[OPE-L:1874] Re: Re: Re: Re: A Review of Lapides' Marx's Wage theory

Subject: [OPE-L:1874] Re: Re: Re: Re: A Review of Lapides' Marx's Wage theory
From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Thu Dec 09 1999 - 07:07:51 EST

Patrick L. Mason wrote:

> Ajit has done a great job of asking two important questions regarding
> Marx's (and Marxian) wage theory.
> 1. "How come a rising rate of unemployment be accompanied with a rise in
> real wages within a Marxist
> framework?"
> 2. "In addition to Marx's famous statement in his 1865 lecture (VPP) where
> he says '... the general tendency
> of capitalist production is not to raise, but to sink the average
> standard of wages, or to push the value
> of labour more or less to its minimum limit' (p.61); in *Capital 1* the
> whole of section 5 of chapter 25
> (68 pages in total) is devoted to documenting a declining tendency of
> real wages in England (for the period
> 1846-66) and Ireland (for the period 1860-65). Most interestingly, Marx
> puts a lot of stress on the
> deteriorating condition of housing for all strata of workers. Since
> housing constitutes a fair share of the
> real wage basket, the case for a declining tendency of the real wage in
> this period is very strong. Meek (1967)
> also agrees with our position in general, though he does not explicitly
> take into account the evidence I have
> alluded to above." (Sinha, Ajit 1998, *History of Economics Review* no.
> 28, summer, f.n. 1, p. 110)
> First, a minor correction. Marx wasn't simply concerned with unemployment,
> but with joblessness - that is, both underemployment and unemployment and
> nonparticipation. Nevertheless, to re-ask Ajit's question with
> "joblessness" substituted for "unemployment" makes it even more unlikely
> that real wages will rise.
> Second, within the spirit of Ajit's question, I will assume that all
> workers are equally skilled or equally unskilled. Without this assumption
> one could very easily move from the theoretical perspective that Ajit is
> concerned with to an empirical answer. For example, if allow differences in
> skill levels then it is entirely plausible that the employment and wage
> levels of (say) the least skilled are declined will the wages and
> employment levels of the more skilled are increasing. If the position wage
> and composition effects among the more the skilled out-weigh the negative
> wage and composition effects of the least skilled then the average
> unemployment (or joblessness) rate will rise even as the average (mean)
> wage rate is also increasing.
> Given these two caveats, here are my responses to Ajit's question.
> Question 1.
> At a given point in time, say during a given business cycle, Ajit is
> correct, that is, both real wages and joblessness will not increase. It is
> likely that real wages will fall as joblessness increases.
> Back to my simple model of Marx's wage theory
> 1. Average real wage = f(ability to pay, ability to make pay).
> With rising unemployment, the ability to make employers pay (bargaining
> power or the ability of workers to wage class struggle within the labor
> market) will decline or at least be non-increasing. Further, in a deep
> recession the ability to pay by employers will also decline.
> However, if we examine a series of periods, say 2 or 3 business cycles of 8
> years each, it is not necessary for the extent of joblessness to move one
> way or the other. It depends on whether the economy is experiencing a
> secular upswing, downswing, or secular stagnation. It also depends on
> what's happenning with the organization strength of workers, or more
> broadly, the social and historical conditions of workers.


Patrick, the time period I'm considering is not 2 to 3 business cycles but rather even
more than that (say 7 to 10). I think there is no disagreement on the issue that
during a business cycle the real wages goes up and down in accordance with the up and
down of the cycle. However, from a secular point of view, an ever increasing labor
saving technical change slowly increases the burden of what you call 'joblessness' on
the labor force which creates the downward pressure on real wages. You talk about
secular upswing, downswing or stagnation of the economy. Of course, Adam Smith (and
Ricardo as well) does the same. But all these authors agree that for a developed
capitalist countries a secular downswing is the only possible scenario; and that is
because in a developed capitalist countries the trend of the rate of profit is to
decline, and so a fall in the rate of accumulation must take place. Marx, as you would
recall, also believed in the fall in the rate of profit. So there is no scope for a
secular upswing in his long term scenario--it basically is a downswing scenario. So
from your own logic my argument should be correct.

> Question 2.
> Ajit's is suggesting that Marx's argument is
> 2. Average real wage = f(value of labor power).
> But, this isn't correct. Marx's argument is
> 3. Average real wage = f(value of labor power, social and historical
> conditions of workers).
> My simple model of Marx (equation 1) is a popularization of equation 3.
> So, Ajit is correct that technological change pushes down the value of
> labor power. But, technological changes also introduces new goods into
> workers' consumption bundle and it changes the condition of labor supply
> and labor demand.
> For example, technological change (and the accompanying accumulation and
> centralization of capital) forced the urbanization of America and other
> capitalist states. This process of urbanization and the expansion of the
> welfare state and the existence of union induced private pension funds lead
> to dramatic changes in family size. Notably, families have been decreasing
> in size for at least one hundred years. Urban children cost more than rural
> children because they produce less and they consume more. With the advent
> of pensions large numbers of children are no longer necessary for old age
> income. Children are less necessary for housework when both parents work
> because wash and wear clothing (no ironing) and the enormous infusion of
> technology into every facet of housework. With few children to care for and
> technological improvements in home work instruments (dryers instead of
> clothes lines), married women are now more likely to work than remain home.
> Hence, although technological change decreases the value of labor power the
> real wage real will not fall, unless we further assume that there are no
> changes in the social and historical conditions of workers (along with no
> changes in the intensity of labor and a number of other factors).
> This is my short response. A longer response is attached below.


