[PEN-L:1755] Re: Minimum wages in real terms

["Patrick L. Mason" <pmason@xxxxxxxxxxxxxxxx>]

Paul:

I think your point on the rising level of unproductive workers is correct. I
also agree that Marx's constant capital (C) can't be readily interpreted as
the 'K' typically found in a neoclassical production function. The 'K' in my
algebra is suppose to represent the monetary equivalent of Marx's value
category, while 'L' in my algebra represents the size of the PRODUCTIVE
labor force only, i.e., in my algebra surplus value includes the wage
payments made to unproductive laborers.

peace, patrick l mason



At 07:35 PM 12/5/95 -0800, you wrote:
>I think I have found an alternative explanation for the difference
>between my conclusions and Doug's.  Without looking up numbers of my own
>and using Doug's 39.3% as the wage share, I realize that Doug is not
>introducing unproductive labor into his calculations.  Unproductive labor
>is paid out of surplus value and therefore over-estimates remuneration to
>value- and surplus value- producing labor.  This over-estimation can be
>quite substantial (in the order of doubling for the U.S. economy if the
>numbers I remember from Shaikh and from Wolff are correct).  Suppose the
>rate of surplus value then is not 60.7/39.3 or something like that, but
>80.3/19.7.  Then real minimum wages and real average wages could double
>and still imply a rate of exploitation on the order of 150%.
>
>If the above is approximately correct, I do not consider my comments on a
>$10 minimum wage in real terms, radical, since it still leaves intact the
>foundations of the capitalist mode of production.  Maybe it could become
>a proposal in the same sense of many of the proposals in the Communist
>Manifesto, but it does seem even less "radical" than ending, say, child
>labor.
>
>Patrick, I appreciate your calculations, but for a person who really got
>into the Cambridge capital theory controversy at one point I am
>uncomfortable with your easy association of the neoclassical construct of
>real "capital" as K, with Marx's C.  It's not that I dismiss it
>altogether, it's just that these formulas that Robert Solow might throw
>at us have to be treated with a level of distrust.  However, if others
>want to get into this discussion, we could do so.
>
>Paul Zarembka, State University of New York at Buffalo
>
>-------------
>
>On Tue, 5 Dec 1995, Patrick L. Mason wrote:
>
>> I tend to agree with most of the posts from Doug Henwood. I tend to agree
with
>> most of the post from Paul Zaremka. Hence, the recent disagreement between
>> Comrades Zaremka and Henwood -- to the point of irritation of Brother Paul
>> -- created an existential crisis of the higher order for me. :):):)
>>
>> Let me respond to Zaremka's question on changes in the minimum wage with the
>> following example.
>>
>> r = S/(C + V) = (p - k)*Q/K = (p - k)*(Q/L)/(K/L)
>>
>> p = unit selling price
>> k = unit cost (wages, circulating capital, depreciation)
>> Q = output
>> L = size of productive labor force
>> K = fixed capital investment
>>
>> Suppose between timeperiod t and timeperiod t + n that both productivity
>> (Q/L) and capital intensity (K/L) have increased, but capital intensity has
>> increased faster than productivity. So, capital per unit of output (K/Q) is
>> less at period t than period t + n.
>>
>> Under this scenario, equal rates of profit at t and t + n will require a
>> higher rate of exploitation at time t + n than at time t, i.e., (p -
>> k)*(Q/L) at time t + n will have to be higher than at time t.
>>
>> r(t)       = [p(t) - k(t)]         * [q(t)]      / [K(t)/L(t)]
>> (1)
>> r(t+n)   = [p(t+n) - k(t+n)]* [q(t+n)]  / [K(t+n)/L(t+n)]
>>
>>   [K(t+n)/L(t+n)]   >      [q(t+n)]   > 1
>> (2)
>>   [K(t)/L(t)]                    [q(t)]
>>
>> The intertemporal change in capital intensity exceeds the intertemporal
>> change in
>> productivity, which exceeds unity. Hence if let r(t) = r(t+n) = r then we
>> may write:
>>
>>        [q(t+n)]  =  *  [K(t+n)/L(t+n)]                      (3)
>>        [q(t)] *  [K(t)/L(t)]
>>
>> By equation (2): [p(t) - k(t)]/ [p(t+n) - k(t+n)]  < 1.
>>
>> So, both Zaremka and Henvood have partially correct. The tremendous rise in
>> productivity does create room for a rise in the minimum wage. But, the
increase
>> in productivity may have occurred with an even greater increase in capital
>> intensity.
>> In which case, there are definitely limits to the increase in any particular
>> capital's
>> wage rate before profitability is threatened.
>>
>> Of course, Howard Botwinick discussed all of this in his book, Persistent
>> Inequalities. Any, I also discussed these issues in my August CJE article.
>> Crass self promotion? Yeah.
>>
>> peace, patrick l mason
>