Monday, 10 February 2014

Wages

Wages are the phenomenal form of the value of labour-power. In other words, they are a superficial appearance of the underlying reality, that is not discernible without further analysis. To make an analogy with physics, when we see something red, this is merely an appearance that hides the underlying reality. “Redness” is not a quality of the object we see. The object appears red, only because its physical make-up reflects light in that part of the spectrum, which our brain interprets as red. For example, we see a red sky at night, because at that time of day, sunlight has to pass through more atmosphere, and particles in the atmosphere filter out more of the light in the violet end of the spectrum, leaving us to see more red light. In the same way, when we look at pictures on a TV or computer screen, all of the range of colours we see are in fact nothing more than the combination of pixels of red, blue and green light combined in such proportions as to convince our brain that it is seeing these other colours.

What capitalists actually buy from workers is not labour, or the product of labour, but a commodity, labour-power – the power to perform labour. Its value, like that of any other commodity is determined by the labour-time required for its production. In this case, the labour-time required to reproduce the worker themselves, as labour-power cannot be separated from the physical being of the worker. That is the labour-time then to produce the food, clothing, shelter, education and other requirements of producing the worker. But, the form that the payment for the purchase of this commodity takes is wages, which appears to be not a payment for this commodity, but a payment rather for the labour that the worker undertakes. Particularly because, under Capitalism, as opposed to pre-capitalist, commodity production, commodities are sold at market prices, rather than at exchange values, and these prices appear to result from the interaction of supply and demand, the wages paid to the worker appear to be determined by nothing more than the demand and supply for labour. In a sense, as with the market price of any other commodity, this is true, but it is impossible to understand the real situation simply on the basis of this interaction of supply and demand, precisely because both of these are also simply a superficial reflection of the underlying reality. Supply is determined by value, whilst demand is determined by use value.  As with the market price of any other commodity, then wages can fall below the value of labour-power when the demand for it is low, and can rise above it when the demand for it is high.  As Engels puts it in setting out the limited role that trades unions can play,

The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”


Even though some workers wages are very
high, the demand for their labour-power is
very high, because it can produce even larger
amounts of surplus value for the capital that
employs it.
The value of labour-power, as with any other commodity, at any moment in time, is an objectively determined quantum equal to the labour-time required for its production. As with any other commodity, what the buyer of this commodity does with it, after purchase is entirely their business. If I buy an apple, the seller of the apple is not bothered whether I eat it, use it as a model to paint a picture of it, or just forget about it, and leave it to rot. Whatever the purpose, the seller will expect me to pay the same price for it, according to its value. If any commodity cannot be sold at a price at least equal to its value (or under Capitalism its price of production) then its supply will be reduced. The same is true with labour-power. If the value of labour-power is equal to 5 hours, that remains the case whether the worker is employed for 2 hours, 4 hours, 6 hours, or 10 hours. Obviously, it makes a difference to the capitalist, however, because they only buy labour-power in order to produce a surplus value. Although, different types of concrete labour produce commodities with different use values, it is only the consumer of those commodities for whom that constitutes a use value. The producer of furniture is not interested in its use value, but only in being able to make a profit from selling it, i.e. in its exchange value. They are equally not interested in the use value of the concrete labour of the carpenter, but only in the use value of labour-power to be able to produce new value and, therefore, surplus value. Their demand for that labour is then a function of the extent to which that labour-power can produce such surplus value for them.

If they buy labour-power at its value of 5 hours, they need to employ it producing new value for more than 5 hours, in order to produce that surplus value. The longer it can be employed, the greater the surplus value produced. However, this is true only within limits. If workers have to work for too long, or too intensively, then just as happens with a machine, they will suffer additional wear and tear. A car driven at high speed for prolonged periods, at the very least will require more fuel than one driven at cruising speed, and at worst damage will be done to its engine, so the cost of running the car will be higher than normal. The same is true with the worker. There is a “normal working day” rather like a cruising speed for a car, which represents the length and intensity of work that the average worker can perform without it affecting their normal lifespan, or requirements. Whilst, working for less than this normal working day, does not change the value of labour-power, therefore, working above it does. Above this normal working-day, workers at least need more food to replace the additional energy they exert, they may need additional healthcare to deal with any damage to their health caused by the additional exertion, and so on. In addition, because the value of labour-power is calculated over the average life of the worker, but recompensed over the working-life, the shorter that working life, the higher the value of labour-power for every hour worked.

