Principles of Political Economy · John Stuart Mill
Chapter V. Of Profits.
(2.) The other cause which renders wages and the cost of labor no real criteria of one another is the varying costliness of the articles which the laborer consumes. If these are cheap, wages, in the sense which is of importance to the laborer, may be high, and yet the cost of labor may be low; if dear, the laborer may be wretchedly off, though his labor may cost much to the capitalist. This last is the condition of a country over-peopled in relation to its land; in which, food being dear, the poorness of the laborer’s real reward does not prevent labor from costing much to the purchaser, and low wages and low profits coexist. The opposite case is exemplified in the United States of America. The laborer there enjoys a greater abundance of comforts than in any other country of the world, except some of the newest colonies; but owing to the cheap price at which these comforts can be obtained (combined with the great efficiency of the labor), the cost of labor to the capitalist is considerably lower than in Europe. It must be so, since the rate of profit is higher; as indicated by the rate of interest, which is six per cent at New York when it is three or three and a quarter per cent in London.
Kind Of Labor. 1841. 1884. Card-room help, per week $3.28 $5.40 Card-strippers, per week 4.98 6.00 Weavers, per week 4.75 6.00 Carding-room overseer, per week 7.00 13.50 The hours per week have decreased in the same time from 84 to 66, while the product of the mill in pounds has increased 25 per cent. It may be unnecessary, perhaps, to say that these figures represent the current wages in other mills at the same periods; and that these facts can be sustained by the records of other mills. In its economic effect we must also consider, under efficiency, the whole question of natural advantages of soil, climate, and natural resources. Laborers of the same skill, paid the same real wages, of the same cost, will produce a vastly greater amount of wheat in Dakota than in Vermont or England. This is the chief reason why profits are so high in the United States. In many industries we have very marked natural advantages, which permits a high reward to labor, and yet yields a high profit to the capitalist. This applies not merely to agriculture, but to all the extractive industries, such as the production of petroleum, wood, copper, etc. In short, the whole matter of ease and difficulty of production, of high or low cost of production, taking it in the sense of great or little sacrifice (compare carefully Book III, Chap. II, § 4), comes in under the element of efficiency, in cost of labor. The reader can not be too strongly urged to connect different parts of the economic system together. And the questions of Cost of Labor and Cost of Production are of paramount importance to a proper understanding of political economy.
500 men, each producing 1,200 yards, give a total product of 600,000 yards. 500 men, each paid 1,000 bushels, cause an outlay of 500,000 yards. Profit: 100,000 yards. (1.) Now suppose a change increasing the efficiency of labor to such an extent that each laborer produces 1,300 instead of 1,200 yards, then the account will stand, if the other elements remain unchanged: 500 men, each producing 1,300 yards, give a total product of 650,000 yards. 500 men, each paid 1,000 bushels, cause an outlay of 500,000 yards. Profit: 150,000 yards. (2.) If efficiency and the cost of producing food remain the same as at first, suppose a change to occur which raises the quantity of corn each laborer receives from 1,000 to 1,100, or, as it is called, increases his real wages—then the account will be: 500 men, each producing 1,200 yards, give a total product of 600,000 yards. 500 men, each paid 1,100 bushels, cause an outlay of 550,000 yards. Profit: 50,000 yards. (3.) If efficiency and real wages remain the same, suppose such an increase in the cost to the employers of obtaining corn that they are obliged to give one and one tenth yard of their goods for one bushel of corn (1,000 bushels of corn costing them 1,100 yards of cloth), then the statement will read: 500 men, each producing 1,200 yards, give a total product of 600,000 yards. 500 men, each paid 1,000 bushels, cause an outlay of 550,000 yards. Profit: 50,000 yards.
Ideas discussed in this chapter
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