Wage Labour and Capital & Value, Price and Profit

“Wage Labour and Capital” (1849) and “Value, Price and Profit” (1898) are two texts by Karl Marx that introduce some of the most fundamental elements of his critique of capitalism. Both texts were originally delivered as lectures intended for a broad, “popular” audience. The former was first published in a newspaper Marx had founded in Germany called Neue Rheinische Zeitung, while the latter was published posthumously by his daughter, Eleanor, and her husband Edward Aveling. Given their intent was to educate and galvanize a general audience, the accessibility of these texts makes them a popular pairing when introducing or teaching Marx’s ideas to people for the first time. As with many of Marx’s works, they attempt to analyze, critique, and explain the workings of capitalism from a perspective outside of the capitalist class. Together, “Wage Labour and Capital” and “Value, Price and Profit” argue that capitalism not only alienates and exploits workers, but that bourgeois ideology obfuscates the true nature of the relationship between workers and capitalists.

This guide is based on the editions freely accessible from Marxists.org.

Summary

In “Wage Labour and Capital,” Marx explores the antagonistic relationship between labor and capital, outlining the numerous ways in which the capitalist mode of production is harmful to, and exploitative of, the working class. He opens by explaining that wages are not an exchange of money for labor performed, but for labor-power (i.e., the potential to work for an agreed-upon amount of time), and illustrates that the value of wages are determined by the minimum cost to ensure the maintenance and reproduction of workers, such as the cost of the commodities they need to survive, their education, and the cost of supporting a family so that there are new workers over time. Ironically, this is also the only reason that workers enter this exchange—they need the wages to buy the commodities necessary for survival.

Marx then shifts his focus to capital, arguing that it is more than just the raw materials, instruments of production, and the means of subsistence like most economists suggest. For Marx, these things must also be used in the preservation and multiplication of capital by being exchanged for labor power. It is through this exchange that the capitalist earns profit, because in paying for the workers’ labor power, they purchase the right to a full day’s labor, in which the worker will produce more value than they are paid in wages. Marx calls the unpaid labor “surplus labor” and the value it creates “surplus value.”

This means wages and profits are inversely related, as they are taken from the same pool of value created by the laborer—if wages increase, profit decreases, and vice versa—making the interests of wage labor and capital diametrically opposed. They are stuck in a perpetual tug-of-war over wages and profits because there is a fundamental antagonism between the two that cannot be resolved. It also means capital and labor presuppose one another and one could exist without the other. However, the exchange of wages for labor power benefits the capitalist because they get a return on their investment, which can then be put to use in buying more labor, while the laborer consumes their wages immediately in order to survive.

Marx closes the essay by discussing the way capital must constantly strive to increase the scale of production while reducing the costs to remain competitive in the market. This is usually done through the implementation of technology and the division of labor; this process has the double effect of making labor less satisfactory and reducing the value of commodities (including labor power). There is a contradiction at the heart of this cycle, because capital needs labor to create profit, while at the same time, it seeks to eliminate labor whenever possible to reduce the costs of production. It also leads to constant cycles of overproduction where there is not enough market for the scale of goods being produced, and the subsequent crashes end up impacting the working class most harshly.

In “Value, Price and Profit,” Marx spends the first five chapters addressing arguments made by John Weston. Weston is ostensibly a fellow leftist, but Marx believes he has presented bourgeois arguments that are antithetical to the working-class struggle. Marx feels it is necessary to refute his claims that an increase in wages would make no material difference in the lives of workers.

Weston’s argument is essentially that an increase in wages would simply be offset by an increase in the cost of commodities, since capitalists would need to make back the money they have paid in wages. Marx immediately points out that this logic is based on the flawed premise that the amount of national production and the amount of wages is fixed. Both assertions are observably false, since production grows year over year, and even if production were fixed, that amount could be divided in numerous ways—e.g., more could go to wages, while less goes to profit.

Marx then asserts that a rise in wages does not lead to a rise in the price of goods, and that the amount of currency in circulation is not fixed. In both instances he uses historical evidence to support his argument. Marx concludes the opening chapters by pointing out that Weston’s premise does not account for the real source of value, since he implies that the value of commodities are determined by wages, but also that wages—which are immediately exchanged for commodities necessary to maintain the worker—are determined by the value of commodities, which is tautological and meaningless.

Satisfied that he has refuted Weston’s claims, Marx moves on to answering the questions Weston’s framework could not: Namely, where does value come from, and how do capitalists make profit? Marx argues that the value of a given commodity comes from all the past labor crystalized in it, including the labor required for the raw materials and the instruments of production. The market may cause the price of a commodity to oscillate above or below its natural value, but on average, its value will always revert to that natural value. He then explains that the value of labor power is determined in the same way: by the cost of labor necessary to produce it. In the case of labor power, this is the cost of goods necessary to maintain it.

Labor power is also the key to understanding profit, since what the capitalist buys from the worker is their labor power, i.e., their ability to work for an agreed-upon amount of time. However, since the value of labor is the cost to maintain it, the laborer will produce more value than this during the time they are employed, which means that some of that time is essentially unpaid labor that produces surplus value (or profit) for the capitalist. The consequences of this exchange are twofold: One, profit comes from selling commodities at their natural value by exploiting unpaid labor; and two, there is a fundamental antagonism between wages and labor that cannot be solved.

Marx closes the essay by asserting that while fighting for an increase in wages is important, real change will not occur until the entire capitalist mode of production is overthrown and a new mode of social organization takes its place.