as "subsistence," it would seem that the rate of productivity per worker is increasing in a still greater proportion. Thus the difference between a man's subsistence level and his productivity tends in a progressive country to become wider. The extent to which the actual rate of wages rises above subsistence level depends largely on the supply of the particular labour relative to the demand, and on the bargaining power of the workers and employers.

It may be generally stated therefore that the rate of wages tends, under free competition, to equal the marginal productivity of the worker. But, as free competition is rarely encountered in everyday life, the wage may fluctuate anywhere between the maximum set by the worker's marginal productivity and the minimum set by his cost of subsistence, the actual rate being determined largely by the bargaining powers of the workers and employers respectively.

CHAPTER IV.

THE WAGES OF LABOUR (continued).

Definition of the Standard.

§ I. THE STANDARD OF LIVING.

It has been shown previously that poverty is a relative term, and that it is impossible to lay down a universally accepted definition. In the same. way, it is extremely difficult to define what is meant by the standard of living, for this varies from individual to individual, from class to class, and from country to country. The standard of life is said to be higher in the United States than in Britain. This implies a standard for a whole society. On the other hand, the standard of life of the doctor is said to be higher than that of the skilled mechanic, the standard of a skilled mechanic higher than that of the general labourer. These represent standards of life for different groups within a society. The first type of standard is governed mainly by the natural wealth of the country, the number and efficiency of the population, and the stage of industrial organisation. The second type is determined largely by the power of the respective groups in competition for their share of the social product. Unless stated to the contrary, the term is usually taken to refer to a group.

"Standard of living" is an elastic phrase, and care must be taken not to stretch its meaning too far. A solicitor may spend five times as much as his clerk-but is his

SOC. ECON.

65

5

"standard" necessarily so many times greater? A man who has regularly lived up to an income of several thousands a year might claim that to be his "standard"-but in such cases the term becomes farcical.

A distinction must be drawn between a standard of life actually found and a desirable standard which would provide the amount necessary to ensure decent comfort and a wholesome manner of living. It is generally agreed that the standard of living should be distinctly higher than a bare subsistence income. This view is positively stated in the Report on Wages and Conditions of Employment of Dock Labour, 1920: The true and substantial case presented by the dockers was based upon a broad appeal for a better standard of living. What is a better standard of living? By this is not meant a right to have merely a subsistence allowance, in the sense of keeping the soul and body of the worker together, but a right to have life ordered upon a higher standard, with full regard to those comforts and decencies which are promotive of better habits, which give a chance for the development of a greater sense of self-respect, and which betoken a higher regard for the place occupied by these workers in the scheme of citizenship... In the opinion of the Court the time has gone past for assessing the value of human labour at the poverty line.”*

This definition of the standard of life does not pretend to be absolute; it does not specify the amount of necessaries and comforts requisite for the particular group. The estimates placed before the Court of Inquiry as to the actual cost of maintaining such a standard varied conThe workers presented a figure of £6, the

The Standard
of Life as
a Basis of
Wages.

siderably.

* Report, § 10.

employers a figure of £3 13s. 6d. out of London and £3 175. in the London area, these figures being based on a family of a man, wife and three children. Dr. Bowley supported the latter figures, while Sir Leo Chiozza Money put the poverty line as high as £5 3s. The workers claimed a minimum daily wage of 16s. Owing to the fact that the docker on the average could secure work for only eight half days out of the eleven, the 16s. per full day claimed would work out at £3 4s. a week. The Court recommended that the standard of 16s. per day be adopted.*

The size of the family is very important in these calculations. The figure for a man, wife and three children, (none of the children being yet old enough to contribute to the family income) represents on the average the period in the life of a family when the net expenses are heaviest. Where there are five or six children altogether, the older ones may be earning something. "A minimum ... so fixed is one under which a bachelor workman at the one end of the scale, and a workman with one or two of his family in employment at the other end of the scale, would stand very largely to gain."†

The question of payment according to need arises in other departments of the subject, notably in the relation between men's and women's wages dealt with at greater length in Ch. V. It is sufficient for the present to state that productivity and not need is the basis of remuneration in the wages system. And if wages for the same task were

* Report, §§ 12 and 45 (1).

† Ibid., §§ II. It should be noted that this so-called average family of man, wife and three children is by no means typical of a large proportion of the population.

For further consideration of the correspondence between occupational rates and relative efforts and needs, see below, pp. 141-2.

differentiated according to need, the cheaper labour would tend to receive preference, and workers with the most dependants would find it harder than ever to secure employment.*

a Fixed

During and since the war, wages have been fixed for a large mass of the population on a cost of Objections to living" basis. A certain sum varying from trade to trade is taken as the basis, and the wage moves above or below this according to the rise or fall of the Ministry of Labour's Cost of Living Index Number.†

Standard.

* One way of avoiding unfair discrimination between workers with different family needs would be the adoption of a plan, under which the employer is compelled to pay so much per worker into an 'equalisation fund, from which grants would be paid to the workers in proportion to their family obligations. The actual wage would be the same, whether there were many dependants or none at all. This and similar methods have been adopted in France and other Continental countries. See below, pp. 144-5.

† The Index Number represents the level of prices or the purchasing power of the money for one period as compared with another. The year 1900 is often taken as the standard, but for purposes of comparison between pre-war and post-war prices, the year previous to the war is usually adopted. The index number for the standard year is said to be 100; if at any other time prices have risen by (say) 25 per cent., the index number is 125; if they have fallen by 25 per cent., the index number is 75. Thus the Cost of Living Index Number in November 1920 was 276, July 1914 being taken as the basis; i.e., prices of articles entering into ordinary consumption had risen by 176 per cent. since the outbreak of the war. Index Numbers may be calculated for different purposes; a figure constructed for the purpose of adjusting wages will not necessarily be satisfactory for measuring price movements in the world market. A Cost of Living Index Number, if it is to be satisfactory, should be based on retail prices. Wholesale prices, however, though they are more determinate for a large area than are retail prices (which often vary from street to street), are more responsive to changes in market