WEBVTT NOTE XXI. Work and Wages 1 00:00:00.000 --> 00:00:04.000 CHAPTER XXI. WORK AND WAGES 2 00:00:04.000 --> 00:00:10.000 1. INTROVERSIVE LABOR AND EXTROVERSIVE LABOR 3 00:00:10.000 --> 00:00:19.000 A man may overcome the disutility of labor, forego the enjoyment of leisure, for various reasons. 4 00:00:19.000 --> 00:00:26.000 1. He may work in order to make his mind and body strong, vigorous and agile. 5 00:00:26.000 --> 00:00:32.900 The disutility of labor is not a price expended for the attainment of these goals. 6 00:00:32.900 --> 00:00:37.180 Overcoming it is inseparable from the contentment sought. 7 00:00:37.180 --> 00:00:43.360 The most conspicuous examples are genuine sport, practiced without any design for reward 8 00:00:43.360 --> 00:00:50.060 and social success, the search for truth and knowledge pursued for its own sake and not 9 00:00:50.060 --> 00:00:55.800 as a means of improving one's own efficiency and skill in the performance of other kinds 10 00:00:55.800 --> 00:01:03.800 Cognition does not aim at a goal beyond the act of knowing. 11 00:01:03.800 --> 00:01:10.260 What satisfies the thinker is thinking as such, not obtaining perfect knowledge, a goal 12 00:01:10.260 --> 00:01:12.980 inaccessible to man. 13 00:01:12.980 --> 00:01:14.620 2. 14 00:01:14.620 --> 00:01:19.420 He may submit to the disutility of labor in order to serve God. 15 00:01:19.420 --> 00:01:26.340 He sacrifices leisure to please God, and to be rewarded in the beyond by eternal bliss, 16 00:01:26.340 --> 00:01:31.740 and in the earthly pilgrimage by the supreme delight which the certainty of having complied 17 00:01:31.740 --> 00:01:35.500 with all religious duties affords. 18 00:01:35.500 --> 00:01:42.160 If, however, he serves God in order to attain worldly ends, his daily bread and success 19 00:01:42.160 --> 00:01:48.040 in his secular affairs, his conduct does not differ substantially from other endeavors 20 00:01:48.040 --> 00:01:52.880 is to attain mundane advantages by expending labor. 21 00:01:52.880 --> 00:01:58.060 Whether the theory guiding his conduct is correct and whether his expectations will 22 00:01:58.060 --> 00:02:05.040 materialize is irrelevant to the catalactic qualification of his mode of acting. 23 00:02:05.040 --> 00:02:10.540 It is hardly necessary to remark that comparing the craving for knowledge and the conduct 24 00:02:10.540 --> 00:02:17.940 The fact of a pious life, with sport and play, does not imply any disparagement of either. 25 00:02:17.940 --> 00:02:19.860 3. 26 00:02:19.860 --> 00:02:23.700 He may toil in order to avoid greater mischief. 27 00:02:23.700 --> 00:02:30.300 He submits to the disutility of labor in order to forget, to escape from depressing thoughts, 28 00:02:30.300 --> 00:02:33.140 and to vanish annoying moods. 29 00:02:33.140 --> 00:02:38.600 Work for him is, as it were, a perfected refinement of play. 30 00:02:38.600 --> 00:02:43.840 This refined playing must not be confused with the simple games of children which are 31 00:02:43.840 --> 00:02:45.880 merely pleasure producing. 32 00:02:45.880 --> 00:02:50.200 However, there are also other children's games. 33 00:02:50.200 --> 00:02:55.080 Children too are sophisticated enough to indulge in refined play. 34 00:02:55.080 --> 00:02:56.640 4. 35 00:02:56.640 --> 00:03:02.480 He may work because he prefers the proceeds he can earn by working to the disutility of 36 00:03:02.480 --> 00:03:06.280 labor and the pleasures of leisure. 37 00:03:06.280 --> 00:03:12.920 The labor of the classes one, two and three is expended because the disutility of labor 38 00:03:12.920 --> 00:03:17.600 in itself and not its product satisfies. 39 00:03:17.600 --> 00:03:23.480 One toils and troubles not in order to reach a goal at the termination of the march, but 40 00:03:23.480 --> 00:03:26.520 for the very sake of marching. 41 00:03:26.520 --> 00:03:31.920 The mountain climber does not want simply to reach the peak, he wants to reach it by 42 00:03:31.920 --> 00:03:33.080 climbing. 43 00:03:33.080 --> 00:03:38.260 He disdains the rack railway which would bring him to the summit more quickly and without 44 00:03:38.260 --> 00:03:44.720 trouble, even though the fare is cheaper than the costs incurred by climbing, for example, 45 00:03:44.720 --> 00:03:46.720 the guide's fee. 46 00:03:46.720 --> 00:03:53.800 The toil of climbing does not gratify him immediately, it involves disutility of labor. 47 00:03:53.800 --> 00:03:59.680 But it is precisely overcoming the disutility of labor that satisfies him. 48 00:03:59.680 --> 00:04:05.800 A less exerting assent would please him not better, but less. 49 00:04:05.800 --> 00:04:12.440 We may call the labor of Classes I, II and III introversive labor, and distinguish it 50 00:04:12.440 --> 00:04:16.720 from the extroversive labor of Class IV. 51 00:04:16.720 --> 00:04:22.980 In some cases, introversive labor may bring about, as a byproduct, as it were, results 52 00:04:22.980 --> 00:04:28.800 for the attainment of which other people would submit to the disutility of labor. 53 00:04:28.800 --> 00:04:33.180 The devout may nurse sick people for a heavenly reward. 54 00:04:33.180 --> 00:04:38.920 The truth-seeker, exclusively devoted to the search for knowledge, may discover a practically 55 00:04:38.920 --> 00:04:41.140 useful device. 56 00:04:41.140 --> 00:04:47.020 To this extent, introversive labor may influence the supply on the market. 