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Marxism and the Wages Struggle

Marcus Halaby and Jeremy Dewar take apart the bosses’ argument that keeping wages down helps preserve jobs.

The pressure is mounting on union leaders in the public sector for a coordinated pay campaign. The National Union of Teachers is likely to call a strike in March, the University and College Union could join them and the Public and Commercial Services union is also balloting on pay and related issues. Unison, the GMB and Unite have also submitted a pay claim in local government, though they are far from agreeing to strikes.

The struggle over wages is becoming a key part of the struggle against austerity. After three years of public sector pay freezes, and effectively the same, if not worse, for workers in the private sector, average earnings have declined by £4,000 since December 2009, and this figure is expected to be £6,000 by the end of this year. That is the equivalent of 25 per cent of total average pay.

One of the key factors in forcing down wages has been the threat of unemployment. Millions of people have been forced to accept part-time work in order to have any work at all. The total of part-time workers was up by 10.5 per cent to 8.12 million in the four years to September 2012. Within this, the number of involuntary part-time workers almost doubled from 727,000 to 1.41 million.

Much the same holds for temporary work, where the total number of workers has increased by 19 per cent to 1.62 million and the number of people who wanted full time work but were forced to accept temporary contracts increased by 86 per cent from 348,000 to 650,000.

This is the reality behind government claims that the economy is recovering because more people are in work, up by 0.87 percent to 29.6 million, even if the number of unemployed has increased by 34 per cent to 2.51 million – an unemployment rate of 7.8 per cent. Bogus self-employment has played a similar role in massaging the unemployment figures, with the number of self-employed rising by 11.1 per cent to 4.2 million.

Worst hit are the under-25s, of whom 945,000 are now jobless, up by a fifth from 780,000, and the long term unemployed, whose numbers more than doubled from 437,000 to 904,000. Since the vacancy ratio has increased by about three quarters, to 5.2 claimants per job, their prospects are bleak.

Many workers, and even more union leaders, accept the argument that there has to be a trade off between wages and jobs. According to this, firms, or the government, can only keep workers in work if the “wage bill” is cut. Ed Miliband made exactly this point in an interview with the BBC. When he was asked, “Would you urge public sector workers to agree to pay cuts to save jobs?” he replied, “Well we’re talking, actually, about a pay increase limited to 1%, but absolutely. Look, the priority now has to be to preserve jobs”.

But do pay cuts preserve jobs? If so, why has unemployment risen despite wages falling?

Behind this argument lies the idea that wages are paid out of profits. That being the case, if profits are down, then wages have to go down. At first sight this seems to add up – and it is certainly the way society works. However, in reality, it is an example of what Karl Marx called “ideology”, that is, a reflection of social reality – but an upside down reflection.

Far from wages being paid from profit, Marx showed how profits were a deduction, by the capitalists, from the increased value created by the working class in the process of production after all production costs, including wages, have been paid.  This additional value, or “surplus value” as economists called it, even before Marx, could go either to the employers or to the workers.

If it goes to profits, it strengthens the position of the employers. Quite apart from any self-indulgence, it can fund investment in further profit-making, for example, the purchase of new technology which reduces the number of workers employed. However, given the current economic situation, it is more likely to be spent on the bond or currency markets in the hope of a quicker return than could ever be achieved in production.

The situation in the public sector is rather different – the majority of workers there are paid from revenue collected through taxation, largely from other workers in the form of income tax, National Insurance and VAT. However, holding down wages has the same effect in the end. If less of the revenue is paid out in wages, more is available to “pay off the deficit”, that is, to guarantee the winnings of the corporations and financiers who gamble on the international bond markets from which the government borrowed billions to bail out the banks. In other words, this, too, strengthens the capitalists.

Of course, the alternative, an increase in the value paid out in wages is not something the bosses would voluntarily agree to, it would require a successful struggle by the workers. The effect of this in the short term would be to maintain their standard of living, their health and that of their families. At a different level, in the longer term, it would strengthen their position as a class, increase collective identity and raise their ability to resist the inevitable counter-attack from the bosses – and their government.

Within capitalism, there can be no end to this struggle over the surplus value but, for socialists, it is not only the pre-condition for maintaining the working class but also the training ground for a bigger battle. That is the battle to take control of the entire economy away from the tiny class of capitalists and into the hands of the overwhelming majority in society. Only then could the huge potential of modern production be used rationally in the interests of society as a whole.

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