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The Pamphlet Collection of Sir Robert Stout: Volume 51

The True Principle of Wages

The True Principle of Wages.

Q. It is a common assertion that the inability which the American manufacturer now experiences in competing in the world's market with foreign producers of like articles, is owing mainly to great differences in wages in favour of the latter; or, stated differently, it is assumed that high wages necessarily involve a high cost of production. Is there any foundation for this assertion?

A. No. The truth is exactly the reverse.

Q. This seems paradoxical. How can it be proved?

A. Wages are labour's share of product, and in every healthy business are ultimately paid out of product. No employer of labour can continue for any great length of time to pay high wages unless his product is large. If it is not, and he attempts, it is only a question of time when his affairs will be wound up by the sheriff. On the other hand, if a high rate of wages is permanently paid in any industry and in any country it is in itself proof positive that the product of labour is large, that the labourer is entitled to a generous share of it, and that the employer can afford to give it him.

Q. What are the comparative wages paid in England and in the States of Continental Europe?

A. They are very much less in the latter than in the former page 25 in almost all avocations. Thus, in free-trade England, the average wages, according to the most recent investigations, are 42 per cent, higher than in Germany, and 58 per cent, higher than the average for France.

Q. Are the products of this low-priced German and French labour admitted free into England?

A. With the exception of wines, spirits, tobacco, and playing cards, they are absolutely so.

Q. Do the people of England ask for any protection against German and French labour? Has German or French competition ever reduced the wages of English labourers?

A. No. Wages in England for the last thirty years have tended constantly to rise and not to decline.

Q. If close competition and low wages on the Continent of Europe do not operate to reduce wages in England, why should the competition of these same low-priced labourers tend to produce an exactly opposite effect in the United States, a country more than 3,000 miles farther removed?

A. This is a problem for protectionists to answer.

Q. Wages in Mexico are very low. Living is also very cheap there, and the native enjoys a much higher protective tariff than that existing in the United States. Notwithstanding all this manufactures do not flourish in Mexico. Now, if a high tariff builds up domestic industries, why does it not so operate in Mexico?

A. This is also a puzzle for protectionists to solve.

Q. Has there been any recent confession on the part of the Government of any of the Continental States of Europe, the labouring population of which are in receipt of very low wages, of inability to withstand the competition of the more highly-paid labour products of the United States?

A. Yes. In 1882 the government of Austria created a new tariff, which largely increased the duties before imposed on imports, and one of the main reasons given by its finance minister for the new policy, was:—"An invasion of Western Europe by United States grain and pork, which threatens to close the markets for these products to Austro-Hungary."

"Self-protection," he said, "demands that the markets of Austria should be reserved for domestic trade, particularly in regard to grain, canned goods, meats, lard, leather, sewing page 26 machines, agricultural implements, domestic utensils, cotton yarns and textiles, and refined petroleum."