Various grades of labor and rates of wages
2. The term general rate of wages can be used only of a certain grade of labor and of the rate for the average worker. Every grade and kind of ability has its rate of wages. To be sure, it is sometimes convenient to speak in a broad but inexact way of "a general rate of wages," when comparing different countries and periods. When it is said that the rate of wages is higher in America than in England, in England than in France, in France than in India, the comparison is between men of the same occupation in the different countries; e.g., the unskilled laborer or the mechanic gets more here than the same grade of laborer gets in England. There is no such thing as a general rate of wages extending throughout all industries.
The different grades of ability differ more markedly in wages than do industries compared as wholes. In the manufacture of cloth all grades of ability are required, from the highly paid artist and engineer, down to the roustabout in the yard. The industries of manufacturing, commerce, and education alike require the coöperation of bookkeepers, janitors, carpenters, and superintendents. It is easy in most cases to pass from any grade of occupation in one industry to a corresponding grade in another industry; but it is difficult to pass from a lower grade to a higher grade in the same or another industry.
Equilibrium of services and wages
Abstractly considered, that is, wherever free competition exists, there is a constant tendency toward a state of equilibrium; each workman is moving into the industry where he earns the highest possible amount, and where he receives just what his fellow-men estimate his importance to be, judged by the service he performs. Each man's place is determined by his specific gravity, just as the place of liquids poured into a glass is determined by their density. There is much reason to believe that this condition is approached actually in a far greater degree than is thought by those who come to the question with preconceived notions of what ought to be, or of what they would like to see. This principle of the economic wage does not preclude the questioning of the justice of existing institutions, but it is a guide in the discussion of all practical problems of wages.
Wages follow the law of marginal valuation
3. The law of wages may be stated thus: in any state of the labor market the wages of any labor or class of labor is equal to its marginal contribution—that is, to the value of its products. Each agent in industry, whether it be a plough, a horse, or a man, is valued in connection with other agents, never apart or isolated. It is not the total service any one of them performs that can be got at; all that can be got at is the utility attributed to the last unit of supply. Their marginal contribution determines their importance. Each agent is considered in combination with other things at a given moment under existing conditions of supply.
Wages exemplify the general law of value
This statement of the law of wages is broad, and appears to be modified in many ways in practice: by changes in industry, by ignorance on the part of the worker, by unequal skill in bargaining; but the law of wages just stated allows for these modifications, and is a guide amid the complexity of facts, for it gives a place to the influence of trade unions, caste, and everything else that affects the labor-supply. The law of wages is but the general law of value, working itself out amid the special conditions accompanying the gratification of wants by human effort.