Are Fair Wages Under Capitalism Possible?
Are Fair Wages Under Capitalism Possible?
By Red Phoenix /
Jan 28, 2013

Every once in a while you may hear politicians, union leaders and ordinary citizens demand fair wages or fair pay for work. While this is surely a noble goal, the fact that people still struggle for fair wages clearly shows that they have not yet been realized. Women are still paid less than men, black and Latino workers are statistically paid less than white workers, and corporate executives make several hundred and even a thousand-fold what the rest of their workers make. Yet while workers struggle for more of the products of their labor, the main question remains: are fair wages possible at all under capitalism? This depends on our definition of a “fair wage;” after all, your boss would most likely consider paying you less than minimum wage “fair” because of the bias that comes from their class position.

Consider the following: if you walk into a store and buy something for ten dollars you would expect to get back something worth that ten dollars. You wouldn’t expect to buy a single stick of bubble gum; it would have to be something of the same value. At the same time, you cannot expect to get a brand new iPod for that money. The seller will readily inform you that this would be a most unfair exchange for him because you would receive far more than you spend, causing him a deficit.

The labor market works in a similar fashion. Those who are there to make the purchase are the employers, the bourgeoisie, who have capital and are in need of workers to manufacture their products and provide service. Those who seek to be hired, who seek an opportunity to sell their “commodity,” are the workers. This “commodity” that they sell to the capitalist is their labor power. This seems like it could be a fair trade, yet workers continue to demand fairer wages, and the capitalists continue to make higher and higher profits while they refuse these demands. How can this be?

Profits cannot be made from the increasing prices of goods alone, the “free market” rules this option out. After all, if a single capitalist increases his prices, he will soon discover that others sell the same goods of the same quality but for less money. Naturally the majority will go for the cheaper offer and the one selling at a more expensive price will have serious trouble getting rid of his goods and making money. If all the others decide to or are forced to increase their prices, this will affect the single capitalist as well, being that he can’t live off his money alone but has to buy commodities like everybody else. We can conclude that increasing prices can be a temporary means to gain profits for a short time in certain sectors of the economy, but they can never be the sole source of capital.

Let us again consider the labor market. The capitalist invests a certain amount of money to hire the worker $56 for 8 hours of work, a wage of $7 dollars an hour. However, the value of the product of this labor will net his boss $200. So is this extra $144 the work of magic? Of course not. The Marxist Labor Theory of Value explains that value is created by labor power. The amount of spent labor power is measured in time, therefore the value of a commodity is determined by the time necessary to produce it. This means that the value of the worker’s labor power can be measured in the amount of goods and, thus, money he needs to keep himself alive and going, to maintain and restore his ability to work after a long day on the job. Therefore the capitalist is compelled to pay him the bare minimum wage needed for survival (sometimes more, sometimes less), $56 in this example, yet the ratio of the amount needed for the basic maintenance of the worker to the hours needed to earn this much is unlimited. Essentially, the capitalist is able to extract more hours from workers while only compensating them to a minimum and reaping the larger part of the value created by the worker.

In our example, the worker would only need to work for approximately 2 hours and 14 minutes to produce a value of $56, but the capitalist hired the worker for a certain period of time, 8 hours here, and during this time all value produced belongs to the capitalist. The workers are paid not for their labor, but for using their labor power to perform work for the capitalist, and they do so with his means of production. The moment they start working, the product of their labor belongs to their employer, no matter if less (which would most likely get the worker fired) value or more value is produced in that period of time than is embodied in the money the workers have received.

This additional, unpaid labor, is called surplus labor and the value it produces without the worker being compensated for it is called surplus value. The extraction of surplus value from the working class is the basis of the capitalist system. Every capitalist’s goal is to extract as much surplus value as possible as it is the basis of their profit. The only way to press more and more surplus labor from a worker is to either reduce the time he works, to gain capital through investment and/or to increase the time the worker works “for free,” without receiving any payment. To put it bluntly: the higher the wages are for workers, the lesser the profit for the capitalists, and vice versa.

Now the question raised at the beginning can easily be answered: are fair wages possible under capitalism? Can a worker receive the full equivalent of the work he performs in a capitalist society? The answer is no; it is entirely impossible as it would leave no surplus value and thus no profits for the capitalist class, and thus render their existence impossible. It would become obvious that they are superfluous parasites, feeding off of the blood and sweat of the working people and living on the unpaid labor of others. The wealth of a selected minority is based on the exploitation of the majority’s hard work. To expect fair wages under this system is like expecting the abolition of slavery in a slaveholder society, as Marx points out. The moment the slaves are freed, we can no longer speak of a slaveholder society; the moment the working class receives the full value it produced, our society has ceased to be capitalist.

Of course there can be higher and lower wages and many of the things we possess are hardly necessary for our immediate survival, for the regeneration and reproduction of our labor power. It cannot be denied that the living conditions of the workers in America and other industrialized nations have improved since the days of Marx and Engels. Yet this implies in no way that the nature of capitalism has changed. Rather, exploitation has been shifted from being confined to national bounds to being applied internationally. Rather than the wealth of our society being based solely on the exploitation of American workers, it is chiefly based on the suffering of millions of people in the countries plundered and ravaged by imperialism.

The exploitation of these neo-colonies makes the capitalist class a tad more “generous” at home (if they decide to employ workers here at all, rather than sending jobs to sweatshops in Honduras or in southeast Asia). It allows them to extract more than enough surplus value to bask in their abundance and luxuries while tolerating a little loss in their profits by obeying the occasional labor law and paying moderately higher wages, keeping the working class more satisfied and less rebellious. As well, with the option of shipping jobs overseas, the well-spring of exploitable labor abroad allows them to undermine attempts at “fairer” wages at home with threats of outsourcing. While workers abroad often have it worse than we do, it doesn’t change the fact that American workers face exploitation.

Fair wages under socialism?

In capitalism, workers must ultimately face exploitation if this system of profit and the reaping of surplus value is to be maintained. Is there another way to live than this? Marx answers this question in his famous Critique of the Gotha Program:

Let us take, first of all, the words ‘proceeds of labor’ in the sense of the product of labor; then the co-operative proceeds of labor are the total social product.

From this must now be deducted: First, cover for replacement of the means of production used up. Second, additional portion for expansion of production. Third, reserve or insurance funds to provide against accidents, dislocations caused by natural calamities, etc.

There remains the other part of the total product, intended to serve as means of consumption.

Before this is divided among the individuals, there has to be deducted again, from it: First, the general costs of administration not belonging to production. This part will, from the outset, be very considerably restricted in comparison with present-day society, and it diminishes in proportion as the new society develops. Second, that which is intended for the common satisfaction of needs, such as schools, health services, etc. From the outset, this part grows considerably in comparison with present-day society, and it grows in proportion as the new society develops.Third, funds for those unable to work, etc., in short, for what is included under so-called official poor relief today” (Marx 1875).

So, the workers still have to perform surplus labor in a socialist society? What then is changed? First of all, the working day will be much shorter in socialism. Not only the necessary working time will be reduced thanks to full employment and the increasing development of the productive forces, but the time spent for producing surplus labor will also no longer be determined by a capitalist’s boundless greed and result in his personal enrichment. Instead it will be determined by social necessity and will benefit the whole society. 

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Are Fair Wages Under Capitalism Possible?