Labor power
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Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. He regarded labour power as the most important of the productive forces.
However, he argues in capitalism the "productive powers of labour" appear as the creative power of capital. Work becomes just work, workers become an abstract labour force, and the control over work becomes mainly a management prerogative. Unsurprisingly in that case, labor economics survives only as a minor branch of economic science.
Definition
Marx introduces the concept in chapter 6 of the first volume of Capital (generally known by its original German title, Das Kapital), as follows:
"By labour-power or capacity for labour is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use-value of any description." [link]
He adds furtheron that:
"Labour-power, however, becomes a reality only by its exercise; it sets itself in action only by working. But thereby a definite quantity of human muscle, nerve. brain, &c., is wasted, and these require to be restored." [link]
A much shorter, to-the-point explanation of labor-power can be found in the introduction and second chapter of Marx's Wage Labour and Capital: [link]
Labor-power versus labour
According to Marx, there is a clear distinction between labor and labor-power'. "Labor" refers to the actual activity or effort of producing goods or services (or what Marx calls use-values). Neoclassical economists sometimes refer to this as "labor services." On the other hand, "labor-power" (or "laboring power") refers to a person's ability to work, his or her muscle-power, dexterity and brain-power. Marx took over this distinction from Hegels' Philosophy of Right and gave it a new significance.
In some ways, this concept is similar to that of "human capital." However most likely Marx himself would have considered the concept of human capital a reification, the purpose of which was to convince the worker that he was really a capitalist.
The distinction Marx introduces between labor and labor-power was intended to solve a problem which David Ricardo failed to solve - the problem of explaining how surplus value could arise out of the exchange between capital and labor.
Labor power as commodity
Under capitalism, according to Marx, labor-power becomes a commodity – it is sold and bought on the market. A worker tries to sell his or her labor-power to an employer, in exchange for a wage or salary. If successful (the only alternative being unemployment), this exchange involves submitting to the authority of the capitalist for a specific period of time.
During that time, the worker does actual labor, producing goods and services. The capitalist can then sell these and realize a profit – what Marx called surplus value – since the wages paid to the workers are lower than the value of the goods or services they produce for the capitalist.
Value of labor-power
Labour power is a peculiar commodity, because it is an attribute of living persons, who own it themselves. Because they own it, they cannot permanently sell it to someone else; in that case, they would be a slave, and a slave does not own himself.
Labour power can become a marketable object, sold for a specific period, only if the owners are constituted in law as legal subjects who are free to sell it, and can enter into labor contracts. Once actualised and consumed through working, the capacity to work is exhausted, and must be replenished and restored.
In general, Marx argues that the value of labor power is equal to its normal or average reproduction cost, i.e. the established human needs which must be satisfied in order for the worker to turn up for work each day, fit to work. This involves goods and services representing a quantity of labor equal to necessary labour or the necessary product.
Included is both a physical component (the minimum physical requirements for a healthy worker) and a moral-historical component (the satisfaction of needs beyond the physical minimum which have become an established part of the lifestyle of the average worker). The value of labor power is thus an historical norm, which is the outcome of a combination of factors: productivity; the assertion of human needs; the costs of acquiring skills; state laws stipulating minimum or maximum wages, etc.
Buying labour power usually becomes a commercially interesting proposition only if it can yield more value than it costs to buy, i.e. employing it yields a net positive return on capital invested. However, in Marx's theory, the value-creating function of labour power is not its only function; it also importantly conserves and transfers capital value.
Labor power and wages
Marx 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 labor, the level of unemployment, and the ability of workers and employers to organise and take action with regard to pay claims.
Marx 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.
Consumption of labor power
When labor power has been purchased and an employment contract signed, normally it is not yet paid for. First, labor power must be put to work in the production process. The employment contract is only a condition for uniting labor 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.
At the end of the working day, labour power has been more or less consumed, and must be restored through rest, eating & drinking, and recreation.
- Note : medical estimates of the average holiday time necessary for workers to fully recuperate in a physiological and psychological sense from work stress during the year differ from country to country; but as an approximate gauge, three weeks continuous holiday is physiologically optimal for the average worker. ILO statistics show a wide range of average hours worked and average holidays for different countries; for example, Korean workers work far more hours per year, and Americans have fewer formal holidays than West Europeans. Several researchers have questioned however to what extent additional hours worked really increase the marginal productivity of labour; particularly in services, the work that gets done in five days could often also be done in four. The most difficult aspect to measure is the intensity of work, though some argue the incidence of work accidents are a reliable yardstick.
Reproduction of labor power
Marx himself argued that:
"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..." [link]
This however is inaccurate. Elites and governments 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 carried an economic cost. 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 labor 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 pays "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.
Labour power and labour market flexibilisation
The commercial value of human labor power is strongly linked to the assertion of human needs by workers as citizens. It is not simply a question of supply and demand here, but of human needs which must be met. Therefore labour costs have never been simply an "economic" or "commercial" matter, but also a moral, cultural and political issue.