Patrick, what you say above may be right. But marx generally assumed that the rate of
growth of population was positive and more or less fixed. If you agree with my answer
to question no.1, then both the other variables in your equation, competitive strength
of the working class as well as their socio-historical conditions are deteriorating
rather than improving. So my thesis should be right on the basis of your equation too.
Since I'm so pressed with work right now that i did not have time to read your longer
version. But I hope to hear what you have to say to my response to your short post.
Cheers, ajit sinha

> The value of labor power [VLP]= "the collection of use values [di, i =
> 1,2,...,n] consumed by workers and the unit values [li]of these use values
> [Slidi]."
> VLP = Slidi
> Each of these is socially determined and the average wage paid in each
> industry is derived from this socially determined norm. For example, both
> the nature and the extent of workers' consumption bundle are clearly which
> related to the bargaining power of labor, which is related to nonmarket
> employment opportunities.
> It is obvious that [di], the consumption bundle or standard of living, is
> socially determined. The average level of productivity combined with the
> class struggle between labor and capital as a whole determine [di].
> "However, it is not primarily the social nature of the standard of living
> of the working class that makes the value of labor power a socialized
> variable." (page 71). Given the standard of living, it is socially
> necessary abstract labor time of society as whole which determines [li],
> the unit values of the use values consumed by workers. These use values
> then depend upon the overall technological development of society via the
> social productivity of labor in each industry which produces workers'
> consumption goods and the means of production used to produce those goods.
> "The rate of surplus value exists first for capital as a whole, since both
> the working day and necessary labor time are determined at this level of
> analysis." (page 72).
> There are also two additional factors which enter into the determination
> of the value of labor value of labor power: (1) the cost of training the
> laborer; and, (2) the labor market participation of labor of women and
> children, which "makes a great difference in the cost of maintaining the
> family of the laborer, and in the value of the labor-power of the adult
> male." (Capital, volume I, page 569).
> VLP = Slidi + ljtj + g, where tj represents the commodities and living
> labor used to train workers and g represents the extent of labor market
> participation of women and children.
> Given the value of workers' consumption bundle, the cost of training, and
> the extent of labor market participation of women and children, the
> relative magnitudes
> of surplus value and the price of labor power (the wage rate) are
> determined by (1) the productiveness of labor; (2) the intensity of labor;
> and, (3) the length of the working day.
> WAGEk <== f(VLP, labor intensity, productivity, length of the workday)
> (wage rate for firm k)
> A workday of a given length and average intensity always creates the same
> amount value, regardless of the productivity of labor. Hence, a ceteris
> paribus increase in productivity of labor will lower the value of labor
> power (VLP) (if the productivity increase is for a wage good) and raise the
> mass of surplus value (S). It is precisely the reduction in the value of
> labor power which raises the mass of surplus value. (The amount of the
> reduction in V is exactly equal to the increase in S, but DV/V DS/S).
> However, the decrease in the value of labor power consequent upon an
> increase in productivity does not imply that the price of labor power
> (wage) will decline by the same amount of even decline at all. The lower
> limit of the potential decline in the wage is determined by the decline in
> the value of labor power; however, the actual extent of the decline is
> determined by the bargaining power of workers.
> Initial Situation New Situation
> 8 hour workday 8 hour workday
> (4 hours necessary labor, (4 hours necessary labor,
> 4 hours surplus labor) 4 hours surplus labor)
> Output = 80 units Output = 160 units
> l = 8hr/80q = 0.10 hr/q l = 8hr/160q = 0.05 hr/q
> lg = 2 hr/oz lg = 2 hr/oz
> p = l/lg p = l/lg
> = 0.10(hr/q)/2(oz/hr) = 0.05(hr/q)/2(oz/hr)
> = .05 oz/q = $5.00/q = .025 oz/q = $2.50/q
> (1 oz of gold = (1 oz of gold =
> 2 hr of labor = $100) 2 hr of labor = $100)
> VLP = l40q = 0.10*40 = 4hr VLP = l40q = 0.05*40 = 2hr
> V = 4hrs = 40q = $200 V = 2hrs = 40q = $100
> S = 4hrs = 40q = $200 S = 6hrs = 120q = $300
> total value = 8hr = $400 total value = 8hr = $400
> With sufficient bargaining power, workers may be able to keep their wages
> from falling to $100. The rate of exploitation (S/V) in the old and new
> situations is 1 and 3, respectively. If workers are able to keep the rate
> of exploitation at 1, then their wages in the new situation will remain at
> $200. Clearly, in this instance, wages have exceeded the value of labor
> power. Note however even if the price of labor power were to fall
> completely to its new lower limit, i.e., fall to $100, the amount of output
> that laborers would be able to purchase is unchanged. In both cases, the
> extent of the means of subsistence is unchanged. The fall in the value of
> labor power is accompanied by a decrease in the price of output; hence, the
> total mass of output workers are able to purchase in unchanged. Hence, an
> increase in productivity can provide the space for both an increase in what
> is commonly called the real wage (the money wage divided by the price level
> = units of output workers are able to purchase) and an increase in the rate
