Labour power
Labour power is the capacity to work, a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do the work, i.e. labour power, and the physical act of working, i.e. labour. Human labour power exists in any kind of society, but on what terms it is traded or combined with means of production to produce goods and services has historically varied greatly.
The general idea of labour-power had existed previously in classical political economy. Adam Smith's The Wealth of Nations and David Ricardo's On the Principles of Political Economy and Taxation already referred to the "productive powers of labour". However, Marx made the concept much more precise, critically examining the functions of labour-power in production, how labour-power is used, organized and exploited, and how it is typically valued and priced in bourgeois society.
Under capitalism, according to Marx, the productive powers of labour appear as the creative power of capital. Indeed, "labour power at work" becomes a component of capital, it functions as working capital. Work becomes just work, workers become an abstract labour force, labour becomes an economic input or a factor of production, and the control over work becomes mainly a management prerogative.
Definition
introduces the concept in chapter 6 of the first volume of Capital, as follows:He adds further on that:
Another explanation of labour-power can be found in the introduction and second chapter of Marx's Wage Labour and Capital. Marx also provided a short exposition of labour power in Value, Price and Profit.
Labour power and labour
For Marx, Arbeitskraft, which he sometimes instead refers to as Arbeitsvermögen refers to a "force of nature": the physical ability of human beings and other living things to perform work, including mental labour and skills such as manual dexterity, in addition to sheer physical exertion. Labour power is, in this sense, also the aspect of labour that becomes a commodity within capitalist society and is alienated from labourers when it is sold to capitalists.By contrast, "labour" may refer to all or any activity by humans that is concerned with producing goods or services. In this sense, the usage of labour in Marxian economics is somewhat similar to the later concept, in neoclassical economics, of "labour services".
The distinction between labour and labour-power, according to Marx, helped to solve a problem that David Ricardo had failed to solve, i.e. explaining why the surplus value resulting from profit normally arises out of the process of production itself—rather than in the investment of capital in labour-power.
According to Marx,
Marx's concept of labour power is sometimes compared to that of human capital. However, Marx himself would most likely have considered a concept such as "human capital" to be a reification, the purpose of which was to suggest that workers were really capitalist investors. In Capital, Vol. 2, Marx writes sarcastically:
Labour power as commodity
Under capitalism, according to Marx, labour-power becomes a commodity - it is sold and bought on the market. A worker tries to sell his or her labour-power to an employer, in exchange for a wage or salary. If successful, this exchange involves submitting to the authority of the capitalist for a specific period of time.During that time, the worker does actual labour, producing goods and services. The capitalist can then sell these and obtain surplus value; since the wages paid to the workers are lower than the value of the goods or services they produce for the capitalist.
Labour power can also be sold by the worker on "own account", in which case he is self-employed, or it can be sold by an intermediary, such as a hiring agency. In principle a group of workers can also sell their labour-power as an independent contracting party. Some labour contracts are very complex, involving a number of different intermediaries.
Normally, the worker is legally the owner of his labour power, and can sell it freely according to his own wishes. However, most often the trade in labour power is regulated by legislation, and the sale may not be truly "free"—it may be a forced sale for one reason or another, and indeed it may be bought and sold against the real wishes of the worker even although he owns his own labour power. Various gradations of freedom and unfreedom are possible, and free wage labour can combine with slave labour or semi-slavery.
The concept of labour power as a commodity was first explicitly stated by Friedrich Engels in The Principles of Communism :
Marx considered the sale and purchase of labour-power "the absolute foundation of capitalist production"; the reason was that "aterial wealth transforms itself into capital simply and solely because the worker sells his labour-power in order to live."
The value of labor power
Labour power is a peculiar commodity, because it is an attribute of living persons, who own it themselves in their living bodies. Because they own it within themselves, they cannot permanently sell it to someone else; in that case, they would be a slave, and a slave does not own himself. Yet, although workers can hire themselves out, they cannot "hire out" or "lease" their labour, since they cannot reclaim or repossess the labour at some point after the work is done, in the same way as rental equipment is returned to the owner. Once labour has been expended, it is gone, and the only remaining issue is who benefits from the results, and by how much.Labour power can become a marketable object, sold for a specific period, only if the owners are constituted in law as legal subjects who are free to sell it, and can enter into labour contracts. Once actualised and consumed through working, the capacity to work is exhausted, and must be replenished and restored.
