№ I
The twelve plates
The wage is the price of the thing most people have to sell — their labor — and so the figure on which most lives turn. The orthodox account makes it the measure of a worker's worth: each is paid the value of what the last hour adds. This volume follows that account to its limits and past them — through the bargain struck between unequals, through the single employer's power to pay less than the work is worth, to the modern and unsettled question of how much of any wage measures contribution, and how much measures leverage.
is the wage what your work is worth — or what you can be made to accept?
The wage is the most personal of prices, and for most people the only one that finally matters, because it is the price of the one thing they have to sell. Rent, interest, the cost of bread — these a person pays; the wage is what a person is paid, the figure that sets the shape of a life, deciding where one can live, what one can eat, whether the children are schooled, how one is spoken to across a counter and how one sleeps at night. And over that figure hangs a question the science has never managed to leave alone, because so much rides on the answer. Is the wage what your work is worth — or is it merely what you can be made to accept?
The reigning answer, taught first and held longest, is the former. Where many employers compete for the same hands, no firm can pay a worker less than the value he adds, for a rival would bid him away; and none will pay more, for that is to throw money off. So the wage settles at the value of the worker's marginal product — the worth of what the last hour of his labor adds to what the firm makes. John Bates Clark drew the thought out to its end in 1899: each factor of production, labor no less than land or capital, is paid exactly the value of its margin, and the division of the nation's income is therefore neither theft nor charity but a kind of natural justice — each paid what it contributes. This is the wage as worth, and its appeal runs deeper than its economics, for it promises that the market, left to itself, rewards a person in proportion to what he brings; that pay is the measure of usefulness; that the world of work is, at bottom, fair. It is the doctrine of this volume's second plate — and the labor-bound case of a claim argued in full in The Margin, the sixth volume of this table.
Everything in that answer hangs on a word easy to read past: compete. It holds only where employers are many and interchangeable, where a worker can cross from one to the next at no cost, where both sides know what labor is worth and neither can outwait the other. Loosen any of these and the wage slips its mooring to the marginal product and drifts toward something else — toward the balance of power between the two parties to the bargain. The point is not new; it is as old as the discipline. Adam Smith, too often read as the prophet of markets left alone, saw it with perfect clarity in 1776. Masters and workers do not meet as equals: the masters are fewer and combine more easily, the law has often licensed their combinations and forbidden the workers', and, above all, a master can hold out longer. "It is not difficult to foresee," Smith wrote, "which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms." A merchant can live a year upon his stock; a laborer with hungry children cannot live a week. The wage, on this older and sharper view, is struck in a contest the worker enters already behind. This is the volume's first plate, The Bargain.
Push the contest to its limit and you reach the case that turns the orthodoxy inside out. Suppose there is not a crowd of employers but, in effect, one — the single mill in a company town, or, far more often, a market so thick with frictions that to quit is costly enough to bind a worker nearly as fast as if there were. Joan Robinson, in 1933, gave the case its name: monopsony, the mirror of monopoly — a single buyer where monopoly is a single seller. A monopsonist, facing by himself the whole upward-sloping supply of labor, knows that to take on one more worker he must lift the wage of all, and so he holds hiring back and pays every worker less than the value of the marginal product. The gap between the two is the exact measure of his power. And from it follows the most startling result in all of labor economics, the one that overturns the first thing a student is ever taught about price floors: under monopsony a minimum wage, or a union, set with judgment, can raise wages and employment at once — by stripping the employer of the very restraint that made him hire too few. The competitive model swears a wage floor must cost jobs. Where the employer has power, it need not, and may do the reverse. These are the volume's plates on The Floor, The Monopsony, and The Union.
For a long time monopsony was kept as a textbook curiosity — the company town, the isolated mine — a special case safely shelved. The last thirty years have moved it toward the center. When David Card and Alan Krueger examined, in 1994, what actually became of employment after New Jersey raised its minimum wage, they found no fall in jobs, and by some measures a rise — a result that scandalized the profession and is most easily explained if employers held a power the competitive model denied them. A large literature has since argued that such power is not the exception but a pervasive condition of labor markets: that concentration among employers, the cost and the dread of switching, the clauses that forbid a worker to carry his skills to a rival, and the plain difficulty of finding the next job all hand the employer a portion of the wage-setting power the older theory had given to no one. How large that portion is, and in which markets, is genuinely unsettled, and the honest position is that real labor markets lie somewhere between the textbook poles of pure competition and pure monopsony. But the burden of proof has shifted, and the wage can no longer be assumed a simple readout of a worker's product.
So the question the volume opened with resolves not into a single answer but into a proportion, and a hard one to take: how much of any given wage is worth — the value of what the worker adds — and how much is power — the slack the employer's position lets him keep? Both are always present, in shares that shift from one job and one market to the next, and that no clean instrument can separate. The remaining plates fill in the rest of the field. The Subsistence asks whether there is a floor beneath every wage that the body, or the bare renewal of the worker, sets. The Skill weighs how much of the gulf between high and low pay buys real productivity built by schooling, and how much merely sorts and signals. The Difference presses why unpleasant work is not reliably paid more, as the theory of compensating differentials promises it must be. The Discrimination takes up the wage paid not for what a worker makes but for who he is. The Insurance turns to the lowest wage a person will take rather than keep searching, and to what a safety net does to it. The Machine asks what becomes of the wage when the work can be done without the worker. And The Share lifts the whole question from the single pay packet to the entire economy, where the fraction of the nation's income going to labor has fallen for forty years and pay long ago stopped keeping pace with what is produced — the macroeconomic echo of this same doubt, argued out in its own volume.
This is the line the volume walks, and it is the line from which the whole table takes its name. A wage arrives in the world as a fact: a number on a contract, an offer to take or leave, a figure as flat and final as a temperature. It is nothing of the kind. It is a verdict — on what the worker can do, yes, but also on what else he might be doing, on how many others would take his place, on whether he stands alone or with a union at his back, on what the law fixes beneath him and what custom and prejudice arrange around him. To read a wage as the measure of a person's worth is to mistake the outcome of a contest for a law of nature — to read the verdict and miss the trial. The twelve plates that follow are the trial: the hidden contest beneath the most personal of all prices, brought up into the light where it can be seen and, perhaps, judged. The argument remains open.