At the start of the process of industrialisation, because large supplies of labour-power are available, capital tends to use it wastefully, because it can be had cheaply, and even if it is used up, there is plenty more to simply replace it. Marx quotes the British MP, William Ferrand, who cited in a speech in the House of Commons, that at the start of the 19th century, British textile capitalists had used up 9 generations of workers in the lifetime of just 3. Where prior to industrialisation, the average worker had a lifespan of around 50, at the start of the 19th century it fell to just over 20! So, a struggle between workers and capitalists takes place to determine the length of this normal working day, and in the end, capital itself recognises that its in its own interests not to go beyond it – though this tends to be a recognition at the level of “capital in general”, i.e. of its “Executive Committee”, the state bureaucracy, rather than at the level of “many capitals”, as each firm tries to obtain its own advantage. Its only in the second half of the 19th century, when big industrial capital, as Engels describes, turns to the extraction of relative surplus value, and sees these “penny-pinching measures” of earlier times, as counter-productive, that individual capitals adopt this view. Even then, in times of stagnation, when the potential for extracting additional relative surplus value becomes limited, and when labour-power is once more abundant, even these big capitals are not averse to reverting to these earlier methods of extraction of absolute surplus value.

As a result of this process, as Marx sets out, a normal working day is established, and additional payments are made for any labour performed in addition to it. So, for example, where work is done on the basis of piece-rates, any work undertaken that is more intensive than the average is compensated in a higher piece-wage, and sometimes in various forms of bonus. Where work is paid as time-wages, then any work done above the normal working-day is considered over-time, and an additional overtime payment is made. But, as Marx points out even where such overtime payments are made at premium rates – for example, at double time – this can still represent a fall in real wages, if the wear and tear on the worker, as a result of this additional work, increases the value of labour-power by a greater proportion.

But, the fact that these wages are really simply a price for the purchase of the commodity labour-power, is hidden by a number of factors that make it appear that what is being bought is a certain quantity of labour. In the process, this hides the fact that in buying labour-power, and then using it to produce a greater amount of new value than was expended for its purchase, this labour-power produces surplus value appropriated by capital. In reality, therefore, although it appears that capital buys labour for a certain number of hours, and pays for it for all of this time, the labour performed is made up of two components – a number of hours of labour equal to the value of the labour-power bought, and a number of hours of labour equal to the surplus value produced. Although, capital buys the commodity labour-power at its full value, looked at in terms of the labour performed it pays for one part of the working day, and receives the other part of the working day as a free gift from the worker. 

The recognition of this fact was implicit in the arguments put forward by manufacturers against the Ten Hours Act, and theorised by the economist Nassau Senior – Capital I, Chapter 9. It suggested that during 10 hours of the day, workers simply reproduced the value of the costs of production, and that, therefore, it was only in the last hour of the day that profits were made. But, in fact, as presented this argument is nonsense, and remains so in its modern variants. Its nonsense in part, precisely because of the fact that workers are paid for their labour-power in the form of wages. In other words, if the value of labour-power is £1,000,000 over the average life of a worker, capital does not buy this labour-power by handing over £1 million to the worker in advance. It does not even hand over £25,000 in advance to cover those costs for a year. The wages paid to the worker are usually paid in arrears, and are broken down into an hourly, daily, weekly or monthly wages in the case of time-wages, or an amount per piece in the case of piece wages. This indeed, is one reason that it appears that wages are a price for labour for a particular period or a particular quantity of labour provided.

If it were the case that workers were paid for their labour-power, and the value of this was equal to 10 hours of labour-time, then its true that if they continued to be paid that amount of money, but worked only 10 hours, there could be no surplus value produced. But, workers were paid hourly wages, so that if they were paid £0.05 per hour, their daily wage for a 12 hour day was £0.60. If the working day was reduced to 10 hours, their wage would fall to £0.50. But, in each hour, this would still be divided into a portion of the hour that was new value that replaced the workers wages, and another portion that was surplus value. Moreover, as Marx pointed out the argument was also false because, a portion of the costs of production was comprised of the costs of means of production. If the working-day were shorter, less of these would also be used, so the cost of production would fall. The proportion of each day, hour etc. that was made up of simply reproducing the value of wages, was then grossly overstated.

