Marx* has a what we might now describe as a very cynical analysis of the wages for labour. In Capital: A Critique of Political Economy, Vol. 1, Part 1, Chapter 6, The Buying and Selling of Labour Power (link goes to the Liberty Fund library), he writes:
Therefore the labour-time requisite for the production of labour-power reduces itself to that necessary for the production of those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence necessary for the maintenance of the labourer.
If the owner of labour-power works to-day, to-morrow he must again be able to repeat the same process in the same conditions as regards health and strength. His means of subsistence must therefore be sufficient to maintain him in his normal state as a labouring individual. His natural wants, such as food, clothing, fuel, and housing, vary according to the climatic and other physical conditions of his country.
The minimum limit of the value of labour-power is determined by the value of the commodities, without the daily supply of which the labourer cannot renew his vital energy, consequently by the value of those means of subsistence that are physically indispensable.
Simply, the minimum amount that ought to be paid to workers, is the minimum amount they need to survival. Businesses need to pay this amount, because otherwise, the worker will not be able to come back the next day and work again. She or he won’t come back, because they simply won’t have the physical strength to do so.
Think about this in the context of New Zealand. The minimum wage here is $13.50 an hour. However, the minimum wage that a worker needs in order to be able to live has been identified: it’s $18.40 an hour. That’s the amount that a worker needs to be paid in order to be able to function.
And businesses here just don’t pay it.
So how on earth do they manage to get workers to turn up for work again the next day?
They stick their hands out, and ask for a subsidy. The government pays the subsidy, through tax credits to workers, such as the Working for Families tax credits. That’s what turns a minimum wage job, paid at $13.50 an hour, into a subsistence level job. The current government might like to say that Working for Families is assistance for the low paid, but in reality, it’s a subsidy for employers. It enables businesses to pay low wages, to pay less than the cost of labour.
Businesses and other employers who aren’t prepared to pay a living wage need to recognise that what they are doing instead is accepting a subsidy from government to prop up their enterprises.
Think about that next time we hear the party of business wailing about all those wretched beneficiaries.
For the record, I support paying benefits and tax credits, because I think that a good society works to ensure that everyone has a chance, that everyone has the resources to participate in the society. At a most basic level, I want to see children fed, and I am not interested in engaging in esoteric debates about responsible and irresponsible parents. That’s a good debate to have, but for goodness sake, feed the children first.
However, businesses ought to recognise that what they are doing when they pay a minimum wage is accepting a subsidy from government.
When I lectured in political theory, I introduced my students to Marx. And to Locke and Hobbes and Mill and Adam Smith and Machiavelli and Wollstonecraft. Marx is part of the canon. But because so many people are scared of Marx (“The universities are full of Marxists!), I used to introduce him with a parable about a statue. Think of a statue in a darkened room. You have a torch, and you can shine a light on it from one angle, and then from another, and then another again. But you can never see the whole thing at once. Each beam of light reveals a different thing about the statue, and sometimes by shining a light from a new angle, you can see something completely different. Adopting a Marxist perspective can highlight particular issues, just as adopting a libertarian perspective can, or using a feminist perspective. You can make use of the framework, without necessarily buying into it.
For the record, I am a social democrat, not a Marxist, and whenever I do one of those political compass tests, I tend to come out as economically left, but a social libertarian. My latest scores were:
Economic Left/Right: -5.00
Social Libertarian/Authoritarian: -6.10
The negative number indicates a skew to the first descriptor in each pair.