Labor Theory for (Marxist) Dummies: Part 1

How exactly does hours of labor reduction work?

I have to say that I honestly have no idea how the minds of Marxists work — all of them, almost without exception. I have, by turns, alternately been accused of being reformist and ultra-Left for advocating hours of labor reduction. So, I thought I would show people how labor theory actually works in practice and why the struggle to reduce hours of labor is neither reformist nor ultra-Left, but a means to progressively abolish wage labor completely. It is the only real means of realizing a so-called ‘post-capitalist’ society.

What I find puzzling is that Marxists don’t seem to be able to do this very simple thought experiment on their own using Marx’s labor theory of value. The only real objection to reducing hours of labor is that Marxists don’t really want to kill capitalism in the first place.

One of the biggest problems I encounter when discussing hours of labor reduction with Marxists is not the dismissal of the idea as reformist or ultra-leftist. Rather, the problem is far more mundane and substantial. Marxists fear hours of labor reduction will plunge the working class into poverty as wages collapse with hours of labor.

This is an extremely important objection to reducing hours of labor, because it reflects what I think is a valid and extremely powerful fear among the working class. Since we live by selling our labor power, we must be suspicious of any proposal the seems to threaten that sale. However, there is no theoretical basis for this fear in labor theory as I will now show.

If you are a follower of value-form Marxism, don’t try this at home. It will only hurt your brain.

Labor power as the source of all value and surplus value

In Marx’s labor theory of value, as many people know, labor power is the source of both value and surplus value. Okay, I know, I know. Not everyone agrees with this. In fact, not even most Marxists believe it anymore. They think value is the product of money and prices, not the other way around. Just to be clear, I am not trying to convince anyone that Marx’s labor theory of value is correct — that is impossible. We still have people who believe there is no such thing as global warming, despite mountains of scientific evidence. And we still have people who believe the Earth and all life on it was created in just six days. Some people want to believe the myth stories on which they were raised and nothing will change their minds. Fine, I won’t argue with you if you think labor theory is not valid. I am not here to change your mind, but to expose your medieval stupidity.

I insist that it is the key premise of labor theory that labor power is the source of all value and all surplus value. I am using this premise as my starting point in explaining how hours of labor reduction works. With that, let us begin.

How is the magnitude of value and surplus value determined?

How is the quantity of value produced by labor determined? In Marx’s labor theory it is determined by the duration of labor time, measured in hours or days or weeks, etc. What unit of time we employ as the unit of duration is not a problem. No matter the unit, labor productively expended for that duration should produce value equal to it. An hour of labor will produce an hour of value; a day’s productive labor will produce a day’s worth of value and so on. Assuming her labor is productive of value, if we know how long the producer has worked, we know the value of her total product.

Now, how is the quantity of surplus value determined? In Marx’s labor theory surplus value is determined by the total duration of labor time, measured in hours or days or weeks, etc. minus the duration of labor time paid to the worker in the form of wages. If the total of labor time is represented by the formula,

x … y … z,

the wages of the worker is represented by the duration,

x … y,

and the surplus value accruing to the capitalist is represented by the duration,

y … z.

How does hours reduction affect wages and profits?

Now, suppose all the workers got together and forced the capitalist state to reduce hours of labor from x … y … z to x … y. How would this affect wages, and how would it affect profits?

The first thing that is obvious is that if the labor day was reduced from x … y … z to x … y, the rate of surplus value would now be zero. We know this, because in the little diagram we are using surplus value is produced during the portion of the labor day y … z. If no surplus value is produced, there is no profit to be realized: the rate of profit falls to zero as well.

We don’t have to guess about what this implies in a capitalist economy, since Marx wrote about it extensively in Capital: If the rate of profit falls to zero, this will produce a crisis for capital. It does not matter what causes the rate of profit to fall to zero — overproduction or reduced hours of labor; if the rate of profit falls to zero, a crisis must result.

In section III of chapter fifteen Marx goes into some detail about what happens in a crisis produced by the falling rate of profit. His most important point is that the crisis is capital’s attempt to restore the rate of profit, i.e., to restore the conditions for sound operation of the capitalist mode of production.

Since the rate of profit is driven to zero in our example, it is of great interest what effect this will have on the existing employment and wages of the working class. This is the subject to which I will turn next.

How does reduced hours of labor affect productive employment?

