The Amendment of the Wage-Fund Theory and the Legalization of British Trade Unions in 1871

Before the Trade Union Act 1871 the legal position of trade unions in the United Kingdom was at best ambiguous, as in many ways they remained outside the law. At the same time, Political Economy maintained that, given a country’s stock of capital and the population of workers, any rise in wages would undermine profits and accumulation. This provided the rationale for politicians and industrialists to argue that wages were not negotiable and that collective action was illegitimate. In reviewing William Thornton’s defence of workers’ right to claim higher wages, John Stuart Mill accepted that the denial of the positive effect of trade unions on wages ‘is deprived of its scientific foundation’. Using evidence from debates in the Royal Commission on Trade Unions, 1867-69, this article examines the extent to which Mill’s acceptance of the economic argument in favour of trade-union collective action contributed to improving the legal status and role of unions in wage bargaining and to change in industrial relations.