Economic and Social Importance of the Eight-Hour Movement
The opposition of the employing class to this measure has not risen so much from an aversion to improving the laborer's condition as from a misconception of their economic relation to the community, and especially to the laboring classes.... For nearly a century the colleges have taught, and the employing classes have believed, that an increase of wages always means a decrease of profits—that their income moves inversely with that of the laborer's, or, in the language of the economic instructors, that "profits rise as wages fall, and fall as wages rise."
This proposition has been periodically discussed for more than three-quarters of a century. The characteristic feature of the controversy is that the measure has always been favored by the laboring class and their sympathizers, and as uniformly opposed by the statesmen, economists and employers. This opposition, however, is not, as is commonly assumed, all due to abnormal selfishness on the part of the employing class. The average employer is not more unsympathetic and indifferent to the welfare of society than is any other citizen. There is nothing in the mere fact of being an employer that necessarily destroys one's interest in the social well-being of others. The opposition of the employing class to this measure has not risen so much from an aversion to improving the laborer's condition as from a misconception of their economic relation to the community, and especially to the laboring classes. Nor are they responsible for this misconception; but as we have elsewhere shown, it is mainly due to the erroneous teachings of political economy. For nearly a century the colleges have taught, and the employing classes have believed, that an increase of wages always means a decrease of profits—that their income moves inversely with that of the laborer's, or, in the language of the economic instructors, that "profits rise as wages fall, and fall as wages rise." With this conviction it is not surprising that they should regard every effort to improve the laborer's economic and social condition— which always involves an increase of wages—as inimical to their interests.
From this point of view the more clearly it could be shown that a reduction of the hours of labor would tend to increase wages, the more imperative seemed the necessity for the employers to oppose it. This attitude has been further strengthened by the fact that hitherto the subject has been presented on sympathetic and philanthropic rather than economic grounds. Appeals to sentiment rather than to science have been made for it. The employing class have been asked to grant a reduction of the hours of labor, not as an act of wise statesmanship, but as a boon to the laborer, out of sympathy for the "unfortunate classes." To this they have with some degree of consistency replied, that "factories are business and not charitable institutions," and have accordingly resisted all efforts in this direction as an unwarranted attempt to compel them to make involuntary contributions to the laborers—to force them to give something for nothing—all of which they regard as a violation of their rights as free citizens. In short, through the influence of these conclusions they have come to regard the labor movement as an unwarranted agitation against the best interests both of the employing class and the whole community.
This view of the subject being generally shared by the leading journalists, essayists and statesmen, who reflect the teachings of the colleges—we naturally find the daily press, the magazines and the legislatures averse to every proposition for reducing the hours of labor. Among the objections usually urged against this measure are, that it would increase dissipation among the masses, that it would diminish production, and make smaller profits, and lower wages or higher prices inevitable, and thus be injurious alike to the employer, the laborer and the consumer. If these views were correct, the opposition which they incite to this measure would be entirely warranted, and the movement for the general establishment of an eight-hour system should be abandoned. But are they correct? In order to give a comprehensive answer to this question, the subject must be removed from the domain of philanthropy to that of philosophy, and science must be substituted for sentiment as the guide to action.
Having taught Microeconomics for over a decade, I take umbrage at your generalization that "...colleges have taught [...] that an increase of wages always means a decrease of profits -that their income moves inversely with that of the laborer's [...]". That's simply untrue, or, at best, a misrepresentation.
There is clear empirical evidence to support the functional relationship between a firm's earnings and the costs of its inputs, of which Labor is an example. Thus, at the most simplified level, if a firm's costs rise (ceteris paribus, especially wrt prices), then its net earnings must decrease. There's nothing else that they can do.
It seems to me that there is a disconnect in your reasoning here, one in which there is an implicit assumption that a firm's labor is also part of its demand, to some extent, as part of the community. Yet for many firms, especially in the digital age, this is not the case. They may do business exclusively with individuals or other businesses in a completely separate geographic location. As such, if their labor's wages rise, they will not receive any direct benefit therefrom. You might be able to argue a tenuous, indirect benefit with increased aggregate demand, but it seems to me that it would be tough to demonstrate.
In any event, I do agree with your statement that this issue ought to be addressed scientifically, examining empirical evidence and reaching conclusions, rather than focusing on sentiment and philosophical ideas.
If, by chance, I've misunderstood your position, please let me know. I'd be happy to discuss this further.
The material I'm posting is actually from 1889, by George Gunton. Gunton is referring to what is known as the wages-fund doctrine, which was taught in colleges at the time he was writting.
I'm posting the whole article, in serial form, without commentary.
Thanks so much! I feel a bit silly now. I thought that my head was going to explode when I first read this.
I'm not an economist so I have a rather simplistic view of the3se issues, maybe even one that is naive. However:
I took the reasoning concerning the relationship between wages and profits to be viewed from an economy wide perspective. Isn't this reasoning also attributed to, of all people, Henry Ford? Ford, I think, seemed to believe that the more people that had jobs at a reasonble wage, the more people that there would be that could buy his products. It seems like the reasoning being used by Gunton.
It seems naive to think that the same reasoning would apply on a business by business basis, or even on an industry by industry basis. It's a total economy phenomenon. Stands to reason that the more people that get paid well, the more people that can spend money on both necessary and less necessary products.
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