In general, Marx argues that in capitalism the value of labour power is equal to its normal or average production cost, i.e. the cost of meeting the established human needs which must be satisfied in order for the worker to turn up for work each day, fit to work. This involves goods and services representing a quantity of labour equal to necessary labour or the necessary product. It represents an average cost of living, an average living standard.
The general concept of the "value of labour power" is necessary because both the conditions of the sale of labour power, and the conditions under which goods and services are purchased by the worker with money from a salary, can be affected by numerous circumstances. If, for example, the state imposes a tax on consumer goods and services, then what the worker can buy with his wage-money is reduced. Or, if price inflation increases, then again the worker can buy less with his wage money. The point is that this can occur quite independently of how much a worker is actually paid. Therefore, the standard of living of a worker can rise or fall quite independently of how much he is paid—simply because goods and services become more expensive or cheaper to buy, or because he is blocked from access to goods and services.
Included in the value of labour power is both a physical component and a moral-historical component. The value of labour power is thus a historical norm, which is the outcome of a combination of factors: productivity; the supply and demand for labour; the assertion of human needs; the costs of acquiring skills; state laws stipulating minimum or maximum wages, the balance of power between social classes, etc.
Buying labour power usually becomes a commercially interesting proposition only if it can yield more value than it costs to buy, i.e. employing it yields a net positive return on capital invested. However, in Marx's theory, the value-creating function of labour power is not its only function; it also importantly conserves and transfers capital value. If labour is withdrawn from the workplace for any reason, typically the value of capital assets deteriorates; it takes a continual stream of work effort to maintain and preserve their value. When materials are used to make new products, part of the value of materials is also transferred to the new products.
Consequently, labour power may be hired not "because it creates more value than it costs to buy", but simply because it conserves the value of a capital asset which, if this labour did not occur, would decline in value by an even greater amount than the labour cost involved in maintaining its value; or because it is a necessary expense which transfers the value of a capital asset from one owner to another. Marx regards such labour as "unproductive" in the sense that it creates no new net addition to total capital value, but it may be essential and indispensable labour, because without it a capital value would reduce or disappear. The larger the stock of assets which is neither an input nor an output to real production, and the wealthier society's elite becomes, the more labour is devoted only to maintaining the mass of capital assets rather than increasing its value.
Wages and labour costs
Marx regards money-wages and salaries as the price of labour power, normally related to hours worked or output produced. That price may contingently be higher or lower than the value of labour power, depending on market forces of supply and demand, on skill monopolies, legal rules, the ability of negotiate, etc. Normally, unless government action prevents it, high unemployment will lower wages, and full employment will raise wages, in accordance with the laws of supply and demand. But wages can also be reduced through high price inflation and consumer taxes. Therefore, a distinction must always be drawn between nominal gross wages and real wages adjusted for tax and price inflation, and indirect tax imposts must be considered.The labour-costs of an employer are not the same as the real buying power a worker acquires through working. An employer usually also has to pay taxes & levies to the government in respect of workers hired, which may include social security contributions or superannuation benefits. In addition there are often also administrative costs. So, in the United States for example, out of the total expenditure on labour by employers, the workers get about 60% as take-home pay, but about 40% consists of taxes, benefits and ancillary costs. Employers may be able to claim back part of the surcharge on labour by means of various tax credits, or because the tax on business income is lowered.
There is typically a constant conflict over the level of wages between employers and employees, since employers seek to limit or reduce wage-costs, while workers seek to increase their wages, or at least maintain them. How the level of wages develops depends on the demand for labour, the level of unemployment, and the ability of workers and employers to organise and take action with regard to pay claims.
Marx regarded wages as the "external form" of the value of labour power. The compensation of workers in capitalist society could take all kinds of different forms, but there was always both a paid and unpaid component of labour performed. The "ideal" form of wages for capitalism, he argued, were piece wages because in that case the capitalist paid only for labour which directly created those outputs adding value to his capital. It was the most efficient form of exploitation of labour power.