This week I came across some more examples:
1. Workers destroy their own human capital. Smith notes that workers who are paid for piece-work labor harder than those who work for a salary. Incentives matter. But Smith goes on:
Workmen, on the contrary, when they are liberally paid by the piece, are very apt to over-work themselves, and to ruin their health and constitution in a few years. A carpenter in London, and in some other places, is not supposed to last in his utmost vigour above eight years. Something of the same kind happens in many other trades, in which the workmen are paid by the piece….
The solution is an imposed limit on overall pay or work hours:
[W]hen soldiers have been employed in some particular sorts of work, and liberally paid by the piece, their officers have frequently been obliged to stipulate with the undertaker, that they should not be allowed to earn above a certain sum every day, according to the rate at which they were paid. Till this stipulation was made, mutual emulation and the desire of greater gain, frequently prompted them to over-work themselves, and to hurt their health by excessive labour…
If masters would always listen to the dictates of reason and humanity, they have frequently occasion rather to moderate, than to animate the application of many of their workmen. It will be found, I believe, in every sort of trade, that the man who works so moderately, as to be able to work constantly, not only preserves his health the longest, but, in the course of the year, executes the greatest quantity of work (Wealth of Nations, I.viii, p. 100 in Liberty Fund edition, emphasis added).
In the passages above, Smith argues that a) incentives matter; and b) that workers are irrational and don't understand their own interests. If they did, they would moderate their efforts so as to produce over the course of a year and preserve their mental and physical health. A caring and wise employer has more time to study these matters and should moderate work efforts!
Note that Smith never says the employer is smarter than the worker—Smith is an egalitarian. Rather, he argues that some people's circumstances give them greater freedom to study and to learn things. The poor are too overwhelmed by hard labor to take on more study:
It is otherwise with the common people. They have little time to spare for education…. As soon as they are able to work, they must apply to some trade by which they can earn their subsistence. That trade too is generally so simple and uniform as to give little exercise to the understanding; while, at the same time, their labour is both so constant and so severe, that it leaves them little leisure and less inclination to apply to, or even to think of any thing else…. the common people cannot, in any civilized society, be so well instructed as people of some rank and fortune…. (Wealth of Nations, V.i.f, pp. 784-5 in LF edition).
So Smith is an egalitarian who is still an elitist—some people do know better than others because they have both the leisure and wealth to acquire experience and wisdom.
2. Workers may not appreciate the value of education. Hence, some minimum mastery of education can be imposed by government:
The public can impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education, by obliging every man to undergo an examination or probation in them before he can obtain the freedom in any corporation, or be allowed to set up any trade either in a village or town corporate (Wealth of Nations, V.i.f, p. 786 in LF edition).
This is essentially an education mandate. Part of Smith's insistence for the education mandate has to do with his belief that maintaining a free society requires a standing military. To make this function the society at large must embody the "martial spirit" that allows the military to operate. If society does so, a smaller standing army can be maintained than otherwise.