Your wages are a problem
Do wage increase put up prices?
One of capitalism’s toughest problems is the size of the wage which is paid to the working people who keep the system operating.
Basically, it is a problem of almost mathematical simplicity. The working class produce values which are higher than their wages. They produce a surplus value which goes to their employers. Ji the workers can force their wages up, there is less of the surplus left for their employers. On the other hand, if the employers can force wages down, more of the surplus will go to them. This must hold good, however the productivity of the worker may be altered by changes in natural conditions or in the intensity of his labour.
It is inevitable that capitalism’s governments should concern themselves in this dispute which, by the way, is known as a “class struggle” by Socialists, who have an uncomfortable habit of calling a capitalist spade a spade. Governments do their governing in the interests of the employing, owning class of capitalism. It is, therefore, equally inevitable that when they concern themselves with the class struggle over wages, governments should take the side of the capitalist class.
Thirty or forty years ago there was no great need for the government’s intervention to be especially vigorous. With capitalism in the doldrums, with never less than one million unemployed in this country, the working class were badly placed to push home any demand for better wages. If they did push any such demands the government had only to stand aside and watch the workers starve themselves onto their knees in a strike or a lock-out.
Since the war, conditions have been rather different. Wage rises must now be restrained by government action and appeals, rather than by the old method of both sides beating their heads together. Sometimes, indeed, conditions have defeated even the appeals and the government itself has surrendered, offering wage increases rather than face a strike. This has happened more than once over the railwaymen, much to the annoyance of newspapers like The Economist, which irritably demands at such times to know whether the government is serious in its desire to stop wages going up.
An essential part of the official campaign on wages has been the thinking up of responsible-sounding excuses for refusing the workers’ demands. These excuses must be epitomised in a snappy name for the refusals. This time last year it was the pay pause which, it seems clear, was designed to hold wages in check for a few months. There are signs that the pause was at least as successful as the government could have hoped. Apart from the rises which were denied to government employees, the engineers themselves forebore to press a wage claim last autumn. The engineering employers have now conceded a three per cent, rise, but in the opinion of at least one newspaper, this would have come earlier but for the pay pause.
Now the “guiding light” on wage increases has replaced the pause, although it is being somewhat buffeted by the arbitration tribunals.
It is safe to forecast that, for those who are willing to do a little research and remembering, the events of capitalism will expose the government’s excuses for what they are. Just after the war, for example, the Attlee government launched a great campaign on wages. There was a propaganda drive to convince everybody that rises were inadmissible because, among other things, Britain’s international balance of payments was in jeopardy. Ministers lost no chance of parading statistics which showed how the British capitalist class were spending more on their imports than they were receiving from their exports. We heard many homely analogies about the difficulties of families which spent more than their income and we were invited to regard ourselves as members of a big, British, capitalist family.
A lot has happened since then. The international trading situation of Britain has varied considerably over the years. Once before—during 1959—the British capitalist class actually had a favourable balance of payments. Now it has happened again. The Treasury has announced that the first quarter of this year yielded a payments surplus in Britain’s international trade of £21 millions. The terms of trade—the ratio of import to export prices—are set fair for British capitalism and have been so for some time. The Chancellor of the Exchequer has suggested that over the year the surplus in payments might come to something like £150 millions.
At the same time another of the difficulties which faced the Labour government has gone, to be replaced by its opposite. There is no longer a desperate need to rush into a gaping wide world market, a market waiting to be filled with any substandard commodities which could be produced fast enough to pump into it. Coal, for example, was one of the big needs of the post war years. But so much has the demand for coal decreased that the National Coal Board has closed many of its pits and intends to close still more.
The dilemma
NCB chairman Lord Robens, speaking at the last annual conference of the National Union of Mineworkers, put his finger on British capitalism’s present dilemma:
“This is not an era of coal at any price—that ended in 1957; we are in the era of hard selling based on price, quality and service, and in this situation the fundamental need is to be able to produce the right produce at the right price.”
Conditions, then, have decidedly changed since the 1945 Labour government and in doing so have wiped out the excuses which were used to justify the wage freeze and the other restrictions of Crippsian austerity. The government itself has changed. But government policy on wage increases remains unaltered. All that has happened is that the old excuses have been replaced by the new. The catch-phrases of the late forties have given way to those of the early sixties. A pay pause may sound different from a wage freeze, but in fact it means almost exactly the same.
In one respect the government has not been caught napping by the changes of the past seventeen years. They have not run out of excuses. Now, we are told that wage rises are inflationary. The argument which goes with this assertion has almost become part of the mystique of modern capitalism.
When wages rise, runs the argument, the costs of production go up and the employers automatically increase their prices to recoup this. Higher prices mean that any unit of currency is able to buy less than before, which means that more currency units are needed to circulate the same amount of commodities. Thus wages are supposed to be going up closely followed by prices which, as they rise, nullify the wage increases and cut the purchasing power of the pound. This, say the pundits, is inflation.
This argument ignores several basic facts of capitalist life. Wages are the price of the commodity labour power and generally will fluctuate in accordance with the state of the labour market. But a market for one commodity can be buoyant at the same time as for another it is depressed. Although the coal mines are having difficulty in selling their product it is still possible for miners to get rises because at the moment most of them could get another job without great difficulty. The prices of many of the commodities which will for ever be associated with the so-called Affluent Society—television sets, refrigerators, washing machines—have tumbled over the past few years. But, as we have seen, the wages of the electricians and the engineers who make these goods have increased.
Karl Marx made the point over a century ago and it is still valid today. Highly paid workers can produce cheap commodities, and vice versa. A wage rise need not, therefore, be followed by a price rise.
The Guardian recently challenged the starting point of the inflation theory. In an editorial published on June 25, they said: This is the same mode of thinking as the one that regards success in enforcing a pay pause as the overriding test of present British economic policy. But in fact labour costs in the United States have risen sharply in periods of falling production and have actually declined in periods of recovery in spite of bigger increases in wages. . . . There is much evidence that the same is true of Britain.
Where, now are the protestations of The Guardian—and of other papers—that wage increases must put up labour costs? Are they buried, along with the other stale excuses? If so, we may be sure that they will return, even if in reincarnation.
Yes, wages are a problem and like most problems they are fertile in paradoxes. Perhaps the biggest paradox of all is that the problem will not be solved by putting wages up, or down, but by getting rid of them altogether.
IVAN.