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Wage Decline under Capital: Wage-Labor and Capital, pt. 3

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This is the last post of a three-part series on Marx’s “Wage-Labor and Capital,” chapters 7-9. For other parts in the series go to the series page. This post covers how capital deleteriously affects all classes with producing a declining wage.

 

What Determines the Rise and Fall of Wages and Profit?

Capitalists must replenish the wage with profit. Therefore, the price of their commodities must account for replenishing raw materials, the wear on tools, wages, and profits. As profits rise, Marx argues, wages fall, and vice-versa. I admit, I don’t fully understand this point of Marx, but I assume it reflects the relation of the two. This doesn’t mean that literally if one goes up, the other goes down; it is relative. E.g., if the profits of capitalists go up, wages can go up also, but not at all in the same ratio.

If profits increase disproportionately to wages, the profits as a fraction take up more of the pie than wages. Let’s say a capitalist gains a technological advantage over his competitor capitalists. He can then produce more for the same production cost, thereby gaining more profit than his competitors. This helps consumers but not workers. Consumers get cheaper products- at the expense of workers.

 

Capital and Wage-labor Are Necessarily Opposed

Rapid increase of profit necessarily involves the rapid decrease of the power of the worker’s wage. The more a worker produces, the more crumbs he gets from the bigger pie of the capitalist, as just mentioned. At the same time, capital requires more workers to work capital. The workers are ever dependent on capital. While wages do increase as capital expands, it can’t possibly keep pace with the rate of capital profits.

Now, the existence of multiple capitalists increases competition between them. Wins come through selling a product cheaper, but gaining more of the market share as well as looking for more markets for the cheaper product. Productive power increases as more innovations impact technology and labor is divided into smaller, simpler tasks.

 

Effect of Capitalist Competition on All Classes

Capitalists seek to best their competition through further division of labor and new machines to offset the equalization of the playing field by all capitalists obtaining the same machinery. As labor divides and divides into smaller, simpler tasks, competition becomes fiercer between workers, and wages go lower. Why? Because the buyer (capitalist) has the advantage: there are more sellers (workers) than buyers. Good old supply and demand. The worker must do more in the same amount of time or work longer hours. However, the more the worker’s output, the less return on his relative wage.

Economists maintain that as one sector of labor recedes, a new sector will arise to replace it. However, Marx argues this applies to the class, not to each laborer in the class. E.g., the young have more of an advantage in acquiring new skills to be productive for a longer time (and at less pay) than their older counterparts. Marx even complains that the bigger productivity gained through technological innovation replaces the natural strength of men with a woman and three children. This wouldn’t be so bad if workers were in control of the means of production. Fact is, they aren’t.

Again, as more product is made, the more markets are needed to exploit. If the capitalist can’t exploit new markets, he can’t continue to make profit. Marx questions, however, what happens when there are no more markets to exploit. This is one of the contradictions of capitalism.

 

This is where Marx rather abruptly concludes the work. As technological innovation moves at a quicker pace, profits increase for the capitalists, and for a short period, to the workers.

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