Section II: The Iron Law of Wages

1. The iron law of wages was the chief weapon used by Lassalle against existing capitalism. Herein liberal social economists, Adam Smith, Ricardo,² J. B. Say, and others, had prepared the way for him. Lassalle³ appeals with evident comfort to these great authorities in establishing his iron law.

² According to the teaching of Ricardo, the average wages will always, in the long run, coincide with the cost of production. Ricardo distinguishes between the natural price and the market price of labor. The natural price is that which is necessary generally to make existence and propagation possible. The market price, on the other hand, is that which under the law of supply and demand is actually paid for labor. The latter may sometimes exceed the natural price, and sometimes fall below it; but it will always fall back to the natural price. It may be conceded that Lassalle has expressed this law in more odious terms than did Ricardo, but in substance their teaching exactly coincides.

³ Especially in his Arbeiter-Lesebuch and Offenes Antwortschreiben. In the latter Lassalle cites for his opinion besides Ricardo, Adam Smith, and Say, also Malthus, Bastiat, and John Stuart Mill.

With Marx himself the law of wages never found recognition, and it has also been expunged from the present official platform of German socialism. Yet Lassalle numbers still many adherents among socialists, and his writings have been republished as a means of propagandism. It is therefore not out of place to bestow some attention on his “iron law of wages.” The meaning of this law is gathered best from Lassalle’s own explanations:

“The iron economic law, which in our day, under the rule of supply and demand, determines the wages of the laborer, is the following: The average wages are always confined to the necessary sustenance which, according to the custom of a given nation, is necessary to insure the possibility of existence and propagation. This is the point around which actual wages oscillate like the swing of a pendulum, without ever remaining long either above or below this standard. Wages cannot permanently rise over this average; otherwise there would result from the easier and better condition of the laborers an increase of the laboring population and a supply of hands which would again reduce the wages to, or even below, the average point.

“Nor can wages permanently fall below the average of the necessary sustenance of life; for this would give rise to emigration, celibacy, prevention of propagation, and finally the diminution of the laboring population by want, which consequently would reduce the supply of hands and again raise wages to their former or even a higher rate. The actual average wages consist, therefore, in a constant oscillation about this centre of gravity, to which they must always return, around which they must revolve, standing sometimes above and sometimes below.”¹

¹ Offenes Antwortschreiben, p. 10. Arbeiter-Lesebuch, p. 5.

"That laborers and wages continually revolve in a circle, the circumference of which can at most reach the margin of what is barely sufficient to satisfy the necessary wants of human sustenance . . . is a circumstance which never changes.”²

² Offenes Antwortschreiben, p. 12.

Lassalle, it is true, admits that these customary necessities of life are greater in our day than in former times; but notwithstanding all this the laboring classes are, in given social circumstances, always confined to what is barely necessary for the continuance of existence and of propagation. Therefore, according to Lassalle, the laborer has no prospect of bettering his condition.³

³ Arbeiter-Lesebuch, p. 27.

2. This is the dreadful law of which socialists have made use until the most recent times to discredit the institution of private property.⁴ But their appeal to this law is without foundation.

⁴ Cf. the Gotha platform. As we have remarked above, the law of wages is expunged from the present platform. Nay, more: Liebknecht and others have since maintained that they had always rejected it. And yet they supported the Gotha platform for fifteen years. And yet, for a quarter of a century, workingmen were assured on the strength of that law that every effort at bettering their situation in the present order of society was useless. Is this not the height of frivolity?

a. If by the iron law Lassalle would only assert that under the rule of supply and demand and as long as workingmen are unorganized and unprotected a certain tendency exists to confine wages generally to what is barely necessary for the support of life, we would have no quarrel with him. For this tendency is a natural result of the selfishness of the rich, who are at the same time the mightier class. The average man is naturally inclined to purchase at a low and to sell at a high rate. As the laborer wishes to sell his labor power at the highest possible rate, so also the employer will endeavor to purchase labor at the lowest possible figure. But the rich employer is commonly the mightier, and will therefore succeed oftener in reducing wages below the normal figure than the laborer will succeed in raising them above the normal standard. Yet this universal tendency, which is the result of human selfishness, is by no means an economic law; else it might be also regarded as an economic law that dealers adulterate goods and that men grow rich by idleness.

But this state of things may be remedied by wise protective legislation in behalf of workingmen and by the organization of strong labor unions.

b. That Lassalle’s principle can be regarded as an economic law lacks every semblance of proof. In order that an economic law, in the proper sense of the word, may be established, we must have a fact which from certain permanent causes necessarily exists in all places and at all times. ‘This, however, is not the case with the supposed law of Lassalle; or, if it is, it has not thus far been proved. Let us examine the arguments which Lassalle, and before him Ricardo, adduce.

