What is marginal production of labor?

Henry George, answered from the texts and cited to the page.

Henry George answers

The margin of production is the lowest point to which men will carry their labor on land that costs them no rent. Wherever cultivation has extended to lands of different qualities, the poorest land in use yields a return, and that return fixes what labor can get everywhere. I put the law thus: wages depend upon the margin of production, or upon the produce which labor can obtain at the highest point of natural productiveness open to it without the payment of rent.¹

The reasoning rests on one principle, as plain as gravitation is to physics, that men seek to satisfy their desires with the least exertion.² Take a settlement where land of equal quality is free. Each man gets the full produce of his labor, and anyone who wishes to hire a neighbor must pay what that neighbor could earn working for himself. Let cultivation then extend to inferior lands.

Wages are no longer the average produce of labor but its produce at the point of lowest return, for that point must yield as much as labor could earn in hunting and fishing, or no one would work there.³ The man on the superior land gets more for the same exertion, but the excess is rent, and it goes to the owner, not to labor. If the margin sinks to lower and lower productiveness, wages must sink with it; if it rises, wages rise.³

The same margin measures rent. Rent is the excess of what labor and capital produce on any land over what the same application yields on the poorest land in use, or, which is the same thing, in the least remunerative occupation they freely engage in.⁴ The line of rent is the measure of the line of wages.¹ Hence progress that pushes the margin downward enriches the landholder and not the laborer.

When improvements make labor more efficient, and laborers press for employment on any terms, the margin of cultivation extends from 20, say, to 18. Rent rises by the difference, while wages and interest in quantity are no more than before, and in proportion to the whole produce are less.⁵ That is the whole secret of the enigma of progress and poverty.

Sources

1. Wages depend upon the margin of production, or upon the produce which labor can obtain at the highest point of natural productiveness open to it without the payment of rent.

   Progress and Poverty, Memorial ed

2. men will seek to gratify their desires with the least exertion

   Progress and Poverty, Memorial ed

3. They will be the average produce of labor at the margin of cultivation, or the point of lowest return. For, as men seek to satisfy their desires with the least possible exertion, the point of lowest return in cultivation must yield to labor a return equivalent to the average return in hunting and fishing.

   Progress and Poverty, Memorial ed

4. to say that rent will be the excess in productiveness over the yield at the margin, or lowest point, of cultivation, is the same thing as to say that it will be the excess of produce over what the same amount of labor and capital obtains in the least remunerative occupation.

   Progress and Poverty, Memorial ed

5. rent would be increased by the difference between 18 and 20, while wages and interest, in quantity, would be no more than before, and, in proportion to the whole produce, would be less.

   Progress and Poverty, Memorial ed