How the Tariff Affects Wages

I

THE form in which the argument that the tariff raises wages is commonly presented is that of a simple comparison of money wages in the United States with money wages in foreign countries. To most people this is a plain and convincing way of putting it. If A pays only fifty cents a day to his workmen, and B pays a dollar a day, it seems clear that A can undersell B, and that B cannot compete with A unless he reduces his wages to A’s rates. The application of this reasoning to our protective duties is familiar enough: if duties are lowered, American employers must either pay lower wages or abandon the field.

This belief is not merely widespread; it is something like an article of faith with millions of Americans, probably with a majority of our people. It is congenial to the average man’s way of thinking about economic matters, and is as firmly held by most of the business men and well-to-do as by the manual workmen. It has been incessantly dinned into the ears of both by protectionists for half a century. That it is a potent device for bolstering up protective tariffs is shown by the fact that it is utilized, not only in our own country, but in others also — in those with low wages as well as those with high. In Germany France, and Italy the appeal for the safeguarding of the laboring man’s wages against foreign competition is as universal and probably as fetching as in the United States. And the appeal is sincere. No doubt, manufacturers and others engaged in protected industries push it for all it is worth, but not usually with conscious demagogy. Certainly in our own country those who make the appeal and those moved by it believe in their hearts that our standard of living and the very basis of our prosperity rest on the maintenance of a system of high duties. Only this will prevent the pauper-paid laborer of Europe and Asia from sending us cheap products which will compel the lowering of wages to a pauper standard.

And yet the verdict of economists is unanimously the other way. Perhaps unanimous is too strong a term; but virtual agreement, there is. I know of no economist, certainly none in England or this country, who would sanction the pauper-labor argument. The extraordinary perversion of thought on all international matters which has resulted from the inflamed rivalries of Continental countries during the last half century has affected their economic thought on all matters relating to trade; and persons of academic repute can be found who give sanction to the talk of the vulgar. A lack of clear thinking and of honest statement has been among the many lamentable consequences of the mad struggle for power. Even so, no economist of standing would maintain that a protective tariff is the one decisive factor in making a country’s rate of wages high.

There are familiar facts in plenty which run counter to the argument. They are familiar, but, as is so often the case, people fail to see the significance of that which stares them in the face. A plain fact, universally known, is that we regularly export from the United States goods to the value of billions of dollars. How can this be if low-paid labor can always undersell high-paid labor? Wages in terms of money, and in terms of commodities also, are higher in the United States in all occupations, of whatever kind. Yet we know that not all employers of every kind are undersold by their foreign competitors. The simple existence of an export trade proves that they are not; nay, that so far as there is any underselling, it is the Americans who undersell the foreigners.

We export an extraordinary quantity and variety of articles: agricultural products like cotton and wheat, crude and semi-manufactured products like mineral ores, timber, and copper, and all sorts of manufactured goods — cotton fabrics, iron and steel in all stages, machinery and tools. All the laborers who are employed in making these exported articles get higher wages than those employed in making similar things abroad. Yet the very fact of exportation proves that the articles are sold at least as cheaply as the competing foreign articles. Wages in agriculture are higher here than in England or Russia. Thirty years ago, the English agricultural laborer got ten to fifteen shillings a week, or somewhere between ten and fifteen dollars a month, and out of this had to pay his own board and lodging. In the United States a farm-hand then got eighteen to twenty dollars a month, and got his board and lodging in addition. In recent times, wages in both countries have risen greatly; yet the difference in favor of the American has persisted. The Canadian farmer has been paying no less than the American. Notwithstanding this sustained higher rate of pay in the United States and Canada, agricultural products have continued to be regularly exported. American and Canadian farmers, while paying higher wages than the British, are sending their wheat to England, even under the handicap of high freight charges by land and water. They are meeting the British farmers in the British market; and meeting not only the British, but the Russians, whose wages are even lower.

So in semi-manufactured and manufactured articles. Copper-miners in the United States, and the men engaged in the smelting and refining plants, get higher wages than men doing the same work anywhere the world over; yet American copper is sold the world over. The laborers and mechanics in the agricultural machinery and sewing-machine industries get high pay; yet these are great articles of export. One of the striking changes in our international trade during the first decade of this century has been the enormous increase in the exports of the semi-manufactured forms of iron and steel. The total exports of structural steel, rods, rails, and wire rose to hundreds and hundreds of millions in the years 1912 to 1914 — years preceding the war, which were not affected by abnormal war conditions.

