefore, resign ourselves to the gloomy view that labor will always be as disagreeable as at present. We must not accept the notion that work is inevitably a grievous and ugly undertaking. Rather, we must stir ourselves to revise and reshape our institutional setting for labor to the end that more and more it may become spontaneous, creative, challenging.

Wages are not paid in proportion to the ugliness or joyfulness of work. The people who like their work the best are likely to receive the largest remuneration. The people who hate their work the most are likely to receive the lowest remuneration. In other words, the degree of pain-cost of labor is no measure of the degree of ulterior reward or pleasure-gain which must be held out as an incentive.

The Wage Share in Distribution. The wage share in distribution may be considered in two aspects: first, the aggregate disbursement in wages as compared with the total national income in a given year; second, the variable rates of wages paid in different occupations and grades of labor.

With regard to the aggregate wage disbursement, the estimate on page 350 by the National Bureau of Economic Research indicates the proportions of the net value product of mines, factories, and land transportation going to wages and to all other factors.2

Wages and salaries absorbed from 66.7 per cent to 77.3 per cent of the total. It is obvious that the share of wages varies materially from year to year. Labor's share was more than one-seventh greater in 1918 than in 1916, as compared with all other shares. The share of wages bulks larger than all other shares combined. Taking two-thirds to threefourths of the net value product, wage earners absorb about twice as great a share of the total income as do land owners, capitalists, and property owners combined. Of course, per capita, the labor share is less

2 Income in the United States, Volume I, p. 97, and data on p. 231 of present volume.

than that of other groups. We are here dealing with the grand totals of wage and non-wage incomes.

PERCENTAGES OF COMBINED NET VALUE PRODUCT OF MINES, FACTORIES, AND LAND TRANSPORTATION DISTRIBUTED AS EARNINGS OF EMPLOYEES, AND RETURNS FOR MANAGEMENT AND USE OF PROPERTY, RESPECTIVELY

With regard to the variable rates of wages paid in different occupations, the following estimate shows the variations in special branches of industry during the first quarter of 1922.

AVERAGE EARNINGS PER HOUR PER EMPLOYEE IN INDUSTRIES OF THE UNITED STATES (FIRST QUARTER OF 1922) •

W. I. King, National Bureau of Economic Research, Employment, Hours, and Earnings in Prosperity and Depression, p. 113.

The highest wage rates in this list are 250 per cent above the lowest. Striking inequalities of rates of pay are obvious when we move from one branch of industry to another.

Theories to Account for the Share of the National Income Going to Wage Earners.-(1) The Subsistence Theory. Ricardo, in a famous passage, says, "The natural price of labor is that price which is necessary to enable the laborers, one with another, to subsist and to perpetuate their race, without either increase or diminution." The doctrine thus expressed had been previously enunciated in various forms by the Physiocrats and by Adam Smith. Ricardo was, however, primarily influenced by Malthus in taking his position, for Malthus held that the tendency of human beings to multiply rapidly and to press upon the means of subsistence was the great law of population. Malthusian pessimism pervades the Ricardian theory of wages. What outlook could be more dismal than that labor must always tend to be reduced to the hard, cruel level of bare subsistence? Because of this type of pessimism, economics came to be called by its critics the "dismal science." Socialistic critics dubbed the Ricardian doctrine the "iron law of wages," and used Ricardo as authority for their contention that under capitalism the laborer had nothing to lose but his chains. Increasing misery loomed. up on the horizon. The future was crusts and rags. There was no hope. This exaggeration of Ricardo's principle was not wholly warranted. Although he did emphasize subsistence as the natural wage, he recognized the possibility of progress in wage levels if certain changes were to take place. These changes might be in the "habits and customs of the people," in an "increase of capital," which occasions a "new demand for labor," and in restriction of population either by "some effort on the part of the legislature" or by "rendering less frequent early and improvident marriages." But even at best, Ricardo held out slight hope of improvement from these sources, and the dominant tone of his writing is pessimistic.

That Ricardo was wrong is evidenced by the fact that wage earners have materially increased their incomes since his day. The factors of which he was so skeptical have more than materialized. Insistence upon better standards of living has restricted population growth, and increases in capital and in technological efficiency have increased the national product. The subsistence theory of wages proved to be untenable.

