You Pay to Work. And Why It Matters.

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BY TOMAS ROTTA | DECEMBER 21, 2016

Workers pay to work. Even though we receive wages and benefits, many of us have to pay to work. If we didn’t, we wouldn’t have a job in the first place. If we didn’t, companies wouldn’t accumulate any profit. Profits are actually derived from what we as workers pay to work.  This was one of Marx’s greatest discoveries about capitalism. 

Marx himself never used the term ‘pay to work’. Instead, he used the term exploitation. Today, unfortunately, exploitation has acquired a meaning that is not in accordance with Marx’s theory of class struggle. Generally we use exploitation to refer to poor working conditions, but Marx was clear that exploitation should not be defined in these terms. For Marx, exploitation exists whenever those who produce wealth do not appropriate it.  You and your coworkers produce together all the wealth for the company but you only get back a fraction of this wealth when you receive your wage. The other share that you created but for which you receive no compensation is what you pay to work.

It is challenging to talk about Marx’s ideas without relying on the language of value, surplus value, and exploitation. How do we engage in a conversation about exploitation when there is a general misconception that exploitation is defined in terms of working conditions? Even if someone works at Google or Facebook, with nice progressive offices, and higher pay, they are being exploited. Even if you have the pleasure of going to work in a nice office and making a good living, you are paying to work too. It just might not seem like it. But higher productivity compensates for bigger salaries. If it didn’t, those employees at Google or Facebook would not even be employed.

It is easier to explain Marx’s conception of exploitation through the phrase ‘you pay to work’ than it is to just tell people they are exploited. No one wants to hear that they are being exploited, especially if their material conditions are fairly comfortable. “How could I be paying to work?” “How is that possible?” Paying to work is possible because there is little to no democracy in the workplace. Most employees are not the shareholders of the corporations or companies they work for, and so they are not entitled to appropriate the wealth they produce.

Capitalism has surely brought us many benefits like high productivity, mass production, better living standards, and cheaper and cheaper goods and services. Capitalism, however, cannot offer these benefits without people paying to work. And paying to work is a major factor behind rising inequality. The more we pay to work, the more unequal capitalism becomes. 

In Capital in the Twenty-First Century Thomas Piketty explored the rise of inequality among developed nations. He measured the actual income shares that accrue to the top 1% and the top 0.1% of the income scale. This accrual of wealth in the 1% is where Occupy Wall Street got their slogan.  What drives the accumulation of wealth among the top 0.1%? Marx teaches us that a major cause of inequality is exploitation itself, or the fact that we pay to work. Inequality goes up when we pay more to work, and inequality goes down when we pay less to work. When you pay more to work, more of the wealth you produce goes to the owners (the shareholders) of companies and corporations, which are those at the top 0.1% of the income scale.

My research on the American economy indicates that the correlation between the income share of the top 1% and the rate of exploitation, or the rate at which we pay to work, is 0.95. For the top 0.1% this correlation is 0.96. A perfect correlation of 1.0 would mean that inequality and exploitation move exactly together. So 0.95 and 0.96 are remarkably high correlations, suggesting that paying more to work is closely linked to rising inequality in the United States.

 

Rate of Exploitation (or Rate of Surplus Value) and Top 0.1% Income Share in the United States: 1947-2011


 

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 Source: link

 

From 1947 until 1980 inequality was roughly stable and even declining. Why? Because Americans paid less to work, mostly due to the development of the welfare state and the hegemony of the US in the global economy after WWII. But after 1980 the story changed. Americans paid more and more to work every year and the gains went to the top 0.1%. In 1974 the average American employee labored half of the working day for herself and the other half for her employer. By 2011 this same average employee was laboring one-third of the work time for herself and two-thirds of the time for her employer. As people paid more to work, more of the national income went to the top 0.1%.

Piketty has suggested that the golden age of capitalism from 1945 to 1980 was a mere exception. He points out that WWII, the reconstruction of Europe, and the Soviet revolution led the developed world into an exceptional period of decreasing inequality. But after the Reagan-Thatcher era, the rich countries are now back to the days of high inequality. Many call this post-1980 era ‘neoliberalism’.

So, what is the solution to rising inequality? For Piketty, it lies in a global tax on wealth and inheritance. But a global tax on wealth across countries would be very difficult to maintain in practice and the super-rich could undo it as soon as politics allowed, as they in fact did after 1980. For Marx, on the contrary, the true solution to close the wealth gap can only be an economic system in which we have prosperity without exploitation, prosperity without paying to work.


Tomás Rotta is Lecturer in Economics at the University of Greenwich in London, UK. He holds a PhD in Economics from the University of Massachusetts at Amherst, US, and an MA in Economics from the University of São Paulo, Brazil. You can contact him here.

