From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Wed Oct 04 2006 - 13:00:44 EDT
Rakesh wrote: Wages are often paid after performance of labor but before commodity output actually sold. Wages or variable capital thus appears to be advanced. Reply: I was interested in this problem once, working with a friend on the New Zealand economic data. He pointed out to me from anecdotal evidence (he had been in business himself) that, as a fact of business accounting, wage payments may also recouped during the year by a commercial business through current revenues from ongoing sales, implying that the actual amount of capital tied up in wage payments at any time during the year (the average "stock level"), or if you like wage-payment funds held "in reserve", may be only need to be e.g. one-tenth or one-seventh of the annual flow value. Thus, the size of the variable capital outlay would depend partly on the normal turnover time (rotation speed) of the total capital outlay (which obviously will vary according to the kind of output of a business; some businesses might indeed "advance" wages, insofar as it concerns a project which comes on stream and yields profit only after a certain time interval). I have never seen this possibility theoretically recognised in the Marxian literature however. Perhaps it deserves an article. That aside, the empirical measurement of a Marxian "variable capital aggregate" confronts at least five other analytical difficulties: 1) The fact, that total labour costs to an employer normally - in advanced capitalist countries - exceed (gross) wages paid (the excess being mainly taxes, levies and benefits of various kinds). To some extent this is reflected in the national accounts concept of "compensation of employees". See an article I did on this, if interested: http://en.wikipedia.org/wiki/Compensation_of_employees In the US social accounts, a reasonable attempt is made to show the different entries to do with disposable versus deferred labor-income, mainly I suppose because in the US private employer-benefit pay-outs in respect of employees can be very considerable. In many other countries, however, the components of "compensation of employees" are not separately identified. Part of the problem I guess is that there are many different factors influencing wage payments made, making accurate wage statistics very difficult to compile. 2) The definition of capitalistically "non-productive" labour - on some Marxist definitions that have been offered, about half of the nation's wage payments (in advanced capitalist countries) reflect such non-productive labour, thus, how the definition is fixed makes a very large difference to the size of this capital outlay, and consequently to estimates of aggregate profitability, S/V, and the OCC - especially since many Marxian authors (e.g. Moseley, Shaikh/Tonak) include the gross wage-payments to employees defined as "non-productive" in aggregate surplus-value, rather than treating it e.g. as a portion of Cc. 3) Whether or not variable capital should really be valued on an accrual basis, or not. In national accounts, it is typically valued on an accrual basis, unlike the other inputs which are supposed to be valued at the time they are actually *used* in production. Probably, this procedure raises the value of labor-compensation in the account, insofar as at any time you become entitled to money money than you actually receive, or that is deferred in your favour. 4) The fact, that indirect taxes and profit-levies are imposed on worker's consumption spending (such as VAT tax or GST tax, or various other levies). Although this is not usually recognised in the Marxist literature, profits are extracted not just "at the point of production", but also at the point of workers' consumption. If for example you buy a muesli bar with your wage income, you also pay the total profit and tax impost on that muesli bar, which is part of its unit-price. Had Marx written about the sphere of consumption (which he indicates as one of the four spheres of the economy, in his introduction to the Grundrisse) he would no doubt have pointed this out. It affects how we understand the value of labor power, i.e. the value relation involved in the exchange between labor and capital. I referred briefly to this issue in a short article here: http://en.wikipedia.org/wiki/Rate_of_exploitation. More generally, we could say that insofar as capitalist production is "the unity of the production process and the circulation process", this involves both relations of production and relations of distribution. 5) The fact, that employees spend a fraction of their own wages on directly work-related activities, for which they may not be compensated. As I cite in my CE article referred to in 1), "For example, British research showed the costs associated with turning up for work each day reduce the average annual wage among British workers by £2,300; The official average salary falls from £22,248 to £19,970 when the typical costs associated with having a job - such as transport, snacks and clothes - have been deducted. A poll by YouGov, sponsored by debit card group Maestro, showed workers typically spent £120 extra a month on food, £50 on travel and £35 on work clothes. The research found that the average worker spent 16 days a year getting ready for and travelling to work. (source: The Guardian, 28 November 2005). Marx might have pointed out that this expenditure is in such cases "gratis" to the employer, in the same way as some forms of maintaining his productive assets in the course of work are supplied gratis, and the surplus-labour is gratis. In modern capitalism, wage-income and wage-related income are in reality normally directly affected not by just two transactors (employers and employees) but at least four (employers, employees, government institutions, and private or semi-private/para-state benefit-paying institutions). Hence the difficulties and the moral problems raised by the "just or fair reward" for labor. Had Marx written the "missing book on wage labour", he would no doubt have covered all these issues from the point of view of the employee both as a *producer* (who produces surplus value) and as a *consumer* (who incurs additional costs due to appropriations of profit and tax imposts on what s/he buys, as well as "incidental expenses" with respect to his work that must be met from his own income). That is, the wage-worker would in this book enter on the scene not just as a seller of labour-power, but also as a "citoyen" who is a buyer of commodities to sustain himself. Frederick Engels refers in his pamphlet "The Housing Question" to various possibilities of rackets in this regard, which he calls "deductions from wages". But he does not attempt to resolve the issues this raises for value theory. He claims only that "When, however, the worker is cheated by his grocer or his baker, either in regard to the price or the quality of the commodity, this does not happen to him in his specific capacity as a worker. On the contrary, as soon as a certain average level of cheating has become the social rule in any place, it must in the long run be leveled out by a corresponding increase in wages. The worker appears before the small shopkeeper as a buyer, that is, as the owner of money or credit, and hence not at all in his capacity as a worker, that is, as a seller of labour power. The cheating may hit him, and the poorer class as a whole, harder than it hits the richer social classes, but it is not an evil which hits him exclusively or is peculiar to his class." http://www.marxists.org/archive/marx/works/1872/housing-question/ch01.htm Engels sees the issue here as only one of "cheating", but the point is that there will be a normal profit and tax impost quite independent of any possible cheating. I forget how Sraffa actually defines the payment of wages to employees, but the general norm adopted in practice is that wages are paid after work is done, and hence they are normally not "advanced" in that sense. The proviso being, that a certain fund must often be held in reserve by the employer to pay wages, particularly when an activity only begins to yield profit after a certain interval of time. It could be argued, in summary, that on those five grounds I mention alone, the Marxian concept of variable capital is itself a theoretical "abstraction" which identifies only an essential relationship, and which would often need to be modified to encompass the empirical reality. Arguably, the "true" measure of variable capital is either the disposable income an employee actually receives in respect of time worked, over his whole lifetime, in cash or in kind; or else the value of goods and services actually appropriated by employees during their lifetime in respect of their total financial claims issuing from their time worked. But a consistent empirical valuation of such an aggregate is statistically speaking obviously enormously difficult. As a graduate student I did not delve greatly into the Physiocrats myself, instead I looked at modern social accounting procedures. Possibly a dry subject for a wet student, but it does point up the problems of very abstract concepts, and the need to qualify them in making sense of experience. For this reason too, the controversy between "Simultaneous Valuation" and "Temporal Single System" adherents in the Marxist camp often does not make much sense to me, or it seems a trifle scholastic. Jurriaan
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