Photo: Kalhh. Source: Pixabay
There’s a memorable scene from the bike-racing movie, “Breaking Away.” When a member of a teenage gang of shows up for his first day of work at a car wash, the pushy new boss tells him: “Don’t forget to punch the clock, Shorty.” Offended by his supervisor’s attitude, the young man wraps his hand in a rag and physically punches the time-clock, breaking its glass. His buddies cheer, and he storms off.
As long as there’s been work, there have been wages. Wages have been part of society from ancient times to the present. There are lots of references to wages in the Bible, with admonishments to pay fair wages. Wages can be calculated by the task or by the time we put in. Day wages were typical in the ancient world, and once clocks became common, hourly wages became the norm.
Paying people by the hour has the virtue of being simple. If you don’t show up, you don’t get paid. But it creates a fundamental conflict. It’s in the employer’s interest to get as much work out of a laborer as possible. But maximum effort isn’t always in the worker’s best interest. As a result, wages always come with oversight – foremen and gang-bosses, paid slightly more – to keep the workers on-task and productive.
Photo: Russell Lee. Source: National Archives
Wage-labor distances workers from the product of their work. When farmers cultivate a field, the crop is a direct result of what they do. It doesn’t matter the hours they put in, what matters is that the job gets done. With wage-labor, though, businesses manage labor as just one of many inputs into the production process. And they need to be sure they get honest work for honest pay.
And specialization brings benefits, most notably an increase in productivity. Ever since Adam Smith wrote about his pin factory in The Wealth of Nations, we’ve understood that when we each do what we do best and trades our output for someone else’s, we’re all better off.
Public Domain. Source: Online Liberty Fund
Wages create a conflict – perhaps the most basic conflict in economics – between workers who own their labor and managers need that labor. If firms want workers to act like owners, they need to find ways for workers to enjoy some of the fruits of their work.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”