[1][2][3] It was coined in reference to the views of classical economists such as David Ricardo's law of rent, and the competing population theory of Thomas Malthus.
This would create a dynamic convergence towards a subsistence-wage equilibrium with constant population, in accordance with supply and demand theory.
Even in countries which still have rapidly expanding populations, the need for skilled labor in certain occupations causes some wages to rise much faster than in others.
According to Terry Peach,[10] economists interpreting Ricardo as having a more flexible view of wages include Haney (1924), J. R. Hicks (1973), Frank Knight (1935), Ramsay (1836), George Stigler (1952), and Paul Samuelson (1979).
However, Ricardo believed that the market price of labor or the actual wages paid could exceed the natural wage level indefinitely due to countervailing economic tendencies: Notwithstanding the tendency of wages to conform to their natural rate, their market rate may, in an improving society, for an indefinite period, be constantly above it; for no sooner may the impulse, which an increased capital gives to a new demand for labor, be obeyed, than another increase of capital may produce the same effect; and thus, if the increase of capital be gradual and constant, the demand for labor may give a continued stimulus to an increase of people...[13]Ricardo also claimed that the natural wage was not necessarily what was needed to physically sustain the laborer, but could be much higher depending on the "habits and customs" of a nation.
Marx also noted that the foundation of what he called "modern political economy" needs, for the theory of value, only for wages to be a given magnitude.
He argued, on a simply empirical basis, that England, the United States, and Australia had a higher pay rate and lower cost of basic necessities than France.