[OPE-L:1627] Re: Re: technical change and real wages

Subject: [OPE-L:1627] Re: Re: technical change and real wages
From: michael a. lebowitz (mlebowit@sfu.ca)
Date: Mon Nov 01 1999 - 14:29:53 EST

Hi Ajit,
        Sorry for taking so long to respond. Things piling up again.

At 05:37 PM 10/26/1999 +0530, Ajit wrote:
>Mike, I have two fundamental questions, and unless I have the answers to
them I have
>a feeling that we will keep beating about the bush. You begin your
analysis by taking
>a certain amount of money wages as given. My first question is, how was
the money
>wages determined in the first instance? Secondly, it seems to me that you
think that
>wages are determined ex-post, that is after the harvest the net output is
>into real wages and profits according to the relative strengths of the two
>This could be okay for Sraffa's model but I have not come accross any
reference in
>Marx were he includes real wages in surplus. What is your reference for
such an
>interpretation? By the way, what is *relative* wages?

        I had written that "only a rise in the *relative* wage or a fall in the
rate of surplus value" rather than a rise in real wages implies an increase
in the bargaining strength of the working class. Marx defined relative wage
in "Wage Labour and Capital" as wages relative to capitalist profits so I
was treating the two as expressions of the same situation.
        I don't think I understand why you find in my argument an ex-post
determination of wages. It certainly isn't conscious but maybe you see it
as implicit? As for your first question, let me try to answer it this way,
which hopefully will bring out better the point I was trying to make here
and in my book. Let us begin with a money wage set by class struggle,
supply and demand in the labour market or whatever. And, let us assume it
has been stable such that a certain set of needs that workers have been
able to satisfy has come to be deemed as "necessary needs". So, we might
say, then, that the value and price of labour-power are equal in this
situation. This, I think, would correspond to your starting point.
        Now, let us introduce a productivity increase in the production of wage
goods. We can distinguish two cases: (a) where the gain drops from the sky
and (b) where the impetus is the result of an increase in the technical
composition of capital-- eg., introduction of machinery in place of living
labour. In both cases, we posit a fall in the values and money prices of
wage goods.
        I had earlier stated:

>> Effectively, you ask-- wouldn't money wages, however, be driven
down by
>> the situation in the labour market to the point where all the gains from
>> productivity increases are captured by capital (and in the limiting case to
>> the level of bare subsistence)? This is what I take your point about
>> "sticky wages" to mean.

        You replied:

>I had meant that you were assuming sticky money wages, i.e. even when the
prices of
>wage goods change, the money wages remain the same. The question is why
should that

        Considering case (a), why-- in the absence of displacement of workers by
machinery-- would money wages fall with falling money prices of wage goods?
There are a number of possible explanations, including:

(1) demographic-- falling wage good prices allow increased population,
which leads to falling wages. (We know Marx rejected that one--- in terms
of its efficacy if nothing else.)
(2) aggregate demand-- falling wage good prices mean workers in general
save which means the general level of output falls; this continues until
wages are driven down and workers spend what they get (cf. discussion in
Grundrisse, Vintage edition, pp. 285-6). This assumes fixed needs on the
part of worker--- Marx's working assumption in Capital.
(3) capitalist power-- capitalists recognise that money wages can be driven
down (presumably without reducing the reproduction of the working class)
and therefore do so. Implicit here is that capitalists are always able to
do so, and thus wages are at physiological subsistence plus what is
necessary to ensure the production of workers with the desired skills.
        Common to these explanations is that there is no need to displace workers
through machinery (and thereby to increase the degree of separation among
them): the price of labour-power gravitates to the value of labour-power,
and real wages remain constant despite falling prices of wage goods. In
contrast, the argument I was making is that *once we remove the assumption
that needs are fixed* (and further acknowledge that workers at any given
point are not able to satisfy all their socially generated needs-- ie., are
not at their bliss point), then ceteris paribus the effect of falling
prices of wage goods is that workers consume more. To the extent that this
condition prevails over time, this new set of needs realised becomes
accepted as customary, as "necessary needs", and in this respect the value
of labour power itself adjusts. Accordingly, productivity increases that
drop from the sky would *not* be sufficient to lead to the generation of
relative surplus value (although that is the way the subject is presented
in Capital); rather, the displacement of workers via the introduction of
machinery (i.e., case (b)), thereby driving down money wages, would be the
necessary condition for relative surplus value. Further, I argued that the
extent of the decline in money wages (and thus the determination of real
wages) in this case depends upon the degree of separation among workers--
ie., class struggle.

>Usually in the real world a general inflation accomplishes what in theory
a fall in
>money wages would do. The point one needs to think about is on what
account workers
>could win higher wages when rate of unemployment is rising. The technical
change that
>has made the wage goods cheaper has also at the same time made the workers
weaker by
>throwing them out in the street.

        I think we are in agreement here. What I am not certain about, however, is
whether in the absence of throwing workers out of work via technological
change you see a reason for real wages not to rise if wage goods are
cheaper--- and, if so, any of the above three explanations represents your

>The question is why didn't these organized workers get the higher real
wages earlier?
>Are you saying that before the technical change the surplus was pushed to
the minimum
>acceptable level for the capitalists? My general sense is that you seem to
think in
>terms of some sort of 'social accord' that took place between the
capitalists and the
>workers in the 20th century in advanced capitalist countries.

        An interesting point. No, I definitely do not assume (and never have
assumed!) a social accord, a capital-labour compromise, etc. Rather, I
simply assume that at any given point there is a certain balance of class
strengths (which I designate as the degree of separation of workers) and it
is this that permits workers to get some portion of the gains from
increases in social productivity. If we assume that conditions are such
that workers cannot, then isn't that the same as assuming (as in #3 above)
that capital is strong enough to drive the wage to physiological
subsistence (and then some)? Why would we talk, then, about the historical
and social element (which can rise or fall) in the value of labour power?

 But this is not a model
>on which either Marx's theory of wages or his notion of class struggle
works, in my
>opinion. Cheers, ajit sinha


Michael A. Lebowitz
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6
Office: Phone (604) 291-4669
        Fax (604) 291-5944
Home: Phone (604) 872-0494
        Fax (604) 872-0485
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