David Ricardo’s iron law of wages shows how higher pay can swell the labor pool and push wages down

Brief outline to guide the journey

• Opening spark: a quick image of wages and crowds, and why one idea about pay sticks in history.

• Who was David Ricardo, in a sentence or two, and why his ideas still pop up.

• The core idea: the iron law of wages and how labor supply nudges wages back toward subsistence.

• A simple walk-through of the mechanism: wages rise, families grow, more workers enter the market, wages drift down again.

• Why this mattered in Period 6: a world shifting to factories, railways, and big urban labor pools.

• Common misreadings aside from the right answer, with concise explanations of why the other options don’t fit.

• Takeaways you can carry into broader history and even modern debates about pay and work.

• A closing nudge to keep curiosity alive, with a relatable analogy.

The iron law and the hum of a growing economy

Let me explain Ricardo with a picture you’ve probably seen in a history chart: a steady push and pull between wages and the number of workers. David Ricardo isn’t the flashiest name in economics, but the way he framed the labor market earned him a stubborn kind of fame. He didn’t see wages as a fixed prize handed out once and for all. He saw them as part of a tug-of-war—between what workers need to live and what the economy can absorb in jobs and hours.

So, what’s the heart of his view? The iron law of wages. It’s not about wage pain or punishment; it’s a description of a natural tendency in a competitive market. When wages go up for any reason, you’ll often see two things happen: workers have more children, and those children join the labor force when they grow up. The result is more people chasing the same kinds of jobs. That extra labor supply, everything else equal, tends to pull wages back down toward the level that keeps people barely above subsistence. The chain reaction is simple, but powerful: raise wages a bit, more workers, wages ease back again.

Think of it like a crowded elevator. If the floor is a premium, more people want in. The crowd gains density, the ride slows, and the perceived advantage of paying more to ride fades as the crowd expands. Ricardo wasn’t saying this with a moral warning; he was tracing a market’s default rhythm: supply expands, demand grows, prices (or wages) drift toward equilibrium.

From theory to the factory floor

To see why this matters for a period of history many of you cover in APUSH—Period 6—start with the big changes of the Industrial Revolution. US and British cities were blooming with factories, coal, rails, and a labor force that could swell rapidly. Wages rose in some industries, but not uniformly across the board, and workers moved in waves. The iron law helps explain why that rise didn’t lock in as a permanent elevation: as soon as wages nudged higher, the hope of a family with more mouths to feed turned into a bigger workforce.

Here’s the succinct mechanism, in a more concrete rhythm:

• Wages move up, perhaps because of a demand spike or a skill bottleneck.

• More workers see opportunity and decide to enter or stay in the job market, or to have another child.

• The pool of labor grows, competition among workers for jobs intensifies.

• Employers respond by firming up the wage scale or by hiring more workers at the going rate, which drags wages back toward subsistence.

• The cycle often settles near a level that covers minimum needs—enough to keep labor supplied but not enough to raise a lasting standard of living without productivity gains.

In the United States, this dynamic shed light on why factory owners could offer higher wages in one town and not in another, or why pay might rise during a boom and then stall when the population grew faster than the demand for labor. It’s a lens for understanding the push-pull between capital and labor, talent and opportunity, and the way markets tend to find a rough equilibrium even as social movements, technology, and policy push in new directions.

What this looks like beyond the theory

Now, let’s parse the multiple-choice frame you’ll often encounter in APUSH materials, because the right answer isn’t just a label—it’s a window into the logic behind the period.

• A. Higher wages increase worker productivity.

Ricardo’s argument isn’t primarily about productivity gains as a cause of wage increases. He’s more focused on the supply side: wages can rise, but the automatic response is often more workers entering the market, which pressures wages downward. So this line misses the core supply-driven feedback loop.

• B. Raising wages arbitrarily leads to increased labor supply, which decreases wages.

This is the heart of the iron law in a nutshell. The key phrase is “labor supply.” When wages rise for any reason, families may have more children, or workers may stay in the labor force longer, swelling the pool of workers. The bigger pool dampens wage gains. This framing captures Ricardo’s take on how a market self-corrects, sometimes undoing the immediate benefit of higher pay.

• C. Wages should always be fixed above subsistence levels.

That’s an attractive ideal, but it doesn’t reflect Ricardo’s market-driven realism. He wasn’t prescribing fixed pay; he was describing how, in a free market, wages tend to gravitate toward subsistence when labor supply expands. It’s a static prescription, not a dynamic pattern that matches the economics.

• D. Workers should only earn enough to survive.

This reads like a moral stance, not a mechanical explanation of how labor markets move. Ricardo was analyzing how wages end up where they end up, not setting a universal rule about what workers “deserve.” It’s a framing mismatch with the theory.

So, the correct pick—B—makes sense if you keep the chain reaction in mind. Wages rise, population and labor supply respond, and wages drift downward again. It’s a tidy, sometimes ruthless, logics of a market that assumes plenty of workers and finite jobs.

Then and now: a thread that keeps pulling

You might be wondering what this means for our own era. The echo of Ricardo’s idea shows up whenever we talk about minimum wages, job automation, or the complexity of global labor markets. When policy tries to push wages up, the study of labor supply reminds us there can be unintended consequences if the supply side expands, or if the push isn’t matched by productivity gains that create real, lasting value.

That doesn’t mean wages can’t rise or that workers shouldn’t be paid more. It’s a nudge toward a nuanced view: pay levels live in a market with many moving parts—technology, education, trade, urbanization, and even cultural expectations about work and family. The iron law isn’t a condemnation; it’s a reminder that the labor market is a living system, not a static ledger.

A few quick, practical takeaways

• The core idea is about the relationship between wages and labor supply. Wages aren’t just a price tag; they influence decisions about families and careers, and those decisions feed back into the market.

• Ricardo’s iron law helps explain why wage gains can be temporary if the economy’s capacity to absorb labor grows at the same pace or faster.

• In Period 6, this dynamic helps illuminate debates about industrial growth, urbanization, and the rise of wage-dependent labor in factories and mines.

• When you see a question about wages and labor supply, ask: what happens to the number of workers if wages rise? How does that shift the balance of supply and demand?

A final thought to carry forward

History isn’t just a string of dates and names. It’s a collection of ideas that map people’s real, human decisions—work, family, risk, hope. Ricardo gives us a compact map of one such decision—the way a wage tick can ripple through households and labor markets. If you ever worry that a wage increase is a magic bullet, remember: in a big, bustling economy, every gain is tethered to a wider crowd and a shifting balance of work.

If you’re curious, test this with a mental exercise: imagine a town where a factory sets higher pay for skilled labor. Who shows up? Will families have more children or invest in schooling to secure those skilled roles? Do more people move into the town? How does the wage adjust over the next year or two? The answers aren’t fixed; they’re the living evidence of Ricardo’s ideas at work.

A conversational endnote

History sometimes feels like reading a long, winding spreadsheet, full of lines that connect in surprising ways. But the essence remains human: we chase security, we adapt our plans, and markets respond in ways that aren’t always predictable. The iron law of wages is one readable, provocative thread in that larger tapestry. It invites you to ask good questions about labor, value, and how societies decide what counts as fair pay.

If you want a simple summary to keep in mind: Ricardo linked wage movements to the size of the labor pool. Higher wages can prompt more workers to enter or stay in the market, which can push wages back down toward subsistence levels. That’s the core idea behind option B—and a useful lens for thinking about the economic shifts that shaped Period 6 and beyond.