When are wages recovered?

Alan Freeman (a.freeman@greenwich.ac.uk)
Sat, 24 Jan 1998 23:33:52 +0000

Juriaan's 'cost of unproductive labour' (Thursday 22 Jan, 20:27) helps the
discussion forward by re-raising the question of the period in which
payments are made and value is consumed. I think his point is valid, but I
think that some confusion might arise by confining the question to the
wages of unproductive workers alone.

He writes:

"unproductive workers aren't paid out of, or part of, currently produced
surplus-value, and consequently that their wages should not be regarded as
a component of surplus-value in the account"

But in general no workers are paid out of currently-produced value, and no
part of capital comes from currently-produced value. Everything has to be
produced before it is used, and everyone has to receive their revenue
before they can spend it. So one might legitimately write

"productive workers aren't paid out of, or part of, currently produced
value, and consequently that their labour-time should not be regarded as
a component of value in the account"


"constant capital isn't purchased out of, or are part of, currently
produced value, and should not be regarded as a component of value in the

I think that all three of these are correct statements, in the strict
sense: they tell us that goods consumed in the current period cannot be a
part of the value product of the same period. But this isn't a special
feature of unproductive activities: it applies to the whole value

I would be both electrified and gratified if everyone who agreed with
statement (1) could take the next logical step of agreeing with statements
(2) and (3).

However, we can look at it the following way, accepting Juriaan's prior
point. Having conceptually assembled, as it were, all the output of the
previous period and added up its value, we can certainly identify what the
sales receipts (which are equal to this value in total) will be spent on in
the next period. A certain part of them will go on buying inputs for the
next period of production, a certain part on the wages of the next period,
and the rest on the revenues of the capitalists. Call these sums (for
arguments' sake) C, V and S. Suppose these to be $200, $300 and $100 to fix

In that case, the NIPA production accounts (expanded to include
intermediate inputs) for that period would read:

Intermediate consumption $200
Wages $300
Profits $100
Total output $600
Less intermediate goods ($200)
Personal revenues $600

If we wish to re-cast these same figures on the assumption that only labour
is productive of value we would write:

Intermediate inputs $200
Value added by labour $400
Total output $600
Less intermediate goods ($200)
Personal revenues $400
Less transfers to property ($100)
Revenue of the workers $300

Now suppose that with this $100, the capitalists hire some private servants
and pay them #50.

In that case, a sector break-down of the capitalists expenditure for this
period would read

transferred from workers $100
Total $100

Servants $50
Luxuries $50
Total $100

The following problem appears: isn't the $50 also income of the workers?
Yes: the sector breakdown of workers' expenditure reads:

production wages (remainder
after transfers to property)$300
servant's wages $50
Total $350

Means of subsistence $350
Total $350

What is this money spent on? First of all, when is it spent? In this case
I don't think it is wrong to conceive of it as spent in the same period.
Money effects the circulation of the goods, not their production.
It is reasonable to conceive that someone sells one thing, and buys
another, in the same period because there is no theoretical lower limit
on the time of circulation, unlike the time of production.

Moreover, in circulation each sale is also a purchase, so in point of
fact it is the same goods that are both sold and purchased.

So the money from sales is spent on the same goods for which we have just
allocated the monetary equivalent to sector accounts. It must therefore
add up to the same.

Total expenditures are made up as follows:

Spent by capitalists on intermediate
goods (not from personal revenue) $200
Spent by capitalists on Luxuries $50
Spent by unproductive workers $50
Spent by productive workers $300
Total $600

These are identical, and there is no problem, that I can see. The servants
are entirely paid out of revenue, and we have accounted for their wages,
and for all expenditures. Each payment appears only once as a payment and
every good is purchased only once. There is no double-counting.

There *is* no problem.

The apparent problem arises from the fact that NIPA educates us to assume
that the value added by the various factors of production will be equal to
the income that these factors receive. We therefore subconsciously tend to
imagine that the figure for wages must be equal to the figure for the
income of the workers. But this is because NIPA incorporates the prejudice,
which comes from neoclassical theory, that the value contributed to output
by each factor is equal to the income it receives.

Total wages are equal to the sum of productive wages and unproductive wages
but this is not the same as the figure in the NIPA accounts for 'wages'
because in reality, the NIPA figure that is called 'wages' really means
'value added by workers'.

You may say 'but you have omitted to include, in the account that you gave
of total expenditures, the $50 that the capitalists spent on the servants'.
Just so, because this is an expenditure on a person, and the expenditure
accounts omit all expenditures on persons. It is the same, for example, as
if I give you a birthday present of $10. This is an expenditure of mine and
a receipt of yours but it does not appear in the expenditure accounts or
the factor income accounts; it is a revenue transfer.

However, we could, if we wished, account even for this and it might be more
complete to do so.

Strictly speaking the output of every period includes not only the material
value-product of $600 but the newly-reproduced labour-power also, which is
reproduced by the working class itself. This total amount of labour-power
presenting itself for sale has a cost of $350, since it includes the

This is paid for in two parts.

The first part, wages of productive workers =$300, is purchased out of the
total sales receipts of the previous period (now $600 + $350 = $950). Since
this has to be paid by the capitalists as part of their responsibilities to
their businesses (and is probably paid by their businesses as distint from
them personally), it does not enter their personal revenue and in this
sense and only this sense it is like an intermediate cost: it is a part of
the necessary expenses that the capitalists have to make as a result of
having produced in the previous period.

The second part, unproductive wages = $50, is also paid out of total sales
revenue but appears in the accounts as a part of the capitalists' revenue.

You are not obliged to present the accounts in this way, but that isn't
what I'm asking for. I'm asking for you to recognise that the way I have
done it is consistent and possible, even though you don't agree with

If not, why not?