Wages Analysis in The Wealth of Nations

Wages are the compensation that employers pay workers in exchange for their labor. They form one part of the cost of goods and the national revenue, along with rents and profits. While wages must always at least cover the cost of subsistence, they can be much higher in fast-growing markets where there is significant demand for labor.

Wages Quotes in The Wealth of Nations

The The Wealth of Nations quotes below are all either spoken by Wages or refer to Wages. For each quote, you can also see the other terms and themes related to it (each theme is indicated by its own dot and icon, like this one:

As the price or exchangeable value of every particular commodity, taken separately, resolves itself into some one or other, or all of those three parts [wages, profits, and rent]; so that of all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out among different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. The whole of what is annually either collected or produced by the labour of every society, or, what comes to the same thing, the whole price of it, is in this manner originally distributed among some of its different members. Wages, profit, and rent, are the three original sources of all revenue, as well as of all exchangeable value. All other revenue is ultimately derived from some one or other of these.

Page Number and Citation: 74

Explanation and Analysis:

Rent, it is to be observed, therefore, enters into the composition of the price of commodities in a different way from wages and profit. High or low wages and profit are the causes of high or low price; high or low rent is the effect of it. It is because high or low wages and profit must be paid, in order to bring a particular commodity to market, that its price is high or low. But it is because its price is high or low, a great deal more, or very little more, or no more, than what is sufficient to pay those wages and profit, that it affords a high rent, or a low rent, or no rent at all.

Page Number and Citation: 200

Explanation and Analysis:

Wages Term Timeline in The Wealth of Nations

The timeline below shows where the term Wages appears in The Wealth of Nations. The colored dots and icons indicate which themes are associated with that appearance.

Capital Accumulation and Investment Theme Icon

...take a portion of everything that labor produces as profit. Profits are not just the wages associated with managing others’ labor. Rather, profits depend on the amount of capital invested and... (full context)

A nation’s overall revenue also consists of these three categories: wages from labor, rent from land, and profit from stock (including interest, the profit from lending... (full context)

Each society’s average rate of wages, profit, and rent depends on its specific circumstances—including its overall wealth, amount of fertile land,... (full context)

...supply of a commodity exceeds effectual demand for it and its prices drop, then rent, wages, and/or profit must fall below their ordinary rates. Thus, landlords, workers, and/or investors will correspondingly... (full context)

...prices from year to year. These price fluctuations don’t affect rents, but they do affect wages and profits, which go up in times of scarcity and down in times of over-supply. (full context)

...commodity’s market price dips below its natural price, sellers stop selling it; when an occupation’s wage dips below its natural wage, new workers stop joining it. (full context)

Ultimately, the natural price is made up of wages, profit, and rent, which all vary depending on a society’s wealth and rate of economic... (full context)

...Then, they start making profit from the difference between what they pay their farmworkers (as wages and maintenance) and the value of what the farm produces. Similarly, master artisans lend materials... (full context)

Institutions and Good Governance Theme Icon

Clearly, workers will try to increase their wages, while masters will try to reduce them. But the masters have the upper hand: they... (full context)

...a certain kind of labor is continually rising, workers in that field will see their wages go up without having to organize. This tends to happen when a country has extra... (full context)

This is why, during Smith’s time, wages are much higher in poor but thriving North America than rich but stagnant England. In... (full context)

...eventually leads to a scarcity of jobs. China appears to be like this, with low wages and entrenched poverty because of economic stagnation. In a country where national wealth is shrinking,... (full context)

Wages are clearly above the subsistence minimum in Britain. After all, workers get paid more in... (full context)

...more of its children survive and its workforce grows—until there are too many potential workers, wages fall, and fewer children start surviving again. In this way, “the demand for men, like... (full context)

High wages also make people work harder. In fact, well-paid laborers often burn out or hurt themselves... (full context)

Still, provision prices still do affect wages because they help determine the cost of subsistence. But this effect counterbalances the changing demand... (full context)

While a growing economy tends to raise wages, it generally reduces profits because it forces merchants to compete. Exact profit rates are difficult... (full context)

Trade is generally more expensive in cities than in villages, since more competition means higher wages and lower profit rates. The same dynamic applies to Scotland and England: although the legal... (full context)

But Britain’s American colonies don’t fit this pattern. Wages are highest there, but so are interest rates and profit margins. This is because the... (full context)

...of all its resources and achieves its maximum level of population will see both low wages and low profits, as there would be high competition among both workers and business owners.... (full context)

At the highest possible rates of profit, all revenue except workers’ subsistence-level wages go to profit. In Smith’s Britain, ordinary market profit rates are about double interest rates,... (full context)

...market will tend toward equality: people will crowd into the best jobs and investments (whose wages and profit rates will then fall) and abandon the worst ones (whose wages and profit... (full context)

...coal miners because mining is dirty, dangerous, and uncomfortable; and public executioners make unusually high wages because their occupation is so dishonorable. Similarly, in advanced societies, hunting and fishing turn from... (full context)

