Who invented the term 'Iron Law of Wages'?

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Accepted Answer

The correct option is 2:

Ferdinand Lassalle is credited with coining the term 'Iron Law of Wages' (German: *Ehernes Lohngesetz*). Although the concept itself—that wages inevitably tend toward a subsistence level—originated earlier with classical economists like Malthus and Ricardo, it was Lassalle, a German socialist and political activist, who gave it this specific, influential name in the 1860s. Lassalle used this term to criticize the prevailing liberal economic theory and to advocate for workers' cooperatives, arguing that any wage increase not accompanied by structural changes would be temporary, as population growth (Malthusian principle) would quickly push wages back down to the minimum necessary for survival. His dramatic naming of the theory contributed significantly to its popularization among workers and socialists across Europe.

The incorrect option is 1 (Adam Smith):
Adam Smith, the father of modern economics, discussed wages in *The Wealth of Nations* and noted that wages must be high enough to allow a laborer to subsist and propagate. However, Smith’s general view on wages, especially in an advancing economy, was more optimistic than the "Iron Law." He suggested that in prosperous countries, competition among employers would keep wages above subsistence level to encourage population growth and ensure a sufficient labor supply. Smith did not use or invent the term 'Iron Law of Wages'; his analysis was foundational to the classical school but lacked the rigid, pessimistic label coined later.

The incorrect option is 3 (David Ricardo):
David Ricardo is perhaps the economist most closely associated with the theory upon which the 'Iron Law' is based. In his *Principles of Political Economy and Taxation*, he laid out the concept that the natural price of labor is the minimum wage necessary for workers to maintain themselves and perpetuate their race. This concept is often called the "subsistence theory of wages." However, while Ricardo articulated the economic mechanism, he never referred to it as the 'Iron Law of Wages.' The term itself was a later, more polemical designation applied by Lassalle.

The incorrect option is 4 (Karl Marx):
Karl Marx, a contemporary of Lassalle, heavily criticized the economic system described by the Iron Law in his critiques of capitalism. Marx incorporated the concept of workers being paid only the value of their labor-power (subsistence wage) into his theory of surplus value. He recognized and referenced Lassalle's term but preferred his own, more comprehensive economic analysis of the exploitation of labor under capitalism. Although Marx dealt extensively with the consequences of subsistence wages, he was not the inventor of the term 'Iron Law of Wages.'