The surplus value of labour
Posted June 24, 2008on:
Over at The Standard they are discussing ‘triangular employment situations’ and a bill that is coming in to play that will give employees greater rights in these situations. Now that’s cool, I don’t have any issues with that. If I had to critique the bill I would run with the employee choice argument – if the employee chooses that he wants to work in a scheme where he doesn’t get sick leave etc (as he gets compensated for this) then these schemes provides this opportunity, so removing this opportunity will reduce the welfare of the workers in the scheme.
Still this isn’t my point. I was interested in the fact that Steve Pierson mentioned the surplus value of labour. The wikipedia definition for this is:
Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is unpaid surplus labor performed by the worker for the capitalist, serving as a basis for capital accumulation.
Now I always found this idea a bit unusual. Fundamentally it states that labour unit creates more value than it is paid by the capitalist, and that excess value is taken by the capitalist and either used to create more capital or for their own consumption. Fundamentally, as capital is in some sense equivalent to savings, which is deferred consumption, the capitalist is taking this surplus away from the labour that created it.
Many contemporary proponents of the theory would not be this extreme – however, they would still fundamentally say that the surplus that the capitalist extracts comes from the exploitation of the worker. As a relatively middle of the road economist this isn’t how I feel:
If we view that the labour unit is provided on the market willingly, so any surplus that is created from the combination of the labour and capital units will be split depending on the relative bargaining power of the labour and capital owners. In this sense the value the is extracted by the capitalist is the section of the surplus from trade which they received due to bargaining.
Now we may have problems with the relative bargaining power of the labour and capital units – but this is not a case for saying that the surplus that was created was solely the result of the implementation of labour.
Fundamentally, the confusion stems from what we view as the marginal input. Typically people that sell the surplus value of labour line tend to state that we have a given capital stock, and this creates value as we add labour – so that each addition unit of labour creates revenue and thereby we assume that they create the value. However, if we take a labour stock and then say that we could vary capital, then we could say that for each unit of capital that is added value is added in the same way – implying by the same logic that capital should extract the entire surplus from production.
This critique is a combination of the Austrian critique and the critque by Steve Keen (of all people, see a critique of Steve’s view of economics here h.t. Anti-dismal) which are mentioned in the aforementioned wikipedia entry (*). The Austrian view tells us that the trade is voluntary and so the value only exists insofar as there is an agreement between labour and capital holders, implying that saying surplus comes from labour is nonsensical. Steve’s point is fundamentally that each input to the production process is involved in the “value-making” process. Together, these points make me feel comfortable with the idea that the surplus value of labour is a over-blown concept.
However, I would love to here what people have to say about the surplus value of labour – especially if you are a supporter. I don’t know any supporters of the concept, which implies that I’ve never really had the chance to see if this critique of it stands up – so please, please comment.