A common talking point amongst apologists for Capitalism is that wage labor isn’t exploitative because people enter into it voluntarily. But this simplistic explanation hides some very interesting points about the true nature of the relationship between owner and worker.
The Freedom of the Labour Market
To the apologist, both parties meet in the labor market as equals, one the buyer of labor and the other the seller, each equally protected before the law. If they manage to make a deal that suits them both, based on the circumstances of each, the worker begins working for the business. It’s a mutually beneficial arrangement
This viewing of the labor market in a vacuum, isolated from the rest of life, ignores the hidden pressures that force workers to accept employment on exploitative terms however.
Firstly, the worker is forced into selling their labor because they have no access to the materials necessary to create commodities on their own. The Means of Production, (the farms and factories etc,) are largely owned privately by Capitalists.
There’s usually a power imbalance between the buyer and seller of labor power. A supermarket that has only 18 shop floor staff where it wants 20, is in a much less desperate position than the individual applicant who needs to pay their rent. Staff can be, and are, forced into working extra hours, but the job applicant can’t solve their problems so easily.
Sixty six percent of Americans regularly need prescription drugs while, under Capitalism, housing, food, and medicine aren’t guaranteed. Unemployment simply isn’t an option for many people.
So while the buyer and seller of labor power might be equal before the law, they don’t have equal bargaining power. Rather, the business is usually able to impose low wages and poor conditions on the worker, who has little choice but to accept the terms or starve.
This alone isn’t a sufficient explanation for our apologist though. To them, it’s merely the market functioning efficiently to find the correct price for the work. So let’s go on.
What do Workers Produce?
Every job occurs in its own particular way. Even two baristas at separate coffee shops will do their work slightly differently, due to the different nuances of the businesses. Even so, whether a person is serving coffee or manufacturing furniture, all workers produce something of a comparable type: value.
Every commodity is something that satisfies a human want or need. Whether a person is making coats or linen, they’re taking useful raw materials and fashioning them into a new product, with a new use. The particular use value of a product is what makes it a commodity worth purchasing. If you want to stay warm, you buy a coat, while if you want to make a coat, you buy linen.
People often want or need things that they don’t have access to though, things different from those that they themselves produce. A coat factory produces coats, but to do so it must buy labor, linen, and machinery. It must exchange the coats that it produces for the commodities that it needs.
In exchanging commodities, we find that they have a second type of value, apart from their use value, and that is their value for exchange.
Let’s say that the exchange value of a coat is $80. Some of that value is made up of the linen used in production, some from the tools and machinery worn down, and the rest from the labor involved.
What workers produce in any workplace is value. They produce products of a particular use value: such as coffee or furniture. In doing so, they also produce a quantity of exchange value, which is embodied in the commodities they create.
Buying Low and Selling High?
For the Capitalist to make a profit, they have to spend less creating the commodity than they’re able to sell it for. This creates a conundrum.
If businesses were able to consistently buy goods for less than their value, they’d still never be able to make a profit. If the factory could buy linen, machinery, and labor at ten percent below their value, and the shops it sells to were able to buy the coats for ten percent below their value, the factory owner wouldn’t be any the richer. The same holds true if businesses were consistently able to sell commodities above their value.
For the business owner to make a profit, then, they need to purchase some commodity that creates extra value as it’s consumed in the production process. That commodity is human labour.
What’s the Value of Human Labour?
At the beginning of this article we saw that labor is treated as a commodity on the market. Like all commodities, its value can be compared to that of every other commodity to find its equivalent amount. If we say that one day’s labor is worth $80, we’re saying that it’s worth the equivalent amount of watches, oranges, or cups of coffee that we can buy for the same amount.
This indicates that all commodities contain something of the same type that differs only in its quantity. If a coat has an exchange value of $80 and an orange that of $2, then the coat contains forty times the quantity of a comparable property. That property is the congealed human labour which is embedded within them. Or rather, the value is a reflection of the average amount of time that it takes to produce those commodities, given the specific level of technology, raw materials, and labor skills that exist in that society at the time.
A person could decide to dawdle when they manufacture a coat, but when they bring it to market, it has to compete for sale with all the other coats on the market. So the exchange value of the coat isn’t increased by laboring longer on it, but only varies depending on the socially necessary labor time for producing the average of its kind.
