The Iron Law of Wages

The Iron Law of Wages seems to be back. We thought it died a final death when Henry Ford doubled the wages of his factory workers in a single stroke back in 1914. He wanted (for perfectly selfish reasons) to be sure his workers could afford to buy the Fords they made. It made him rich.
Today millions of Americans handle, sell and build merchandise they cannot afford to buy. Half of all working Americans (says Dobbs on CNN TV) work for less than $500 a week. Minimum wage (retail, fast food, meat packing) doesn’t add up to anything like that.
Trust me, the clerk in Saks or J.C.Penney’s that you bought a dress from last week could not afford that same dress –and to eat too. The same was true for American laborers for most of the Nineteenth Century. The system that guaranteed their impoverishment was called “The Iron Law of Wages.”
It worked very simply. You flooded the labor market with an endless stream of illiterate and desperate immigrants. If anyone wanted a raise, he was free to leave his job. He could be instantly replaced by another immigrant or illiterate farm hand.
There was no minimum wage (no benefits either). Men worked twelve or more hours a day for six days a week for One Dollar a Day – for decade after decade. Women worked the same hours for about $1.75 a week. Kids as young as six got about a dollar a week.
As long as there were new immigrants, a steady flow of native Americans who had neither skills nor literacy, children of families so impoverished there could be no thought of educating them, the Iron Law continued to enforce itself in the American workplace. Decade after decade.
As recently as 1956, Tennessee Ernie sang a song about miners – “You load sixteen tons and what do you get? A day older and a deeper in debt. … St. Peter, don’t you call me ‘cause I can’t go—I owe my soul to the company store.” When my wife quit a job at JCPenney a few years ago, her credit card was deep in debt. It wasn’t worth her working. She was surrounded by people who needed the tiny income to survive. Their hours were cut to eliminate the need to pay benefits.
Today we have a continuing flood of illegal immigrants. Our high schools are cranking out thousands upon thousands of unskilled and illiterate “graduates”, not to count those who simply drop out. We have a rising flood of downsized workers desperate to take any work they can find.
I have substitute taught for nearly a decade. Gas and all costs (including fees) have more than doubled in that time. There have been no raises. Why should they? Retirees like me, laid off teachers, recent graduates flood the substitute pool. For substitutes, retail, unskilled jobs and – increasingly—professional and white collar workers, the pool keeps filling up.
Wages fall or stagnate. There is often no more hope of improvement than there was in the 1800s. An Iron Law seems to have fallen across the nation. Business Week magazine, in the current issue, points out that the productivity increases and rising standard of living we have enjoyed the past few decades have all come from borrowing – from home equity and credit cards.
In other words, there has been no real improvement in a long time. Masked behind leveraged luxury homes and expensive automobiles on credit, even the upper middle class is mired by an Iron Law. My physician told me recently that his income had declined 40% in the past five years.
American Express is troubled. The people on the upper East Side of Manhattan are said to be eating out less and wearing last year’s dresses to charity balls. Even that level of society seems to be touched by the general angst.
Maybe you haven’t noticed, but for millions of Americans, the Iron Law of Wages is back.