The argument of the volume
Of all the prices a market sets, the wage is the one that decides the most. It is what most people receive for most of what they do, and the shape of a life — its security, its hours, its horizon — is largely the shape of a wage. A price of such consequence invites the belief that it must rest on something solid: that the figure on the cheque is fixed by the worker's productivity, by the arithmetic of supply and demand, by something out in the world rather than at the table. The wage, more than any other price, is mistaken for a fact of nature.
The orthodox theory obliges that belief, and does so with great elegance. In a competitive market a worker is paid the value of his marginal product — the worth of what the last hour of his labor adds — because an employer who paid more would lose money, and one who paid less would lose the worker to a rival. The wage is thus pinned, determinate, and, in the hands of its first great expositor, even just: each is paid the value of what he himself creates. On this account the wage is a measurement, the labor market an instrument that reads a worker's contribution and reports it in money, and the distribution of income the morally neutral sum of those readings.
The volume is concerned with what the measurement leaves out, and the omission is named at the very beginning of the subject, by the same Adam Smith usually invoked to bless the market. The wage, Smith insisted, is settled by a bargain between two parties who are not equally placed: the employers are fewer and combine more easily, and they can hold out far longer than the workers, whom hunger brings quickly to terms. The competitive idealization erases that asymmetry by assuming no party has any power over the price. The plate at the volume's center asks what becomes of the wage when the assumption is dropped — when an employer must raise the wage to hire more labor, and so has reason to hire less and pay less — and the answer is an inversion: the wage falls below the marginal product, and the gap between the two measures not the worker's worth but the employer's power. The same number the orthodoxy read as contribution can be read, as well or better, as the price of the worker's weaker place at the table. And the measurement leaves out, too, the floor beneath the bargain: the least a worker will accept is fixed not by his product but by what he can fall back on while he keeps looking, so that a public insurance, by funding the search, can raise the wage he is able to refuse — and with it the wage he must be offered.
The argument remains open. What follows is an attempt to fix its exact edges.
The twelve plates of this volume
- i The Bargainin print the wage as an unequal exchange; the asymmetry Adam Smith placed at the origin of the subject. Read the plate →
- ii The Marginin print the marginal-productivity orthodoxy; the wage as the value of the last hour worked, determinate and, it was said, just. Read the plate →
- iii The Subsistencein print the classical and Marxian alternatives; the wage driven toward the cost of keeping a worker alive and able to return. Read the plate →
- iv The Skillin print human capital and the return to schooling; the wage as the yield on an investment lodged in the person. Read the plate →
- v The Differencein print compensating differentials; the part of a wage that pays not for the work but for its danger, its tedium, its hours. Read the plate →
- vi The Discriminationin print taste-based against statistical; the wage gaps that survive equal skill, and the two very different mechanisms behind them. Read the plate →
- vii The Floorin print the minimum wage in the competitive model; the standard verdict that a price floor must cost the lowest-paid their jobs. Read the plate →
- viii The Monopsonyin print employer power and the inversion; why a single buyer of labor pays below the worker's worth, and the gap is the measure of its power. Read the plate →
- ix The Unionin print collective bargaining and countervailing power; the workers' combination as the answer to the employers', and the case where it costs no jobs. Read the plate →
- x The Insurancein print search, the reservation wage, the safety net; the lowest wage a worker will accept, and what raises the floor beneath it. Read the plate →
- xi The Machinein print automation and the future of the wage; the old fear that the machine ends the wage, and what it gets right and wrong. Read the plate →
- xii The Sharein print labor's share and the great divergence; the wage as a slice of the whole product, and why the slice has been shrinking. Read the plate →
In closing
This volume began with the price that decides the most, and asked what it measures. The orthodox answer — the value of the marginal product — is not so much wrong as partial: it describes the ceiling a wage cannot long exceed, and the relative pull of one kind of labor against another, and it does so with real power. The plates in print followed that answer to its limit, and past it.
The bargain, Smith saw, was never struck between equals. The marginal product fixes the wage only where no one at the table has power over it; and the skill a worker brings, real as its return is, can be priced below its worth by an employer who has the upper hand, and cannot by itself say who keeps the surplus it produces. At the volume's center a single, realistic change — that an employer must offer more to hire more — turns the wage from a measure of contribution into a measure of power, and returns Smith's asymmetry, banished by the competitive idealization, as the general case. The union is the answer the structure invites: against the combination of employers, a combination of workers, restoring to the weaker party the one thing the bargain turned on — the ability to wait. The safety net, last of the plates in print, restores that ability by another route: an unemployment insurance funds the worker's search and raises his reservation wage — the least he will accept — so lifting the floor beneath which no wage can fall, a result John McCall drew from the simple problem of a worker deciding, offer by offer, when to stop looking.
The wage is the first volume of this table, and it is also its plainest lesson. A price commonly taken for a fact of nature — fixed, impersonal, out in the world — turns out to be the residue of a contest, and the figure it reports is as much a verdict on power as a reading of worth. What is true of the wage is the wager of the whole work: that beneath each of the table's prices and quantities lies not a hard floor but a settlement, and that the task of the discipline is less to take the readings than to see, honestly, what they are readings of. Every element here is a primitive that turns out not to be primitive. The wage is the one where it matters most that we admit it.
If the wage is part worth and part power, and no arithmetic divides the one from the other, then when a life is priced by what it earns, how much of that price was ever about the work?