57 00:04:47.020 --> 00:04:53.420 But as a rule, catallactics is concerned only with extroversive labor. 58 00:04:53.420 --> 00:04:59.820 The psychological problems raised by introversive labor are catallactically irrelevant. 59 00:04:59.820 --> 00:05:06.940 Seen from the point of view of economics, introversive labor is to be qualified as consumption. 60 00:05:06.940 --> 00:05:13.340 Its performance as a rule requires not only the personal efforts of the individuals concerned, 61 00:05:13.340 --> 00:05:19.460 but also the expenditure of material factors of production and the produce of other people's 62 00:05:19.460 --> 00:05:25.500 Practice extroversive, not immediately gratifying labor, that must be bought by the payment 63 00:05:25.500 --> 00:05:27.300 of wages. 64 00:05:27.300 --> 00:05:32.600 The practice of religion requires places of worship and their equipment. 65 00:05:32.600 --> 00:05:38.540 Sport requires diverse utensils and apparatus, trainers and coaches. 66 00:05:38.540 --> 00:05:43.220 All these things belong in the orbit of consumption. 67 00:05:43.220 --> 00:05:45.660 2. 68 00:05:45.660 --> 00:05:49.440 Joy and Tedium of Labor 69 00:05:49.440 --> 00:05:56.780 Only extroversive, not immediately gratifying labor, is a topic of catallactic disquisition. 70 00:05:56.780 --> 00:06:01.820 The characteristic mark of this kind of labor is that it is performed for the sake of an 71 00:06:01.820 --> 00:06:08.300 end which is beyond its performance and the disutility which it involves. 72 00:06:08.300 --> 00:06:12.620 People work because they want to reap the produce of labor. 73 00:06:12.620 --> 00:06:19.340 The labor itself causes disutility, but apart from this disutility, which is irksome and 74 00:06:19.340 --> 00:06:26.300 would enjoin upon man the urge to economize labor even if his power to work were not limited 75 00:06:26.300 --> 00:06:33.500 and he were able to perform unlimited work, special emotional phenomena sometimes appear, 76 00:06:33.500 --> 00:06:41.040 feelings of joy or tedium accompanying the execution of certain kinds of labor. 77 00:06:41.040 --> 00:06:48.400 Both the joy and the tedium of labor are in a domain other than the disutility of labor. 78 00:06:48.400 --> 00:06:55.640 The joy of labor, therefore, can neither alleviate nor remove the disutility of labor. 79 00:06:55.640 --> 00:07:00.760 Neither must the joy of labor be confused with the immediate gratification provided 80 00:07:00.760 --> 00:07:03.480 by certain kinds of work. 81 00:07:03.480 --> 00:07:09.720 It is an attendant phenomenon which proceeds either from labor's immediate gratification, 82 00:07:09.720 --> 00:07:15.680 from the produce or reward, or from some accessory circumstances. 83 00:07:15.680 --> 00:07:20.960 People do not submit to the disutility of labor for the sake of the joy which accompanies 84 00:07:20.960 --> 00:07:25.880 the labor, but for the sake of its immediate gratification. 85 00:07:25.880 --> 00:07:31.800 In fact, the joy of labor presupposes, for the most part, the disutility of the labor 86 00:07:31.800 --> 00:07:34.020 concerned. 87 00:07:34.020 --> 00:07:37.660 The sources from which the joy of labor springs are 88 00:07:37.660 --> 00:07:39.980 1. 89 00:07:39.980 --> 00:07:46.560 The expectation of the labor's immediate gratification, the anticipation of the enjoyment of its success 90 00:07:46.560 --> 00:07:48.440 and yield. 91 00:07:48.440 --> 00:07:54.260 The toiler looks at his work as a means for the attainment of an end sought, and the progress 92 00:07:54.260 --> 00:07:58.540 of his work delights him as an approach toward his goal. 93 00:07:58.540 --> 00:08:05.000 His joy is a foretaste of the satisfaction conveyed by the mediate gratification. 94 00:08:05.000 --> 00:08:10.760 In the frame of social cooperation, this joy manifests itself in the contentment of being 95 00:08:10.760 --> 00:08:17.200 capable of holding one's ground in the social organism, and of rendering services which 96 00:08:17.200 --> 00:08:25.000 one's fellow men appreciate either in buying the product or in remunerating the labor expended. 97 00:08:25.000 --> 00:08:30.660 The worker rejoices because he gets self-respect and the consciousness of supporting himself 98 00:08:30.660 --> 00:08:36.120 and his family and not being dependent on other people's mercy. 99 00:08:36.120 --> 00:08:37.840 2. 100 00:08:37.840 --> 00:08:43.700 In the pursuit of his work, the worker enjoys the aesthetic appreciation of his skill and 101 00:08:43.700 --> 00:08:45.520 its product. 102 00:08:45.520 --> 00:08:51.080 This is not merely the contemplative pleasure of the man who views things performed by other 103 00:08:51.080 --> 00:08:52.440 people. 104 00:08:52.440 --> 00:08:58.680 It is the pride of a man who is in a position to say, I know how to make such things, this 105 00:08:58.680 --> 00:09:02.480 is my work. 106 00:09:02.480 --> 00:09:08.100 Having completed a task, the worker enjoys the feeling of having successfully overcome 107 00:09:08.100 --> 00:09:11.460 all the toil and trouble involved. 108 00:09:11.460 --> 00:09:17.600 He is happy in being rid of something difficult, unpleasant and painful, in being relieved 109 00:09:17.600 --> 00:09:21.740 for a certain time of the disutility of labor. 110 00:09:21.740 --> 00:09:25.540 This is the feeling of, I have done it. 111 00:09:25.540 --> 00:09:27.000 4. 