The employment contract with externalised costs: the avatars of Marxian exploitation

Abstract

The paper pursues two aims. The first is to argue that the foundation of Marx’s theory of capitalist exploitation is to be found, not in the labour theory of value, but rather in the contract of employment, the legal frame of the capital-labour relation. The second is to suggest that the partial externalisation of the reproduction cost of labour power has been an important source of relative surplus value, along with the productivity increase, emphasised by Marx, in the industries supplying wage goods.

Keywords:

• Marxian capitalist exploitation
• surplus value
• labour value
• prices of production
• employment contract
• cost externalisation
• welfare state
• labour market flexibility

Acknowledgements

The authors wish to thank Harald Hagemann, Julian Wells and two anonymous referees for useful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Veneziani and Yoshihara (2017) also analyse the concept of exploitation as an unequal exchange of labour, without attributing it to Marx.

2 The distinction between absolute and relative surplus value corresponds to the distinction between what Marx calls the formal and the real subsumption of labour under capital. The former modifies only the form of the relation between the labourer and his exploiter, without changing the production process, the latter requires on the contrary such a change, operating at an intersectoral (hence systemic) level. See Marx ([1861–63] 2010, 93–117).

3 A more general analysis, extending to joint production, can be found for instance in Morishima and Catephores (1978, ch. 2) or, covering in addition the case of decreasing returns, in Roemer (1981, ch. 2).

4 Notice that we are here taking the value of workers’ consumption as being a component of value added, whereas it might alternatively be treated on the same footing as intermediate consumption, by augmenting the Leontief matrix A.

5 Notice that Marx uses a labour concept of value (as an aggregator and as the supposed foundation of equilibrium prices), without in fact defending a labour theory of value, since his equilibrium prices diverge systematically from labour values.

6 Quoted and commented by Marx ([1861–63] 2010, 171–175).

7 An alternative choice of numeraire would be labour power, or rather the disposal of labour power during one day, in the line of Smith’s “labour commanded” measure of value. If the wage w is equal to the (redefined) value of labour power p*ω, this choice of numeraire leads to $\left(1/\mathit{w}\right){\mathit{p}}^{\ast }\omega =1$, hence to the expression of the rate of exploitation as $\mathit{T}\left(1/\mathit{w}\right){\mathit{p}}^{\ast }\widehat{\mathit{y}}-1$.

8 After having shown that, under joint production, positive profits are compatible with negative surplus value, depriving this magnitude of its intended significance, Steedman (1977, ch. 11) suggests to abandon all reference to Marxian values and to concentrate on observable magnitudes. This is not our position. Negative surplus value is the consequence of persisting to use a system of equations, in a context where one should instead resort to inequalities, allowing for some slack in the production of by-products (see Morishima and Catephores, 1978, s. 2.2). Thus, while dispensable, the reference to Marxian values when characterizing exploitation is not doomed to be a source of confusion.

9 “The day labourer […] receives in place of his productive power [Produktivkraft], the effect of which he has bargained away to the farmer, five silver groschen, which he exchanges for means of subsistence” (Marx [1849] 2010, 214).

10 Several tests of economic dependence are listed by the Administrator: the integration of the work performed to the employer’s business, the inexistence of an opportunity for profit or loss, the disproportion between the worker’s and the employer’s investments, the engagement on a permanent or indefinite basis (typically as at-will employment), the control being exercised over the worker. The natural implication of this battery of tests is that “most workers are employees.”