But, the fact that wages are paid by the hour or by the piece suggests that what capital is buying is labour for that duration, and that wages are then a price for labour for that period or amount of work. This impression is enhanced by the fact that if workers work part-time, therefore, their wages fall proportionately. But, the appearance is undermined in relation to piece wages, when productivity rises. The impression is given that workers are paid a wage for a particular quantity of work performed. For example, they may receive a piece wage of £0.01 for every 1000 pieces produced. If on average they produce 5000 pieces per hour then their wage will work out at £0.05 per hour, the same as with time wages. But, if productivity doubles because of some new machine, they will produce 10,000 pieces in an hour and their wage will rise to £0.10 per hour. So, wages would double whilst the value of labour-power has remained constant. Capital then seeks to reduce the price paid per piece, which undermines the notion that this price is for a particular amount of labour provided.

In fact, although wages are described as the price of labour, this statement is meaningless. Labour is the measure of value. So it cannot be a measure of itself. The value of anything is expressed as so many hours of labour. It is a meaningless tautology to say then that the value of 10 hours of labour is 10 hours of labour! It was because Adam Smith and his successors confused labour and labour-power that they became embroiled in an irreconcilable dilemma as to where surplus value came from, because if workers work for 10 hours and are paid in exchange the equivalent of 10 hours of labour, the value they receive in wages is equal to the new value they create, leaving no possibility of any surplus value.

But, its clear why a contradiction arises between this payment of wages, and the value of labour-power. Because capital pays wages on the basis of the purchase of labour-power for a particular duration, workers can only reproduce their labour-power, if they work for the duration of the normal working-day, and indeed if they are employed for the normal working-week, year etc. If the normal working-day is 10 hours, which ensures that the wages paid for that time equal the value of labour-power for a day, then if the worker is only provided with 8 hours work, their wages are insufficient to ensure the reproduction of their labour-power. We see that today with workers who are under-employed, on zero hours contracts etc., and who therefore are dependent upon welfare to make up the difference. Without that, the consequence is that the reproduction of labour-power does not take place. Ultimately the supply of labour-power (either in quantity, quality or both) falls, until eventually the reduced supply forces wages up.

Of course, wages are only forced up under such conditions if the supply of labour-power is not sufficient to meet the demand, and the demand depends upon the extent to which the labour-power can produce surplus value for capital i.e. to the extent that it provides use value to capital. If it is not great, demand will be low. This creates a contradiction. The excess supply of labour-power reduces wages, possibly even below the value of labour-power. In order to raise their wages, workers with jobs are prepared to work additional hours, which has the effect of raising the supply of labour-power relative to the demand even further. Unemployment then rises, because with each worker working more hours, to compensate for their low hourly rate, any given amount of labour-power is provided by fewer workers, leaving more workers without jobs.  So, the contradictory situation arises that with low wages, rather than it reducing unemployment as neo-classical economists argue, it has the effect both of increasing overwork, and of increasing unemployment at the same time! A similar situation arises where the supply of labour-power is increased by raising the retirement age, so that elderly workers have to keep supplying their labour-power for several more years than previously. Not only are workers then expected to work more hours, but to work more years, at the very time when there is record levels of youth unemployment.  It results in a fall in wages, and rise in profits.

There is then a clear difference between wages, which are the phenomenal form of the value of labour-power, which is the case with wage labour, and the exchange of the products of labour, which is typical of pre-capitalist production. The wage labourer sells their labour-power at its value, but then creates new value by working for a specified length of time. A condition of their employment is that the new value they create is in excess of the value of their labour-power. The excess constitutes the surplus value appropriated by the capitalist. By contrast, the individual producer, does not sell their labour-power, but the product of their labour - that is true also when that product is some kind of service. By definition, the value of that product is equal to the labour-time expended. All of the labour-time expended by the individual producer, therefore, obtains an equivalent amount of value in return, but only a portion of the labour-time expended by the wage worker is returned to them, in exchange, another part of the labour-time they expend is unpaid.

It might be wondered why then the individual producer would provide this unpaid labour. The initial reason is that where these producers are separated from ownership of the means of production, the only way they can survive is by becoming wage workers. The capitalist can continue to live off their capital, but the wage worker can only survive by working. Capital then always has the whip hand. A condition of allowing the wage worker to work is that they work for part of the day unpaid. But, once Capitalism becomes established, a further reason exists, as can be seen in many modern, industrialising economies. Capitalism is thousands of times more efficient than peasant production. As a consequence, the standard of living it can offer to peasants, even as they work for a large part of the day unpaid, and providing large profits for capital, is far in excess of the standard of living they could provide for themselves. Leaving the poverty of the countryside, to become an exploited wage worker in the town, therefore, is a rational economic choice for millions of peasant producers to make.

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