Still another set of facts may be adduced, not so familiar as those relating to our enormous export trade, yet familiar enough, and equally inconsistent with the belief that a country where wages are high must be undersold under free trade by one where wages are low. Great Britain has maintained complete free trade since the middle of the nineteenth century. The situation has endured without change for over half a century — ample time for testing the matter. No import duties have been imposed, except a few of strictly revenue character on articles such as tea and coffee. Commodities of every other kind have been admitted to Great Britain from foreign countries free, competing on equal terms with those of British production. India, Japan, China, Turkey, Italy, France, Germany — some of them with wages vastly lower than the British, all with wages considerably lower — could send their goods to England without let or hindrance. India, with hundreds of millions of the cheapest labor, and in closest commercial contact with Great Britain; Japan, fast outgrowing her old industrial system and keen to enter modern trade; France and Germany, just across the Channel and eager for exports — everywhere wages were lower, and in the Orient lower to an extent that would well-nigh paralyze with fright an American protectionist contemplating free trade with such regions. And yet England grew and prospered. British India, apparently the most dangerous competitor because so directly linked with the imperial country, so far from threatening English industry, actually asked for protection against the competition of the English cotton manufacturers who paid wages much higher. So did the French and Germans; their protective measures ware directed against the country of higher wages. And British wages, high at the beginning of the period, not only remained high, but advanced markedly between the middle and the close of the nineteenth century.

The explanation of all such facts is simple. Turn to the most familiar fact of all — the continuing exports from the country of high wages to those of low wages. The workman whose labor is embodied in the exports is paid more; but he also produces more. The labor is more effective, and the employer can therefore afford to pay more for it. Sometimes, as in the case of wheat and iron and copper, the same exertion produces a greater quantity of identically the same article. Sometimes, as with our exported cottons, it produces a greater quantity and also a better quality. Sometimes again, as in the case of our sewing-machines and agricultural implements, the greater effectiveness consists in producing an article which is better made and better adapted to its purposes. The greater (or better) product yields a larger gross return to the employer, even though not a larger sum per unit, than the return from similar labor elsewhere; and the employer is able to pay higher money wages. Not only is he able to do so, but he must: for thousands of employers compete with each other for laborers; and the result must be that wages will be high in some proportion to the productiveness of the laborers.

Beyond doubt this is the fundamental explanation of the differences that prevail in the various parts of the world. The plain reason why wages are very low in India and China, higher but still meagre in countries like Italy and Austria, comparatively high in England and Germany, and highest of all in the United States, is to be found in the varying productiveness of labor in these countries.

The relation between Great Britain and Germany under British free trade illustrates in another way the same simple principle. The illustration is not so obvious, yet rests again on broad facts of general knowledge; it involves no labored investigation. In Germany in the middle of the nineteenth century, when Great Britain entered on her free-trade career, wages were considerably lower than in that country. Yet, it was not Great Britain’s industries that feared Germany’s, competition, but just the contrary: it was Germany that adopted protection (not extreme in those days) designed chiefly to keep out British manufactured goods. As time went on, the trend of wages came to be upward in Germany as well as in Great Britain; and the rate of advance, though not the actual level, was even higher. True, wages in Germany did not attain the British range, either in money or in commodities, at any time up to the Great War. But starting as they did from a level much, lower, they showed a more marked advance.

Now, it might have been supposed that, as wages rose in Germany, this country would have become a less dangerous competitor in the ‘markets of the world,’ which play so large a part in the ordinary discussion of international competition. Not so: German exports grew and German competition came to be feared during the very period in which German wages were steadily rising. And the explanation is again simple. One and the same fact underlies the advance in wages and the growth of exports — increasing effectiveness of German labor, especially in the exporting industries. The causes of that increasing effectiveness were various: partly that Germany, starting from a low level, acquired with rapidity the methods and machinery of modem industry; partly the exercise of care, persistence, and skill in some branches of applied science; and partly a burst of leadership which was associated with political and military ambition. It matters not for the present purpose what the causes were. The main thing is that advancing wages proved no obstacle to exports and no stimulus to imports.

