Problems of Poverty: An Inquiry into the Industrial Condition of the Poor

by J. A. Hobson

So far as the State or Municipality chooses to regulate by an "uncommercial" or moral standard the conditions of labour for the limited number of employés required for the services which are a public monopoly, it is able to do so, provided the public is willing to pay the price. There is much to be said in favour of such a course, for the public example might lend invaluable aid in forming a strong public opinion which should successfully demand decent conditions of life and work, for the whole body of workers. But if the State or Municipality were to undertake to provide work and wages for an indefinite number of men who failed to obtain work in the competition market, the effect would be to offer a premium upon "unemployment." Thus, it would appear that as fast as the public works drew off the unemployed, so fast would men leave the low-paid, irregular occupations, and by placing themselves in a state of "unemployment" qualify for public service. There would of course be a natural check to this flow. As the State drained off all surplus labour, the market value of labour would rise, greater regularity of employment would be secured, and the general improvement of industrial conditions would check the tendency of workers to flow towards the public workshops. This consideration has led many of the leaders of labour movements to favour a scheme of public workshops, which would practically mean that the State or Municipality undertook to limit the supply of labour in the open market, by providing for any surplus which might exist, at the public expense. The effect of such a policy would be of course to enormously strengthen the effective power of labour-organizations. But while the advocates of public workshops are fully alive to these economic effects, they have not worked out with equal clearness the question relating to the disposal of the labour in public workshops. How can the "protected" labour of the public workshops be so occupied, that its produce may not, by direct or indirect competition with the produce of outside labour, outweigh the advantage conferred upon the latter by the removal of the "unemployed" from the field of competition, in digging holes and filling them up again, or other useless work, the problem is a simple one. In that case the State provides maintenance for the weaker members in order that their presence as competitors for work may not injure the stronger members. But if the public workmen produce anything of value, by what means can it be kept from competing with and underselling the goods produced under ordinary commercial conditions? Without alleging that the difficulties involved in these questions are necessarily fatal to all schemes of public works, we maintain that they require to be clearly faced.

Even if it be held that public workshops can furnish no economic remedy for poverty, this judgment would of course be by no means conclusive against public emergency works undertaken on charitable grounds to tide over a crisis. Every form of charity, public or private, discriminate or indiscriminate, entails some evil consequences. But this consideration is not final. A charitable palliative is defensible and useful when the net advantages outweigh the net disadvantages. This might seem self-evident, but it requires to be stated, because there are not wanting individuals and societies which imagine they have disposed of the claim of charitable remedies by pointing out the evil consequences they entail. It is evident that circumstances might arise which would compel the wisest and steadiest Government to adopt public relief works as a temporary expedient for meeting exceptional distress.

§ 9. Restriction of Foreign Emigration.--Two further proposals for keeping down the supply of low-skilled labour deserve notice, and the more so because they are forcing their way rapidly toward the arena of practical politics.

The first is the question of an Alien law limiting or prohibiting the migration of foreign labourers into England. The power of the German, Polish, or Russian Jew, accustomed to a lower standard of life, to undersell the English worker in the English labour market, has already been admitted as a cause of "sweating" in several city industries. The importance of this factor in the problem of poverty is, however, a much disputed point. To some extent these foreign labourers are said to make new industries, and not to enter into direct and disastrous competition with native workers. In most cases, however, direct competition between foreign and native workers does exist, and, as we see, the comparatively small number of the foreign immigrants compared with the aggregate of native workers, is no true criterion of the harm their competition does to low-waged workers. Whether this country will find it wise to reverse its national policy of free admission to outside labour, it is not easy to predict. The point should not be misunderstood. Free admission of cheap foreign labour must be admitted primâ facie to be conducive to the greatest production of wealth in this country. Those who seek to restrict or prohibit this admission, do so on the ground that the damage inflicted upon that class of workers, brought directly or indirectly into competition for employment with these foreigners, overbalances the net gain in the aggregate of national wealth. It is this consideration which has chiefly operated in inducing the United States, Canada, and Australia to prohibit the admission of Chinese or Coolie labour, and to place close restrictions upon cheap European labour. Sir Charles Dilke, in a general summary of colonial policy on this matter, writes, "Colonial labour seeks protection by legislative means, not only against the cheap labour of the dark-skinned or of the yellow man, but also against white paupers, and against the artificial supply of labour by State-aided white immigration. Most of the countries of the world, indeed, have laws against the admission of destitute aliens, and the United Kingdom is in practice almost the only exception."[[32]]

