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Vol. 79/No. 17      May 11, 2015

Why winning higher pay
doesn’t cause prices to rise

The article below presents excerpts from Wages, Price and Profit by Karl Marx. The pamphlet is available from local distributors listed below.

Opponents of the current fight for a $15 an hour minimum wage and unionization often argue that if wages go up, prices will too. Therefore, they contend, workers fighting for higher pay actually hurt themselves and workers in other industries.

This false claim was the subject of a debate 150 years ago in the International Workingmen’s Association, led by Karl Marx and Frederick Engels. In 1865, amid a strike wave and campaign to raise wages in Europe, a member of the International’s General Council from England, John Weston, argued the same point. Marx answered him, tearing apart the rationalizations the bosses use to justify their entire wages system.

The resulting pamphlet, published initially in English under the title Value, Price and Profit and later under the more accurate title Wages, Price and Profit, makes for valuable reading today. It concludes with Marx offering three resolutions, which were adopted:

“Firstly. A general rise in the rate of wages would result in a fall of the general rate of profit, but, broadly speaking, not affect the prices of commodities.

“Secondly. The general tendency of capitalist production is not to raise, but to sink the average standard of wages.

“Thirdly. Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerrilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class that is to say, the ultimate abolition of the wages system.”

Value is produced by social labor

To explain why wages don’t determine prices, and why workers are correct to fight for a greater portion of the wealth they produce, Marx gives a concise explanation of how the capitalist wages system works.

The value of a commodity, that is anything produced for exchange, is determined generally by “the quantity of labor necessary for its production in a given state of society.” The price of that commodity will fluctuate based on supply and demand, but over time will average out to its value.

When a worker is employed by a capitalist, “what the working man sells is not directly his Labor, but his Laboring Power,” Marx notes. The value of this labor power “is determined by the value of the necessaries required to produce, develop, maintain, and perpetuate the laboring power” — the worker’s food, housing, etc.

In the course of each workday, a worker produces more new value than what’s needed to replace their wages. Marx gives the example of a spinner in a cotton mill, who may produce the value of his wages in six hours’ work. But the boss demands 12 hours work, saying he’s hired the spinner for the whole day. The value produced in the additional hours goes to the capitalist. “It is this sort of exchange between capital and labor upon which capitalistic production, or the wages system, is founded.”

This surplus value, produced by workers’ labor, is the source of all profits, including the rent and interest that the boss may pay to the landlord and the bank.

Since the new value produced through labor is divided between the worker and the capitalist, “if wages fall, profits will rise; and if wages rise, profits will fall,” Marx says, “but all these variations will not affect the value of the commodity.”

Capitalist tendency is to lower wages

“The general tendency of capitalistic production is not to raise, but to sink the average standard of wages, or to push the value of labor more or less to its minimum limit,” Marx notes, impelling workers to fight for higher wages.

When labor productivity rises, for example, the value of workers’ wages is produced in less time, and the boss pockets more profit. “Although the laborer’s absolute standard of life would have remained the same, his relative wages, and therewith his relative social position, as compared with that of the capitalist, would have been lowered. If the working man should resist that reduction of relative wages, he would only try to get some share in the increased productive powers of his own labor.”

Monetary inflation often erodes the buying power of workers’ wages, causing their standard of living to deteriorate unless they fight for higher pay.

The length of the working day and the intensity of labor are also fronts in the struggle between labor and capital. By fighting to limit the working day to “rational dimensions,” the workers “only set limits to the tyrannical usurpations of capital,” Marx says. “Time is the room of human development. A man who has no free time to dispose of, whose whole lifetime, apart from the mere physical interruptions by sleep, meals, and so forth, is absorbed by his labor for the capitalist, is less than a beast of burden.”

And during downturns of the business cycle workers regularly see their wages decline. “If, during the phases of prosperity, when extra profits are made, he did not battle for a rise of wages, he would, taking the average of one industrial cycle, not even receive his average wages, or the value of his labor.”

If workers didn’t fight to raise wages and improve their conditions “they would certainly disqualify themselves for the initiating of any larger movement,” Marx said. In these skirmishes they “are retarding the downward movement, but not changing its direction.”

“They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social forms necessary for an economic reconstruction of society,” he concludes. “Instead of the conservative motto: ‘A fair day’s wages for a fair day’s work!’ they ought to inscribe on their banner the revolutionary watchword: ‘Abolition of the wages system!’
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