Labour power

2-14Marx regards money-wages and salaries as the price of labour power (though workers can also be paid “in kind”). That price may contingently be higher or lower than the value of labour power, depending on market forces of supply and demand, on skill monopolies, legal rules, etc. Normally, unless government action prevents it, high unemployment will lower wages, and full employment will raise wages, in accordance with the laws of supply and demand. But wages can also be reduced through high price inflation and consumer taxes. Therefore a distinction must always be drawn between nominal gross wages’ and real wages adjusted for tax and price inflation. The labour-costs of an employer are not the same as the real buying power a worker acquires through working.

There is typically a constant conflict over the level of wages between employers and employees, since employers seek to limit or reduce wage-costs, while workers seek to increase their wages, or at least maintain them. How the level of wages develops depends on the demand for labour, the level of unemployment, and the ability of workers and employers to organise and take action with regard to pay claims.
2-16Marx regarded wages as the “external form” of the value of labour power. The compensation of workers in capitalist society could take all kinds of different forms, but there was always both a paid and unpaid component of labour performed. The “ideal” form of wages for capitalism, he argued, were piece wages because in that case the capitalist paid only for labour which directly created those outputs adding value to his capital. It was the most efficient form of exploitation of labour power.

When labour power has been purchased and an employment contract signed, normally it is not yet paid for. First, labour power must be put to work in the production process. The employment contract is only a condition for uniting labour power with the means of production. From that point on, Marx argues, labour power at work is transformed into capital, specifically variable capital which accomplishes the valorisation process.

Functioning as variable capital, living labour creates both use values and new value, conserves the value of constant capital assets, and transfers part of the value of materials and equipment used to the new products. The result aimed for is the valorisation of invested capital, i.e. other things being equal, the value of capital has increased through the activity of living labour.

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The Labour Supply curve

If the substitution effect is greater than the income effect, the labour supply curve (diagram to the left) will slope upwards to the right, as it does at point E for example. This individual will continue to increase his supply of labor services as the wage rate increases up to point F where he is working HF hours (each period of time). Beyond this point he will start to reduce the amount of labor hours he supplies (for example at point G he has reduced his work hours to HG). Where the supply curve is sloping upwards to the right (positive wage elasticity of labor supply), the substitution effect is greater than the income effect. Where it slopes upwards to the left (negative elasticity), the income effect is greater than the substitution effect. The direction of slope may change more than once for some individuals, and the labor supply curve is likely to be different for different individuals.
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Other variables that affect this decision include taxation, welfare, and work environment. This article has examined the labour supply curve which illustrates at every wage rate the maximum quantity of hours a worker will be willing to supply to the economy per period of time. Economists also need to know the maximum quantity of hours an employer will demand at every wage rate. To understand the quantity of hours demanded per period of time it is necessary to look at product production. That is, labour demand is a derived demand: it is derived from the output levels in the goods market.labour_supply_income_and_substitution_effects_small

A firm’s labour demand is based on its marginal physical product of labour (MPL). This is defined as the additional output (or physical product) that results from an increase of one unit of labour (or from an infinitesimally small increase in labour). If you are not familiar with these concepts, you might want to look at production theory basics before continuing with this article.

Reproduction of labour power

Marx himself argued that:

250px-farmer_plowing “The maintenance and reproduction of the working-class is, and must ever be, a necessary condition to the reproduction of capital. But the capitalist may safely leave its fulfilment to the labourer’s instincts of self-preservation and of propagation. All the capitalist cares for, is to reduce the labourer’s individual consumption as far as possible to what is strictly necessary…”

2455192070_538654af07_mThis understanding, however, only captures the sense in which the reproduction of labor power comes at no cost to capitalists, like the reproduction of ecological conditions, but unlike the reproduction of, say, machine bolts and plastic wrap. Elites and governments have always sought to actively intervene or mediate in the process of the reproduction of labour power, through family legislation, laws regulating sexual conduct, medical provisions, education policies, and housing policies. Such interventions always carry an economic cost, but that cost can be socialized or forced upon workers themselves, especially women. In these areas of civil society, there has been a constant battle between conservatives, social reformists and radicals.

Marxist-Feminists have argued that in reality, household (domestic) labour by housewives which forms, maintains and restores the capacity to work is a large “free gift” to the capitalist economy. Time use surveys show that formally unpaid and voluntary labour is a very large part of the total hours worked in a society. Markets depend on that unpaid labour to function at all.

Some feminists have therefore demanded that the government pay “wages for housework”. This demand conflicts with the legal framework of the government in capitalist society, which usually assumes a financial responsibility only for the upkeep of “citizens” and “families” lacking other sources of income or subsistence.