ABSTRACT

Adam Smith advanced the proposition that “wages of labor in different occupations vary with the constancy or inconstancy of employment.” He gave two reasons for the higher daily wages of inconstant employment: first, the need of a reserve for the period of unemployment, and second, as he said, “some compensation for those anxious and despondent moments which the thought of so precarious a situation must sometimes occasion.” The significant fact about business cycles is that they upset many of the calculations of the economists, from the time of Smith to the time of marginal utility, as to what is “normal.” In addition to the higher daily wages that Adam Smith attributed to seasons, turnover and anxiety, modern labor, both organized and unorganized, demands and gets a higher daily wage on account of the business cycle. The cycle of employment and unemployment tends to increase, or, at least, not decrease, in amplitude as industry is concentrated in large establishments.