The Iron Law of Wages

Exceprt from Ricardo's The Principles of Political Economy and Taxation

   In the natural advance of society, the wages of labour will have a tendency to fall, as far as they are
regulated by supply and demand; for the supply of labourers will continue to increase at the same
rate, while the demand for them will increase at a slower rate... I say that, under these circumstances,
wages would fall if they were regulated only by the supply and demand of labourers; but we must not
forget that wages are also regulated by the prices of the commodities on which they are expended.

   As population increases, these necessaries will be constantly rising in price, because more labour will
be necessary to produce them. If, then, the money wages of labour should fall, while every
commodity on which the wages of labour were expended rose, the labourer would be doubly
affected, and would be soon totally deprived of subsistence... These, then, are the laws by which
wages are regulated, and by which the happiness of far the greatest part of every community is
governed. Like all other contracts, wages should be left to the fair and free competition of the
market, and should never be controlled by the interference of the legislature.

   The clear and direct tendency of the poor laws is in direct opposition to those obvious principles: it is
not, as the legislature benevolently intended, to amend the condition of the poor, but to deteriorate
the condition of both poor and rich; instead of making the poor rich, they are calculated to make the
rich poor; and while the present laws are in force, it is quite in the natural order of things that the fund
for the maintenance of the poor should progressively increase till it has absorbed all the net revenue
of the country, or at least so much of it as the state shall leave to us, after satisfying its own
never-failing demands for the public expenditure.