112 00:09:27.000 --> 00:09:31.020 Some kinds of work satisfy particular wishes. 113 00:09:31.020 --> 00:09:37.660 There are, for example, occupations which meet erotic desires, either conscious or subconscious 114 00:09:37.660 --> 00:09:38.840 ones. 115 00:09:38.840 --> 00:09:41.980 These desires may be normal or perverse. 116 00:09:41.980 --> 00:09:48.460 Also, fetishists, homosexuals, sadists and other perverts can sometimes find in their 117 00:09:48.460 --> 00:09:53.460 In their work, an opportunity to satisfy their strange appetites. 118 00:09:53.460 --> 00:09:58.580 There are occupations which are especially attractive to such people. 119 00:09:58.580 --> 00:10:05.180 Cruelty and bloodthirstiness luxuriantly thrive under various occupational cloaks. 120 00:10:05.180 --> 00:10:10.220 The various kinds of work offer different conditions for the appearance of the joy of 121 00:10:10.220 --> 00:10:11.740 labor. 122 00:10:11.740 --> 00:10:20.180 These conditions may be, by and large, more homogeneous in Classes I and III than in Class II. 123 00:10:20.180 --> 00:10:25.440 It is obvious that they are more rarely present for Class IV. 124 00:10:25.440 --> 00:10:29.700 The joy of labor can be entirely absent. 125 00:10:29.700 --> 00:10:33.020 Psychical factors may eliminate it altogether. 126 00:10:33.020 --> 00:10:39.500 On the other hand, one can purposely aim at increasing the joy of labor. 127 00:10:39.500 --> 00:10:45.720 Even discerners of the human soul have always been intent upon enhancing the joy of labor. 128 00:10:45.720 --> 00:10:51.180 A great part of the achievements of the organizers and leaders of armies of mercenaries belong 129 00:10:51.180 --> 00:10:53.160 to this field. 130 00:10:53.160 --> 00:10:59.140 Their task was easy as far as the profession of arms provides the satisfactions of class 131 00:10:59.140 --> 00:11:00.140 four. 132 00:11:00.140 --> 00:11:05.980 However, these satisfactions do not depend on the arms bearer's loyalty. 133 00:11:05.980 --> 00:11:11.420 They also come to the soldier who leaves his warlord in the lurch and turns against him 134 00:11:11.420 --> 00:11:14.340 in the service of new leaders. 135 00:11:14.340 --> 00:11:19.940 Thus the particular task of the employers of mercenaries was to promote an esprit de 136 00:11:19.940 --> 00:11:26.500 corps and loyalty that could render their hirelings proof against temptations. 137 00:11:26.500 --> 00:11:32.380 There were also, of course, chiefs who did not bother about such impalpable matters. 138 00:11:32.380 --> 00:11:38.600 In the armies and navies of the 18th century, the only means of securing obedience and preventing 139 00:11:38.600 --> 00:11:42.840 desertion were barbarous punishments. 140 00:11:42.840 --> 00:11:49.040 Modern industrialism was not intent upon designedly increasing the joy of labor. 141 00:11:49.040 --> 00:11:54.740 It relied upon the material improvement that it brought to its employees in their capacity 142 00:11:54.740 --> 00:12:01.580 as wage earners, as well as in their capacity as consumers and buyers of the product. 143 00:12:01.580 --> 00:12:07.140 In view of the fact that job seekers thronged to the plants and everyone scrambled for the 144 00:12:07.140 --> 00:12:13.140 manufacturers, there seemed to be no need to resort to special devices. 145 00:12:13.140 --> 00:12:18.300 The benefits which the masses derived from the capitalist system were so obvious that 146 00:12:18.300 --> 00:12:26.060 no entrepreneur considered it necessary to harangue the workers with pro-capitalist propaganda. 147 00:12:26.060 --> 00:12:31.980 Human Capitalism is essentially mass production for the needs of the masses. 148 00:12:31.980 --> 00:12:37.980 The buyers of the products are, by and large, the same people who, as wage earners, cooperate 149 00:12:37.980 --> 00:12:40.620 in their manufacturing. 150 00:12:40.620 --> 00:12:46.100 Rising sales provided dependable information to the employer about the improvement of the 151 00:12:46.100 --> 00:12:48.560 masses' standard of living. 152 00:12:48.560 --> 00:12:53.480 He did not bother about the feelings of his employees as workers. 153 00:12:53.480 --> 00:12:58.560 He was exclusively intent upon serving them as consumers. 154 00:12:58.560 --> 00:13:04.760 Even today, in the face of the most persistent and fanatical anti-capitalist propaganda, 155 00:13:04.760 --> 00:13:08.600 there is hardly any counter-propaganda. 156 00:13:08.600 --> 00:13:15.040 This anti-capitalist propaganda is a systematic scheme for the substitution of tedium for 157 00:13:15.040 --> 00:13:17.360 the joy of labor. 158 00:13:17.360 --> 00:13:24.780 The joy of labor of classes one and two depends to some extent on ideological factors. 159 00:13:24.780 --> 00:13:30.680 The worker rejoices in his place in society and his active cooperation in its productive 160 00:13:30.680 --> 00:13:32.020 effort. 161 00:13:32.020 --> 00:13:38.160 If one disparages this ideology and replaces it by another which represents the wage earner 162 00:13:38.160 --> 00:13:44.880 as the distressed victim of ruthless exploiters, one turns the joy of labor into a feeling 163 00:13:44.880 --> 00:13:48.420 of Disgust and Tedium. 164 00:13:48.420 --> 00:13:56.160 No ideology, however impressively emphasized and taught, can affect the disutility of labor. 165 00:13:56.160 --> 00:14:02.980 It is impossible to remove or to alleviate it by persuasion or hypnotic suggestion. 