Note 54 — Chapter III

Thus the old theory of the wage-fund, which has so often been attacked of late, has after all this great residuary truth, namely, that the amount of wealth that is spent and taken in wages is limited by the total amount of wealth produced in proportion to the number of labourers who assist in its production. That theory, however, as commonly understood, is no doubt erroneous, though not for the reasons commonly advanced by its critics. The theory of a wage-fund as commonly understood means this—that if there were eight labourers and a capital of four hundred pounds, which would be spent in wages and replaced within a year, and if this were distributed in equal shares of fifty pounds, it would be impossible to increase the share of one labourer without diminishing that of the others; or to employ more labourers without doing the same thing. But the truth is that if means were discovered by which the productivity of any one labourer could be doubled during the first six months, the whole fifty pounds destined for his whole year’s subsistence might be paid to him during the first six months, and the fund would meanwhile have been created with which to pay him a similar sum for the next six months—the employer gaining in the same proportion as the labourer. So, too, with regard to an additional number of labourers—if ability could employ their labour to sufficient advantage, part of the sum destined to support the original labourer for the second six months of the year might be advanced to them, and before the second six months’ wages became due there might be enough to pay an increased wage to all.