At the end of last month, US Rep. Alexandria Ocasio-Cortez tweeted a review of Ivanka Trumpwho said she was against the idea of a guaranteed minimum wage because "I do not think most Americans, in their heart, want to give something … People want to work for what they have." So, I think this idea of a minimum Guaranteed is not something that most people want. "
Ocasio-Cortez replied"A living wage is not a gift, it's a right. Workers are often paid much less than the value they create."
This caught my attention because it is essentially a rephrasing of Karl Marx's "Theory of the Value of Work" and it is not often that we talk about it in mainstream media.
If all workers are paid less than the value they create, there will never be enough workers to buy the products that they make.
Before Marx, the "value" of any product was considered almost the same as its price on the market. That's what you would pay to avoid making the product yourself, according to Adam Smith (1723-1790). The reason you could spend 100 bucks for a pair of shoes is that even though 100 bucks are quite expensive, it's a lot easier than making a pair of shoes by hand, yourself, Smith said. .
Marx (1818-1883), who was a big fan of Smith, was more interested in how products gain value over time. A cow does not shoot herself and magically turns into a pair of leather shoes. This only happens because the workers apply work on the cow's corpse, turning his skin into leather, and then sewing that leather into shoes. Once the work is done, do the shoes have value? This is the work force that creates value, not just the fact that shoes can be exchanged for money.
If you accept this, then it becomes immediately obvious that what Ocasio-Cortez said is correct. Workers in a shoe factory are paid much less than the value they create. They to have be. If 100% of the money from the sale of shoes was paid directly to the workers, the factory would cease its activities: there would be no more money to pay for electricity and it would not work. There would be no profit to invest in more efficient shoe machines to help the factory to be competitive in the future.
But this raises a contradiction. If all workers are paid less than the value they create, there will never be enough workers to buy the products that they manufacture. Suppose our shoe factory has a worker who makes five pairs of shoes a day, which sells for $ 100 on the market. The factory makes sales of 500 dollars a day. The worker's salary is $ 10 / hour for a 10-hour day. So the worker is paid $ 100 a day. The worker can afford to buy only one pair of shoes while she has manufactured five.
At first, that does not seem to be a problem, because obviously there are billions of people on the planet and they all need shoes. The factory can definitely sell these other four pairs to someone somewhere. What worried Marx was that in the end, every worker in the world, in every office and every factory, was paid less than the value of the products he created. It is not possible for all goods produced to be purchased by all the workers who make them. In addition, there is almost always a reserve army of unemployed people who can not buy anything, which aggravates the problem.
The tendency is to collapse the system, believes Marx
The trend is for the collapse of the system and the destruction of shoe factories whose customers are too poor or not enough to buy all the shoes, he added. This collapse can be avoided, he says, if the shoe factory goes a long way, for example by investing in a new technology that allows the woman to double her productivity and make 10 pairs of shoes a day ( or maybe the same number of shoes). at a lower price).
But the collapse is only pushed into the future. The new technologies will also be acquired by all competing shoe factories, which will reduce profits – and prevent some factories from closing. And if the factory buys shoe machines instead of hiring new workers, it still has to produce more shoes than the workers who make them.
Coincidentally, Ocasio-Cortez tweeted a graph showing workers' wage increases relative to their productivity, indicating that even when work becomes more valuable, they do not share the benefits:
It is impossible for capitalists to pay workers the full value of their work without going bankrupt
This is an oversimplification of Marx's analysis, but you understand the essential.
Marx thought that capitalism was intrinsically unstable, precisely because workers did not receive the full value of their work and precisely because it was impossible for capitalists to pay them full value without failing. It is one of the internal contradictions that capitalism can not solve.
Of course, not all profits are invested in new equipment. Factory owners take a share for themselves, and that's a much larger share than the workers benefit. There are reasons for that, of course. It is capitalist money that gave birth to the factory and the inevitable collapse can be avoided if profits are diverted into a new venture, such as a hat factory, that could create new jobs (for workers who can then buy shoes).
Whatever they do, the bosses become richer than the workers. Now you have two groups of people doing the same thing (making shoes) but receiving extremely unequal amounts.
This is another way of saying that "workers are often paid much less than the value they create," as reported by Ocasio-Cortez on Twitter.
The AOC and investment banks are on the same side of the debate
She is not the only one to worry about what workers are paid for. In recent years, a surprising number of investment bank analysts at Citi, HSBC, and Macquarie have published a study that says that inequality and low wages could lead to recessions, or all the while. less curb economic growth (which irony even poorer rich).
These people are obviously not Marxists (although, like Marx, they are economists). But, like Marx, they fear that inequality in the United States and the West will become so extreme that ordinary citizens do not have enough money to run the economy.
The charts in this story all show the same thing: the share of national income going back to the 1% of the better-off is increasing, while the share of income going to the 50% less affluent is decreasing. The rich become richer. And the rest of us share a smaller and smaller share of the pie. The poorest 50% of the United States and Europe share only 13% of the national income.
What if we lacked rich people?
According to an article by Gabriel Zucman, professor of economics at the University of California at Berkeley, the richest 0.1% owns nearly 20% of the total wealth of US households.
Investment banks say it's a problem because there are not enough people with money to keep up with capitalism. "Income inequality is cited as an additional factor in the stagnation process, as some wealthy individuals can not drive an economy by themselves," said Citi analysts Tobias M Levkovich and Lorraine M Schmitt, in 2015.
Macquarie analysts Viktor Shvets and Perry Yeung said something similar last year. They cited works by Moritz Kuhn and Moritz Schurlarick, published by the Minneapolis Federal Reserve in 2018, and Emmanuel Saez and Thomas Piketty, who said:
- The 25% of the poorest households have a negative net worth (that is, they are in debt).
- The population between 25% and 50% owns only 2% of the national wealth.
- The share of the "middle class" between 25% and 75% increased from 15% in 1989 to only about 8%.
- The richest 10% control about 77% of the national wealth.
- Over time, the share of the richest 1% went from 27% in 1989 to about 40% in 2013.
"In other words, wealth has not only reached the top 10% of the population, but almost exclusively the 1%," they told their clients. "The creation of the middle class in the years 1950-1970 has clearly been replaced by a compression of the middle class over the past three decades, certainly since the late 1980s."
If the West goes into recession, the lot of the rich could worsen it
Janet Henry, an economist at HSBC, told clients in 2018 that wealth accumulation by a tiny minority risked curbing the economy. "Inequality of income suppresses consumption given the lower marginal propensity to consume higher incomes and can be negative for growth if saving higher incomes does not increase spending." 39; productive investment but immobilized in real estate bonds or government bonds ", she wrote.
"Inequality of income, which often goes hand in hand with a lack of social mobility, also creates disparities in life expectancy, education, skills and mobility of the labor force. That will have an impact on future productivity and growth potential, given the enormous structural factors – from demographics to technology – that contribute to the increasing polarization of incomes, it is not something that will miraculously disappear after one or two years of strong growth, "she said," I said.
Worse, if the West goes into recession, the wealth of the rich will only aggravate things, she says, because the poor do not have enough money to support it. "The end of any downturn, if any, could be magnified by this distribution of income and debt," she explained to her clients in a note published late last year.
In other words, the richest 1% could buy a lot of shoes, but they could not buy enough shoes to keep all the shoemakers employed. You also need workers with enough money to buy shoes. And that means – as the AAP tweeted last month, that investment banks have been worrying since the 2008 financial crisis and, as Marx wrote it, 200 years ago – that it is very important to consider workers' wages in relation to the value they create.