Capitalism and wages

When bosses and pundits bemoan the success of the $15 an hour minimum wage campaign here or in the US and argue that it will mean rising prices for commodities and services, businesses shutting down and workers losing their jobs, what they are essentially arguing is that workers should agree to sustain an economy based on their impoverishment.

As Karl Marx explained, wage increases don’t affect the prices of goods and commodities, they only reduce profit rates for capitalists.

Value, price and profit

Value, Price and Profit was a speech given to the First International Working Men's Association in June 1865. It was written between the end of May and June 27 in 1865, and was published in 1898.

Karl Marx was polemicizing against the viewpoint of John Weston that "(1) that a general rise in the rate of wages would be of no use to the workers; (2) that therefore, etc., the trade unions have a harmful effect".

One of the arguments was that increasing workers' wages would only result in an increase in prices and therefore make any wage gains ineffective. The other argument and the one of most interest to the capitalists was that an increase in wages across the board would decrease the profits of the capitalists and lead to all sorts of catastrophe.

To illustrate his point Marx talks about the introduction of the Ten Hours Bill in England in 1848: "It was a sudden and compulsory rise of wages, not in some local trades, but in the leading industrial branches by which England sways the markets of the world. It was a rise of wages under circumstances singularly unpropitious. Dr. Ure, Professor Senior, and all the other official economical mouthpieces of the middle class, proved, and I must say upon much stronger grounds than those of our friend Weston, that it would sound the death-knell of English industry. They threatened a decrease of accumulation, rise of prices, loss of markets, stinting of production, consequent reaction upon wages, ultimate ruin. Well, what was the result? A rise in the money wages of the factory operatives, despite the curtailing of the working day, a great increase in the number of factory hands employed, a continuous fall in the prices of their products, a marvellous development in the productive powers of their labour, an unheard-of progressive expansion of the markets for their commodities."

Marx locates the source of all profit – not in the fluctuations of commodity prices – but in the surplus value extracted from workers by capital. Under capitalism, Marx argues, it can seem like 'a fair day's wage for a fair day's work'. Nothing could be further from the truth.

As a worker you spend some portion of every day working to replenish yourself (and your family) – making enough money to cover what Marx calls the 'necessaries' of life: housing, clothes, food, etc. If it takes, say, the first half of the day to make enough wages to cover those necessities, the rest of your work day is essentially spent making profit for your boss.

As Marx puts it, the worker is essentially working for nothing for a part of the working day: "Although one part only of the workman's daily labour is paid, while the other part is unpaid, and while that unpaid or surplus labour constitutes exactly the fund out of which surplus value or profit is formed, it seems as if the aggregate labour was paid labour."

In this struggle between workers and bosses Marx locates a duty for working people to defend themselves against the encroachments of capital that prevent them from living truly human lives. When workers struggle for higher wages or against wage cuts, according to Marx, they are fighting to “set limits to the tyrannical usurpations of capital. Time is the room of human development. A man who has no free time to dispose of, whose whole lifetime, apart from the mere physical interruptions by sleep, meals, and so forth, is absorbed by his labour for the capitalist, is less than a beast of burden. He is a mere machine for producing Foreign Wealth, broken in body and brutalized in mind. Yet the whole history of modern industry shows that capital, if not checked, will recklessly and ruthlessly work to cast down the whole working class to this utmost state of degradation.”

Fight for $15

This still rings true today when you hear the testimony of workers – women, men, Black, Hispanic – who have been struggling in the Fight for $15, against some of the wealthiest mega-corporations in the world. Here is Derrell Odom, Iraq war veteran and KFC worker, currently earning $7.25 an hour, when he spoke in Atlanta for the $15 an hour minimum wage and for union rights: “I’m a man who came home after serving in Falujah and Ramadi and I can’t even put food on the table for my family. I can’t even afford to put a roof over my child’s head with the amount of money that I’m making. I don’t want my son to look at me like I’m something less because I have to work for $7.25 when I bust my butt every day and I take pride in what I do. We have a voice and we want it to be heard. We want $15; we deserve $15.”

Struggles in the public sector, where wages may be higher in some cases, are for similar aims. When governments argue that the money isn’t there for public sector workers, that workers have to tighten their belts, that workers shouldn’t be greedy - what they really mean is that they intend to keep public spending low in most areas, to permit continued spending on the military and wars (both here and in the US) and to allow the continuation of a benign tax regime for corporations and the rich.

Marx finished his speech this way, and his words are ones we should remember today:

“Firstly. A general rise in the rate of wages would result in a fall of the general rate of profit, but, broadly speaking, not affect the prices of commodities.

Secondly. The general tendency of capitalist production is not to raise, but to sink the average standard of wages.

Thirdly. Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class that is to say the ultimate abolition of the wages system.”