Chapter 14 — Protection and Wages

Discussions 
of the tariff question seldom go further than the point we have now reached, for though much is said, in the United States at least, of the effect of protection on wages, it is as a deduction from what is asserted of its effect on the production of wealth. Its advocates claim that protection raises wages; but in so far as they attempt to prove this it is only by arguments, such as we have examined, that protection increases the prosperity of a country as a whole, from which it is assumed that it must increase wages. Or when the claim that protection raises wages is put in the negative form and it is asserted that protection prevents wages from falling to the lower level of other countries, this assertion is always based on the assumption that protection is necessary to enable production to be carried on at the higher level of wages, and that if it were withdrawn production would so decline, by reason of the underselling of home producers by foreign producers, that wages must also decline.

Trade, as we have seen, is a mode of production, and the tendency of tariff restrictions on trade is to lessen the production of wealth. But protective tariffs also operate to alter the distribution of wealth, by imposing higher prices on some citizens and giving extra profits to others. This alteration of distribution in their favor is the impelling motive, with those most active in procuring the imposition of protective duties and in warning workmen of the dire calamities that will come on them if such duties are repealed. But in what way can protective tariffs affect the distribution of wealth in favor of labor? The direct object and effect of protective tariffs is to raise the price of commodities. But men who work for wages are not sellers of commodities; they are sellers of labor. They sell labor in order that they may buy commodities. How can increase in the price of commodities benefit them?

It is true that there is a constant tendency of all wages to a common level, and that this tendency arises from competition. But this competition is not the competition of the goods market; it is the competition of the labor market. The tendency of wages to a common level is quickest in the same occupation, because the transference of labor is easiest. If we pass to a comparison of occupation with occupation, we see that although there is a tendency to a common level, which maintains between wages in different occupations a certain relation, there are, in the same time and place, great differences of wages.

Though these differences exist, wages in different occupations are nevertheless held in a certain relation to each other by the tendency to a common level, so that a reduction of wages in one trade tends to bring about a reduction in others, not through the competition of the goods market, but through that of the labor market. As a matter of fact, trade unions, by checking the competition of labor, have considerably raised wages in many occupations, and have even brought about differences between the wages of union and non-union workers in the same occupation. And what limits the possibility of thus raising wages is clearly not the free sale of commodities, but the difficulty of restricting the competition of labor.

Let us imagine under the general conditions of modern civilization, one country of comparatively high wages, and another country of comparatively low wages. Let us, in imagination, bring these countries side by side, separating them only by a wall which permits the free transmission of commodities, but is impassable for human beings. Can we imagine, as protectionist notions require, that the high-wage country would do all the importing and the low-wage country all the exporting, until the demand for labor so lessened in the one country that wages would fall to the level of the other? That would be to imagine that the low-wage country would go on pushing its commodities through this wall and getting back nothing in return. Clearly the one country would export no more than it got a return for, and the other could import no more than it gave a return for. What would go on between the two countries is the exchange of their respective productions, and, as previously pointed out, what commodities passed each way in this exchange would be determined, not by the difference in wages between the two countries, nor yet by differences between them in cost of production, but by differences in each country in the comparative cost of producing different things. This exchange of commodities would go on to the mutual advantage of both countries, increasing the amount which each obtained, but no matter to what dimensions it grew, how could it lessen the demand for labor or have any effect in reducing wages.

Now let us change the supposition and imagine such a barrier between the two countries as would prevent the passage of commodities, while permitting the free passage of men. No goods produced by the lower-paid labor of the one country could now be brought into the other; but would this prevent the reduction of wages? Manifestly not. Employers in the higher-wage country, being enabled to get in laborers willing to work for less, could quickly lower wages.

What we may thus see by aid of the imagination accords with what we do see as a matter of fact. In spite of the high duties which shut out commodities on the pretence of protecting American labor, American workmen in all trades are being forced into combinations to protect themselves by checking the competition of the labor market. The American protective tariff on commodities raises the price of commodities, but what raising there is of wages has been accomplished by trades unions and the Knights of Labor. Break up these organizations and what would the tariff do to prevent the forcing down of wages?

The whole aim and spirit of protection is not the protection of the sellers of labor but the protection of the buyers of labor, not the maintaining of wages but — the maintaining of profits. The very class that profess anxiety to protect labor by raising the price of what they themselves have to sell, notoriously buy labor as cheap as they can and fiercely oppose any combination of workmen to raise wages. The whole spirit of protection is against the rights of labor.

I have already shown that protection cannot, except temporarily, increase the profits of producers as producers, but without regard to this it is clear that the contention that protection raises wages involves two assumptions: (1) that increase in the profits of employers means increase in the wages of their workmen and (2) that increase of wages in the protected occupations involves increase of wages in all occupations.

To state these assumptions is to show their absurdity. Is there anyone who really supposes that because an employer makes larger profits he therefore pays higher wages?

Buyers of labor, like buyers of other things, pay, not according to what they can, but according to what they must.