166 00:14:02.980 --> 00:14:08.340 On the other hand, it cannot be increased by words and doctrines. 167 00:14:08.340 --> 00:14:13.620 The disutility of labor is a phenomenon unconditionally given. 168 00:14:13.620 --> 00:14:19.940 The spontaneous and carefree discharge of one's own energies and vital functions in aimless 169 00:14:19.940 --> 00:14:26.280 freedom suits everybody better than the stern restraint of purposive effort. 170 00:14:26.280 --> 00:14:33.240 The disutility of labor also pains a man who with heart and soul and even with self-denial 171 00:14:33.240 --> 00:14:35.640 is devoted to his work. 172 00:14:35.640 --> 00:14:41.780 He too is eager to reduce the lump of labor if it can be done without prejudice to the 173 00:14:41.780 --> 00:15:09.820 The Worker begins to hate his work if he becomes convinced that what makes him submit to the 174 00:15:09.820 --> 00:15:16.740 The Disutility of Labor is not his own higher valuation of the stipulated compensation, but 175 00:15:16.740 --> 00:15:20.320 merely an unfair social system. 176 00:15:20.320 --> 00:15:26.660 Deluded by the slogans of the socialist propagandists, he fails to realize that the disutility of 177 00:15:26.660 --> 00:15:33.840 labor is an inexorable fact of human conditions, something ultimately given that cannot be 178 00:15:33.840 --> 00:15:39.120 removed by devices or methods of social organization. 179 00:15:39.120 --> 00:15:44.980 He falls prey to the Marxian fallacy that in a socialist commonwealth work will arouse 180 00:15:44.980 --> 00:15:48.360 not pain but pleasure. 181 00:15:48.360 --> 00:15:54.500 The fact that the tedium of labor is substituted for the joy of labor affects the valuation 182 00:15:54.500 --> 00:16:00.320 neither of the disutility of labor nor of the produce of labor. 183 00:16:00.320 --> 00:16:07.160 Both the demand for labor and the supply of labor remain unchanged, for people do not 184 00:16:07.160 --> 00:16:13.640 work for the sake of labor's joy, but for the sake of the immediate gratification. 185 00:16:13.640 --> 00:16:18.120 What is altered is merely the worker's emotional attitude. 186 00:16:18.120 --> 00:16:23.880 His work, his position in the complex of the social division of labor, his relations to 187 00:16:23.880 --> 00:16:30.960 other members of society and to the whole of society, appear to him in a new light. 188 00:16:30.960 --> 00:16:36.920 He pities himself as the defenseless victim of an absurd and unjust system. 189 00:16:36.920 --> 00:16:43.580 He becomes an ill-humored grumbler, an unbalanced personality, an easy prey to all sorts of 190 00:16:43.580 --> 00:16:46.160 quacks and cranks. 191 00:16:46.160 --> 00:16:51.580 To be joyful in the performance of one's tasks and in overcoming the disutility of 192 00:16:51.580 --> 00:16:57.700 labor makes people cheerful and strengthens their energies and vital forces. 193 00:16:57.700 --> 00:17:02.520 To feel tedium in working makes people morose and neurotic. 194 00:17:02.520 --> 00:17:08.880 A commonwealth in which the tedium of labor prevails is an assemblage of rancorous, quarrelsome 195 00:17:08.880 --> 00:17:11.360 and wrathful malcontents. 196 00:17:11.360 --> 00:17:18.080 However, with regard to the volitional springs for overcoming the disutility of labor, the 197 00:17:18.080 --> 00:17:25.560 role played by the joy and the tedium of labor is merely accidental and supererogatory. 198 00:17:25.560 --> 00:17:32.480 There cannot be any question of making people work for the mere sake of the joy of labor. 199 00:17:32.480 --> 00:17:38.020 The joy of labor is no substitute for the immediate gratification of labor. 200 00:17:38.020 --> 00:17:45.520 The only means of inducing a man to work more and better is to offer him a higher reward. 201 00:17:45.520 --> 00:17:49.520 It is vain to bait him with the joy of labor. 202 00:17:49.520 --> 00:17:55.040 When the dictators of Soviet Russia, Nazi Germany and Fascist Italy tried to assign 203 00:17:55.040 --> 00:18:00.520 to the joy of labor a definite function in their system of production, they saw their 204 00:18:00.520 --> 00:18:03.560 Their Expectations Blighted 205 00:18:03.560 --> 00:18:09.480 Neither the joy nor the tedium of labor can influence the amount of labor offered on the 206 00:18:09.480 --> 00:18:11.000 market. 207 00:18:11.000 --> 00:18:16.360 As far as these feelings are present with the same intensity in all kinds of work, the 208 00:18:16.360 --> 00:18:18.440 case is obvious. 209 00:18:18.440 --> 00:18:23.840 But it is the same with regard to joy and tedium which are conditioned by the particular 210 00:18:23.840 --> 00:18:30.080 features of the work concerned, or the particular character of the worker. 211 00:18:30.080 --> 00:18:34.240 Let us look, for example, at the joy of Class IV. 212 00:18:34.240 --> 00:18:39.580 The eagerness of certain people to get jobs which offer an opportunity for the enjoyment 213 00:18:39.580 --> 00:18:45.940 of these particular satisfactions tends to lower wage rates in this field. 214 00:18:45.940 --> 00:18:52.200 But it is precisely this effect that makes other people less responsive to these questionable 215 00:18:52.200 --> 00:18:57.720 pleasures, prefer other sectors of the labor market in which they can earn more. 216 00:18:57.720 --> 00:19:04.200 Thus, an opposite tendency develops, which neutralizes the first one. 217 00:19:04.200 --> 00:19:10.880 The joy and the tedium of labor are psychological phenomena, which influence neither the individual's 218 00:19:10.880 --> 00:19:17.360 subjective valuation of the disutility and the immediate gratification of labor, nor 219 00:19:17.360 --> 00:19:21.640 the price paid for labor on the market. 