According to Marx’s labor theory of value, in a normal crisis caused by overproduction of capital and a falling rates of profit, a portion of capital has to lie unused and a portion of the worker population would be discharged into the ranks of the industrial reserve army of labor.

“A drop in the rate of profit is attended by a rise in the minimum capital required by an individual capitalist for the productive employment of labour; required both for its exploitation generally, and for making the consumed labour-time suffice as the labour-time necessary for the production of the commodities, so that it does not exceed the average social labour-time required for the production of the commodities. Concentration increases simultaneously, because beyond certain limits a large capital with a small rate of profit accumulates faster than a small capital with a large rate of profit. At a certain high point this increasing concentration in its turn causes a new fall in the rate of profit. The mass of small dispersed capitals is thereby driven along the adventurous road of speculation, credit frauds, stock swindles, and crises. The so-called plethora of capital always applies essentially to a plethora of the capital for which the fall in the rate of profit is not compensated through the mass of profit — this is always true of newly developing fresh offshoots of capital — or to a plethora which places capitals incapable of action on their own at the disposal of the managers of large enterprises in the form of credit. This plethora of capital arises from the same causes as those which call forth relative over-population, and is, therefore, a phenomenon supplementing the latter, although they stand at opposite poles — unemployed capital at one pole, and unemployed worker population at the other.”

However, in our own discussion, the rate of profit has fallen to zero, not because of the overproduction of capital, but because the working class has withdrawn the portion of the social labor day y … z, during which surplus value is created and retained by capital as profit.

Since the rate of profit has fallen to zero because fewer hours of labor are worked by the working class, no productively employed workers would be discharged, nor would productively employed capital stand idle when the rate of profit falls to zero.

Why?

The reduction of the social labor day from x … y … z to x … y, has the same proportional effect as laying off an equal portion of the workers and the same proportional effect on the existing capital as leaving a proportional mass of the existing capital laying unused.

To make this clearer: If 100 workers each work an eight hours day, they contribute a total of 800 hours in aggregate. If four hours of the social labor day is paid out in wages and four hours is retained as the profit of capital, a reduction of the social labor day from x … y … z (eight hours) to x … y (four hours) has the same effect as discharging half of the 100 workers through layoffs and letting half of the means of production stand unused. In either case, the new aggregate social labor day is now 400 hours; down from 800 hours previously.

Which is to say, capital could not restore the rate of profit by discharging half the workers or by letting half the existing capital stand idle as would occur in a normal crisis of overproduction, but will be forced to somehow increase output by other means.

Thus, reducing hours of labor has the same effect (on the labor day) as discharging workers into the reserve, except there is no unemployment.

How does reduced hours of labor affect the wages of productively employed workers?

Since wages are paid by the hours, some Marxists (particularly those who follow the value-form school) wrongly believe a reduction of hours of labor will proportionally reduce both wages and profit, leaving the rate of surplus value unchanged.

This is not true. The worker sells her commodity, labor power, all at once for the period of labor, even if it is paid out by the hour,  by the piece (as in piece-rate) or by the day. Those who have questions about this can read Marx here on the subject of how piece-rate works. The result of all of this is that insofar as a reduction of hours of labor does not fall so far as to encroach on the socially necessary labor time materially required to produce the wages of the working class, a reduction of hours of labor can only reduce the profits of capital. The wages of the working class cannot be affected by a reduction of hours of labor, no matter how they are paid out — by the piece, the hour or the day.

I conclude that with hours of labor reduction neither the wages nor the employment of existing productively employed workers are affected by this crisis.

As can be seen from this simplified example, in theory:

1. There would be no unemployment caused by reducing hours of labor. A normal crisis leads to unemployment, because workers are discharged. But we have reversed the process: by reducing hours of labor first and causing the rate of profit to fall to zero, the capitalist cannot layoff millions of workers. We have “laid ourselves off” partially by reducing our own hours of labor in order to prevent the capitalists from laying a section of us off completely. The capitalists, therefore, cannot use discharges to restore the rate of profit.

2. Contrary to the fears of most Marxists, wages are not affected by a reduction in hours of labor. This may seem to contradict logic, since workers are paid by the hour. But being paid by the hour has nothing to do with the issue. A worker is paid for her commodity, labor power, no matter that this is paid out by the hour, the piece or the day.

*****

Our discussion has not ended however. We know capital will respond viciously to a fall in the rate of profit. In my next post, I will explain what weapons capital has to restore the normal operation of the mode of production. Once we understand how this is done, we can better map a strategy to defend against it.