In turn, this has meant that governments have typically strongly regulated the sale of labor power with laws and rules for labor contracts. These laws and rules affect e.g. the minimum wage, wage bargaining, the operation of trade unions, the obligations of employers in respect of employees, hiring and firing procedures, labor taxes, and unemployment benefits.
This has led to repeated criticism from employers that labour markets are over-regulated, and that the costs and obligations of hiring labor weigh too heavily on employers. Moreover, it is argued that over-regulation prevents the free movement of labor to where it is really necessary. If labour markets were deregulated by removing excessive legal restrictions, it is argued that costs to business would be reduced and more labor could be hired, thereby increasing employment opportunities and economic growth.
However, trade union representatives often argue that the real effect of deregulation is to reduce wages and conditions for workers, with the effect of reducing market demand for products. In turn, the effect would be lower economic growth and a decline in living standards, with increased casualisation of labor and more "contingent labor". It is argued that, because the positions of employees and employers in the market are unequal, employees must be legally protected against undue exploitation. Otherwise employers will simply hire workers as and when it suits them, without regard for their needs as citizens.
Often the demand for "labour market flexibility" is combined with the demand for strong immigration controls, to block any movement of labour which would be only a burden for capital accumulation. The term "flexibility" is used because, while capital must be able to move freely around the globe, the movement of labour must be strictly controlled. If that control does not exist, it is argued, it could mean additional costs to employers and taxpayers.
Criticism of the concept of labour power
There are four main kinds of criticism of Marx's concept.
- Critics have often argued that Marx's definition of labour-power, and how its value and price are regulated, is vague, incomplete, too general or imprecise; at any rate, that it permits of different interpretations. In part, this criticism is anticipated by Marx, who acknowledged there was not just "one way" of valuing and compensating workers, although the basic relationship involved remained the same.
- Another sort of criticism is that whereas the concept of labour power may be valid, Marx misrepresents what happens when a worker enters into a labour contract with an employer (see Hodgson).
- A recent criticism by Prof. Marcel van der Linden is as follows: "Marx's thesis is based on two dubious assumptions, namely that labour needs to be offered for sale by the person who is the actual bearer and owner of such labour, and that the person who sells the labour sells nothing else. Why does this have to be the case? Why can labour not be sold by a party other than the bearer? What prevents the person who provides labour (his or her own or that of somebody else) from offering packages combining the labour with labour means? And why can a slave not perform wage labour for his master at the estate of some third party?"[link]. The idea here is that the buying and selling of human work effort can and has taken many more different forms than Marx acknowledges - especially in the area of services. A modern information society makes possible all kinds of new forms of hustling.
- Finally, it is argued by some that the concept of labour power is now out of date, and superseded by the concept of human capital. In a knowledge economy, everyone is a capitalist, because all invest in their human capital.
References
- Karl Marx, Das Kapital, Volume 1.
- Bonnie Fox, Hidden in the Household: Women's Domestic Labour Under Capitalism, Womens Press, 1980.
- Harry Braverman, Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century. New York: Monthly Review Press, 1974.
- Ernest Mandel, The Formation of the Economic Thought of Karl Marx. Monthly Review Press, 1969.
- Bob Rowthorn, "Marx's Theory of Wages", a chapter in Bob Rowthorn, Capitalism, Conflict, and Inflation, Lawrence & Wishart, London.
- Roman Rosdolsky, The Making of Marx's "Capital". London: Pluto Press, 1977.
- Kenneth Lapides, Marx's Wage Theory in Historical Perspective: Its Origins, Development, and Interpretation. Westport: Praeger 1998.
- Makoto Itoh, The Basic Theory of Capitalism: The Forms and Substance of the Capitalist Economy. Barnes & Noble, 1988.
- Ben Fine, Labour Market Theory: A Constructive Reassessment. Routledge, London, 1998.
- Peter Scholliers (ed.), Real wages in 19th and 20th Century Europe; Historical and comparative perspectives. New York; Berg, 1989.
- Samuel Bowles & Herbert Gintis, "The Problem with Human Capital Theory--A Marxian Critique", American Economic Review, vol. 65(2), pages 74-82, (1975)[link]
- Ian Gough & L.Doyal, A Theory of Human Need, Macmillan Press Ltd. 1991.
- Ian Gough, Global Capital, Human Needs and Social Policies: Selected Essays 1994-99 London: Palgrave, 2000.
- Geofrey Hodgson, Capitalism, Value and Exploitation (Martin Robertson, Oxford, 1982).
- Tom Brass and Marcel Van Der Linden (eds.), Free and Unfree Labour: The Debate Continues (International and Comparative Social History, 5). New York: Peter Lang AG, 1997.
- The Critical Lawyer's Handbook
See also
- human capital
- exploitation
- surplus value
- surplus labour
- surplus product
- variable capital
- productive forces
- Abstract labour and concrete labour
- Compensation of employees
- Reserve army of labour
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