II

The general proposition that a high rate of wages is the result of a high productiveness of industry is simple and undeniable. In a sense it is superficial; it may be said to be a truism, though it is one of those truisms which are constantly forgotten. Beyond doubt there remain questions much more difficult. Just how and through what channel or mechanism does high general productivity lead to the high wages? And what determines the share of the total product, be that great or small, which shall go to the laborer, the employer, the owner of capital, the owner of land? But these questions, the most important and perhaps the most complex in the field of economics, lie quite outside the tariff controversy. Wide-ranging as that controversy is, this limitation of its scope seems to be generally recognized. In popular discussions of the tariff, the relations of labor and capital and the distribution of wealth and income are not usually touched, and we need not here concern ourselves with them. It suffices for the purpose in hand to get a broad explanation of the differences in wages in different countries, such as we find in the varying productiveness of labor. The explanation is so simple, and the notion that a high tariff causes general high wages is so flatly contradicted by plain facts, as well as by simple reasoning, that any elaborated discussion of it would call for an apology if the tariff-and-wages argument were constantly repeated.

In truth, few intelligent and unbiased persons would seriously argue that protective duties are the chief cause of high wages in the United States. But many would doubtless say that the duties keep up the wages in certain industries, and therefore at least help to maintain them, not in those only, but in all others. On the other hand, the opponents of protective duties generally argue that duties keep wages high in no industry whatever, and that, when they affect wages at all, they always tend to lower them. An examination of these conflicting views will enable us better to understand what is the real situation.

Begin with the line of argument which maintains that high wages are never the result of duties, but always and invariably of greater effectiveness of labor — a not infrequent answer by the free traders to the protectionist contention.

To this it must be replied that high wages in the United States, at present, are not in all cases the result of greater productiveness. If not caused by the tariff system alone, they are at the least, dependent on it. They are the result of the tariff system in this sense: as they are and where they are, they could not be paid but for that system. Many workmen — not so many as is often supposed, but still many — could not be paid in their present occupations what they now earn but for the barrier against foreign competition. It does not follow that, if duties were removed, they could not get wages as high or higher in some other occupation; but, where they are, their present wages could not be paid but for the duties.

When a system of protection has been established, it is not true, as we are often told by writers opposed to protection, that high wages are an invariable sign of productiveness, of great effectiveness of labor. In the United States we do have a great and dominant range of industries in which labor is effective, cost is low, commodities are produced with less exertion than in other countries, and in which wages therefore are high. But side by side with these, the protective tariff has established industries in which labor is no more productive than in other countries. China ware of the finer grades supplies an example. If there were no duty on such ware, very little would be made in the United States, perhaps none. The employer who should try to make it could not afford to pay wages at the high rates set by other more effective industries. It would be imported, and would be paid for by the exportation of commodities for which our conditions are more favorable. But so far as the individual employer and workman are concerned, the duties on china ware serve to offset the lack of favorable conditions. The duties enable the ware to be sold for more here than it will bring abroad; it can sell in this country for the foreign price plus the duty. The employer is put in the same position as if his labor were more effective than the foreign labor. The tariff enables him to get more money for his product than the foreign employer gets for the product of the same labor abroad; therefore he can pay higher wages than are paid abroad. And he must pay them. The standard is set by farmer and steel-maker and implement manufacturer, who get a larger gross return per unit of labor than their foreign competitors, and will under any conditions pay higher wages. The manufacturer who is dependent on protection must pay as much; and he is enabled to pay as much, even though his men produce no more in quantity or quality than those of his foreign competitors, because the duties make it possible for him to sell identically the same product at a higher price than prevails abroad.

But the staunch protectionist will ask: Given the situation as it nowstands and must be dealt with now, is there any other possible way in which the wages of these men can be kept high? And not only of these men, but of all workmen in all fields of industry? Suppose the duties removed, the chinaware industry wiped out, a quantity of other industries to meet the same fate, workmen to rush into those more productive or effective industries which free traders extol — what then? Will not the competition of the added numbers bring down wages all around, and will it not appear that wages everywhere will be lowored under free trade? Can they be kept at their present high rates without the aid of protection?

To these questions the free trader has his answer ready. Yet there are problems and possibilities which compel the unbiased inquirer to pause, and to reflect carefully before giving an unqualified opinion or offering unqualified advice.

It can be reasoned, as the free trader will reason, that, if the protective tariff be abolished, the men freed from the protected industries will ultimately find their way into the others not dependent on protection, and will there be employed at the same high wages that now obtain — nay, at wages probably higher. These industries will expand; and the market for their expanding output will be found abroad. An extension of international trade and of the international division of labor will take place. Things formerly made at home will be imported, while other things, which the foreigners formerly made for themselves, will be supplied to them from our exports. The result will be in the end that we and the foreigners alike gain. Each set of people will produce the things which it can produce to best advantage, and each will be better off by utilizing the best services of the other. All this is but a restatement of the proposition that international trade depends on differences in the productiveness of industry, and largely on differences that are comparative rather than absolute. The material prosperity of the United States is increased if we confine our labor and capital to the commodities in which we have an advantage and in which our employers can afford to pay high wages. The most effective way to get those things in which our productiveness is no greater than that of foreign countries is to import them, and to export in exchange those things in which our productiveness is greater.

The reasoning is beyond attack, granting its assumptions. But it assumes, in a country which has long maintained a protective system and in which there are many industries dependent on that system, a great shift and an expensive transformation. No doubt the shift in the United States, even with the sudden adoption of complete free trade, would not be as vast as the protectionists commonly state or imply. Their version of the consequences is that every single manufacturing plant would have to be given up — not to mention the even more dire prophecy that all industries of every kind whatever would crumble in universal ruin. Just how many industries would succumb, no one can say; but I am convinced that they would form a minority among the manufacturing industries themselves. Our manufacturing industries are not in general such bottle-fed weaklings as their ardent supporters allege. None the less, the change would be absolutely large. There would be shut-downs, attempts to meet the situation by lowering wages, strikes, slow transfer of laborers to other regions and other industries, business failures, empty mills and villages, a trying readjustment of prices and probably of the general scale of money wages, hard times and uncertain employment. A considerable period of transition would have to be gone through before the new and better alignment of industry was finally reached. Those whose present commitments and investments have been made in business ventures dependent on protection could not be expected to do otherwise than oppose the change with might and main; oppose it too with the firm conviction that right and justice, as well as the need of maintaining general prosperity, were on their side.

Further: that expansion of exports which the free trader expects, and which he rightly regards as the complement of expanding imports, will not take place by an easy or rapid process. The ills which the protectionist predicts will appear at once and conspicuously; whereas the predicted gains on the other side will appear so slowly as to be recognized only after a considerable interval. True, imports are paid for by exports, and cannot long continue unless so paid for. But there is no automatic connection. Each transaction in import trade and in export trade stands by itself, as Ricardo long ago remarked. Exports will grow only when they become profitable in consequence of the relation between prices of particular articles in this country and in foreign countries, and this relation will not be immediately changed. The economist may discern in the troublous period of transition the trend toward a developed and presumably more beneficial state of international exchange. But the average man will see only hard times and business troubles. The case is but one of many — the introduction of new processes and improvements is of the same sort — in which the immediate effect of a general economic change is unsettlement and depression. The ultimate good result, when it comes, is accepted as a matter of course, with no attention to the causes which brought it about. It is in this way that we accept unfettered free trade throughout the length and breadth of the United States, rarely stopping to think what far-reaching consequences it has for our material prosperity.

So great are the difficulties of an abrupt shift from one industrial policy to another, — the real ones, not the imaginary ones of universal collapse and perpetual ruin, — that no country, it can be safely predicted, will ever adopt such a ruthless procedure. If a change takes place, it will be by slow and gradual steps; and the first steps will be for a short start in a new direction, not at the moment of much consequence. Meanwhile, the bulk of the established indust ries will be safeguarded. And within the range of the industries thus protected it will remain true that wages can be kept high only so long as the protection is maintained. And since most persons jump from a single thing which they see to sweeping generalizations, their conclusion will be that the tariff keeps all wages high.

There is still another case which leads to the same sort of unwarranted generalization. The drift of the preceding reasoning is that, where the productiveness of a country’s industries at large causes its rate of wages to be high, that high rate will be transmitted to the protected industries which could not otherwise afford them; while yet in the long run no workmen anywhere are really benefited by protection. But there are conditions under which protection may bring substantial and permanent advantage to some workmen, not only in the sense of keeping their wages up to the general level, but in that of lifting them higher. These are conditions of labor monopoly. A tight union of highly skilled workmen can get wages above the average, if it can not only keep the union closed within the country, but obtain legislation for keeping out foreign workmen and the products made by foreign workmen. Apparently this was achieved, for example, for a considerable time by the glass-blowers; and in olden days, for a shorter period, by the iron-puddlers. In both cases the exceptional advantage was wiped out, as such advantages usually are, by new processes which dispensed with the urgent need for the special skill. But the advantage lasted during the period of limited labor-supply and favoring industrial demand; and the tradition lasted long after the golden era itself.

The trade-union spirit of selfish exclusion fits perfectly into the general scheme of protectionism; just as does the employers’ spirit of combination and monopoly. It is rare that either kind of combination succeeds in maintaining high gains permanently — either high wages or high profits; at all events, experience proves that a tariff barrier will not avail, unless other and stronger forces are behind. And it is to be borne in mind that the chances of effective monopoly are better for the capitalists than for the workmen; because the general trend of modern industry to large-scale operations works that way, whereas the general trend toward equalized opportunities among laborers works to prevent even the highest, trade union from holding a privileged position indefinitely. Nevertheless, rare and insecure as are the conditions under which anything like monopoly wages can be secured by any set of workmen, the possibility and the occasional realization strengthen the tradition that a high tariff leads to high wages.

Most persons, and virtually all spokesmen of the organized workmen, see only one outstanding thing at a time, and generalize therefrom at once. To them it seems axiomatic that any conditions which increase the wages, even of the smallest group, keep up the wages of all. The well-to-do and educated are entitled to no absolution on this score; they are perpetually and naively urging fallacies or half-truths to justify this or that arrangement profitable to a knot of their own people.

But when all is said, every qualification made, every exception granted, the fundamental proposition remains intact. The general rate of wages in a country is not made high by protection and is not kept high by protection. I will quote what I have said elsewhere:

In current discussions on the tariff and wages, it has often been alleged that in one industry or another the efficiency or skill of the workmen is no greater in the United States than in England or Germany; that the tools and machines are no better, the raw materials no cheaper. How then, it is asked, can the Americans get higher wages unless protected against the competition of the Europeans? But it may be asked in turn, suppose all the Americans were not a whit more skillful and productive than the Europeans — perhaps quite as skillful, but not more so; suppose the plane of effectiveness to be precisely the same throughout the realm of industry in the countries compared; how could wages be higher in the United States? The source of all the income of a community obviously is in the output of its industry. If its industry is no more effective, if its labor produces no more, than in another community, how can its material prosperity be greater and how can wages be higher? A high general rate of real wages could not possibly be maintained unless there were in its industries at large a high general productiveness.¹

III

The general and dominant productiveness of American industry — how comes it about and in what directions is it likely to be found? A full answer would carry far beyond the limits of the protective controversy proper— limits which unfortunately are often passed in popular debate on this subject, which strays into any and every phase of economic inquiry. On the causes of varying effectiveness in industry much might be said; but the essentials can be stated briefly.

Those who reflect at all on the fundamental causes of general productiveness would probably emphasize two: more fertile land and more efficient labor. Both tell; yet others tell also, and are frequently ignored.

True it is that American agriculture long was the mainstay of our prosperity; on the whole it is so still. True also that we are blessed with great stretches of fertile land in a temperate zone. But the natural resources alone do not explain our favored position among the nations. That position is due no less to the intelligence with which the American farmer has learned to adapt methods of cultivation in such way as to get the best yield from the plenty of good land. And he has been powerfully aided by the inventors and business men who have supplied him with agricultural machinery unique in its excellence, and by the railroad promoters and builders who have provided a transportation system which, as regards long-distance hauls, is also unique in its excellence. The American farmer is able to raise and to bring to market more wheat per unit of labor applied than his European competitor, not only because he has abundance of good land, but also because he works more intelligently, uses more and better machinery, takes better advantage of the plenty of land, and gets his wheat to market more cheaply.

And — to turn to an analogous case — the copper-miner of the United States produces more copper per unit of labor applied than the miner of Europe or South America, not merely because the deposits of copper ore arc richer, but also and mainly because the mining methods are better, the machinery more perfected, the transportation of ore and materials cheaper, the dressing and smelting and refining processes more advanced, all the advantages of largescale operations better utilized. Invention, ingenuity, enterprise, management, are of a higher stamp than in competing countries. The human factor counts immensely in agriculture and mining, as well as in manufacturing industries. And it counts in the whole complex of operations: in the work of the farmer who ploughs and the miner who digs, as well as in that of the engineer, the inventor, the business man.

The reader may have observed that in preceding paragraphs I have spoken, not of the ‘efficiency’ of labor, but of its ‘effectiveness.’ Efficiency, as the word is commonly used, implies greater output by the individual workman, alone and by virtue of his special excellence — greater physical vigor, better intelligence, better use of tools. Now in this regard the American of native stock does excel; the first nativeborn of foreign stock usually does; even the immigrant may, under the influence of example and environment. Most important, however, is what may be called, for want of a better term, the general effectiveness of industry — the accumulated result of all the factors that unite in making a people’s work yield a given physical output. And among those factors a commanding place must be assigned to direction and management — to the business leaders. The business men of America who ‘ make ’ clocks and watches, boots and shoes, furniture and building hardware, steel in its semifinished and more advanced shapes, tools and machines of all sorts, — to specify some striking cases, — turn out from their establishments, with the same capital and labor, more than the foreigners do; and this not solely, or even primarily, because their workmen are stronger or steadier or more skillful, but because of superior management.

When we try to define, not the physical causes of effectiveness, but those that rest on the character and genius of a people, precision is impossible. The characteristics that most pervade a people are often the most difficult to explain. Those of the Americans go with the spirit of democracy, the universal tradition of a free career for every talent, conceptions of large possibilities that correspond to the large scale of the country, the ubiquitous and restless energy in money-making — elements both good and bad. Business schemes, business ambition, business leadership, have played a larger part in our social and political development than in that of any other country. Only in Great Britain is to be seen anything comparable. And this has led to a general effectiveness of industry, not only wherever natural resources have been abundant, but often where there has been no such favoring foundation. The national genius has led to a high level of productive capacity over a wide range of mechanical industries. By far the greater part of what are classed as manufacturing industries have an inherent strength. They are able to pay the American rate of wages, not because they are bolstered up by the tariff, but because their output per unit of labor is large. They are among the strong and self-sufficing industries, not among the less effective which are upheld by those that dominate.

It is in the large-scale, standardized manufacturing industries that this strong position is most often found. Anyone who looks through tariff demands and debates will be struck by the fact that competing foreign products are likely to be specialties or handicraft articles. Where a thing is turned out in great quantities, all of a single pattern, the American producer is almost sure to hold his own. Sewing-machines, for example, are made in the United States by the thousand and hundred thousand, and are exported in great quantities to all parts of the world. Yet certain special types, of which a very few are in demand for unusual bits of stitching, are imported. Since only these few can be sold in any case, the American manufacturer does not find it worth while to set up the apparatus of moulds, patterns, machines, systematized continuous output, which he organizes for the standard types. The European maker is willing to take orders for a few pieces, and makes the specialized machines by using a much larger proportion of handicraft-labor.

Again, table-knives are standardized, innumerable dozens being made of each pattern; pocket-knives, on the other hand, are of infinitely diverse patterns, no one marketable in great quantities. Hence table-knives are made in the United States unhindered by foreign competition; whereas pocket-knives have been steadily imported in face of high duties. Among textiles, the more ornate and expensive fabrics are commonly imported. Not many yards of any one such fabric can be sold; the American producer does not find its production worth while. But where there is mass production of an enormous yardage, he takes hold with success. His success is most conspicuous in the great range of ordinary cotton fabrics, easily marketed by millions of yards, and made as cheaply in this country as anywhere in the world.

It would give a false picture to sketch in these broad terms the general traits of American industry without calling attention also to the exceptions. Often the success of a given establishment, or even of an industry, is due to that elusive element, the personality of an individual. An Englishman may devise a system of highly standardized production for a given article. An American may have a bent, perhaps an artistic gift, for a specialty. Sometimes the division of the market between domestic and foreign producers is quite inexplicable on any general grounds; it seems to be a matter of tradition or accident or mere inertia. Idiosyncrasies of this kind are as common as the departures from the standard type which the biologist finds in the living world. Probably not a single generalization in economics can be laid down to which there are not significant exceptions. And yet the general propositions remain the significant ones. For the present purpose these are: that our country’s high rate of wages rests on a high general effectiveness of industry; that effectiveness is not merely a matter of natural resources or physical causation, but is largely the product of national spirit, temper, adaptiveness; and that it appears over a wide range of manufacturing industries, in which the keynotes are labor-saving devices, the utmost use of elaborated machinery, large-scale operations, mass production.

