Four questions on reduction of hours of labor

by Jehu

clock-newI received a comment on my blog regarding hours of labor that raises four questions that deserve answers. I am taking them slightly out of order, since it is easier for me to answer them that way.

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The multiple worker scenarios retain the rate of surplus value and absolute surplus value for the 8 hour period. There is some additional overhead. It does reduce worker salaries, which could lead to deflation, but as we see today, usually it is made up for in debt accumulation.

This was question 2, but it is probably easier to answer in first place because it has the least complications: do two workers, working 4 hours each, produce the same surplus value as one worker working 8 hours? Assuming all else is held equal, (I leave out of consideration the impact reduced hours have on improvement in the intensity of labor, etc.), two workers working 4 hours each can never produce as much surplus value as one worker working 8 hours.

While it is true that in both cases the total expenditure of socially necessary labor time is 8 hours, the capitalist must now purchase two labor powers where before he only need purchase one. Assume the capitalist can purchase labor power for the equivalent of 2 hours of labor. In this case a reduction of hours of labor from 8 to 4 would have the effect of doubling the capitalists outlay of variable capital.

Where before the capitalist paid out 2 hours of labor on wages and realized 6 hours of labor as surplus value, now he must lay out 4 hours of labor and will realize only 4 hours of surplus value. The rate of surplus value has fallen from 6 hours of surplus labor time versus 2 hours of variable capital or 300% to 4 hours of surplus labor time versus 4 hours of variable capital or 100%.

How do you address overtime pay as an incentive for longer hours? This would encourage workers to work longer, and while it would decrease the rate of surplus value, it would have benefits of reducing training and tax costs. Unless workers agree to refuse overtime, wouldn’t this prevent price deflation and encourage inflation in basic goods, as workers who did work overtime would have higher purchasing power?

With regards to question 1 — how is this complicated by overtime pay? — it should be clear that overtime pay has no impact on this analysis. In the capitalist mode of production the duration of labor is determined by the profit of capitalists, not the wages of the worker. In the specific case under discussion, the profit of the capitalist are directly affected by a reduction in hours of labor.

While it is true the overtime premium gives the worker an incentive to work longer hours, it is also true the capitalist incurs steeper labor costs as a result of this premium and has an incentive to reduce living labor.

Despite this apparently iron logic, hours of labor will increase. Why? Because no matter that labor costs have increased and profits have fallen, the capitalist will increase investment in capital goods. To curtail labor costs and replace living labor with machinery requires more, not less, labor.

According to Grossman, it is notable that investment in new technology and machinery rises during depressions. The falling rate of profit compels more investment by the capitalists in capital goods to reduce the employment of living labor. At least in part, this explains why, contrary to bourgeois simpleton economists, reducing hours of labor can increase employment.

Although labor costs will be increasing and profits falling, this is no different than what happens at the peak of any expansion. This, in turn, triggers the crisis of overproduction and the following depression. Credit collapses, capital of every type is devalued, competitors are forced out of the market, comnpetition among capitals increases, etc. The amount of capital necessary to remain profitable will increase — resulting in the concentration and centralization of capital.

To make a profit under these conditions requires an advance in the productive capacity of existing capital and this requires investment and a general increase in the organic composition of capital.

The scenario is graphically described by Marx in chapter 15 of volume 3, with the single exception that the crisis is produced by reduction of hours of labor, not overaccumulation. The falling rate of profit always requires more investment, more capital, larger scale of production — no matter the cause of the fall. For this reason, a reduction of hours of labor accelerates the development of the capitalistic mode of production.

While it is true that the surplus value increases with longer hours, reduction of hours will at first affect industries that have lower rates of surplus value, thus encouraging consolidation into monopolies/trusts which can spread working capital to fund mechanization. In the face of worker revolt will smaller companies get the funding they would need to mechanize? If industry is further consolidated, doesn’t that reduce the worker labor power as well as increase the ability for the companies to obtain superprofits, which are then not shared with labor.

With regards to question 3 — what impact does reducing hours of labor have on smaller capital? — I think the writer is correct: A reduction of hours of labor has the same impact on smaller capitals that any fall in the rate of profit must have. These smaller capitals are, in Marx’s words, “driven along the adventurous road of speculation, credit frauds, stock swindles, and crises.”

Essentially, these smaller capitals are rendered superfluous to the productive employment of capital. The process may differ slightly here from the one that Marx describes in that the smaller capitals may be needed as an additional source of investment; however, in any case, these capitals will no longer be able to operate as capitals on their own.

How likely is it really to get price deflation? Especially considering that most production is outside the U.S. Do you really think that military industrial complex employees are going to do this?

With regards to the fourth and final question — how likely is it that prices will fall when most production is located outside the US?

In the first place, international trade has no direct impact on this issue. We are talking here not about nation states, but capitals organized as nation states, whose relations are determined exactly as would be expected between private capitals within a single state. One national capital is compelled to reduce hours of labor and thus to increase investment so as to lower the quantity of living labor in production. This, in turn, reduces the prices of production of the commodities produced by that capital.

With lower prices of production, the national capital will enjoy a competitive advantage and will realize super-profits on its output. To remain competitive, the other national capitals will be required to undertake the same reduction of hours of labor as the first in order to force their domestic capitals to increase their capacity to extract surplus value from their respective working classes.

This, in fact, was the untapped advantage the Soviet Union had over the United States during the cold war, but it never recognized it. Instead, the Soviet Union insisted on never reducing hours of labor and allowed enterprises to hoard excess labor powers. To his credit, Stalin realized the necessity for reducing hours of labor after the country was rebuilt. But the successors to Stalin never bothered to implement the measure even though writers like Kornai identified labor hoarding.

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