From the February 1988 issue of the Socialist Standard
How often have you heard the term "a fair day's wage for a fair day's work?" To the defenders of the wages system this slogan exemplifies the essentially "honest and fair" relationship between employer and employee within capitalism. But is it "fair"?
Marx understood that this relationship is based on the exploitation of employees as members of the working class by the capitalist (employer) class. Marx offered an explanation of how this exploitation takes place in his Labour Theory of Surplus Value. In the pamphlet Wages, Price and Profit, Marx demonstrated the fallacy of "a fair day's wage for a fair day's work".
Marx explains that all commodities produced have an exchange value. For instance in present day conditions 1lb of coffee beans may have the same approximate value as 5lb of sugar. To arrive at this comparison we compare both the coffee and the sugar against a third measure that is common to both. Marx identifies this common measure as labour - the "social substance" common to all commodities. In other words, commodities require different amounts of labour in production. The more labour required, the more exchange value the commodity has.
Marx explains that the price of a commodity is the monetary expression of its value. Here he is careful to point out that we are talking of market prices representing the average amount of social labour necessary across the whole production process. (Marx talks of social labour to differentiate it from the labour of the individual isolated from society who may produce things for his own use. In this case the product is not a commodity since it will not be sold or exchanged). Furthermore the price is an average because although the price will be the same for each commodity of the same type, the conditions of production will differ between each manufacturer. These prices will “gravitate" towards the actual value but in reality shifts in supply and demand will cause prices to fluctuate around value. Marx showed in Capital that some commodities sell above, and others below, value at a price that is derived from value and that we must be aware that in developed capitalism commodities do not sell at value. In Wages. Price and Profit the important point is made that the capitalists make profit while buying the workers' commodity, labour power, at its value.
Since on average price tends to equate with value over a given period of time, then it is clear that profit is not derived by selling commodities at a price consistently above value. In fact a profit is made by selling commodities at a price that is derived from value. How can this be?
To answer this Marx starts by looking at the value of labour power. We have established that the value of a commodity is determined by the amount of labour invested in its production. This can be applied to labour power as well because it is another commodity on the market, the one owned by the worker which has a price tag called wages.
The value in this case is fixed by the value of the necessities of life needed to maintain the worker's ability to continue and maintain the "production" of labour power.
A capitalist buys the right to use a worker's labour power for the whole of the working week, but the crucial point is that the value of that labour power is covered by the worker's production before the end of the working week. For the rest of the time the worker is producing what Marx termed "surplus value" - that is, value over and above the amount needed to cover the value of the worker's labour power. It is here, in the production of surplus value, that a profit is realised for the capitalist despite the fact that the commodities are sold at their value. The factory owning capitalist does not keep all the surplus value. Apart from the profits which they take the land owning capitalist takes rent on the land involved in the production process and the money lending capitalist takes interest on loans advanced to set up, maintain and expand the production process. The important point Marx makes is that the value of labour power is covered by the amount of work necessary to maintain and perpetuate that labour power but the use of the labour power is only limited by the physical endurance of the labourer: "The daily or weekly value of the labouring power is quite distinct from the daily or weekly exercise of that power..." Thus, although the worker performs unpaid labour for the capitalist it appears as though the worker is paid for that labour in full in the form of wages.
Before capitalism the exploited classes produced wealth for the ruling class in more obvious forms. Slaves produced wealth for their owners and feudal serfs handed over a portion of the wealth they produced to the land owning aristocracy. Under a different guise this production process continues under capitalism, but it is obscured by the method of extracting of surplus value.
Since Marx formulated his Labour Theory of Value during the 1860s the fundamental structure of capitalism has remained unchanged although some features have altered. For instance, when Marx was developing these ideas he could not have forseen the growth and influence of trade unions as an important factor in influencing the level of wages. Instead Marx concentrated on environmental factors that could influence the supply of, and demand for, labour power.
The Labour Theory of Value remains as crucial an element to the socialist case today as it did during the nineteenth century and the proclamation made by Marx towards the end of Wages, Price and Profit demands as much attention from the working class now as it did then:
Instead of the conservative motto "A fair day's wage for a fair day's work!" (Workers) ought to inscribe on their banner the revolutionary watchword. "Abolition of the wages system!".