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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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