Monday, August 10, 2009

On Relative Wages

Relative Wages,
Marx discusses three different wages
1-Money wage
2-Real Wage
3-Relative Wage
According to him, it is very clear that relative wage is the most relevant one. Real wage and profit can go together, but relative wages and profits have always, as a rule, an inverse relationship. To him, the main indicator of the poverty of working class lies in the relative wage which tends to decrease as a result of increasing share of the profit of capitalists.

In his words “ [n]either the nominal wages – i.e., the amount of money for which the laborer sells himself to the capitalist – nor the real wages – i.e., the amount of commodities which he can buy for this money – exhausts the relations which are comprehended in the term wages. Wages are determined above all by their relations to the gain, the profit, of the capitalist. In other words, wages are a proportionate, relative quantity”

This point is very crucial for many purposes. When Joseph Schumpeter explains the success of capitalism in his magnus opum “Capitalism Socialism and Democracy” , he argues that, as opposed to the claim of Marx, capitalism has improved the conditions of workers. He counts several improvements in the conditions of working class. One of them is high real wages (he published the book in 1942). This line of argument has been repeated several times. Even, some of progressive critiques have tried to focus on real wages as opposed to relative wages to show the failure of capitalism.

However, Marx’s original position is much more insightful and strong (although in Chapter 8 he has a twist in his position, this may be another discussion). According to him “If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened”.

In this line, in several passages, he seems to think that relative poverty of working class means more antagonism between working class and capitalist class even though real wages increase. Can this position be justified by historical observations? ( If not, why ?). Can we say that Marx does ignore the importance of ideology in this discussion?


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