The last method of redistributing unearned wealth is by a tax on those elements in profits which are due to the abuse of monopoly conditions. [Footnote: Monopoly will be treated more fully in Chapters XXVII and XXVIII.] Complete monopoly rarely exists, but in many businesses there is an element of monopoly which allows the capitalist or entrepreneur to secure a measure of unearned wealth. In the interest of justice, much or all of this ought to be taken for the use of the community.
171. SOMETHING MORE THAN JUSTICE IS NECESSARY.—It is an error to suppose that justice would necessarily eliminate either low wages or poverty. As we have seen, justice would require the redistribution of a large amount of unearned wealth. But much more important is the question of large numbers of laborers whose wages are undesirably low. If the rule of justice were applied to this latter class, that is, if they were given just what they earned, many would continue to be poor. Indeed, if justice were strictly administered, it is even possible that among a few groups poverty would increase, since some individuals are incapable of really earning the wages they now receive.
Something more than justice, therefore, is necessary. We must not only see that a man gets as much as he produces, no more, no less, but we must make it possible for every individual actually to produce or earn enough to support himself decently or comfortably. This, in essence, is the distinction between the socialist and the liberalist, i.e. he who accepts the democratic program of industrial reform: the socialist would practice injustice and invite economic ruin in a vain effort to eliminate poverty; the liberalist seeks the abolition of poverty without violating either justice or economic law.
172. WHY WAGES ARE LOW.—A little thought will show that directly or indirectly poverty is sometimes the result of low wages. It follows, thus, that the source of some poverty would be dried up if an increase in wages could be secured in an economical manner. To come to the heart of the problem, wages are low because productivity is low. That is to say, employers operating under conditions of free competition will pay laborers in proportion as the latter give promise of adding to the value of the product. When men are scarce, relatively to the supply of land and capital, the employer will be justified in offering high wages, because under those circumstances the productivity of each of his prospective employees will be high. He will actually offer high wages, because if he does not, the laborers will tend to hire out to his competitors. But if laborers are plentiful, relatively to the supply of the other factors of production, the employer will be forced to offer lower wages, because under the circumstances each of the prospective employees shows promise of being able to add relatively little to the value of the product. In such a case, the employer will actually offer low wages because he need not fear that his competitors will hire all of the laborers applying for jobs.
Thus when laborers are plentiful, relatively to the demand, the automatic functioning of the law of supply and demand will result in low wages. We need not waste time debating whether or not there ought to be such a thing as the law of supply and demand; a far more profitable exercise is to recognize that such a law exists, and to consider how our program of industrial reform may be adapted to it.
173. AN ECONOMICAL REMEDY FOR LOW WAGES.—Low wages are generally the result of low productivity, and low productivity is in turn the result of an oversupply of laborers relatively to the demand. Granting the truth of these premises, an economical remedy for low wages involves two steps: first, the demand for labor [Footnote: By "labor" is here meant those types of labor which are poorly paid, because oversupplied. Unskilled day labor is an example.] must be increased; and second, the supply of labor must be decreased. Any measure which will increase the demand for labor, relatively to the demand for the other factors of production, will increase the productivity of labor, and will justify the payment of higher wages. Competition between prospective employers will then actually force the payment of higher wages. Similarly, any measure which will decrease the supply of labor will strengthen the bargaining position of the laborer, and, other things remaining equal, will automatically increase wages.
174. INCREASING THE DEMAND FOR LABOR.—If we bear in mind that modern industry requires a combination of the various factors of production, it will be seen that the utilization of laborers depends upon the extent to which land, capital, and entrepreneur ability are present to combine with those laborers. Where there is a large supply of these factors, many laborers can be set to work. Thus one way of increasing the demand for labor is to increase the supply of land, capital, and entrepreneur ability.
The available supply of land can be increased by several methods. Irrigation, reclamation, and dry farming increase the available supply of farm land. The fertility of land may be retained and increased by manuring, rotation of crops, and careful husbandry. Improved agricultural machinery will also enable land to be used in larger quantities and in more productive ways. And while we do not think of man as actually creating land, the draining of swamps and the filling in of low places increases the available amount of both farm and urban land. By whatever means the amount of available land is increased, the effect is to open more avenues to the employment of laborers.
The supply of capital may be increased chiefly by the practice of thrift among all classes of the population. Capital arises most rapidly when individuals produce as much as possible, and spend as little as possible for consumers' goods. Any measure which will discourage the well-to-do from wasteful or luxurious ways of living, and at the same time encourage the poor to save systematically, even though they save only a trifle, will add to the supply of available capital. Every increase in the supply of capital will enable more and more laborers to be set to work.
Entrepreneur ability may be increased by a variety of methods. The training of men for business callings increases the supply of entrepreneurs. Taxes on inheritances, excess profits, and the unearned increment of land will tend to force into productive work many capable men who now either idle away their lives, or retire from business prematurely. It is also important that the well-to-do classes be encouraged to rear larger families, since it is these classes which can best afford to give their children the higher forms of training and education. Lastly, it is desirable to teach that leisure is disgraceful, and that whether one is rich or poor, the useful and productive life is the moral and patriotic life. "He who does less well than he can does ill."