by In Chapter 19 of volume 1 of Capital Marx quotes the Classical economics on wage determination: “Classical political economy borrowed from every-day life the category ‘price of labour’ without further criticism, and then simply asked the question, how is this price determined? It soon recognized that the change in the relations of demand and supply explained in regard to the price of labour, as of all other commodities, nothing except its changes, i.e., the oscillations of the market price above or below a certain mean. If demand and supply balance, the oscillation of prices ceases, all other conditions remaining the same. But then demand and supply also cease to explain anything. The price of labour, at the moment when demand and supply are in equilibrium, is its natural price, determined independently of the relation of demand and supply. And how this price is determined, is just the question. Or a larger period of oscillations in the market-price is taken, e.g., a year, and they are found to cancel one the other, leaving a mean average quantity, a relatively constant magnitude. This had naturally to be determined otherwise than by its own compensating variations.
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Marx essentially endorses in this chapter the view that wages fluctuate above and below an equilibrium value: the “necessary price” or “natural price” of labour.“Classical political economy borrowed from every-day life the category ‘price of labour’ without further criticism, and then simply asked the question, how is this price determined? It soon recognized that the change in the relations of demand and supply explained in regard to the price of labour, as of all other commodities, nothing except its changes, i.e., the oscillations of the market price above or below a certain mean. If demand and supply balance, the oscillation of prices ceases, all other conditions remaining the same. But then demand and supply also cease to explain anything. The price of labour, at the moment when demand and supply are in equilibrium, is its natural price, determined independently of the relation of demand and supply. And how this price is determined, is just the question. Or a larger period of oscillations in the market-price is taken, e.g., a year, and they are found to cancel one the other, leaving a mean average quantity, a relatively constant magnitude. This had naturally to be determined otherwise than by its own compensating variations. This price which always finally predominates over the accidental market-prices of labour and regulates them, this ‘necessary price’ (physiocrats) or ‘natural price’ of labour (Adam Smith) can, as with all other commodities, be nothing else than its value expressed in money. In this way political economy expected to penetrate athwart the accidental prices of labour, to the value of labour. As with other commodities, this value was determined by the cost of production. But what is the cost of production—of the labourer, i.e., the cost of producing or reproducing the labourer himself? This question unconsciously substituted itself in political economy for the original one; for the search after the cost of production of labour as such turned in a circle and never left the spot. What economists therefore call value of labour, is in fact the value of labour-power, as it exists in the personality of the labourer, which is as different from its function, labour, as a machine is from the work it performs. Occupied with the difference between the market-price of labour and its-so-called value, with the relation of this value to the rate of profit, and to the values of the commodities produced by means of labour, &c., they never discovered that the course of the analysis had led not only from the market prices of labour to its presumed value, but had led to the resolution of this value of labour itself into the value of labour-power.” (Marx 1906: 589–590).
But what Marx does say is that the Classical economists did not really understand the real nature of the “natural price”: they did not understand that this was the value of the maintenance and reproduction of labour-power, a subsistence wage.
As we know from other passages, Marx also rejected the Malthusian population theory, but even so the important point remains: Marx sees capitalism as driving wages towards an equilibrium subsistence wage, the value of the maintenance and reproduction of labour-power (sometimes with a moral and historical element).
Supply and demand might cause wage rates to temporarily go above or below this level, but the tendency of capitalism is to drive the real wage back to the subsistence level.
There are powerful forces driving the real wage back to the subsistence level as follows:
M. C. Howard and John King have a good discussion of Marx’s wage theory as follows:(1) capitalists try to reduce the real wage to and even below subsidence level;
(2) capitalists reduce the price of basic commodities required for subsistence and so reduce the necessary part of the working day and hence the value of the maintenance and reproduction of labour (see Chapter 12 of volume 1 of Capital);
(3) continuous technological unemployment produces a large and growing reserve army of labour (see Chapter 25 of volume 1 of Capital), and this reserve army keeps the real wage in check and keeps wages down.
So, for Marx, this rules out a long-run real wage rising and rising above subsistence level in capitalism, and that is also absolutely in line with this theory of surplus value, as I have argued here.“The value of labour power [sc. for Marx], like the value of any other commodity, is given by the quantity of labour required, under the prevailing technical and social conditions, for its reproduction. The labour time needed to produce and reproduce human labour power is simply that required to keep the worker, and where relevant also the worker’s family, alive and capable of performing labour. In this sense Marx, like Ricardo had a subsistence theory of wages. He was, however, even more careful to qualify it. The value of labour power has both a natural and a ‘historical and moral element’ (Capital 1:171), and depends in part on social norms. But, like Ricardo, Marx treated this element of the wage as given in the short run, so that the concept of a fixed subsistence wage retains its validity within any given historical period.
Marx broke with Ricardo on the question of the mechanism by which real wages are maintained, in long-run equilibrium, at their subsistence level. …. Furthermore, as we have seen, Malthus’s theory of population was rejected by Marx. Instead he concentrated upon a factor specific to the process of capitalist accumulation: the industrial reserve army of the unemployed, which creates competition among workers and prevents wages from rising above the value of their labour power. This is a form of ‘overpopulation’, but it has little in common with the classical use of that concept.” (Howard and King 1985: 93).
“The existence of the industrial reserve army of the unemployed means that competition between workers for jobs prevents real wages from rising, in the long run, above the subsistence level which reflects the value of labour power.” (Howard and King 1985: 94).
BIBLIOGRAPHY
Howard, Michael Charles and John Edward King. 1985. The Political Economy of Marx (2nd edn.). Longman, London and New York.
Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.