Wages, he says, cannot permanently rise beyond the average of what is barely necessary, according to custom, for the support of life; for else there would result an increase of the laboring population, and consequently of the supply of labor hands, which would again reduce wages to the former standard. But is it true, let us ask, that the laboring population will increase in the same proportion as the comforts of life? Such a statement cannot be borne out; experience rather teaches the contrary. He who would find large families in England, say, must not look for them in the dwellings of the better-to-do laborers, or wealthier classes, but in the poorest tenements of the Irish laborers. In like manner, in America large families are to be found generally among the poorer classes of immigrants, while the birth-rate among the wealthier classes is notoriously low. Again, there is no land whose population generally is better off than France, and in no land is the rate of increase of population so low. And the reason is evident, even though we abstract altogether from religious influence. The better off a laboring family is the more it is concerned, as a rule, to maintain its social standing and to rise to a still higher rank. Rash marriages are more rarely entered upon in such circles than in the lower ranks of society. It does not follow, however, that morals are purer in the higher than in the lower strata of society. There is another feature of the question, however, which Lassalle overlooks. Granted that better circumstances would produce an increase of population, yet it does not thence follow that the competition of the laborers would increase in like manner, for it would take a period of from sixteen to twenty years at least to produce any marked effect of such increase. Children are not from their very birth capable of competition. Consequently, even according to the supposition of Lassalle, a laborer could for well-nigh a generation receive more wages than would be “necessary, according to existing customs, for the support of life and for propagation.”

It may also happen that, despite the increase in the supply of labor, wages do not diminish, as with the supply also the demand may increase. If the demand for labor increases in the same proportion as the supply, wages remain the same; but it may easily happen that in many places, owing to new enterprises, the demand for labor may steadily increase for years, so that the increase of the number of laborers does not necessarily entail the diminution of wages.

We have no proof, therefore, that wages cannot for a considerable time exceed what is necessary for the maintenance of life. Nor has Lassalle proved that wages may not in some cases remain permanently below this standard. In that case he thinks emigration, celibacy, restriction of propagation, and finally a decrease of the laboring population resulting from misery would ensue, which would lessen the supply of labor hands and would bring wages back again to their former standard.

But, as we have already remarked, poverty does not lessen the birth-rate unless in that extreme case in which the laborers are literally starved. It can easily happen, and has happened, sad to say, that in many places the laboring classes have for a long time led a wretched life in the sense of Lassalle, without any perceptible diminution in the birth-rate. Poverty does not prevent marriages among the poor, nor does it prevent propagation. The poor are precisely in this respect often much more conscientious than those who call themselves the cultured classes. For the rest, even though poverty might produce a decrease in the birth-rate among the laborers, yet the effects of this diminution would be noticeable in the labor market only after the lapse of many years. In the mean time the gaps would be filled up by new laborers coming from surrounding districts. Marx has established, on the data of inquiries made by physicians and inspectors of factories, that in many manufacturing districts the laborers had lived for many years in the most wretched misery without experiencing any increase of wages. Lassalle’s law, therefore, whether we consider it from its favorable or unfavorable aspect, remains unproved.

But it is not only unproved: it is simply false. The principal touchstone of economic laws are facts. Now what are the facts in regard to Lassalle’s law? The statistics quoted above (p. 165 sqq.) are proof sufficient that long since the position of laborers, especially in England, has been improved, and that above all, in the matter of wages, there has been constant progress. We trust to God that a wise social policy to be pursued in the future will make the improvement permanent.¹

¹ Karl Marx from the outset rejected Lassalle’s iron law of wages. Nay, in his Criticism of the Social Democratic Programme he characterizes the insertion of this law in the platform as a “revolting retrogression”; and rightly so, from his own standpoint. According to Lassalle, the injustice of the wage system consists only in this, that the laborer’s wages can never go beyond a low maximum, and thus the wage-worker is doomed to a miserable existence. According to Marx, the wage system in the capitalistic order of things is absolutely unjust and intolerable, because it makes the laborer the slave of the capitalist, and permits the workman to labor for his sustenance only, with the obligation to work a certain portion of the time for nothing, merely to produce "surplus-value” for the capitalist. For '‘surplus-value” is always effected at the cost of the laborer: and as the capitalist is then only willing to carry on industry when his money is likely to produce “surplus-value,” capital is of its very nature calculated for oppression. It is a “pitiless beast of prey.” Hence he was forced to consider the adoption of Lassalle’s iron law in the socialist programme as a step backwards. Nay, the adoption of this law was diametrically opposed to, and an abandonment of, Marx’s theory of “surplus-value.” Hence we can easily understand his indignation at finding the iron law on the socialist platform.