As a commodity, there is also a socially necessary amount of labor that goes into producing living labor. A person needs food and shelter, so that they can restore their lost energy and return to work the next day. They need clothing and a phone, and whatever other articles are made necessary by the nature of their society. The next generation also needs to be fed and nurtured through childhood, and taught any skills that are required for them to enter the workforce, or else the whole system will collapse.
Living labor, then, has a definite production cost. That cost is the minimum necessary for it to sustain and reproduce itself. It’s this subsistence level of value that the worker brings to market when they put their labor power up for sale beside everybody else’s. And the Capitalist who, on average, buys everything at its value, pays the worker only enough to sustain themselves.
Where Does Profit Come From?
If commodities, including labor and raw materials, are bought and sold at their value, how does the Capitalist make money?
If the Capitalist invests in linen worth $35, machinery worth $5, and labor worth $40 for each coat, then the value of the coat must surely be $80. If using up $80 worth of materials leaves our Capitalist with an $80 coat, and they can’t sell it above its value, then how are they to make a profit?
For our Capitalist, Mr Moneybags, to make a profit, they have to be lucky enough to find some commodity as an input which produces extra value as it’s consumed. As it happens, there is such a commodity: living labor. People are consistently able to produce more value, through their work, than it takes for them to sustain and reproduce themselves. The Capitalist’s trick then, is to take that extra value for themselves.
Say the cost of sustaining a worker for a day is $80. If the worker adds $40 worth of value to each coat they create, then each one they produce after the second one in the day contains labor for which the worker isn’t paid. If the worker produces 3 coats in the day, the surplus value that the Capitalist keeps is $40: the $120 dollars worth of value that the worker produced, minus the $80 paid to them so that they can sustain themselves.
Doesn’t the Capitalist Deserve the Profit for Risking Their Capital?
Confronted with the fact that the Capitalist keeps the fruits of their employees’ labor, our apologist for Capitalism frequently tells us that profit is merely the necessary reward for the Capitalist, who, after all, puts their own money at risk.
This begs two questions. Firstly: why does this excess of wealth belong to an individual in the first place? Secondly: how much risk does the Capitalist actually take?
To the apologist, where the money comes from is seen as irrelevant. But all profit, we’ve seen, is generated from the unpaid labor of those who work. The money that the Capitalist invests today, then, is merely the unpaid labor of those who worked in the past. Why, then, should an individual be allowed to profit from it today?
While every organization or project needs resources to be implemented, there’s no reason why society can’t collectively own and invest the resources, and use any surplus value taken from the workers to reinvest in the public good. The idea that there needs to be a separate class of owners, who siphon off profits, is nonsensical.
And how much do Capitalists actually risk anyway?
An enterprise that produces commodities is a curious thing, in that it continually pays for its own existence.
Let’s return to our coat factory, where our employee makes three coats per day. The raw materials cost $200, 3 coats X ($35 for linen and $5 for machinery) + $80 to pay the worker for a day. Initially then, our capitalist must invest $200. For simplicity’s sake, we assume the goods are sold immediately.
Since the three coats sell for $80 each, $240 in total, the business provides the Capitalist with the $200 necessary for the following day’s operations, plus $40 extra to pocket or reinvest.
After the initial investment, a successful business continually pays for itself through its own operations, multiplying the wealth of its owners. This is how a person such as Jeff Bezos is able to accumulate a net worth of $121 billion from a $300,000 initial investment. Investors are able to put money up once and then get paid forever, out of revenue generated by their employees’ labor.
Like the masters of old who used to pay for their slaves once, and then profit off the labor of generations of their descendants, the Capitalist pays once and their profits continue to multiply indefinitely into the future.
Conclusion
The employee is coerced and exploited in every aspect of the employment process. They’re forced to accept work on bad terms, under the threat of starvation, and then they’re paid less than they’re worth, so that someone who risked little can profit indefinitely off their labor.
Under Socialism, any surplus value not paid directly to the employee is reinvested in society for the public good. Under Capitalism, it’s pocketed by the business’s owners.
It’s only by ignoring the true relationship between the buyer and seller of labor that apologists for Capitalism can pretend that it’s a fair and voluntary exchange.
Suggested reading:
