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Monday, November 12, 2012

Some Artisans Earn More, Others Less, According to the Different Cases and Circumstances

In addition to training and the forces of supply and demand, workers with higher quality skills, risky jobs, or jobs which require trustworthy employees will receive higher wages. This is now known as the theory of compensating differentials that is often attributed to Adam Smith.

IF TWO TAILORS MAKE all the clothes of a village, one may have more customers than the other, whether from his way of attracting business, because his products are better or more durable than the other, or because he follows the fashions better in the style of his garments.
If one dies, the other, finding himself with more work, will be able to raise the price of his labor, expediting the work of some in preference to others, until the villagers find it to their advantage to have their clothes made in another village, town or city, losing the time spent in going and returning, or until another tailor comes to live in their village and shares the business.
The jobs which require the most time in training or most ingenuity and industry must necessarily be the best paid. A skillful cabinetmaker must receive a higher price for his work than an ordinary carpenter, and a good clock and watchmaker more than a blacksmith.
The arts and occupations, which are accompanied by risks and dangers, like those of foundry workers, sailors, silver miners, etc., ought to be paid in proportion to the risks. When skill is needed, over and above the dangers, they ought to be paid even more, such as ship pilots, divers, engineers, etc. When capacity and trustworthiness are needed, the labor is paid still more highly, as in the case of jewelers, bookkeepers, cashiers, and others.
By these examples, and a hundred others we could draw from ordinary experience, it is easily seen that the differences in the prices paid for labor is based upon natural and obvious reasons.

Essay on Economic Theory, An

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