> of surplus value, even though the value of labor power declines with an
> increase in productivity (with constant labor intensity and constant length
> of the workday); whether real wage increases or remains constant however
> depends on the relative strength of labor and capital.
> An increase in labor intensity (above the norm) represents more abstract
> labor per unit of the day. Say the intensity of labor doubles. In this
> case, one workday represents 16 hours of abstract labor time rather than 8.
> If output also doubles, the unit value of output remains the same. (Unlike
> the case of an increase productivity where the unit value of output would
> be reduced by half). Hence, individual prices do not fall and the total
> money received from the sell of output will be doubled. Of course, with
> twice as much revenue wages can also increase but whether or not they do
> depends on the bargaining strength of labor. An increase in wages however
> does not necessarily imply that the price of labor power is above the value
> of labor power. "On the contrary, the rise in price may be accompanied by a
> fall in value. This occurs whenever the rise in the price of labor power
> does not compensate for its increased wear and tear." (page 575) If then we
> take an above average intensity of labor as an unpleasant working
> condition, Marxian economics does not suggest that workers will receive a
> compensating wage differential -- unless they are able to extract this
> differential because of greater bargaining power. Moreover, the maximum
> potential wage consequent upon an increase in labor intensity may not be
> sufficient to compensate for the increased wear and tear on workers.
> Finally, one can see that all firms will have a constant incentive to
> increase labor intensity -- especially those firms utilizing the most
> backward means of production.
> If the intensity of labor increases equally in all industries, this new
> higher level of intensity would become the normal and cease to have an
> impact on changes in the price of labor power and the amount of surplus
> value. "But still, even then, the intensity of labor would be different in
> different countries, and would modify the international application of the
> law of value." (page 576).
> Changes in the length of the workday also affect the extent of surplus
> value and the price of labor power. Shortening the workday leaves the value
> of labor power unchanged and therefore necessary labor time is unchanged,
> but surplus labor time is decreased. Capital will be worse off unless they
> are able to lower the price of labor power. An increase in the length of
> the workday (if it isn't too great) will provide space for a rise in the
> price of labor power along with magnitude of surplus value can increase.
> However, an increase in the length of the workday may cause the value of
> labor power to fall below the price of labor power, even if the price of
> labor power has remained unchanged or risen slightly. The longer workday
> implies an above average amount of wear and tear on the worker. This
> greater wear and tear can be compensated for by higher wages, up to a
> certain point. However, "beyond this point the wear and tear increases in
> geometrical progression, and every condition suitable for the normal
> reproduction and functioning of the labor power is suppressed. The price of
> labor power and degree of its exploitation cease to be commensurable
> quantities." (page 578)
> Summarizing, Marx's argued that international differences in wage rates
> (and hence also intra-national wage differentials) may occur because of
> differences in :
> 1) the price and extent of the average worker's household consumption
> bundle as historically and socially determined; 2) the cost of training the
> laborer; 3) the part played by the labor of women and children; 4) the
> productiveness of labor; 5) the intensity of labor and the length of the
> workday; 6) nonmarket employment opportunities.
> We have shown that wages, the price of labor power, in Marx' s model are
> regulated by the value of labor power (Marx, 1906, 1977a, 1977b). In turn,
> the value of labor power is determined by the value of the commodities that
> are necessary to sustain the laborer and her family at the socially and
> historically given level of subsistence.
> Consistent with classical analysis, the wage rate does not reflect the
> relative scarcity of labor in the economy; it represents the costs of
> reproduction of labor power--which are inseparable from the costs of
> reproducing the worker. Although the average wage rate cannot exceed the
> average rate of productivity (for a sustained period of time), there is no
> automatic relationship between the general wage rate and the average level
> of productivity; an increase in productivity will secure a wage increase
> only if workers are sufficiently organized to force capital to grant an
> increase in compensation. Additionally, recent developments in economic
> theory have also shown that there is no monotonic relationship between
> individual wage rates and individual rates of productivity (Sraffa, 1960;
> Eatwell, 1983; Nell, 1980).
> However, the average level of productivity does provide an upper bound for
> the general wage rate. One effect of technological change is to raise this
> limit and thereby create additional space for the general wage rate to rise.
> So, the value of labor power determines the average wage rate;
> fluctuations in supply and demand cause the market price of labor to
> oscillate around the long run supply price of labor power. Inter- and
> intra-industry expansions or contractions in output are responsible for the
> allocation of workers across different capitals in the economy.

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