Wage Labor and Inflation II

by Jehu

Above is one of those misleading minimum wage charts you might come across in radical activist agitation. As is usually the case, it tells us very little about the minimum wage or why, despite its steady increase since the late 1930s, a minimum wage worker continues to be mired in poverty. The answer, as I will show, is that it is designed to keep the worker in poverty. The minimum wage is set at such a level as to maintain the worker in such condition that she must sell her labor power no matter the increase in the productive power of her labor.

How this is accomplished is the subject of this post.


When I posted my comment to Reddit, r/antiwork suggesting the minimum wage should be set at $52, rather than $7.25 as it is now, my argument garnered several negative comments. My approach led to results that wildly differed with the results offered by the Bureau of Labor Statistics’ Consumer Price Index (CPI). Naturally, sober-minded folks took exception to my approach, which uses gold price as the metric for inflation. They preferred the more modest minimum wage suggested by the CPI instead.

This is entirely understandable. I am prone to making wild assertions that appear to contradict common sense. Still, as usual, I am right in this case and these objections are wrong. There’s another approach available to us that should raise serious questions about the lack of imagination of folks on the Left who take exception to my assertion that the minimum wage should be $52, not $7.25, where it stands today, nor $9.75, where the BLS’s CPI inflation calculator says it should be, nor even $15, as some union activists demand. That approach takes into account some estimate of the living standard that could be produced today in the same time as it would  have taken to produce the equivalents of the BLS’s minimum wage basket of goods in 1970.


According to the Bureau of Labor Statistics, today the CPI-adjusted minimum wage should be set at $9.75 in order to match the purchasing power of the minimum wage of $1.45 in 1970. My own commodity-money (exchange-value) approach concludes the dollar-denominated 1970 minimum wage today should be set at $52.

So let’s do an exercise:

If we divide my exchange-value result ($52) by the BLS’s CPI-adjusted result ($9.25), we get this further result:

$52 ÷ $9.75 = 5.33

The math seems to suggest that my exchange-value-based estimate of what the minimum wage should be today is roughly 5 times what the Bureau of Labor Statistics thinks it should be.

Another way to frame this result is that for the equivalent of the variable capital that was necessary to employ a single minimum wage worker in 1970, the capitalists can employ 5.33 minimum wage workers today.

What a bargain!

So, what explains this result? It is not hard to understand. You have probably already guessed the answer. My results differ from  the BLS not because either approach is “wrong”, per se, but because we run into the problem of what Marx calls the dual character of the commodity.

Think of it this way: the Bureau of Labor Statistics treats the minimum wage as if it is merely a collection of sundry use-values — an place to live, some means of transportation, so many pair of shoes, so many pounds of chicken, etc. — for which prices may change over time. We all must eat after all. By and large, this basket only changes slowly as one sort of use-value is replaced by another. (A landline by a cell phone, for instance.) The prices also change, but the most basic needs to be satisfied by the basket remain mostly unchanged. So, if the particular use-values in the basket change over time, the minimum requirements of labor power, stated in the form of use-values, remain basically unaltered. The prices of these minimum basic use-values is what the BLS measures with its CPI.

My approach, however, ignores what is in the basket and treats the 1970 minimum wage as a definite quantity of exchange value, measured in a definite weight of gold. It does not concern itself with what is in the basket, but only its actual value. It also doesn’t look at the needs of the worker, but only at what she can produce in that period of time. Thus, it never asks, what are the minimum requirements of the worker as a wage slave; but asks, instead, what are the practical possibilities of the present productivity of social labor.

As can be seen, use-value or exchange-value, which thread we choose to follow can lead to wildly different results. While the BLS focuses on the physical basket of wage goods (use-values) that go into the minimum requirements of labor power and tracks their prices over time, I ignore the individual wage goods in the basket completely and focus only on the actual exchange value of the basket as it was in 1970.

(NOTE: I chose 1970 because this was the last year the dollar was legally fixed to gold. In 1971, the United States was finally forced to completely sever the connection between the dollar and gold.)

