Sunday, November 24, 2013

Smith on the Liberal Reward for Labour

"The liberal reward of labour, therefore, as it is the effect of increasing wealth, so it is the cause of increasing population. To complain of it, is to lament over the necessary effect and cause of the greatest public prosperity. …
The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives....Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low."
See the full account by Smith of the positive role of high wages in Wealth Of Nations, (WN I, VIII: Of the Wages of Labour).
Most of the deplorable affects of modernization from industrialism in the 19th century, that Marx and Engels focussed upon, and is now firmly embedded in the folk-lore of modern leftish social democratic movements (though their political and trade union leaders ensure that they achieve high incomes in the highest tax brackets of their respective economies).
As it happens, the extremely low incomes of labourers, certainly in the 18th and 19th centuries, were partly occasioned by the dulling affects of large-scale migration of populations fro the countryside and inward migration from Ireland, rather than inherent or necessary for a growing market economy.  This rapid growth of population filled the towns and cities and turned housing into slums, and lowered wages rates in such jobs as in the mines (where my own family came from) and manual manufacturing. 
Despite this dreadful experience suffered by many people, industrialisation, particularly in engineering, also occasioned the growth of skilled, technical and supervisory employments, on higher wages and promoted education of those entering this work.  It also promoted small businesses using skilled labour and produced the high wages that Smith applauded. The founding institutions of Heriot-Watt University, in Edinburgh, was the first school for training mechanical, chemical, mathematical and general technical education in 1821.  Many other such schools were founded thereafter, feeding the demand for skilled and technical labourers that the growing UK economy needed.               
Once that process takes-off in an economy it can rapidly transform the situation in respect of wages for a slice of the labouring classes.  Nigh-schools were a route for young labourers to climb out of low- wage poverty.  [It was my route to university.] It’s happening now quite quickly in Africa and in the BRIC economies, not neatly – history is messy – but inexorably.
Readers of Cora Robin’s Blog should have that drawn to their attention.


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