Employers never give the increase of their profits as a reason for raising the wages of their workmen, though they frequently assign decreased profits as a reason for reducing wages. But this is an excuse, not a reason. The true reason is that the dull times which diminish their profits increase the competition of workmen for employment. Such excuses are given only when employers feel that if they reduce wages their employees will be compelled to submit to the reduction, since others will be glad to step into their places. And where trades unions succeed in checking this competition, they are enabled to raise wages.

No matter how much a protective duty may increase the profits of employers, it will have no effect in raising wages unless it so acts upon competition as to give workmen power to compel an increase of wages.

There are cases in which a protective duty may have this effect, but only to a small extent and for a short time. When a duty, by increasing the demand for a certain domestic production, suddenly increases the demand for a certain kind of skilled labor, the wages of such labor may be temporarily increased, to an extent and for a time determined by the difficulties of obtaining skilled laborers from other countries or of the acquirement by new laborers of the needed skill.

But in any industry it is only the few workmen of peculiar skill who can thus be affected, and even when by these few such an advantage is gained, it can only be maintained by trades unions that limit entrance to the craft. The cases are, I think, few indeed in which any increase of wages has thus been gained by even that small class of workmen who in any protected industry require such exceptional skill that their ranks cannot easily be swelled; and the cases are fewer still, if they exist at all, in which the difficulties of bringing workmen from abroad, or of teaching new workmen, have long sufficed to maintain such increase.

Any temporary effect which a tariff might have to increase wages in the way pointed out would be so quickly lost that it could hardly be said to come into operation. For an increase in the wages of such occupations would at once be counteracted by the flow of labor from other occupations. And it must be remembered that the effect of "encouraging" any industry by taxation is necessarily to discourage other industries, and thus to force labor into the protected industries by driving it out of others.

Nor could wages be raised if the bounty which the tariff aims to give employing producers were given directly to their workmen. If, instead of laws intended to add to the profits of the employing producers in certain industries, we were to make laws by which so much should be added to the wages of the workmen, the increased competition which the bounty would cause would soon bring wages plus the bounty to the rate at which wages stood without the bounty. The result would be what it was in England when, during the early part of the nineteenth century, it was attempted to improve the miserable condition of agricultural laborers by "grants in aid of wages" from parish rates. Just as these grants were made, so did the wages paid by the farmers sink.

But if it is preposterous to imagine that any effect a tariff may have to raise profits in the protected industries can raise wages in those industries, what shall we say of the notion that such raising of wages in the protected industries would raise wages in all industries? This is like saying that to dam the Hudson River would raise the level of New York Harbor and consequently that of the Atlantic Ocean. Wages, like water, tend to a level, and unless raised in the lowest and widest occupations, can be raised in any particular occupation only as it is walled in from competition.

The general rate of wages in every country is manifestly determined by the rate in the occupations which require least special skill, and to which the man who has nothing but his labor can most easily resort. As they engage the greater body of labor these occupations constitute the base of the industrial organization, and are to other occupations what the ocean is to its bays. The rate of wages in the higher occupations can be raised above the rate prevailing in the lower, only as the higher occupations are shut off from the inflow of labor by their greater risk or uncertainty, by their requirement of superior skill, education, or natural ability, or by restrictions such as those imposed by trades unions. And to secure anything like a general rise of wages, it is necessary to raise wages in the lower and wider occupations. That is to say, to return to our former illustration, the level of the bays and harbors that open into it cannot be raised until the level of the ocean is raised.

No matter what be the conditions of a country or what the peculiarities of its industry, that part of its labor engaged in occupations that can be "protected" by import duties must always be small as compared with that engaged in occupations that cannot be protected. In the United States, where protection has been carried to the utmost, the census returns show that not more than one-twentieth of the labor of the country is engaged in protected industries.

The lowest and widest occupations are those in which men apply their labor directly to nature, and of these agriculture is the most important. How quickly the rise of wages in these occupations will increase wages in all occupations was shown in the early days of California, as afterwards in Australia. Had anything happened in California to increase the demand for cooks or carpenters or painters, the rise in such wages would have been quickly met by the inflow of labor from other occupations, and in this way retarded and finally neutralized. But the discovery of the placer mines, which greatly raised the wages of unskilled labor, raised wages in all occupations.

The difference of wages between the United States and European countries is itself an illustration of this principle. During the colonial days, before there was any American protective tariff, ordinary wages were higher there than in Europe. The reason is clear. Land being easy to obtain, the laborer could readily employ himself, and wages in agriculture being thus maintained at a higher level, the general rate of wages was higher.

Yet, even in countries that are net importers of agricultural productions, a protective tariff upon such productions could not increase agricultural wages, still less could it increase wages in other occupations, which would then have become the widest. This we may see by the effect of the corn laws in Great Britain, which was to increase, not the wages of the agricultural laborer, nor even the profits of the farmer, but the rent of the agricultural landlord.

We thus see from theory that protection cannot raise wages. That it does not, facts show conclusively. This has been seen in Spain, in France, in Mexico, in England during protection times, and everywhere that protection has been tried. In countries where the working classes have little or no influence upon government it is never even pretended that protection raises wages. Such a preposterous plea is made only in countries where it is necessary to cajole the working class.