Smith’s theory of wages and its impact on the theory of wages in the 19th century

Abstract

Adam Smith has not accepted subsistence theory of wages as an explanation of wages. He can be marked not only as a founder of wages-fund theory, but also of the bargaining theory of wages. Wage-fund doctrine dominated the next hundred years of English economics. Besides, Smith’s explanation of the differentials in wage rates among occupations were accepted by his successors for a century. That was the first step into direction of human capital theory.

Keywords

• subsistence theory of wages
• wages-fund doctrine
• Mill’s "recantation"
• human capital theory