220 00:19:21.640 --> 00:19:24.240 3. 221 00:19:24.240 --> 00:19:26.040 Wages 222 00:19:26.040 --> 00:19:29.500 Labor is a scarce factor of production. 223 00:19:29.500 --> 00:19:33.080 As such it is sold and bought on the market. 224 00:19:33.080 --> 00:19:38.860 The price paid for labor is included in the price allowed for the product or the services 225 00:19:38.860 --> 00:19:44.080 if the performer of the work is the seller of the product or the services. 226 00:19:44.080 --> 00:19:50.520 If bare labor is sold and bought as such, either by an entrepreneur engaged in production 227 00:19:50.520 --> 00:20:09.160 For acting man, his own labor is not merely a factor of production, but also the source of disutility. 228 00:20:09.160 --> 00:20:15.460 He values it not only with regard to the immediate gratification expected, but also with regard 229 00:20:15.460 --> 00:20:18.600 to the Disutility it Causes. 230 00:20:18.600 --> 00:20:24.620 But for him, as for everyone, other people's labor as offered for sale on the market is 231 00:20:24.620 --> 00:20:27.940 nothing but a factor of production. 232 00:20:27.940 --> 00:20:33.340 Man deals with other people's labor in the same way that he deals with all scarce material 233 00:20:33.340 --> 00:20:35.720 factors of production. 234 00:20:35.720 --> 00:20:41.780 He appraises it according to the principles he applies in the appraisal of all other goods. 235 00:20:41.780 --> 00:20:46.940 The height of wage rates is determined on the market in the same way in which the prices 236 00:20:46.940 --> 00:20:50.060 of all commodities are determined. 237 00:20:50.060 --> 00:20:54.440 In this sense we may say that labor is a commodity. 238 00:20:54.440 --> 00:21:00.660 The emotional associations which people under the influence of Marxism attach to this term 239 00:21:00.660 --> 00:21:02.400 do not matter. 240 00:21:02.400 --> 00:21:07.980 It suffices to observe incidentally that the employers deal with labor as they do with 241 00:21:07.980 --> 00:21:15.620 with Commodities because the conduct of the consumers forces them to proceed in this way. 242 00:21:15.620 --> 00:21:21.620 It is not permissible to speak of labor and wages in general without resorting to certain 243 00:21:21.620 --> 00:21:22.620 restrictions. 244 00:21:22.620 --> 00:21:30.020 A uniform type of labor, or a general rate of wages, do not exist. 245 00:21:30.020 --> 00:21:36.640 Labor is very different in quality, and each kind of labor renders specific services. 246 00:21:36.640 --> 00:21:42.080 Each is appraised as a complementary factor for turning out definite consumers' goods 247 00:21:42.080 --> 00:21:44.320 and services. 248 00:21:44.320 --> 00:21:49.120 Between the appraisal of the performance of a surgeon and that of a stevedore, there is 249 00:21:49.120 --> 00:21:51.720 no direct connection. 250 00:21:51.720 --> 00:21:58.400 But indirectly, each sector of the labor market is connected with all other sectors. 251 00:21:58.400 --> 00:22:04.760 An increase in the demand for surgical services, however great, will not make stevedores flock 252 00:22:04.760 --> 00:22:10.640 back into the practice of surgery. Yet the lines between the various sectors of the labor 253 00:22:10.640 --> 00:22:17.480 market are not sharply drawn. There prevails a continuous tendency for workers to shift 254 00:22:17.480 --> 00:22:24.480 from their branch to other similar occupations in which conditions seem to offer better opportunities. 255 00:22:24.480 --> 00:22:33.480 Thus, finally, every change in demand or supply in one sector affects all other sectors indirectly. 256 00:22:33.480 --> 00:22:50.480 All groups indirectly compete with one another. If more people enter the medical profession, men are withdrawn from kindred occupations, who again are replaced by an inflow of people from other branches, and so on. 257 00:22:50.480 --> 00:23:00.480 In this sense, there exists a connexity between all occupational groups, however different the requirements in each of them may be. 258 00:23:00.480 --> 00:23:14.480 There again we are faced with the fact that the disparity in the quality of work needed for the satisfaction of wants is greater than the diversity in men's inborn ability to perform work. 259 00:23:14.480 --> 00:23:26.480 Conexity exists not only between different types of labor and the prices paid for them, but no less between labor and the material factors of production. 260 00:23:26.480 --> 00:23:34.480 Within certain limits, labor can be substituted for material factors of production, and vice versa. 261 00:23:34.480 --> 00:23:43.480 The extent that such substitutions are resorted to depends on the height of wage rates and the prices of material factors. 262 00:23:43.480 --> 00:23:53.480 The determination of wage rates, like that of the prices of material factors of production, can be achieved only on the market. 263 00:23:53.480 --> 00:24:01.780 There is no such thing as non-market wage rates, just as there are no non-market prices. 264 00:24:01.780 --> 00:24:08.200 As far as there are wages, labor is dealt with like any material factor of production 265 00:24:08.200 --> 00:24:11.740 and sold and bought on the market. 