Ernest Mandel's:

Marx's Theory of Wages

in the Communist Manifesto
and Subsequently

by Greg Bigelow
 

   Marx's theory of wages evolved considerably since his writing of the Communist Manifesto, but, let me start by explaining what he believed at this point. In 1848, the year of publication of the Communist Manifesto, Marx and Engels both held firmly that the natural tendency of wages under capitalism was to fall absolutely and to sink to the physiological subsistence minimum.

This drastic diminution of wages was believed to be the result of two factors. First, the replacement of workers by machines. As an industry becomes more capital intensive, it eliminates more jobs (generally) then it creates. Second, the growing unemployment caused by capital intensity produces a highly competitive atmosphere among workers. They must literally fight for their survival.

  So, initially Marx's theory of wages was that the natural price of labor is the minimum wage. All wages should converge to this natural price and it is determined by physiological, not economical means. As we know today, based on the theory of human capital for example, there is no natural price that all wages eventually converge to. So, what made Marx re-evaluate his theory?

About ten years after the first publication of the Communist Manifesto, Marx published the Grundrisse. In this work, it was obvious that his theory of wages had undergone considerable changes. He reported that the worker can take part in higher forms of enjoyment during periods of economic prosperity. That the worker will actually increase his needs to match historically created needs. This implies that wages are actually determined by two factors: physiological and variable based on the workers increased needs.

    Eight years later, in 1865, during his address to the General Council of the First International, Marx presented his fully developed theory of wages. There is still a minimum limit on wages that is basically a physiological minimum but there is no maximum. The determination of where a given wage will lie between the minimum and maximum (infinity) is based on the respective powers of the combatants. This seems very similar to the class struggle Marx details in the Communist Manifesto.

Marx attributes the long-term imbalance in favor of capitalists to the conversion from labor- to capital-intensity. The resultant differences in labor supply and demand worsen the condition of the proletariat while improving that of the capitalist.

      I  find it ironic though, that heavy industrialization is used by Marx in his theory on reproduction as a means of providing improvements for workers. When capital is controlled and expanded by capitalists, the capitalists benefit most. Likewise, under a communist system, where capital is controlled and expanded by the government, the government benefits most. So, for the worker to really benefit from communism, there must be a direct link between government benefits and proletariat benefits.

But, as government officials are generally self-interested, profit-maximizing individuals, the benefits of controlling capital were not shared with the proletariat. Instead, the workers were essentially provided with a physiological subsistence minimum. So, from the workers point of view, what was the difference between capitalism and communism? Essentially, very little; it was still a struggle to survive, the worker just had a different party to struggle with.

  In conclusion, there are certainly equity problems that arise from control of the means of production by one group, be it capitalists or party officials. And both groups, being utility-maximizing, will be inclined to pay workers the natural minimum. Just as Marx's theory on wages can be applied to capitalism, it can also be applied to communism (in the realistic, not perfect sense). So, what does his theory demonstrate? That both systems are imperfect when it comes to wages.

References:

The Communist Manifesto by Karl Marx. A Norton Critical Edition edited by Frederic L. Bender. W.W. Norton & Company, 1988.