Another characteristic of modern industry from the labor point of view is the existence not merely of a wage-earning class, but, more fundamental, of the wage system. “It is characteristic of the modern industrial system,” writes President Hadley,[10] “that a laborer who owns no capital, though nominally free to do what he pleases, must actually find some property owner who will give him enough to keep him alive during the period which must elapse between the rendering of the labor and the sale of the finished product. Under such circumstances, the laborer almost inevitably submits to the direction of the property owner in deciding how his labor shall be applied. Laborers without capital must necessarily work on this basis; even those who have small amounts of capital habitually do so. Such advances of capital are known as wages.” Here we have the essence of the wage system in a nut shell. The laborer sells his labor to an employer for a stipulated wage. He has a commodity, his labor, consisting of a certain amount of strength and skill, which he is free to dispose of on the market to the best advantage, as the owner of any other commodity might do. Legally, labor is property. Owing, however, to the fact that all modern production requires capital, the only buyer of his labor is a capitalist, who directs the way in which the labor shall be applied. Such a condition, as well as some peculiarities of the commodity labor leave the laborer, indeed, only “nominally” free. In theory the labor contract is a perfectly free contract, entered into voluntarily by both employer and wage-earner, and the courts have generally insisted that this theoretical freedom must be maintained. In practice various modifications of the theory have taken place: legislation has been passed protecting
laborers from bargaining away their rights, and trade unions have been formed to bargain collectively for a group of laborers. In the last analysis, however, the laborer must support himself by the sale of his labor; society guarantees him neither a living nor even the right to work. He is a bargainer in a competitive industrial world and he must assume the responsibility of providing for himself and his family by securing work. Just what is involved in such a statement is perhaps best brought out by comparing the modern wage system with previous systems of labor.
The first historical system of labor, aside from that in the family, was that of slaves. In this case the labor was forced, and being given under coercion was probably very inefficient; but the laborer was at least assured of a minimum of food, clothes and shelter. Slavery was the main source of manual labor in the ancient world, and did not disappear in England until the eleventh century. The feudal system of the Middle Ages was characterized by serfdom, according to which the laborer was bound to the soil and was compelled to render his lord certain services. Gradually serfdom was broken down and the wage system took its place, although remnants of serfdom remained in England until the eighteenth century. Four centuries before this, however, the disintegration of the feudal society had already begun, the serfdom of the agricultural laborer was commuted into regular money payments, and the artisan bought or otherwise secured his freedom from feudal exactions. In the towns industry was regulated by the guilds, and while at first they were distinctly beneficial, in time they became monopolistic and oppressive. Power was lodged in the hands of the wealthy traders and merchants and they legislated in their own behalf against the growing class of laborers, as did the wealthy land owners against the agricultural laborers. The Statute of Laborers and other acts sought to fix wages and to prevent the freedom
of the laborer in moving about or choosing his own occupation. Not indeed until the nineteenth century were the last of these old regulative laws repealed and the modern labor contract recognized in law and practice as a free contract. “The growth of labor,” says Brentano, has been “from the system of authority to the system of contract.” The system of authority, by which rates of wages, length of apprenticeship, and other details of industry were fixed by some superior authority, was found to be restrictive, uneconomic and unjust, and it gave way to the principle of economic freedom. According to the newer theory, first given effective voice by Adam Smith, in 1776, the individual should be left to himself, as he knows his own interest better than does the most enlightened government. The freest scope was given to the powers of individuals and each was to be the unlimited master of himself and his possessions.
It has since been found necessary, however, to modify both the theory and practice of this extreme individualism in order to protect the interests of various classes of society, especially the laborer. The legal theory still is that “today the labor contract is perfectly free: either side may make whatever contract he can get the other side to sign. Not only this, but either side may freely combine to demand any form of contract from the other side, as mere combinations alone are now made perfectly legal.”[11] In practice, however, this complete freedom has been greatly modified by factory acts, acts restricting the hours and conditions of employment of women and children, anti-truck acts, laws providing for weekly payments, guarding of machinery, limiting the hours of labor, and on the other hand prohibiting intimidation and molesting. For the most part these laws have applied to women and children, who are thought less capable of guarding their own interests, and
to a much less degree to labor contracts made by men, who have been considered better able to make equal contracts with employers. But concerning certain conditions of employment it has been realized that even adult males are not capable of securing equitable bargains, and along these lines the nominal freedom of the labor contract has been decidedly abridged. The attitude of the courts toward such legislation shows that they have declared many laws unconstitutional on the ground that they infringe upon the right of free contract, but in the long run seem inclined to uphold as much of this restrictive legislation as seems necessary to obviate the undoubtedly evil results that flow from this real inequality of employer and laborer.
It is a very vital and important practical economic problem that presents itself in this connection. How far shall we carry this regulative principle, or how far shall we insist upon the principle of freedom? Many labor leaders are again asking for an effectual control of the labor contract, not by the action of trade unions, but by the direct legislation of the state. What shall be our attitude to this demand? Before we can fairly answer this question we must consider somewhat more fully the character of the bargain that takes place between an employer and an individual workman, and the nature of the commodity that the laborer has to sell.
It has already been stated that the commodity which the laborer brings upon the market is his labor, that is, himself, his time, and his energies. But these wares are peculiar and differ in several important respects from ordinary marketable commodities. In the first place, labor is like a perishable commodity which must be sold at once if the owner is not to incur loss. The laborer has usually little if any capital by which to support himself in case he cannot find work, and may be compelled to make a forced sale of his labor, that is, to accept unduly low wages. In
this respect then he is at a disadvantage in bargaining with his employer. A second peculiarity of the sale of labor is that the laborer and his work are inseparable. The seller of an ordinary commodity disposes of it absolutely when he makes a sale. “It matters nothing to the seller of bricks whether they are to be used in building a palace or a sewer; but it matters a great deal to the seller of labor, who undertakes to perform a task of given difficulty, whether or not the place in which it is to be done is a wholesome and a pleasant one, or whether or not his associates will be such as he cares to have.” The person who buys this labor necessarily directs the application of it to the task in hand, and thus controls very largely the place, the sanitary and social conditions, the hours, the character, and safety of the work. In the third place, the superior knowledge and intelligence of the employers gives them an advantage in bargaining with their employes, while the reluctance of employers to “spoil the labor market” often prevents that freedom of competition which is supposed to secure to the laborer his full share of the product he helps to produce.
In view of these facts we may fairly conclude that workmen are inferior to employers as bargainers and that protective legislation is necessary in order to put them on a real equality. “When laborers have to make a forced sale of their labor, their freedom of contract is more nominal than real. When women and children stand individually before the manager of hundreds of thousands of capital, it is possible that there may be little freedom and less equality in the contract by which they sell their services.”[12] It is clear that between two parties of such unequal knowledge, resources and ability as a laborer and his employer the labor contract cannot be entirely free and equal. While trade unions, by combining isolated workmen into formidable