Shop Talks on Economics/Chapter 7
VII.
Wages.
There are several ways whereby wage-workers may try to improve their condition today. In Lesson V we discussed Low Prices and their effect upon the condition of working class life. We discovered that as the prices on the necessities of life fall, wages fall proportionately, because of the competition among wage-workers for jobs.
It would be impossible for an employer of labor arbitrarily to lower wages, just as it is impossible for capitalists arbitrarily to raise the prices on commodities. The conditions must be favorable to such a rise or fall in prices. It is the Army of Unemployed men and women that force wages (or the price of labor-power) down when the cost of living falls. We were unable to find where low prices would benefit the working class.
In discussing prices in the last two lessons, we have not said much about wages, or the price of labor-power. Labor-power is a commodity just as stoves, coats or flour are commodities. And the value and price of labor-power are determined exactly as the price and value of all other commodities are determined.
Wage-workers are always trying to get higher wages, or a better price for their labor-power.
It is easy to understand that the gold miner who secures a raise in wages from $2.00 to $3.00 a day, leaves less surplus value for the mine-owner. He receives back more of his product. And the aim of Socialists or revolutionary workmen and women is to become owners of their entire product.
Confessed economists have repeatedly claimed that a rise in wages was no benefit to the proletariat. They insisted that the capitalists would raise prices on the necessities of life, so that the workers would be just where they were before.
But in Value, Price and Profit, Chapter II, page 17, Marx says: "How could that rise of wages affect the prices of commodities? Only by affecting the actual proportion between the demand for, and the supply of, these commodities."
"It is perfectly true, that, considered as a whole, the working class spends, and must spend, its income upon necessaries. A general rise in the rate of wages would, therefore, produce a rise in the demand for, and consequently (temporarily) in the market prices of, necessaries.
"The capitalists who produce these necessaries would be compensated for the risen wages by the rising market prices of the commodities."
Note, Marx says that temporarily the prices on necessaries would probably rise, owing to the increased demand for food, clothing and better houses; not because the capitalists decided to raise prices. And then note what begins to follow immediately:
"What would be the position of those capitalists who do not produce necessaries? For the fall in the rate of profit, consequent upon the general rise in the price of wages, they could not compensate themselves by a rise in the price of their commodities, because the demand for their commodities would not have increased…
"Consequent upon this diminished demand, the prices of their commodities would fall. In these branches of industry, therefore, the rate of profit would fall…
"What would be the consequence of this difference in the rates of profit for capitals employed in the different branches of industry? Why, the consequence that generally obtains whenever, from whatever reason, the average rate of profit comes to differ in the different spheres of production.
"Capital and labor would be transferred from the less remunerative to the more remunerative branches; and this process of transfer would go on until the supply in the one department of industry would have risen proportionately to the increased demand, and would have sunk in the other departments according to the decreased demand.
"This change effected, the general rate of profit would again be equalized in the different branches. As the whole derangement originally arose from a mere change in the proportion of the demand for, and supply of, different commodities, the cause ceasing, the effect would cease and prices would return to their former level and equilibrium.
"The general rise in the rate of wages would, therefore, after a temporary disturbance of market prices, only result in a general fall in the rate of profit, without any permanent change in the prices of commodities."
We will use a concrete illustration to explain Marx's point. In a mining camp the miners secured a gain of wages of from $2.00 to $3.00 a day. The man who ran the only restaurant in the camp thought he could raise the price of board from $4.00 to $5.00 a week. For a week or two the miners paid the advanced prices, but the third week a new restaurant was opened by a man who heard of the "prosperity" in this particular camp, and inside of two months there were four restaurants competing for trade in Golden Gulch. This competition among the restaurant keepers forced board down to $3.00 a week. Some of them moved away until board fell to the average rate of board in that state.
As long as prices were better there new investors came to Golden Gulch, and when they fell below the average price for board investors went away.
Marx says that when workmen and women get higher wages, they spend this increase in better food, better homes and better clothing. This stimulates the demand for food, clothing and houses. More capitalists begin to invest in food production, in houses and in the manufacture of clothing. The competition among capitalists often brings the prices on these things below the rates charged before the workers received their increase, until these capitalists find they can make more money in other fields, when they invest in other industries and prices fall to what they were before the rise in wages.
On the very last page of Value, Price and Profit, Marx says again:
"A general rise in the rate of wages would result in a fall of the general rate of profit, but, broadly speaking, not affect the prices of commodities."
QUESTIONS.
If you were getting three dollars a day for digging gold out of a mine and you secured $4.00 by striking, would there be as much surplus value left for your Boss as before?
On what do wage-workers usually spend their money? On luxuries?
If the working CLASS is able to force up wages two dollars a week for every man and woman, will they spend the increase on automobiles, trips to Europe, or upon more and better clothing and food?
What happens when there is a sudden increased demand for a commodity? Does the price of this commodity rise or fall (temporarily)? If the capitalist producing this commodity, for which there is a suddenly increased demand, is able to get higher prices for it, will this attract other capitalists into the same field of production in the hope of securing bigger profits?
What happens when several big capitalists fight for a field of production where prices are high? Do prices fall?
Do these capitalists remain producing a commodity after its price falls so low that they cannot make the average rate of profit?
When they go into another sphere of production do prices on this commodity fall to normal again?
Why cannot a capitalist raise prices at his own will? Suppose a wealthy ranch owner has a splendid stock of horses when the U. S. troops are sent down to the Mexican borderline. Horses are very scarce, since automobiles have won favor with the leisure class. He sells these horses at an enormous price. There is still talk of war. What does every other ranchman in the country plan to do when he hears of the profits of the lucky owner of the horses? Do they all go into the COAL BUSINESS?
EVEN if there is still war, or rumor of war, will the price on horses be as high in a few years as it Is now? Why not?