Value and wages

P8475423 at vmsuser.acsu.unsw.EDU.AU P8475423 at vmsuser.acsu.unsw.EDU.AU
Sun Aug 6 18:00:41 MDT 1995

Jerry seems determined to stop me getting on with my
current research this morning! -:)

He has raised two renowned areas of criticism of and within
Marxism, the relation of wages to the value of labor-power,
and the question of the reduction of skilled labor to

I am in complete agreement with the way Jerry has expressed the
beginning of the first problem:

|What is the use value of the commodity labour power? It is its ability to
|create value (and its potential ability to create surplus value and

|How are we to understand the value of the commodity labour power? Marx
|answered this question initially by saying that the value of the
|commodity labour power is determined by the costs to produce and
|reproduce that commodity. The meaning of that expression has given rise
|to many (!) debates within the Marxist tradition.

Jerry then refers to this as a first approximation, and comments
that this issue of the relation of the wage to the value of labor-
power is one Marx never got around to. True, but he did leave
some clues. And I think the area can help clear up the confusion
Carrol referred to concerning value and exchange-value.

Briefly, I would argue that the use-value of labor-power is
exactly as Jerry put it, its ability to produce value; the
value of labor-power is exactly as Jerry put it above,
"determined by the costs to produce and reproduce that
commodity"--that is not a first approximation, but an
exact statement.

The first approximation, however, is to assume that the
exchange-value of labor-power equals its value.

Given the unique attributes of labor-power--that it is the
only input to production which is not divorced from its
"owner" by the purchase of commodity inputs which precedes
production--the question arises as to whether the value
needed to purchase this input (its exchange-value) is
equal to, greater than, or less than its value.

The majority opinion of followers of Marx has been that the
exchange-value of labor-power equals its value--or in
other words, that the average wage is the value of labor-
power. This is expressed in two recent papers on this
subject, by Harvey (1985) and Green (1991). Green, for
example, states that Marx believed that the wage was
"on average equal to the 'value of labor-power'"
(p. 199).

However, Marx left many clues that his view was quite
different. Whenever he did refer to the wage, he said that
the value of labor-power was the *mimimum*. There is
even a section of the Grundrisse entitled "The minimum of wages",
where Marx made it clear that in his complete analysis, the wage
would normally exceed the value of labor-power:

"For the time being, necessary labor supposed as such; i.e. that
the worker always obtains only the minimum of wages. This
supposition is necessary, of course, so as to establish the laws of
profit in so far as they are not determined by the rise and fall of
wages or by the influence of landed property. All these fixed
suppositions themselves become fluid in the further course of
development."  (Marx 1857, p. 817.)

So if Marx believed that the value of labor-power set the
minimum wage, there must be a mechanism whereby the wage is
maintained above this minimum.

My nomination for this mechanism is once again, dialectical.
If the wage were to sink to the level of the value of labor-
power, then labor would be treated like all other commodities.
But labor-power is not like all other commodities, and for
this reason it can be expected to quite literally demand a
payment which exceeds its cost of production--something no
other "commodity" can do. I suggest that this was the concept
Marx had in mind whenever he referred, as he often did, to
the value of labor-power as being the "wage-minimum":

"the value of the labour power is equal to the minimum of
wages",(*Theories of Surplus Value*, Part I, p. 46.)..; "the
*minimum wage*, alias the value of labour power".(*Theories of
Surplus Value*, part II, p. 223.)

As for the reduction of skilled labor to unskilled, Jerry is
again correct that this has been an area of contention:
|1) the skills of the laborers. How we understand how skills modify wages
|is also a subject of some (!) debate both within the Marxist tradition
|and outside of it (e.g. the so-called "reduction problem" was a source of
|attack by Bohm-Bawerk against Marx).

What the vast majority of Marxists have missed, however, is that
this attack was well met and defeated by Hilferding in his
reply to Bohm-Bawerk. The latter said that:

"if the labor which went into educating a workman simply reappeared in the
product, then "there could only be actually five hours of unskilled labor
in one hour of skilled labor, if four hours of preparatory labor went into
every hour of skilled labor" (Bohm-Bawerk 1896, pp. 84-85). Thus,
according to Bvhm-Bawerks interpretation of Marxs reasoning, the ratio
of skilled labor to unskilled labor would in practice be at most of the
order of two, and not, as Marx muses, of the order of six (Marx 1867, p.

The form of reasoning Bohm-Bawerk criticises does accurately
characterise the arguments later used by Sweezy, Meek and Dobb.
Sweezy, for example, says that the skilled worker:

"expends in production not only his own labor ... but also indirectly that
part of the labor of his teachers... If the productive life of a worker
is, say, 100,000 hours, and if into his training went the equivalent of
50,000 hours of simple labor (including his own efforts in the training
period), then each hour of his labor will count as one and a half hours of
simple labor." (Sweezy 1942, p. 43)

This clearly falls foul of Bohm-Bawerk's objection, that this cannot
possibly account for the acknowledged higher productivity of
skilled labor.

However, Hilferding gave the perfect rejoinder, using the logic of
exchange-value and use-value.

To explain how education can increase both the value of skilled labor and

also the value-creating power of that labor--thus enabling an hour of

skilled labor to produce much more value than an hour of unskilled

labor--Hilferding refers to education transferring both value and

use-value to the student. He first hypothetically reduces the labor of the
tutor to 'a number of unskilled labors". Then in an expression which

demonstrates the proper application of Marxs use-value/exchange-value

dialectic, he characterizes the value-creating power as the use-value of

the technical educator: training '"thus creates on the one hand new value

and transmits on the other to its product its use-value--to be the source

of new value." (Hilferding 1904, p. 145).

Using Hilferdings method, the training inputs will determine the wage
paid to skilled labor, but the additional productivity of the skilled
laborer--the use-value of the education imparted--is independent of the
cost of education, and the "value-creating power" of education can only be
determined ex-post. Skilled labor can therefore add much more value than
the education cost--which as Hilferding points out means that education
can be a source of additional surplus value. In contrast, as Harvey
observes, the Sweezy/Meek characterization of education echoes Marxs
portrayal of machinery as "unproductive" in that it simply preserves
value, rather than increasing it (Harvey 1985, p. 87).

Steve Keen

References (including my paper where I discuss the above)

Bvhm-Bawerk, E., Karl Marx and the Close of His System, Sweezy, P.
(ed.), 1949, Orion, New York.

Green, F., 1991. "The relationship of wages to the value of labor-power in
Marx's labor market", Cambridge Journal of Economics, Vol. 15, pp.

Harvey, P., 1985. "The Value-creating Capacity of Skilled Labor in Marxian
Economics", Review of Radical Political Economics, Volume 17 No. 1/2, pp.

Hilferding, R., 1904. "Bvhm-Bawerks Criticism of Marx", in Sweezy, P.
(ed.), 1949, Karl Marx and the Close of His System, Orion, New York.

Keen, S., 1993, "The Misinterpretation of Marx's Theory of Value", Journal
of the History of Economic Thought, 15 (2), Winter, pp. 282-300.

Sweezy, P.M., 1942. The Theory of Capitalist Development, Oxford

University Press, New York.

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