Daniel Cotton looks at Marx’s 1865 pamphlet Wages, price and profit, explaining where profit comes from and its relationship to wages and the prices of commodities
Why should we fight for higher wages? On one level, the answer is obvious to every working person. But as socialists, we need to know that wage struggle is an essential part of the class struggle that can build the kind of movement we need to transform capitalism.
In one debate in the 1860s, a man named John Weston argued that wage increases would lead to price increases. He believed that these price increases would outstrip wage increases, meaning there would be no advantage for workers to the higher wage.
Weston, as a follower of the progressive British industrialist Robert Owen, opposed trade union struggles, arguing employers could simply be convinced to treat workers better.
In response, Marx wrote the pamphlet Wages, price and profit. He set out his own economic theories and explained the heart of Weston’s economic mistake: where profits come from. He showed that both profits and prices come from one source: labour. Prices are not merely set according to the whims of the capitalist. Marx argued that every commodity had a “value” in comparison to other commodities. Value is the underlying measure behind which supply and demand fluctuations take place. Its value sets the long-term average price—or what Adam Smith called the “natural price”.
This value is determined by labour, equal to the quantity of “socially necessary labour time” that is required to make it.
So if it takes three hours of labour to produce a shirt (over its entire production from start to finish) and six hours of labour to produce a pair of shoes, then the shoes will cost twice as much as the shirt, if the commodities are sold at their value.
Socially necessary labour time refers to the amount of labour required at society’s level of productivity and skill. So if I handweave a top in twenty hours that could be made in three under the average conditions of production, its value is still only three hours of socially necessary labour.
What workers sell to the capitalist is not simply labour but our “labour power”—our ability to work (as the boss orders) over a certain period. “Labour” refers to the actual number of labour hours the capitalist extracts.
Value of labour
Our labour power has a value, determined just like anything else: the quantity of labour required to reproduce it.
We require a certain amount of food, accommodation, recreation, and so on, to be able to function as workers: what Marx called the, “value of the necessaries required to produce, develop, maintain, and perpetuate the labouring power”. This value is what the worker receives as a wage.
It takes the worker only a certain number of hours to produce the value of their own labour power—or their wage. But the capitalist can force us to keep working through the week past this point. Marx draws a line between this necessary labour to sustain the worker that we actually get paid for, and the surplus labour that we don’t.
With all of the surplus labour we put in, we produce surplus value. Because the capitalist doesn’t pay us for these extra hours, they pocket this surplus value as profits.
Armed with this economics, we return to the question of what happens when we fight for higher wages.
Pushing up wages doesn’t necessarily push up prices. Neither prices nor wages are set through the will of the capitalist; they both track the underlying value determined by the quantity of socially necessary labour contained in a commodity.
Higher wages in one workplace don’t come at the expense of lower real wages for everyone else. They come at the expense of the profits of the capitalist, reducing the amount of surplus value they extract from a worker. So pushing for higher wages improves the workers’ conditions at the expense of the capitalist.
Capitalists will try to push wages down as much as possible. Inflation, changes in the intensity and extent of work, market price fluctuations and business cycles can all be used to put downward pressure on wages.
Wage struggle is needed to fight back this onslaught, and prevent the absolute degradation of the position of workers. For Marx, “the necessity of debating their price with the capitalist is inherent to their condition of having to sell themselves as commodities”.
Similarly, as labour productivity increases, the total product increases. If wages are stagnant against such increases, the gains will go entirely to the capitalist. This is merely fuels social and economic inequality.
Workers wanting to maintain their relative social position rightly demand higher wages in line with the productivity increases. For all these reasons, wage struggle is a necessary and progressive element of class struggle.
But we should not limit ourselves to wage struggle. The slogan of “a fair day’s pay for a fair day’s work” does not challenge capitalism. There’s nothing fair about submitting yourself to the dictatorship of your boss at work. There’s nothing fair about getting cheated out of part of the value of your labour, and working to enrich a boss.
As long as there is wage slavery, there will be alienation, growing inequality, and a fundamentally undemocratic society. As Marx ended his pamphlet, socialism, the emancipation of the working class requires, “the ultimate abolition of the wages system”.