Rate of exploitation

In Marxian economics, the rate of exploitation is the ratio of the total amount of unpaid labor done (surplus-value) to the total amount of wages paid (the value of labour power). The rate of exploitation is often also called the rate of surplus-value.

Divergence of the two rates

Marx did not regard the rate of surplus value and the rate of exploitation as necessarily identical, insofar as there was a divergence between surplus value realised and surplus value produced. Thus, the quantity of surplus labour performed by workers in an enterprise might correspond to a value higher or lower than the surplus value actually realised as profit income upon sales of output. The implication is that if the gross profit volume was related to wage costs to establish the rate of surplus value, this might overstate or understate the real rate of labor-exploitation. Although this is a subtle point, it has sometimes played an important role in wage bargaining negotiations by trade unions. For an extreme example, workers might work extremely hard in an enterprise which nevertheless operates at a loss. For another extreme example, workers might work less hard, knowing that their product will sell like hotcakes in a sellers market at sharply inflated prices, yielding profits disproportionate to labour input. The divergence between surplus value realised and surplus value produced becomes even more marked if surplus value is viewed in terms of the net incomes of social classes, i.e. net labor income and net property income. Marx identified five different formulae for the rate of surplus value (see surplus value).

Criticism

Several important criticisms have been made of Marx's concept from different sides:

• The ambiguity of the concept - does it have a purely objective, economic significance in terms of the yield of labour utilisation, or does it rather have a moral-political significance?

• All factors of production can add value to products, invalidating Marx's law of value and his claim that workers are exploited.

• None of the five measures that Marx cites express anything directly about the intensity of labor-exploitation, which can increase or decrease without being reflected in his ratios. Exploitation in the workplace might involve much more than Marx envisaged (see also productivity).

• Marx disregards the fact, that workers may be doubly exploited, not just at the point of production, but at the point of their consumption; when they spend their wages on goods and services, they are "taxed" again by the profit and tax component added to the value of the goods and services they buy (this point is not theoretically developed in most Marxist literature, although it can give rise to consumer resistance and consumer boycotts). This importantly affects our understanding of the economic value of labour power.

• Marx theoretically largely disregards state intermediation which can strongly influence the magnitude of both wages and profits earned, in many different ways.

• Marx equates wage costs with labour costs, but labour costs may involve much more than wages (taxes, social security levies, employer contributions to schemes benefiting employees, bribes and all sorts) (see also Compensation of employees).

• Marx disregards the unpaid labor of (mainly) women in the household, and associated voluntary labor necessary and indispensable for the reproduction of labour power. Market relations depend to a large degree on non-market relations.

• Viewing the labor process in terms of exploitation is not conducive to anything, since it disregards the constructive role of employers in developing production. If they are just viewed as exploiters, this distracts from the problem of how else you could organise production with better forms of association.

• Marx largely disregards that employers of labor might be exploited by each other, or that workers might be exploited by each other (this is obviously not completely true, but Marx's main focus was certainly on the capital-labor relationship).

See also

• Exploitation of labour
• Marginal product of labor
• Marxian economics
• Rate of profit
• Surplus value
• Technological unemployment