The greater contrast between the customary standard of living of the immigrants and that of the native workers with whom they would compete, has naturally made the question seem a more vital one for our colonies, and for the United States than for us. There can, however, be little doubt that if a few shiploads of Chinese labourers were emptied into the wharves of East London, whatever Government chanced to be in power would be compelled to adopt immediate measures of restraint on immigration, so terrible would the effect be upon the low class European labourers in our midst. Whether any such Alien legislation will be adopted to meet the inroad of continental labour depends in large measure on the course of continental history. It is, however, not improbable that if the organization of the workers proceeds along the present lines, when they come to realize their ability to use political power for securing their industrial position, they may decide that it will be advisable to limit the supply of labour by excluding foreigners. Those, however, who are already prepared to adopt such a step, do not always realize as clearly as they should, that the exclusion of cheap foreigners from our labour-market will be in all probability accompanied by an exclusion from our markets of the cheap goods made by these foreigners in their own country, the admission of which, while it increases the aggregate wealth of England, inflicts a direct injury on those particular workers, the demand for whose labour is diminished by the introduction of foreign goods which can undersell them. If an Alien law is passed, it will bring both logically and historically in its wake such protective measures as will constitute a reversal of our present Free Trade policy. Whether such new and hazardous changes in our national policy are likely to be made, depends in large measure upon the success of other schemes for treating the condition of over-supply of low-skilled labour. If no relief is found from these, it seems not unlikely that a democratic government will some day decide that such artificial prohibition of foreign labour, and the foreign goods which compete with the goods produced by low-skilled English labour, will benefit the low-skilled workers in their capacity as wage-earners, more than the consequent rise of prices will injure them in their capacity as consumers.

§ 10. The "Eight Hours Day" Argument.--The last proposal which deserves attention, is that which seeks to shorten the average working-day. The attempt to secure by legislation or by combination an eight hours day, or its equivalent, might seem to affect the "sweating system" most directly, as a restriction on excessive hours of labour. But so far as it claims to strike a blow at the industrial oppression of low-skilled labour, its importance will depend upon its effect on the demand and supply of that low-skilled labour. The result which the advocates of an eight hours day claim for their measure, may be stated as follows--

Assuming that low-skilled workers now work on an average twelve hours a day, a compulsory reduction to eight hours would mean that one-third more men were required to perform the same amount of work, leaving out for convenience the question whether an eight hours day would be more productive than the first eight hours of a twelve hours day. Since the same quantity of low-skilled work would require to be done, employment would now be provided for a large number of those who would otherwise have been unemployed. In fact, if the shorter day is accompanied by an absolute prohibition of over-time, it seems possible that work would thus be found for the whole army of "unemployed." Nor is this all. The existence of a constant standing "pool" of unemployed was, as we saw, responsible for keeping the wages of low-skilled labour down to a bare subsistence wage. Let this "pool" be once drained off, wages will rapidly rise, since the combined action of workers will no longer be able to be defeated by the eagerness of "outsiders" to take their work and wages. Thus an eight hours day would at once solve the problem of the "work-less," and raise the wages of low-skilled labour. The effect would be precisely the same as if the number of competitors for work were suddenly reduced. For the price of labour, as of all else, depends on the relation between the demand for it and the supply, and the price will rise if the demand is increased while the supply remains the same, or if the supply is decreased while the demand remains the same. A compulsory eight hours day would practically mean a shrinkage in the supply of labour offered in the market, and the first effect would indisputably be a rise in the price of labour. To reduce by one-third at a single blow the amount of labour put forth in a day by any class of workers, is precisely equivalent to a sudden removal of one-third of these workers from the field of labour. We know from history that the result of a disastrous epidemic, like the Black Plague, has been to raise the wages and improve the general condition of the labourer even in the teeth of legal attempts to keep down wages. The advocates of an Eight Hours Act assert that the same effect would follow from that measure.

Setting aside as foreign to our discussion all consideration of the difficulties in passing and enforcing an Eight Hours Act, or in applying it to certain industries, the following economic objection is raised by opponents to the eight hours movement--

The larger aggregate of wages, which must be paid under an eight hours day, will increase the expanses of production in each industry. For the increased wage cannot in general be obtained by reducing profits, for any such reduction will drive freshly-accumulated capital more and more to seek foreign investments, and managing ability will in some measure tend to follow it. The higher aggregate of wages must therefore be represented in a general rise of prices. This rise of prices will have two effects. In the first place it will tend to largely negative the higher aggregate of money wages. Or if organized labour, free from the competition of unemployed, is able to maintain a higher rate of real wages, the general rise in prices will enable foreign producers to undersell us in our own market (unless we adopted a Protective Tariff), and will disable us from competing in foreign markets. This constitutes the pith of the economic objection raised against an eight hours day. The eight hours advocates meet the objection in the following ways--First, they deny that prices will rise in consequence of the increased aggregate of wages. A reduction in interest and in wages of superintendence will take place in many branches of industry, without any appreciable tendency to diminish the application of capital, or to drive it out of the country.

Secondly, the result of an increased expenditure in wages will be to crush the small factories and workshops, which are the backbone of the sweating System, and to assist the industrial evolution which makes in favour of large well-organized factories working with the newest machinery.