266 00:24:11.740 --> 00:24:17.440 It is usual to call the sector of the market of producers' goods on which labor is hired 267 00:24:17.440 --> 00:24:19.620 the labor market. 268 00:24:19.620 --> 00:24:25.340 As with all other sectors of the market, the labor market is actuated by the entrepreneurs 269 00:24:25.340 --> 00:24:28.460 intent upon making profits. 270 00:24:28.460 --> 00:24:35.240 Each entrepreneur is eager to buy all the kinds of specific labor he needs for the realization 271 00:24:35.240 --> 00:24:38.280 of his plans at the cheapest price. 272 00:24:38.280 --> 00:24:45.740 But the wages he offers must be high enough to take the workers away from competing entrepreneurs. 273 00:24:45.740 --> 00:24:51.740 The upper limit of his bidding is determined by anticipation of the price he can obtain 274 00:24:51.740 --> 00:24:58.560 for the increment in saleable goods he expects from the employment of the worker concerned. 275 00:24:58.560 --> 00:25:04.080 The lower limit is determined by the bids of competing entrepreneurs who themselves 276 00:25:04.080 --> 00:25:07.860 are guided by analogous considerations. 277 00:25:07.860 --> 00:25:13.200 It is this that economists have in mind in asserting that the height of wage rates for 278 00:25:13.200 --> 00:25:19.080 for each kind of labor is determined by its marginal productivity. 279 00:25:19.080 --> 00:25:24.120 Another way to express the same truth is to say that wage rates are determined by the 280 00:25:24.120 --> 00:25:31.120 supply of labor and of material factors of production on the one hand, and by the anticipated 281 00:25:31.120 --> 00:25:35.440 future prices of the consumer's goods. 282 00:25:35.440 --> 00:25:41.440 This catallactic explanation of the determination of wage rates has been the target of passionate 283 00:25:41.440 --> 00:25:44.760 but entirely erroneous attacks. 284 00:25:44.760 --> 00:25:49.600 It has been asserted that there is a monopoly of the demand for labor. 285 00:25:49.600 --> 00:25:54.640 Most of the supporters of this doctrine think that they have sufficiently proved their case 286 00:25:54.640 --> 00:26:00.760 by referring to some incidental remarks of Adam Smith concerning a sort of tacit but 287 00:26:00.760 --> 00:26:07.520 constant and uniform combination among employers to keep wages down. 288 00:26:07.520 --> 00:26:12.640 Entrepreneurs refer in vague terms to the existence of trade associations of various 289 00:26:12.640 --> 00:26:15.200 groups of businessmen. 290 00:26:15.200 --> 00:26:18.400 The emptiness of all this talk is evident. 291 00:26:18.400 --> 00:26:24.440 However, the fact that these garbled ideas are the main ideological foundation of labor 292 00:26:24.440 --> 00:26:31.040 unionism and the labor policy of all contemporary governments makes it necessary to analyze 293 00:26:31.040 --> 00:26:34.100 them with the utmost care. 294 00:26:34.100 --> 00:26:39.460 The entrepreneurs are in the same position with regard to the sellers of labor as they 295 00:26:39.460 --> 00:26:44.460 are with regard to the sellers of the material factors of production. 296 00:26:44.460 --> 00:26:50.020 They are under the necessity of acquiring all factors of production at the cheapest 297 00:26:50.020 --> 00:26:51.140 price. 298 00:26:51.140 --> 00:26:57.740 But if in the pursuit of this endeavor some entrepreneurs, certain groups of entrepreneurs, 299 00:26:57.740 --> 00:27:05.080 For all entrepreneurs, offer prices or wage rates which are too low, that is, do not agree 300 00:27:05.080 --> 00:27:08.100 with the state of the unhampered market. 301 00:27:08.100 --> 00:27:13.920 They will succeed in acquiring what they want to acquire only if entrance into the ranks 302 00:27:13.920 --> 00:27:19.440 of entrepreneurship is blocked through institutional barriers. 303 00:27:19.440 --> 00:27:25.280 If the emergence of new entrepreneurs, or the expansion of the activities of already 304 00:27:25.280 --> 00:27:29.180 The operating entrepreneurs is not prevented. 305 00:27:29.180 --> 00:27:35.520 Any drop in the prices of factors of production not consonant with the structure of the market 306 00:27:35.520 --> 00:27:40.040 must open new chances for the earning of profits. 307 00:27:40.040 --> 00:27:45.000 There will be people eager to take advantage of the margin between the prevailing wage 308 00:27:45.000 --> 00:27:49.200 rate and the marginal productivity of labor. 309 00:27:49.200 --> 00:27:54.640 Their demand for labor will bring wage rates back to the height conditioned by labor's 310 00:27:54.640 --> 00:28:04.520 The tacit combination among the employers to which Adam Smith referred, even if it existed, 311 00:28:04.520 --> 00:28:11.440 could not lower wages below the competitive market rate unless access to entrepreneurship 312 00:28:11.440 --> 00:28:18.500 required not only brains and capital, the latter always available to enterprises promising 313 00:28:18.500 --> 00:28:37.060 It has been asserted that a job seeker must sell his labor at any price, however low, 314 00:28:37.060 --> 00:28:43.740 as he depends exclusively on his capacity to work and has no other source of income. 