 


Showing 6 comments

  • commented 2017-01-12 14:28:43 -0500
    This is what Henry George refers to as a monopoly surcharge for no services rendered. It is the truly objectionable profit and should be made illegal. (Other things we call profit, like interest on loans/stocks and remuneration for the labor involved in organizing and management, would still exist in a cooperative, albeit the later would be shared amongst all workers) Under the regime of private property, owners can restrict access to only those who will pay the extra fee. This is easily understood in housing where the “market rate” is typically above the actual utility value of the housing. This happens in a business, with the (unemployed) labor market willing to bear less remuneration than the amount of surplus wealth actually produced.

    David Ahrens, coops would certainly replace what were known as trade unions – organizations based around a shared skill set and grievances with specific employers. Industrial unions on the other hand, as Aubergine Aura suggests, would still be useful as training organizations, teaching co-management skills and financial literacy. Imagine the IWW but with less wildcat strikes and more small business consulting. Two-thirds of what the suits learn in their MBA programs is how-to-be-a-greedy-sanctimonious-prick, but the other third is the boring, tedious, and ABSOLUTELY ESSENTIAL, how-to-keep-a-business-from-failing-financially that every member of a worker-coop would need some expertise in.
  • commented 2017-01-04 18:46:41 -0500
    I just stumbled across this article and these comments. I will attempt to answer them as well as my limited knowledge allows.

    Wouldn’t the creation of worker-owned co-ops eliminate the need for unions entirely?

    This question has been asked of Richard Wolff several times and his answer (as best I can recall) is that we can still use unions in worker coops to work side by side with management structures, similar to how they do now. They would take on more of an oversight role, I believe, making sure the “Tyranny of personality” or some other nefarious conspiracy doesnt emerge, creating a new decision making class and worker class in effect.

    Instead of striking and picketing I imagine they would take on more of an educators role. Hey guys look at this new health plan we found, or there is a newer less polluting way we can do this. That sort of thing. This last bit is just a few examples I came up with on my own. I hope this gives you a better sense of how we could use unions as more of a workers advocacy group than a hammer to smash management.

    How do we get unions like the AFL-CIO and IBEW to begin helping workers establish worker-owned co-ops when corps such as Carrier threaten to leave, rather than begging and groveling as the unions do now?

    As I understand it this is being done in the UK and perhaps elsewhere. Richard Wolff has spoken about how in the UK (I think it is) that when a publicly traded company tries to move or sell or close the workers get the right of first refusal. Meaning they get a chance to buy the company before anyone else and the glorious part is the government is putting in place methods to finance the purchases. Check me on this but I believe that is the case due to a recent UK law being passed.

    The second answer I have heard Richard Wolff give is more of a state or government action, I think, but that is to take over the factory when the company leaves and let the workers run it themselves. This provides a powerful disincentive for a company to move for a few reasons. One, they immediately have competition in their old factory and workers. If those workers are savvy they can label all their products worker owned and market it as such while also showing the parent companies abandonment of America and local communities. All in all creating a potentially powerful PR campaign that could definitely affect sales and damage the parent companies brand.

    Richard Wolff also mentioned a partnership between workers/unions and local government stating in effect that there is much political capital to be had for a politician willing to back this sort of movement that is certain to be popular on a local level at least.

    I hope this helps you guys a bit. Also I must say I feel odd speaking for Richard Wolff as I am just some guy who listens to his radio shows but figured that sharing what I knew couldnt hurt.
  • commented 2017-01-03 09:28:04 -0500
    David Aherns it could mean that. On the other hand, it would be decades before all capitalist structures could be replaced with worker-owned co-ops, I suspect. During that time, if unions were smart, they’d develop into tech training and support organizations for industries—providing apprenticeships as they do now, as well as support centers to worker-owned co-ops. So, for example, no longer needing to bargain for wages and benefits, the IBEW would become the source for highly-skilled electricians who apprentice and are eventually employed at worker-owned construction co-ops. They might also provide “emergency labor” to co-ops faced with labor shortages, as well as continuing ed training for new industry technology, etc. Instead of individual union members paying dues, the co-ops would pay the dues. Unions could also serve as the political representatives of various industries, just as they do now. In short, I still see a vital role for unions, if they grow with the movement rather than fighting it.
  • commented 2016-12-31 13:38:43 -0500
    Wouldn’t the creation of worker-owned co-ops eliminate the need for unions entirely? If the employee’s own the company that they work in there would really be no need to unionize. It’s hard to expect a union to participate and its own demise, isn’t it?
  • commented 2016-12-24 12:46:16 -0500
    Tomas, Marx’s “prosperity without exploitation” to which you referred is an “association of producers,” whether in the form of workers’ cooperatives or soviets. Such associations would own and manage their conditions as they produce for use and need. How such associations might be organized is the critical question seldom asked and never answered in my experience. It’s time we started on it.
  • commented 2016-12-21 13:11:30 -0500
    How do we get unions like the AFL-CIO and IBEW to begin helping workers establish worker-owned co-ops when corps such as Carrier threaten to leave, rather than begging and groveling as the unions do now?
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