The Subsistence Wage and the Value of Labor Power

C. The Subsistence Wage and the Value of Labor Power

“By labor power or capacity for labor is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use value of any description” (MECW 35: 177). This def- inition is important for the perception of surplus value as unpaid labor time, but plays no particular role in the positive analysis of the labor market, for “the price of labour power . . . appears as the prices of labour under the capitalist mode of pro- duction . . . ” (MECW 37: 809). Now in Marx’s speech of 1865, market wages are said to tend “in the long run” towards equality with “the value of labour power,” this

5 See also for further evidence, MECW 35: 638–9 cited below, p. 98. 6 For a catalogue of references to Marx’s allusions to a contemporary fall in living standards in Britain, see Gottheil 1966: 157f; also Sinha 1998, note 1. 7 There is one further matter. Marx’s Reserve Army includes a range of unemployed and under- employed and also those engaged in low-skilled non-industrial activities and the full-fledged pauper population, the welfare burden of which falls on labor:

Pauperism is the hospital of the active labour army and the dead weight of the industrial reserve army. Its production is included in that of the relative surplus population, its necessity in theirs; along with the surplus population, pauperism forms a condition of capitalist production, and of the capitalist development of wealth. It enters into the faux frais of capitalist production; but capital knows how to throw these, for the most part, from its own shoulders on to those of the working class and the lower middle class (MECW 35: 638).

To the extent that the welfare burden rises – and Marx maintained that “[t]he relative mass of the industrial reserve army increases . . . with the potential energy of wealth” – there is further pressure on the disposable income of employed labor.

91 latter comprising a “physical element” corresponding to “the necessaries absolutely

C. The Subsistence Wage and the Value of Labor Power

indispensable for living and multiplying” – which forms the minimum limit to the wage and is represented as an (apparently unchangeable) physiological quantum – and a cultural element reflecting the “traditional standard of life,” which is repre- sented as variable (MECW 20: 144–5). Marx here explained that “[b]y comparing the standard wages or values of labour in different countries, and by comparing them in different historical epochs of the same country, you will find that the value of labour itself is not a fixed but a variable magnitude, even supposing the values of all other commodities” – alluding here to wage goods – to “remain constant” (145). For the present we may, therefore, assume that the value of labor power reflects variations in the magnitude of the wage basket, setting aside variations in the cost of producing a given basket.

Wages reflecting the “physical element” permits labor merely “to maintain and reproduce itself, to perpetuate its physical existence” (144); at the physical limit the wage is just equal to an amount “necessary for the physical perpetuation of the race” (144–5). Population at that wage is merely replaced but not expanded. The “ultimate limit” to the (long-run) wage corresponds therefore to the orthodox

subsistence wage, that wage assuring zero population growth. 8 Now, in this same context, we find the presumption of ongoing contemporary population growth – Marx refers to the “English capital having grown in the last twenty years so much quicker than English population” (147) – although (long-run) wages are assumed equal to the value of labor power. And this is the essential point: for Marx a wage equal to the value of labor power is consistent with net population growth once allowance is made therein for the cultural element. (Here is a source of confusion, since for the orthodox economists the subsistence, or zero-growth, wage itself contained a cultural element.)

Let us again turn for further elucidation to Capital 1. The definition of the min- imum wage will be found once more with reference to constancy of population: “The labour power withdrawn from the market by wear and tear and death, must

be continually replaced by, at the very least, an equal amount of fresh labour power. Hence the sum of the means of subsistence necessary for the production of labour power must include the means necessary for the labourer’s substitutes,

8 Sinha objects to my interpretation of Marx’s subsistence wage, on the grounds that the term “necessaries absolutely indispensable for living and multiplying” (MECW 20: 144) is given “a

multiplication factor of one” which is arbitrary (Sinha 1998: 104–6). But my reading turns on numerous expressions in the 1865 paper all pointing in the same direction: “the necessaries required for . . . maintenance and reproduction”; a sufficiency “to maintain and reproduce itself, to perpetuate its physical existence”; an amount “necessary for the physical perpetuation of the race.” “Reproduction,” “maintenance,” “perpetuation” – and also “conservation” in MECW

37: 845 (cited below, p. 92) – strongly suggest to me zero population growth. For all that, it probably mattered less to Marx whether at subsistence population growth is zero or positive (or even negative), than that there is a general downward trend of the real wage. And Sinha too insists on the absolute immizeration interpretation (1998: 104, 100), and agrees that the population growth rate is “naturally” positive “during normal circumstances” (110, also 115).

92 Economic Growth and the Falling Real-Wage Trend

ie., his children, in order that this race of peculiar commodity owners may per- petuate its appearance in the market” (MECW 35: 182; emphasis added). 9 Now Marx, in this context, stressed the constancy of “the value of labour power” at any particular state of historical development – by which expression he intended (con- sistently with the 1865 speech) not merely the minimum wage but the minimum supplemented by the cultural element or the laborer’s “necessary” in addition to his “natural” wants. Here, too, he emphasized that the cultural element is gov- erned by the habits under which “the class of free laborers has been formed” – contrasting with the natural element which varies “according to the climatic and other physical conditions of his country,” confirming the latter’s physiological character (181). Similarly: “The value of labour-power is determined by the value of the necessaries of life habitually required by the average labourer. The quan- tity of these necessaries is known at any given epoch of a given society, and can therefore be treated as a constant magnitude” (519). The same theme is restated in Capital 3 in a passage which even refers to the physical minimum as a “nat- ural law”: “Wages . . . are regulated on the one hand by a natural law; their lower limit is determined by the physical minimum of means of subsistence required by the labourer for the conservation of his labour power and for its reproduction; i.e., by a definite quantity of commodities” (MECW 37: 845). Again we see here the constant-population affirmation with respect to the minimum. “The actual value of his labour power,” on the other hand, “depends not merely upon the physical, but also upon the historically developed social needs, which become second nature. But in every country, at a given time, this regulating average wage is a given magnitude” (845–6).