315 00:28:43.740 --> 00:28:50.100 He cannot wait, and is forced to content himself with any reward the employers are kind enough 316 00:28:50.100 --> 00:28:52.100 to offer him. 317 00:28:52.100 --> 00:28:58.040 This inherent weakness makes it easy for the concerted action of the masters to lower wage 318 00:28:58.040 --> 00:28:59.460 rates. 319 00:28:59.460 --> 00:29:06.060 They can, if need be, wait longer, as their demand for labor is not so urgent as the workers' 320 00:29:06.060 --> 00:29:08.940 demand for subsistence. 321 00:29:08.940 --> 00:29:11.200 The argument is defective. 322 00:29:11.200 --> 00:29:16.000 It takes it for granted that the employers pocket the difference between the marginal 323 00:29:16.000 --> 00:29:23.000 productivity wage rate and the lower monopoly rate as an extra monopoly gain, and do not 324 00:29:23.000 --> 00:29:28.360 pass it on to the consumers in the form of a reduction in prices. 325 00:29:28.360 --> 00:29:34.500 For if they were to reduce prices according to the drop in costs of production, they, 326 00:29:34.500 --> 00:29:40.360 in their capacity of entrepreneurs and sellers of the products, would derive no advantage 327 00:29:40.360 --> 00:29:42.560 from Cutting Wages. 328 00:29:42.560 --> 00:29:48.160 The whole gain would go to the consumers, and thereby also to the wage earners in their 329 00:29:48.160 --> 00:29:50.700 capacity as buyers. 330 00:29:50.700 --> 00:29:55.720 The entrepreneurs themselves would be benefited only as consumers. 331 00:29:55.720 --> 00:30:02.080 However, to retain the extra profit resulting from the exploitation of the workers' poor 332 00:30:02.080 --> 00:30:08.500 bargaining power would require concerted action on the part of employers in their capacity 333 00:30:08.500 --> 00:30:11.280 as Sellers of the Products. 334 00:30:11.280 --> 00:30:17.260 It would require a universal monopoly of all kinds of production activities which can be 335 00:30:17.260 --> 00:30:25.100 created only by an institutional restriction of access to entrepreneurship. 336 00:30:25.100 --> 00:30:30.120 The essential point of the matter is that the alleged monopolistic combination of the 337 00:30:30.120 --> 00:30:37.040 employers about which Adam Smith and a great part of public opinion speak would be a monopoly 338 00:30:37.040 --> 00:30:38.880 of Demand. 339 00:30:38.880 --> 00:30:44.880 But we have already seen that such alleged monopolies of demand are in fact monopolies 340 00:30:44.880 --> 00:30:48.780 of supply of a particular character. 341 00:30:48.780 --> 00:30:55.240 The employers would be in a position enabling them to lower wage rates by concerted action 342 00:30:55.240 --> 00:31:02.880 only if they were to monopolize a factor indispensable for every kind of production, and to restrict 343 00:31:02.880 --> 00:31:07.720 and the employment of this factor in a monopolistic way. 344 00:31:07.720 --> 00:31:14.520 As there is no single material factor indispensable for every kind of production, they would have 345 00:31:14.520 --> 00:31:19.720 to monopolize all material factors of production. 346 00:31:19.720 --> 00:31:25.060 This condition would be present only in a socialist community, in which there is neither 347 00:31:25.060 --> 00:31:29.440 a market nor prices and wage rates. 348 00:31:29.440 --> 00:31:34.640 Here would it be possible for the proprietors of the material factors of production, the 349 00:31:34.640 --> 00:31:40.660 capitalists and the landowners, to combine in a universal cartel against the interests 350 00:31:40.660 --> 00:31:42.560 of the workers. 351 00:31:42.560 --> 00:31:48.660 The characteristic mark of production activities in the past and in the foreseeable future 352 00:31:48.660 --> 00:31:55.040 is that the scarcity of labor exceeds the scarcity of most of the primary, nature-given 353 00:31:55.040 --> 00:31:58.400 material factors of production. 354 00:31:58.400 --> 00:32:04.440 The comparatively greater scarcity of labor determines the extent to which the comparatively 355 00:32:04.440 --> 00:32:09.600 abundant primary natural factors can be utilized. 356 00:32:09.600 --> 00:32:16.200 There is unused soil, there are unused mineral deposits, and so on, because there is not 357 00:32:16.200 --> 00:32:20.320 enough labor available for their utilization. 358 00:32:20.320 --> 00:32:26.880 If the owners of the soil that is tilled today were to form a cartel in order to reap monopoly 359 00:32:26.880 --> 00:32:52.560 Various other objections have been advanced against the doctrine of the monopolistic exploitation 360 00:32:52.560 --> 00:32:57.980 of Labor by a tacit or avowed combine of the employers. 361 00:32:57.980 --> 00:33:04.300 It has been demonstrated that at no time and at no place in the unhampered market economy 362 00:33:04.300 --> 00:33:08.220 can the existence of such cartels be discovered. 363 00:33:08.220 --> 00:33:13.780 It has been shown that it is not true that the jobseekers cannot wait and are therefore 364 00:33:13.780 --> 00:33:20.160 under the necessity of accepting any wage rates, however low, offered to them by the 365 00:33:20.160 --> 00:33:21.460 employers. 366 00:33:21.460 --> 00:33:26.820 It is not true that every unemployed worker is faced with starvation. 367 00:33:26.820 --> 00:33:30.940 The workers, too, have reserves and can wait. 368 00:33:30.940 --> 00:33:34.620 The proof is that they really do wait. 369 00:33:34.620 --> 00:33:40.820 On the other hand, waiting can be financially ruinous to the entrepreneurs and capitalists, 370 00:33:40.820 --> 00:33:41.820 too. 371 00:33:41.820 --> 00:33:45.100 If they cannot employ their capital, they suffer losses. 