IV

Finally, a word must be said in criticism of an argument with which the free trader sometimes meets his opponent. He compares the wages paid in protected industries with those paid in industries not protected. In the former class conspicuous cases are adduced of wages below the general range and below the rates in non-protected industries; therefore, the free trader reasons, protection cannot be said to have any effect in keeping wages up. Nay, it is sometimes argued that protection is thus proved actually to bring them down. Some years ago, when there was a great strike in Lawrence, Massachusetts, figures were cited to show that the operatives in the woolen mills got wages unusually low. Here, said the opponents of protection, is an industry which notoriously has the advantage of high duties and yet pays its employees wretched wages. How can it be maintained that protection benefits the workingman?

On this issue judgment must be given for the protectionist. The free trader perhaps is fairly justified in using this sort of fetching rejoinder as a tit-fortat to the harping on tariff and wages which constitutes the campaign ammunition of the other side: he may be entitled to fight the devil with fire. But the impartial judge must rule that the facts are misinterpreted, the inferences not warranted. In any country, whatever the tariff system, and whether the general level of wages be high or low, some workmen will earn more than the average and some less. Differences in education and training, in skill, intelligence, and character, will always cause divergences from the general scale. The range is great from the common laborer to the highly skilled mechanic. Tariff legislation has as little to do with fostering or checking these divergences as currency legislation or railroad legislation. Far more significant in its bearing on these matters is the course of legislative policy on immigration, and even more important is the education of the masses.

It may indeed be alleged that the protected industries employ the lower grades of labor in unusually large proportions. Some of them do so — as for example the silk and woolen manufacturers. But other industries not dependent on protection do so also, such as ironand steel-making, formerly a child of protection, but now quite grown out of tutelage, and the meat-packing trade, never under tutelage at all. American business leaders have shown singular adaptiveness in utilizing any and all resources at their disposal, both the natural and the human. They have directed the skilled mechanics to the construction and operation and repair of the most complex machinery; they have directed the drudges supplied by immigration to monotonous but effective mass-production. But there is no clear evidence that the employment of the one class or the other, or the relative rates of pay, have been modified by the country’s protective policy. Through it all, the wages of the lowest stratum have been higher in the United States than in foreign countries; and so have those of the upper strata. The difference in favor of the American workmen has not indeed been on the same scale throughout. The skilled mechanic has enjoyed, at least during the last generation, a larger differential than the pick-and-shovel man. But this special advantage has appeared quite as much in the industries not dependent on protection as in those that are dependent. It is due to general social causes quite different from those that bear on the tariff problems.

It is possible, nay, probable, that in the next generation marked changes will take place in this part of the social structure. The supply of human cattle will be much abridged by the application of the illiteracy test to immigrants, conceivably by the future application of tests even more narrowly selective. Further, the tendency of democracy and of universal education is toward lessening the stratification of labor; and that tendency will be no longer counteracted, as it has been in recent decades, by a steady congestion in the lowest stratum through immigration. A most desirable and welcome smoothing of the differences will gradually result, opposed by the employers, opposed also and bitterly resented by the semiaristocratic crafts, yet not to be resisted. It may not take the form of a lowering of the craft wages; possibly these will simply remain stationary, while those of the unskilled gradually rise; but some smoothing away of the differences may be expected.

The development of American manufacturing industries may be much influenced by this social change. The industries which had been planned and organized on the basis of being able to draw cheap common labor from a vast reservoir will find conditions less propitious than before. Both protected and non-protected industries will have to adjust themselves to altered conditions. But it would be hard to say that the adjustment will be greater or more difficult in one set than in the other. Important though the new situation will be for our social and political problems, it is not likely to bring consequences significant for the protective controversy.

To return to the main question: it is reduced again to its simplest elements. Wages at large, and the prosperity of the laboring class as a whole and so of the country as a whole, are not kept high by protection. True, in those branches of industry which are really dependent on the tariff, the workmen there engaged could not there remain, at the current high wages, if the tariff barrier were to be removed. True, also, a transfer of labor and of capital to other industries not dependent on the tariff could take place only with great difficulty and great hardship; and here are problems which the free trader cannot lightly dismiss. But none the less it is untrue that high wages in general have been caused by protection, or are now made possible only by protection. They rest not on that feeble prop, but on the solid foundation of general effectiveness of industry — on the resources of the country and the genius of the people.