The Iron Law of Wages: Difference between revisions
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'''''The Iron Law of Wages''''', also known as the [[Subsistence theory of wages]], is an economic law proposed by [[David Ricardo]] (1772 -- |
'''''The Iron Law of Wages''''', also known as the [[Subsistence theory of wages]], is an economic law proposed by [[David Ricardo]] (1772 -- 1823). Building on the ideas of [[Adam Smith]], [[Jean Baptiste Say]], and [[Thomas Malthus]], Ricardo argued, in books, articles, pamphlits, and letters published in 19th Century England (collected in <ref>''The Works and Correspondence of David Ricardo'', edited by Piero Sraffa, Cambridge University Press, 1951.</ref>), that it is both unnatural and immoral to pay workers more than the minimum wage necessary for their survival. The Iron Law of Wages is one of the three cornerstones of [[classical economics]].<ref>John Kenneth Galbraith, ''Economics in Perspective'', p. 87, Houghton Mifflin, 1987, ISBN 0395355729</ref> |
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To pay more than a living wages is unnatural because, as Malthus observed, populations expand until limited by war, disease, or starvation.<ref>Thomas Malthus, ''An Essay on the Principle of Population'', 6th edition, p. 15, Ward, Lock, 1890.</ref> Thus, without government interference, there are always people who are willing to work for the bare minimum needed to buy food. It is unnatural to pay any worker more than the wage that will be accepted by the worker willing to work for the least pay. On the subject of morality, Ricardo argued that workers payed more than this minimum spend that money on vice, and therefore overpaying workers invariably leads them into sin. |
To pay more than a living wages is unnatural because, as Malthus observed, populations expand until limited by war, disease, or starvation.<ref>Thomas Malthus, ''An Essay on the Principle of Population'', 6th edition, p. 15, Ward, Lock, 1890.</ref> Thus, without government interference, there are always people who are willing to work for the bare minimum needed to buy food. It is unnatural to pay any worker more than the wage that will be accepted by the worker willing to work for the least pay. On the subject of morality, Ricardo argued that workers payed more than this minimum spend that money on vice, and therefore overpaying workers invariably leads them into sin. |
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Revision as of 15:37, 24 November 2009
The Iron Law of Wages, also known as the Subsistence theory of wages, is an economic law proposed by David Ricardo (1772 -- 1823). Building on the ideas of Adam Smith, Jean Baptiste Say, and Thomas Malthus, Ricardo argued, in books, articles, pamphlits, and letters published in 19th Century England (collected in [1]), that it is both unnatural and immoral to pay workers more than the minimum wage necessary for their survival. The Iron Law of Wages is one of the three cornerstones of classical economics.[2]
To pay more than a living wages is unnatural because, as Malthus observed, populations expand until limited by war, disease, or starvation.[3] Thus, without government interference, there are always people who are willing to work for the bare minimum needed to buy food. It is unnatural to pay any worker more than the wage that will be accepted by the worker willing to work for the least pay. On the subject of morality, Ricardo argued that workers payed more than this minimum spend that money on vice, and therefore overpaying workers invariably leads them into sin.
The Iron Law of Wages is a necessary consequence of free markets. Ricardo wrote, "Like all other contracts, wages should be left to the free and fair competition of the market, and should never be controlled by the interference of the legislature."[4]
The Iron Law of Wages was cited in opposition to various socialist ideas of the time, such as limiting the number of hours children can work to 12 hours per day, providing unemployment insurance to reduce the incidence of starvation, providing for widows, orphans, the elderly, and the infirm, and requiring a minimum wage. Any attempt by the government or by private charity to alleviate the suffering of the poor would invariably lead to an increase in their numbers and to even greater suffering. One practical application of this principle came during the potato famine in Ireland, when, at the urging of the classical economists, the British government allowed four million people to die of starvation, while absentee landlords continued to export food to England[5].
References
- ^ The Works and Correspondence of David Ricardo, edited by Piero Sraffa, Cambridge University Press, 1951.
- ^ John Kenneth Galbraith, Economics in Perspective, p. 87, Houghton Mifflin, 1987, ISBN 0395355729
- ^ Thomas Malthus, An Essay on the Principle of Population, 6th edition, p. 15, Ward, Lock, 1890.
- ^ The Works and Correspondence of David Ricardo, p. 94, edited by Piero Sraffa, Cambridge University Press, 1951.
- ^ Cecil Woodham-Smith, The Great Hunger: Ireland 1845-1849, Signet, 1964