372 00:33:45.100 --> 00:33:51.740 Thus, all the disquisitions about an alleged employer's advantage and worker's disadvantage 373 00:33:51.740 --> 00:33:55.180 in bargaining are without substance. 374 00:33:55.180 --> 00:33:59.300 But these are secondary and accidental considerations. 375 00:33:59.300 --> 00:34:05.700 The central fact is that a monopoly of the demand for labor cannot and does not exist 376 00:34:05.700 --> 00:34:08.900 in an unhampered market economy. 377 00:34:08.900 --> 00:34:17.860 It could originate only as an outgrowth of institutional restrictions of access to entrepreneurship. 378 00:34:17.860 --> 00:34:21.020 Yet one point must be stressed. 379 00:34:21.020 --> 00:34:26.980 The doctrine of the monopolistic manipulation of wage rates by the employers speaks of labor 380 00:34:26.980 --> 00:34:30.580 as if it were a homogeneous entity. 381 00:34:30.580 --> 00:34:38.540 It deals with such concepts as demand for labor in general and supply of labor in general. 382 00:34:38.540 --> 00:34:44.980 But such notions have, as has been pointed out already, no counterpart in reality. 383 00:34:44.980 --> 00:34:51.900 What is sold and bought on the labor market is not labor in general, but definite, specific 384 00:34:51.900 --> 00:34:56.460 labor suitable to render definite services. 385 00:34:56.460 --> 00:35:01.660 Each entrepreneur is in search of workers who are fitted to accomplish those specific 386 00:35:01.660 --> 00:35:06.520 tasks which he needs for the execution of his plans. 387 00:35:06.520 --> 00:35:11.680 He must withdraw these specialists from the employments in which they happen to work at 388 00:35:11.680 --> 00:35:13.180 the moment. 389 00:35:13.180 --> 00:35:18.720 The only means he has to achieve this is to offer them higher pay. 390 00:35:18.720 --> 00:35:24.720 Every innovation which an entrepreneur plans, the production of a new article, the application 391 00:35:24.720 --> 00:35:30.780 of a new process of production, the choice of a new location for a specific branch, or 392 00:35:30.780 --> 00:35:36.460 or simply the expansion of production already in existence, either in his own enterprise 393 00:35:36.460 --> 00:35:44.900 or in other enterprises, requires the employment of workers hitherto engaged somewhere else. 394 00:35:44.900 --> 00:35:50.540 The entrepreneurs are not merely faced with a shortage of labor in general, but with a 395 00:35:50.540 --> 00:35:56.260 shortage of those specific types of labor they need for their plants. 396 00:35:56.260 --> 00:36:01.800 The competition among the entrepreneurs in bidding for the most suitable hands is no 397 00:36:01.800 --> 00:36:08.020 less keen than their competition in bidding for the required raw materials, tools and 398 00:36:08.020 --> 00:36:13.500 machines, and in their bidding for capital on the capital and loan market. 399 00:36:13.500 --> 00:36:20.380 The expansion of the activities of the individual firms as well as of the whole society is not 400 00:36:20.380 --> 00:36:27.820 only limited by the amount of capital goods available and of the supply of labor in general. 401 00:36:27.820 --> 00:36:34.500 In each branch of production, it is also limited by the available supply of specialists. 402 00:36:34.500 --> 00:36:41.000 This is, of course, only a temporary obstacle, which vanishes in the long run when more workers, 403 00:36:41.000 --> 00:36:47.260 attracted by the higher pay of the specialists in comparatively undermanned branches, will 404 00:36:47.260 --> 00:36:51.980 will have trained themselves for the special tasks concerned. 405 00:36:51.980 --> 00:36:58.700 But in the changing economy, such a scarcity of specialists emerges anew daily and determines 406 00:36:58.700 --> 00:37:03.340 the conduct of employers in their search for workers. 407 00:37:03.340 --> 00:37:09.740 Every employer must aim at buying the factors of production needed, inclusive of labor, 408 00:37:09.740 --> 00:37:11.940 at the cheapest price. 409 00:37:11.940 --> 00:37:17.540 An employer who paid more than agrees with the market price of the services his employees 410 00:37:17.540 --> 00:37:23.020 render him would be soon removed from his entrepreneurial position. 411 00:37:23.020 --> 00:37:28.780 On the other hand, an employer who tried to reduce wage rates below the height consonant 412 00:37:28.780 --> 00:37:34.460 with the marginal productivity of labor would not recruit the type of men that the most 413 00:37:34.460 --> 00:37:38.960 efficient utilization of his equipment requires. 414 00:37:38.960 --> 00:37:44.400 There prevails an inevitable tendency for wage rates to reach the point at which they 415 00:37:44.400 --> 00:37:50.720 are equal to the price of the marginal product of the kind of labor in question. 416 00:37:50.720 --> 00:37:57.040 If wage rates drop below this point, the gain derived from the employment of every additional 417 00:37:57.040 --> 00:38:03.960 worker will increase the demand for labor and thus make wage rates rise again. 418 00:38:03.960 --> 00:38:10.480 If wage rates rise above this point, the loss incurred from the employment of every worker 419 00:38:10.480 --> 00:38:14.440 will force the employers to discharge workers. 420 00:38:14.440 --> 00:38:21.440 The competition of the unemployed for jobs will create a tendency for wage rates to drop.