You know that when a man takes a job as a wage-worker, he enters into a contract to give something in return for a certain amount of money. What is it that he thus sells? Not his actual labor, but his power and will to labor. In other words, he undertakes to exert himself in a manner desired by the capitalist who employs him for so much an hour, so much a day, or so much a week as the case may be.
Now, how are the wages fixed? What determines the amount a man gets for his labor? There are several factors. Let us consider them one by one:
First, the man must have enough to keep himself alive and able to work. If he does not get that much he will die, or be unfit to work. Second, in order that the race may be maintained, and that there may be a constant supply of labor, it is necessary that men as a rule should have families. So, as we saw in a quotation from Adam Smith in an earlier letter, the wages must, on an average, be enough to keep, not only the man himself but those dependent upon him. These are the bottom requirements of wages.
Now, the tendency is for wages to keep somewhere near this bottom level. If nothing else interfered they would always tend to that level. First of all, there is no scientific organization of the labor force of the world. Sometimes the demand for labor in a particular trade exceeds the supply, and then wages rise. Sometimes the supply is greater than the demand, and then wages drop toward the bottom level. If the man looking for a job is so fortunate as to know that there are many places open to him, he will not accept low wages; on the other hand, if the employer knows that there are ten men for every job, he will not pay high wages. So, as with the prices of things in general, supply and demand enter into the question of the price of labor in any given time or place.
Then, also, by combination workingmen can sometimes raise their wages. They can bring about a sort of monopoly-price for their labor-power. It is not an absolute monopoly-price, however, for the reason that, almost invariably, there are men outside of the unions, whose competition has to be withstood. Also, the means of production and the accumulated surplus belong to the capitalists so that they can generally starve the workers into submission, or at least compromise, in any struggle aiming at the establishment of monopoly-prices for labor-power.