Although non-monetary benefits remain an important component of most workers’ wages in today's industrial economies, development economists and economic historians tend to view such payments as a remnant of older, obsolete labour regimes. But when in-kind wages are assumed to be exploitative, an outcome of market inefficiencies, or simply the result of limited supply of coinage, their actual economic functions can be obscured. Once we drop the constraints imposed by such assumptions and look at the historical evidence, we are forced to confront the possibility that workers actually used them to their advantage.

In this article, I analyse how in-kind wages functioned in certain historical contexts, and conclude that available explanations are far too limited. As the historical cases studied show, the different forms of in-kind payments must be examined because those forms – not just overall wage levels – helped determine labour supply, social and occupational mobility, and even capital formation.

The goods and services that made up in-kind payments also provide a fuller understanding of gender wage gaps. Non-monetary wages gave workers options that cash wages did not, and so created and reproduced fundamental inequalities among different groups.

This article examines the business strategies employed by early twentieth-century Bombay mill owners in work organization and wage differentiation. The traditionally highly segmented and fluctuating domestic textile markets in India were further complicated by colonial free trade policies, making them highly competitive. This prompted Bombay mills to adopt various strategies, including maintaining a flexible workforce, product diversification, tailoring sales strategies to the Indian market, and increasing labour inputs, related to their heavy reliance on short-stapled Indian raw cotton. Using detailed and disaggregated data reported by textile mills in Bombay during the 1920s and 1930s, this article investigates how employers adopted these strategies in tandem with distinct wage-setting systems as management tools to depress the wage bill. By analysing the motivations behind the adoption of or resistance to these tools across different operations within the production process – such as weaving, spinning, reeling, and winding – the article reveals how gendered and social-class stratifications shaped these strategies and led to wage disparities across the industry. Ultimately, these labour-intensive strategies, conditioned by the broader colonial context in which India's textile industry developed, were at the root of the lower productivity of Indian workers, with long-run adverse consequences for India's general industrial development.