We shall see presently, that in the full analysis of the growth process, the value of labor power is treated (as in the speech of 1865) as a variable – this is, in fact, what the falling wage trend is all about. At this point, it is the Marxian position that a wage equal to the supposedly known value of labor power is consistent with population growth that I seek to establish. On this Marx is explicit both in Capital 1 and Capital 3. The wage-earning class under capitalism earns “ordinary” wages which “suffice, not only for its maintenance, but for its increase,” the formulation encapsulating

9 Despite the wealth of statements pointing to zero population growth at the minimum limit, it may be necessary to allow a certain “fuzziness” in that respect, in the light of the following

passage which suggest declining population at the minimum: “The minimum limit of the value of labour power is determined by the value of the commodities, without the daily supply of which the labourer cannot renew his vital energy, consequently by the value of those means of subsistence that are physically indispensable. If the price of labour power fall to this minimum, it falls below its value, since under such circumstances it can be maintained and developed only in a crippled state” (MECW 35: 183). We find, in fact, that Marx allows net population growth at subsistence in agriculture (below, note 19). See Ong 1980 for an interesting account of Marx’s concept of subsistence “not as a single level of real wage but as a range of possible levels of real wage which is consistent with the reproduction of the capitalist system” (264).

93 the meaning of accumulation or real net investment as the conversion of surplus

C. The Subsistence Wage and the Value of Labor Power

product into “means of subsistence”: Now in order to allow of these elements actually functioning as capital, the capitalist

class requires additional labour. If the exploitation of the labourers already employed do not increase, either extensively or intensively, then additional labour power must

be found. For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus value into capital is complete (MECW

35: 580; emphasis added). As for the posthumous volume: “The working class must find at least the same

quantity of necessities at hand if it is to continue living in its accustomed average way. . . . Moreover, there must be an additional quantity to allow for the annual increase of population” (MECW 37: 187; emphasis added). In a growing system, then, the long-run wage rate, while equal to the value of labor power, exceeds the (physiological) subsistence rate at which population growth ceases; population growth is built into the value of labor power. 10

Let us now consider more closely the labor-supply function. Laborers engaged in the centers of modern industry – “factories, manufacturers, iron works, mines, &c.” as distinct from “domestic industry” – constitute a category with a particularly high death rate and extremely short life span: “The consumption of labour power by capital is . . . so rapid that the labourer, half-way through his life, has already more or less completely lived himself out. . . . It is precisely among the workpeople of modern industry that we meet with the shortest duration of life” (MECW 35: 635–6). Taking for granted net population growth as an aspect of the general process of capitalist development, Marx points to peculiarly high marriage and birth rates to assure such growth notwithstanding the high death rate:

In order to conform to these circumstances [physical disability and high mortality], the absolute increase of this section of the proletariat must take place under conditions that shall swell their numbers, although the individual elements are used up rapidly. Hence, rapid renewal of the generations of labourers (this law does not hold for the other classes of the population). This social need is met by early marriages, a necessary consequence of the conditions in which the labourers of modern industry live, and by the premium that the exploitation of children sets on their production (636).

10 Objecting to my view of Marx on population, Perelman argues that “[a] diligent reader could select and organize hundreds or even thousands of extracts from Marx, which when taken

together would appear to be a most conventional, conservative compendium of political economy. Such a work would accurately reflect elements of Marx’s analysis, but the sum of these parts would amount to considerably less than the whole” (1985: 463–4).

94 Economic Growth and the Falling Real-Wage Trend

The net increase in labor supply in the modern industrial sector is thus a conse- quence of population growth internal to that sector, rather than of an inflow into that sector from (say) agriculture. 11

We now address a complexity in Marx’s analysis, namely assertions that both wage increases and wage decreases are consistent with an increased rate of popula- tion growth. For in a discussion of “absolute overproduction of capital” (upward pressure on wages exerted by particularly rapid accumulation), specific reference is made to a consequential acceleration of the population growth rate: “Prosperity would have led to more marriages among labourers and reduced the decimation of offspring. While implying a real increase in population, this does not signify an increase in the actual working population. But it affects the relations of the labourer to capital in the same way as an increase of the number of actually working labourers would have affected them” (MECW 37: 253–4). Yet we also read that a fall in wages – due to the capital-conversion process, a matter I postpone for the moment – “would be a breeding ground for a really swift propagation of the population, since under capitalist production misery produces population” (217). 12

I propose the following solution to the apparent paradox consistently with the earlier exegesis: To each given “value of labor power” or “standard of life” and growth rate of labor demand there corresponds a specific growth rate of population to assure the maintenance of the standard; a wage increase, given the standard, will stimulate an increased population growth rate, and a wage decrease a decline. This much for fluctuations of the wage about a given standard. But should the fall in the wage reflect a deterioration in the standard itself, then matters are very different; at the lower standard the population growth rate may remain constant, or, indeed, may even rise compared to the original level if the degradation in standards is suffficiently marked. This latter possibility plays a part in the full account of the downward wage path as we shall now see.