Definition
Subsistence in Smith's framework is the bundle of food, clothing, lodging, and other necessities required for a worker to live and to raise the next generation of workers. It sets a long-run floor under wages — wages below subsistence cause the labouring population to shrink, which raises wages back to the floor; wages above subsistence support population growth, which eventually returns wages toward the floor.
Smith is careful that subsistence is not a fixed biological minimum. It includes whatever the customs of the country make decent: in Scotland, leather shoes; in his England, a linen shirt. The level rises as a society grows wealthier.
Why it matters
How it works
Smith's mechanism is demographic. When wages are high, workers can afford to marry younger and raise more children to adulthood; the labour force grows over a generation. The growing supply of labour eventually drives wages back down. When wages are low, marriage is delayed, more children die in infancy, and the labour force contracts; the shrinking supply eventually drives wages back up. The system has a homeostatic property, with subsistence as the natural anchor.
The implication is dynamic, not static. In a growing economy, where capital accumulates faster than the labour force can expand, wages stay above subsistence for sustained periods. This is the condition Smith associates with rising standards of living — North America in his time, where wages permitted "a plentiful subsistence" and population doubled in a generation. In a stagnant economy capital does not grow, so wages remain at the floor.
The framework was systematized by Malthus and Ricardo into a sharper "iron law" of wages, then partially relaxed by later economists as productivity growth began to lift living standards in ways Smith's mechanism alone did not predict. The contemporary concept of a living wage, the legal minimum wage, and discussions of basic-needs budgets all sit downstream of Smith's original framing.