To arrive at its consumer price index, the Bureau of Labor Statistics took a basket of wage goods that went into the minimum requirements of labor power and tracked the change in the currency prices of the constituents of that basket over time owing to the depreciation of the dollar’s purchasing power.

Using this method, they arrived at a CPI-adjusted minimum wage figure of $9.75.

By contrast, I looked at the actual exchange value — in a definite physical weight of gold — the Bureau of Labor Statistics’ basket of wage goods had in 1970 and tracked the change in the currency price of that exchange value, (essentially, what is often mislabeled, “the price of gold”), over time owing to the depreciation of the dollar’s purchasing power.

Using my method, I arrived at an exchange value adjusted figure of $52.

Then I simply divided my exchange value adjusted result by the BLS’s CPI-adjusted result to arrive at how many minimum wage workers can be employed in 2019 for the variable capital required to employ one worker in 1970.


I could have as easily performed the inverse of the above math to arrive at another result:

$9.75 ÷ $52 = 19%

Formulated this way, we can see that the capitalist only requires 19% of the variable capital he needed to employ a minimum wage worker in 1970 to hire a minimum wage worker in 2019.

Something has changed between 1970 and 2019.

To put this in a way that might be comprehensible to our dumb Leftists, who object to my approach, according to my estimate, the productivity of the labor required to produced the material requirement of a minimum wage wage worker has increased more than five-fold. As a result of the increase in the productivity of social labor, the labor power of a minimum wage worker in 2019 can be had for less than one fifth of the variable capital it required in 1970.

If the minimum wage of the worker had kept pace with the actual increase in the productivity of social labor, she would now be earning $52 to flip hamburgers at McDonald’s. But it did not. It did not even keep pace with what she earned in 1970 in CPI-adjusted terms. Her minimum wage, according to the Bureau of Labor Statistics, has fallen to just 74.3% of what it was in 1970: $7.25 versus as CPI-adjusted minimum wage of $9.75.

Our dumb Leftists might object to my conclusion that the minimum wage should be $52, but this is only because, apparently, they share with the bourgeois simpleton economist the rather barbaric assumption that the wages of the least skilled worker never should rise more than the absolute minimum required to allow her the barest survival as a wage slave and to reproduce the next generation of wage slaves.

The Left only seek, in other words, a minimum wage consisting of, in the words of Karl Marx, “a definite quantity of the means of subsistence [that] varies with the value of these means or with the quantity of labour requisite for their production.” As the productivity of social labor increases over time, the quantity of labor required for production of this crude minimum decreases, and with it also the minimum wage.

To be charitable, these dumb Leftists are so dumb that they don’t even realize that when they adopt the CPI-adjusted figure for the minimum wage, or even its more radical $15 alternative, they are actually saying that all improvement in the productivity of social labor is, by natural right, the property of capital. The worker, no matter how productive her labor becomes, no matter how far it progresses in abolishing scarcity, is entitled only to that absolute minimum means of subsistence as is constituted by the Bureau of Labor Statistics consumer basket. She is entitled only such consumption as permits her to remain a wage slave of adequate capacity and to reproduce her kind — and no more.

Which is why I call them dumb, not evil: they are just too stupid to realize the implications of their own argument.


My second conclusion is as follows:

If inflation is defined as a sustained change in the general price level over some period of time, it is obvious that the legally established minimum wage cannot be implicated in the problem. The present minimum wage is only 74.3% of the Bureau of Labor Statistics own CPI-adjusted figure for a minimum wage having the same purchasing power it had in 1970 of a fixed basket of consumer goods and services — $7.25 versus $9.75. And it is less than one-seventh of what it would be if it had kept pace with the exchange value it embodied in 1970 — $7.25 versus $52.

This would suggest that almost all of the increase in the productivity of social labor since 1970 has accrued to capital in the form of profits, not the working class. Yet, as we have seen in the previous part of this post, the appreciation of stocks and other securities are handled differently than increases in the prices of consumer goods like bread and shoes. Appreciation of securities are ignored altogether and only the changes in the prices of bread and shoes are tracked.

This bourgeois simpleton approach is then imported into the thinking of many Marxist and other radical Left writers.