Second, the easier and cheaper an occupation is to learn, the lower its wages. Like complex machinery, workers in highly skilled industries require lots of upfront investment, which takes... (full context)

Third, the constancy of employment shapes wages. For instance, bricklayers cannot work in certain kinds of weather, so they often miss days... (full context)

Fourth, wages vary depending on the trust bestowed on an occupation. For example, people trust their precious... (full context)

Fifth and finally, the odds of success in any given business affect its wages. Shoemaking apprentices are likely to become master shoemakers, while most law students do not become... (full context)

In this way, while ordinary unwholesomeness deters people from joining a profession (and raises its wages), the promise of adventure and surmountable danger instead attracts young people to the army and... (full context)

Of the five factors that affect wages, only agreeableness and risk also affect profits. This is why, in a given time and... (full context)

For agreeableness, education, constancy, trust, and risk to reliably shape wages, three other factors must also hold. First, this only applies to old, established trades. Getting... (full context)

Third and finally, these wage effects only apply to people’s primary sources of employment. People with significant leisure time often... (full context)

...the Policy of Europe.” By making the market deviate from “perfect liberty,” national policies exacerbate wage and profit inequalities in three ways. First, they restrict competition by giving professional associations (also... (full context)

...Masters would lose out on their revenue from apprentices, and competition would likely drive tradespeople’s wages and profits down, but the public would benefit from greater access to cheaper high-quality goods.... (full context)

As these corporations take over a town’s trades, both prices and wages rise. This has enriched towns at the expense of rural areas, which send raw goods... (full context)

The second way that policy drives inequalities in wages and profits is by artificially increasing competition. For instance, public scholarships and prizes draw too... (full context)

The third and final way that policy drives wage and profit inequalities is by preventing labor and capital from moving freely across different places... (full context)

Laws and judges used to set wages, but don't anymore because this dissuades people from working hard and innovating. Parliament still passes... (full context)

...whatever they’re producing. This demand always exists for some products and varies for others. Thus, wages and profits determine prices, and prices determine rents. (full context)

...There is always demand for food, and nearly all land produces enough food to cover wages and profits, so nearly all land yields rent. The more fertile the land and the... (full context)

...the price of wood, and at the least, it will cover the cost of the wages and profit involved in mining it, with no part left over for rent. Since coal... (full context)

...for all other goods, the lowest price for silver and gold is the cost of wages plus the ordinary rate of profit on the capital required to mine and sell them.... (full context)

But gold is closer to its lowest possible price—wages plus profit, with no rent—because the Spanish king’s tax on gold is lower than his... (full context)

...new machinery and the advancing division of labor more than compensate for the growth in wages. In a few trades, like carpentry, the rising cost of raw materials more than offsets... (full context)

The value of a country’s annual produce gets divided into rent, wages, and profit, which respectively go to landlords, workers, and employers. These are “three great, original... (full context)

...revenue of any particular enterprise, the revenue of society as a whole is divided into wages, rent, and profit. Any estate’s gross rent (what the farmer pays) is more than its... (full context)

...their businesses add to the economy in two ways: through their profits and through the wages of the people they employ to transport goods by land and sea. (full context)

...capital) that they need to make their products, as well as to pay their workers’ wages. In this way, a fixed quantity of capital adds more to the economy in manufacturers’... (full context)

...country, except through the merchant’s profit (if they spend it at home) and the sailors’ wages (if they are from the home country). (full context)

...and get to keep everything they produce, so they are willing to pay relatively high wages for laborers. Thanks to this combination of high wages and cheap land, even poor laborers... (full context)

...and demand for British goods falls in response. While merchants blame these effects on high wages, high profits are the true culprit. (full context)

By increasing merchants’ profits, the exclusive trade also reduces wages, discourages land improvement, reduces land rents, and raises interest rates in Europe. In short, it... (full context)

...they withdraw the exact same amount back from the economy in the form of their wages. They only contribute to the national revenue if they earn less in wages than they... (full context)

...cases, the sovereign’s general revenue must come primarily from taxes. It can tax rents, profits, wages, or all three. Four key principles apply to all four kinds of taxes. First, taxes... (full context)

“Article III. Taxes upon the Wages of Labour.” All production requires labor, so a tax on wages increases the price of... (full context)

...commodities with whatever revenue they happen to have, whether it comes from profit, rent, or wages. (full context)

...its tax more strictly than England. Capitation taxes on workers are equivalent to taxes on wages. But they’re easy to administer, so governments have often chosen them, even though they hurt... (full context)

Taxes on necessities raise the price of subsistence, so wages must rise to compensate for the difference. Taxes on luxuries deter people who can’t afford... (full context)

...for the poor to raise more children, which reduces the supply of labor. By increasing wages, taxes on necessities also cause rents to fall and the price of manufactured goods to... (full context)

...the vast majority of people are poor farmers, tradesmen, and small-time merchants, their expenses and wages account for most of society’s consumption and revenue. (They also earn much of the nation’s... (full context)

The Wealth of Nations

Adam Smith

Wages Term Analysis

Wages Quotes in The Wealth of Nations

Wages Term Timeline in The Wealth of Nations