Wages and Salaries

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WAGES AND SALARIES. The vast majority of American adults gain their livelihoods by working for a corporation or partnership that they do not own. This is true of people who work in factories, stores, or offices. It is also true of many highly educated workers, such as doctors, and non-tenured college professors (who have no property rights in their jobs). Most unskilled and semi-skilled workers are paid by the hour, most professionals or semiprofessionals are paid by the month or the year. Although hourly employees are called wage workers and others are generally considered salaried, all depend for their livelihoods on payment by the owners of productive property (capital) who make a profit on their labor. In that sense they are all wage workers.

The average major league ballplayer in 2000 earned $1,895,630, worked for only seven months, and was not likely to think of himself as a wage earner. But like assembly line workers, wages are ballplayers' primary source of income, and they are employed by corporations that make a profit from their work. If an owner's team consistently loses money, players will be paid less—or traded. The vast discrepancy in compensation among wage earners is one factor that makes today's workforce so different from that of the nation's period of industrialization in the late nineteenth century. In the last decades of the nineteenth century, although the proportion of workers on railroads or in factories rose steadily, most of the working population, rural or urban, were independent producers. In the north and west, they worked on family-owned farms, while in the south about two-thirds of blacks (and many poor whites) were sharecroppers who rented their farms from large landowners, to whom they usually paid half their crops.

Whole families worked on these farms and received no wages or salaries. Skill and providence mattered, but elements over which they had little or no control—the weather, the market, their relationship with banks and railroads, on whom they depended for credit and access to markets—were just as important. Tenants were also at the mercy of landlords who owned the local stores where the sharecroppers were required to buy seed, tools, and staples, often at exorbitant prices. Still, tenants, too, were independent producers.

As the internal market grew in the years before 1900, farm productivity increased rapidly, and fewer and fewer farmers were needed to feed and clothe the nation. In these decades a steady stream of people left farms and went to work for wages in urban factories. By 1900, the balance of the American population had shifted from rural to urban in a process that still continues. At the turn of the twenty-first century, less than 3 percent of the workforce were farmers.

In manufacturing, productivity also grew rapidly. By the early 1900s capital-intensive technology and large-scale corporate organization also raised the value of manufactured goods more rapidly than the number of workers needed to produce them. As increasing productivity in manufacturing reduced the relative amount of labor required to produce all the goods that the market could absorb, capital sought newareas of investment. Large amounts of surplus capital, the emergence of overproduction (or under consumption), and growing chronic unemployment spurred the drive to increase consumer spending. This initiated the shift from competitive industrialization to today's corporation-dominated consumer society.

The social and political turmoil of the Progressive Era (1900–1920) reflected these changes in the national economy. Beginning in these years, whole newareas of enterprise—and employment—began to change the way people lived. From the expansion of production of newly manufactured things, such as automobiles and radios, to the creation of new consumer goods and services such as popular fashion and entertainment, new industries invaded areas that had previously been the domain of small independent producers. By the 1920s the great increases in labor productivity showed in the accelerated growth of chronic unemployment and dislocations, and increasing under consumption led to stagnation in major sections of the economy—even as corporate profitability increased. In retrospect, these changes foreshadowed the need to create a consumer society and a welfare state. Yet their significance was overlooked as the nation struggled with the stock market crash of 1929, the Great Depression, and World War II.

After the war, however, as large amounts of capital shifted to service industries, government and corporate leaders consciously promoted sub urbanization and popular consumption. As a result, small businesses of all kinds disappeared as giant chains of supermarkets, pharmacies, and fast food restaurants covered the land. This process created some well-paid employment, especially in electronics and then computers—and in military production—but it created many more full-and part-time jobs paying minimum wage or just above it.

The expansion of corporate capital has also affected college-educated professionals. In 1900 a professional degree was the equivalent of capital for those who had private practices. But with the growth of large-scale manufacturing such degrees lost value. Engineers for example, were transformed from independent consultants to employees, and with the growth of for-profit hospital chains and HMOs, many doctors began to work for wages.

The expanded corporate economy has created new jobs mostly at the income extremes. As factories have reduced their labor forces—or simply moved overseas—many well-paid semiskilled and unskilled union members have found work only at near-minimum-wage jobs; many now work two or even three jobs. Many highly educated people, however, are very well paid, especially if they are licensed to practice medicine, law, or other professions. For such people, skill or educational level is a determinant of income and working conditions. Yet many other highly educated people, even those with doctorates, find themselves working for wages not much above poverty level.

In the industrializing years of the nineteenth century, few workers made more than the barest subsistence wage, and most worked ten or more hours a day, six days a week. Some skilled workers responded by organizing unions. On the railroads, for example, the brotherhoods of locomotive engineers, firemen, and brakemen had guild-like unions, while in factories small numbers of machinists and others formed craft unions that won concessions from management, including a shortening of the work day.

Even today, with unionized manufacturing on the decline, a clear gap exists between the wages of union and nonunion workers. In 2002 full-time unionized workers median wage was $718 a week, while nonunion workers earned $575. Unions also affect wages because many non-union employers raise their workers' wages in order to keep unions out of their shops.


Marx, Karl. Capital: A Critique of Political Economy. Chicago: Charles H. Kerr, 1909.

Ray, Marshall F. Back to Shared Prosperity: The Growing Inequality of Wealth and Income in America. Armonk, N.Y.: M.E. Sharpe, 2000.

Seidel, Michael. Ted Williams: A Baseball Life. Lincoln: University of Nebraska Press, 2000.

Sklar, Martin J. The United States As a Developing Country: Studies in U.S. History in the Progressive Era and the 1920s. Cambridge, U.K.: Cambridge University Press, 1992.


See alsoLabor ; Railroad Brotherhoods ; Trade Unions .

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