From Jurriaan (unproductive labor, int'l labor costs, welfare state)

Julio Huato juliohuato at
Wed Jun 27 18:01:06 MDT 2001


I noticed a slight slip of the pen in the last mail I did about productive
labour. I said, "Normally for instance SNA operating surplus will contain
gross profits by self-employed proprietors, household income is included,
and so on". Well, UNSNA "operating surplus" conceptually doesn't include
household income, except perhaps where selfemployed proprietors make profits
at home, but GDP does, that was my intended point.

As regards the labour costs index, this is of course the way an employer
looks at labour, he looks at the total cost of hiring a worker. And
obviously the total reproduction cost (the value of labour-power) of a
Chinese worker would on average be much lower than for a German worker, i.e.
the labour costs data does not take into account the real living costs,
which would be much lower in China. So for a more balance picture you would
need to compare household expenditure data for different countries, which is
normally collected for the purpose of compiling the consumer price index.

Why the neoliberals are interested in studying relative labour costs is in
part because they think that, apart from European wages being too high in
relation to productivity (the usual refrain), employers pay too much in the
way of social insurance levies to the state.

In another issue (NRC Handelsblad 28 October 1995) they published the
average labour costs for an employee in industry, in Dutch guilders per hour
worked for 1994, excluding and including employer contributions (social
security payments etc.) in respect of employees (the discrepancy is the
target of the attack on the welfare state, it goes without saying)  (source:
Swedish Employers Federation):

Country         Gross hourly wage (Dfl.)        Total hourly labour cost
West Germany    37.75                           49.75
Switzerland             37.50                           45.25
Belgium         30.25                           41.75
Japan                   33.50                           38.75
Netherlands             29.00                           37.75
Sweden          24.75                           34.25
United States           23.50                           31.00
Italy                   20.25                           29.50
United Kingdom  20.75                           24.75

One US dollar = about 2.5 guilders or so. As you can see from these figures,
the total labour cost is larger than gross wages, the discrepancy being
social insurance levies of various kinds.

If one could somehow get rid of the welfare state system, then the employers
can win a "double banger", namely labour costs are reduced and a whole new
area of insurance business opens up from which you can make big profits. Of
course the real arguments are more complex,  because employers can also
benefit from the welfare system since e.g. they can offload sick workers on
to the care of the state. That is to say, sometimes employers benefit from
the welfare state insofar as they can offload costs, at other times it seems
a burden.

But the "hard core" neoliberal idea is that the whole redistributive welfare
system in Western Europe ought to be reduced to a minimum, the slogan being
that people should take individual responsibility for their own health,
unemployment insurance, education etc.

The problem with that idea is that is doesn't really work since low-income
workers simply don't have the cash for that. Hence the general neoliberal
argument is that welfare payments should be more carefully "targeted"at
people who really need them - at which point the argument become totally
political and ideological, because who is really "in need" and who decides
that ?

Very few Marxists I know of have actually developed a sophisticated critique
of the welfare state. The main reason for this is, that Marxists generally
see the state as an apparatus of the bourgeois class. However the existence
of government social security schemes (especially superannuation) means that
workers do have a (perhaps limited) "stake" in the state. Anwar Shaikh and
E. Tonak have tried to undercut this argumentation; they  calculated that in
the USA, the working class as a whole usually pays more into the government
coffers through taxation than they get out of the government in the form of
benefits. Therefore it would seem that the US working class doesn't really
have any "stake" in the US government, i.e. that the idea of the state
paying workers a "social wage" is a myth.  But can you conclude from this
that welfare programmes should be axed ? I would think not.

An alternative argument is that social benefits are a genuine social wage, a
collectivised portion of the wage (see e.g. the more or less neo-ricardian
arguments of Ian Gough) over which workers should have real control (e.g.
Mandel's argument). The fact is that workers have less control over their
"social wage" than stockholders have at a shareholder's meeting of a
publicly listed company. But anyway the issue of the welfare state hasn't
been unambiguously resolved by Marxists.

What is clear though is that the existence of government social insurance
has been the most powerful prop of social-democratic reformism. Once you rip
up that social insurance to a large extent (as happened e.g. in New Zealand)
the social democracy basically withers away, it no longer has funds to
redistribute and social justice bureaucracies no longer have anything they
can really do.


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