(2) The Wages-fund Theory. John Stuart Mill laid down the following wage principle: "Wages depend mainly upon . . . the proportion between population and capital" or "between the number of the laboring class and the aggregate of what may be called the wages-fund, which consists of that part of circulating capital which is expended in the direct hire of labor." Just how the amount of circulating capital was to be determined was never clearly explained by the wages-fund theorists. If wages are a ratio between two things, population and circulating capital, we must know the size of the two things before we can express

the ratio. The doctrine was seized upon by enthusiastic adherents of the business viewpoint to prove that wages were a fixed quantity, incapable of increase by any methods whatsoever. In spite of all that trade unionists or socialists might hope to accomplish, one cold, ironic fact was said to stare the reformers in the face. This fact was that nothing which reformers could do would increase the wage fund. If labor in one section forced wages up, the artificial excess which was thereby squeezed out of the total fund meant that labor in another section would have its wages reduced by a corresponding amount. Labor as a whole could not benefit from unionism and strikes if the doctrine were true.

Mill was himself greatly influenced by the pessimism of Ricardo and Malthus. Although he had profound human sympathies and believed in the possibility of progress, we find him declaring in the most cynical tone, "It is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being." Contemporary students made drastic criticisms of the wages-fund theory, and Mill eventually made a public recantation of his theory. The main positive contribution of the theory was to draw attention to the mutual interdependence of labor and capital. Wages are advanced out of capital. The laborer is paid before the products of his hands have been sold. Employers advance the pay. But since a time element enters into the calculation, the amount advanced to wage earners is reduced by the discount for the period. Wages may be viewed as the discounted product of labor.

(3) The Commodity Theory.-A third theory is the commodity theory of wages. According to its teachings wages are subject to all of the market laws of supply and demand. The price paid to labor is fixed in the same way as the price paid for pig iron or coal. A large supply of labor relative to the demand leads to a low wage and a low supply of labor relative to demand leads to a high wage. Labor is looked upon as a thing to be bought and sold in the same fashion as any other commodity. Labor has long smarted at the humiliating inference of the theory, and organized labor in 1916 secured the passage of a law by Congress declaring that labor should henceforth not be considered a commodity or an article of commerce. Experience since that time has indicated that the passage of a congressional statute does not alter the attitude of employers towards employees, nor prevent them from still hiring labor at as low a figure as the market will bear. A number of features of the commodity theory are important. It considers labor as a collection of individual units, but fails to consider the changed marketing power of labor as an organized group. A million men in the labor market as individuals might find their wages fixed by arbitrary forces of supply and demand, but the same million laborers organized into a powerful labor union might be able, as experience has abundantly shown, to raise the wage level considerably above the old market figure. In practice the effort of employers to consider labor as an article of commerce has amounted to an attempt for the most part to secure the maximum of

work for the minimum of wages. Labor has widely matched the attitude of the employers by determination to give the minimum of work for the maximum of wages. The laborer when looked upon as a commodity has come to feel that so far as wages are concerned he "gets what he can,' whereas the employer has come to feel that the laborer after all "gets just what he deserves." The commodity theory of labor, therefore, leads to unwholesome and embittered feelings in the industrial world. It takes little account of the need of the workers to live, and reckons as of little importance the higher elements of the human factor in industry.

(4) Socialistic Wage Theory. Karl Marx borrowed largely from the subsistence theory of wages in expounding his own wage theory. The Communist Manifesto declared: "The average price of wage-labor is the minimum wage, i.e., that quantum of the means of subsistence which is absolutely requisite to keep the laborer in bare existence as a laborer. What, therefore, the wage-laborer appropriates by means of his labor merely suffices to prolong and reproduce a bare existence. We by no means intend to abolish this personal appropriation of the products of labor, an appropriation that is made for the maintenance and reproduction of human life, and that leaves no surplus wherewith to command the labor of others. All that we want to do away with is the miserable character of this appropriation under which the laborer lives merely to increase capital, and is allowed to live only in so far as the interest of the ruling class requires it." In his treatise on Capital, Marx built up an intricate theory of the hopeless struggle of labor for a better wage. He held that capital would always hire labor at the lowest possible wage. And this lowest possible wage would be merely the amount necessary to prevent present laborers from starving and to enable them to reproduce their kind for the future. Cost of labor was viewed as the cost of reproducing work animals. These human work animals would be paid by capital only enough to provide their crude and miserable existence. But the value of their product would be much above their existence price. This excess he termed surplus value. The return gained by capital was produced by labor and justly belonged to labor, but was stolen by capital. Unrequited labor, or stolen wages, were regarded as the source of the exploitation of which capitalists were accused.

Orthodox economics of the present day does not accept the Marxian doctrine. That doctrine erred in attributing to labor the sole and exclusive quality of productivity. Modern economics considers that land and capital as well as labor are entitled to productive shares.

Marginal Elements in Wage Determination.-The following account of marginal theory is probably the general line of reasoning most commonly accepted among present day economic authorities. It is an outgrowth of the good and bad features of the theories which preceded. Earlier theories suffered sharp critical attacks and many parts were chopped away while certain parts survived the attacks and merged themselves with the final marginal theory of wages. We cannot in this treatise give detailed analysis of the strong and weak points of these