Wednesday, November 25, 2009

The decline of the wage system

My girlfriend is setting up her own business. It is something she had always wanted to do, but her being laid off in the wake of the current economic downturn – as we have come to call what might very well the new economic normality – kickerd her into action. She is hardly the only one in this situation. All over the country there is a flurry of new business creations. In normal times, this would bode well for a country which has indeed coined the word "entrepreneur" but had forgotten it quite a long time ago. We are not in normal times however, and this unprecedented wave of entrepreneurship tells in fact of an deep economic insecurity which can only increase with the coming energy descent. It also announces the end of an economic arrangement which had shaped the western social landscape for nearly a century : the wage system.

Wage labor has become so common, so "normal" in today's society, that we have forgotten how marginal – and despised -it was before the Industrial Revolution. In agrarian societies wages were what farmhands, servants and journeymen got – and for the last category it was considered temporary. All respectable working people were self employed, either owning or renting a land or running a small – or even not so small – businesses. Living on wages was something you did when you had no other choice, and, socially speaking, that put you a mere step above a beggar or a slave. It is particularly revealing that in Latin, the word for wages has the same root as the word for prostitute.

There were, of course exceptions, but they were not seen as such. Journeymen lived on wages but, at least theoretically, it was, for them only a temporary step on the way to mastership and self-sufficiency. Civil servants and officers – privates were seen, not without reason, as the scum of the society – also received a salary, but considered themselves as servants of the king in a relationship reminiscent of the old vassalage system. In many countries they bought their offices, which emphasized the fact they could live without it, should the need arise.

It was not before the spread of the factory model during the XIXth century that the wage system ceased being marginal, and this evolution was bitterly opposed by large sections of the societies. As the late Christopher Lasch pointed out in The True and Only Heaven, one of the early labor movement's goals was to stop and reverse the move toward "wage slavery". Karl Marx is often quoted in that matter, but his archenemy, the anarchist Proudhon held similar view, even if he favored a social organization based upon small property and cooperatives. Both in Europe and America, the abolition of the wage system was a major theme in early socialism.

As the artisan model became restricted to a few professionals and farmers became a tiny minority, this theme lost its strength, however. Union's focus shifted to getting higher wages, better career prospects and working conditions. With the sweeping reforms enacted by European governments after WWII, the status of wage laborer became more and more comfortable, since, along with a relatively high income, it offered some security and the ability to plan long term. It had indeed become costly of a company to fire somebody without a very good reasons – the unions were ever watchful – and in France at least lays off were subject to a prior authorization from the state.

The result was that wage labor became synonymous with job security and the ability to own a house and decently feed one's family.

This system began to unravel after the first oil shock, as companies looked for workarounds, so they could dispose of unneeded workers. Of course they found them – ironically while in France a so-called socialist held the presidency. They began to resort to fixed term contracts and interim workers. Large firms, such as my home town's shipyard shifted their manpower to contract manufacturers, retaining only core employees. Ironically , but not without reasons, this move out of "wage slavery" was, and is, as bitterly resisted by unions and left wing parties as the spread of the wage system had been in the XIXth century.

The ongoing collapse of the world economy has triggered a new step in this process. Many small businesses have gone under and most large companies are struggling. My home town's shipyard, for a contractor of which my girlfriend worked, is starved for work and is down to laying off a significant part of its core employees. The result was that a lot of people found themselves jobless – less than in America since a large part of the French manpower works for the State or one of its subsidiaries and is essentially unfirable, but quite a lot nevertheless.

Those people – the majority of whom with very specialized skills – turned to business creation out of desperation, because they felt they had no other way to make a living. Many will fail, of course, and slip into permanent poverty – independent workers have no unemployment insurance in France. Other will eke out a living with a few underpaid contracts – something the government has made easier by creating a special "self-entrepreneur" status for small businessmen , which basically means they can dispense with any decent accounting provided they pay a 21% tax and have revenues smaller than 32.000€ a year. A few will thrive – I expect my girlfriend to be among them, of course – but what will matter is that the wage system will have been dealt another blow.

As we advance further in the energy crisis and economic expansion becomes a thing of the past, we can expect wage labor to become increasingly restricted to a small core elite. Even the administration, the stronghold of job security is no longer safe. Whole branches have been quietly sold out and while today's civil servant are sure to keep their job for life, barring some dramatic political upheaval, they will eventually retire, and they will be increasingly replaced by temporary workers or independent contractors.

Eventually, the bulk of the population will be self-employed, which, for most people will mean surviving hand-to-mouth by contracting either with whatever business remains or with local authorities ... until, at some point, some crisis sweep both away, and with them the last remnants of the wage system.


  1. Excellent article. You are correct in totality.

  2. This is why young people going to college should be thinking about self-employment skills rather than teamplayerish corporate careers.

    I'm guessing languages, writing, numeracy, natural sciences, and history will all be good preparation for the rough ride that lies immediately ahead.

  3. An Excellent trip through the history of western economic "progress".

    Keep them coming

  4. Excellent points, although I have been unable to confirm the etymological claim that 'wage' and 'prostitute' have the same Latin root.

    In the USA one hundred years ago, approximtely 40% of the population was engaged in agriculture. Today, approximately 1% of the population is engaged in agriculture.

    Manufacturing seems to be going through a similar cycle, especially as knowledge work rises in economic importance.

    It will be very interesting to see how large governments respond to a move away from centralized employment. When individuals work for large, centralized organizations, taxing their incomes is relatively easy; when individuals are scattered across the map, the task becomes more challenging.

  5. Energy capture will still be an imperative for life. As the availability of exosomatic energy decreases there will be a concurent decline in productivity in all areas of production. Eventually, the unemployed wage laborers will return to agriculture as a means of sustanance and trade.