I was reading s few of the comments posted below the article written for a web site (I hate the term blog, short for weblog, when used for essay writing even if it is informal) regarding the Seattle Business owner raising his minimum salary for new employees. The article covered the reasons for the raise, the reactions, and the possible motives which were either economic, charitable, or legal (the manager’s brother is suing him). One comment I present below.
“Employees produce more value per hour than they are paid per hour. That surplus amount of value, once converted from commodity to money (through the sale), is profit, and goes to the capitalist. The same goes for services.
Thus, quite literally, the entire history of capitalism is built on the concept of the capitalist getting more than what he pays for.”
The argument is that the employee’s output value is more than the wage he receives. Is that really true? I am a contractor and have been contracted to build a house for you on land you own. There are many expenses that go into the building of a house, not the least of it is the labor. First plans must be drawn up and approved by the local government building department. Fees are paid and inspections scheduled. Services are scheduled for the excavation of the foundation, the trenching of utilities such as water, sewerage, gas, electricity, telephone, and catv. As a contractor I can do the work myself but time is of the essence in construction for one is at the mercy of nature. No one wants to buy a house made with wet two by fours. Besides, my job, the one I get paid to do, is that of supervision and coordination of the work being performed. Note that as a contractor I am self employed, that is, I am paid out of the remainder of the contract monies. I am a capitalist in that I will have saved a portion of my previous wages to buy equipment that is needed for the completion of the work.
Now I have a decision to make. Do I buy, rent, or hire someone with the machinery needed for the excavations mentions above? My cement men, my carpenters, my electricians, my plumbers, my roofs, and my finish men could care less about that decision. They only care about getting paid for the hours they work. And they are paid up front, meaning that they do not have to wait until the house is complete, accepted by the customer, and the customer pays. Because they either do not or can’t wait for payment they are willing to accept a discount on their money earned. They are also employees and that means I pay their workers compensation insurance, I paid their unemployment insurance, and I pay other “benefits” out of my pocket before ever see a dime. Now let’s fast forward to the framing of the house and all the rough-in work. I have build large sheds and even a house s I know what the work encompasses. Erecting a frame wall by yourself is a difficult process and adding the sheer wall (plywood or fiberboard panels) is difficult to do alone. With two individuals working together the process is done in almost a quarter of the time. But like all complex activities, when you have individuals who specialize but must complete their work on a complex project, someone must be the project manager, someone must ride herd on the workmen. Sheetrock men don’t give a shit if the plumber or electrician haven’t done their rough-in work before the sheetrock goes up. I as the contractor/foreman/project manager has to give a shit because if the rough-in work isn’t done and the sheetrock is put up, guess what? It’s got to be ripped out and guess who pays for that mistake? If you guessed me, you got it right.
The fact is, someone has to check that work is done on schedule and completed with the quality expected. When I worked outside construction for the telephone company I spent a couple of years on what was termed the “buried crew”. We placed the small burred telephone cable in housing tracts, did the splicing (joining the individual pairs of wires together), ran the drop lines from the terminals to the house (that’s the buried six or eight pair cable service cable), and other such jobs. Each Friday we would meet with a gas and electric crew to have our afternoon steak fry and beer bust (the good old days, now they are gone). The housing tract we were working in was one of those upscale affairs, the houses cost about twice the average. So we would pick one where the garage was almost done and proceed to barbeque our steaks and drink a six pack or better in the afternoon. I remember that I inspected the framing of the roof joists and rafters in the garage and was amazed by the lack of quality. The lumber was often short or the center and ridge beams by as much as one inch and held with two nails at the most. Outside craft for us in the utilities meant attention to quality. Your reputation in the construction was determined by your quality or its lack. And when someone had to wipe your bottom that fact was made well known. we tended to get rid of those whose work was poor quality. If you are the contractor for building a house, your future work depends on the quality of the work your crew does.
The quote above implies that a capitalist merely ride the coat tails of his workers and steals a portion of the fruits of their labor. But is that really the case? Marx thought that the worker was denied the full wage by the capitalist. The question is, even it the worker owns the tools of his production, and the case of a carpenter or plumber, who owns the factory where the production is done? Who buys the raw materials and the semi-finished goods for completion of the product? And who markets and sells the product, supplied the energy needed for production? Marx never understood how the business or manufacture worked. He didn’t understand how a contractor provide a very valuable service for his workers. You see, such statements are made in ignorance. they are made by those individuals with no experience with the subject. But back to the house under construction.
Now suppose that this house I have been contracted to build is larger that my crew can complete on time. I must determine how many extra individuals and in what speciality I must hire to complete the house on time. Now let us say that I am not bothered with union rules and I can pay my workers according to their individual productivity. When having to hire another individual or two I must calculate the additional utility of their work versus their wage. If I over pay I do not get the economic value from them. In short, I subsidize their wage at the expense of my own workers. We expect that when we hire that extra worker there will be some delay in their reaching an acceptable level of productivity. But let’s say that I hire an apprentice. Depending on that workers experience his productivity may be a tenth to half that of an experienced journeyman. These are the decisions that a “Capitalist” must consider. On the other hand if I hire a master carpenter I may be over paying for his work. That is, his productivity may be marginally better than most of my workers yet his wage may be far higher. And so it goes, management makes the necessary decision (well, we hope they do) and earns a wage. What is left, that profit or loss belongs to the business. Here again, the question becomes, what is done with the profits that’s earned after all to cost of materials, labor expense, Are they reinvested into the business or distributed to the owners?
We could consider the case of a machine shop type factory making speciality machined parts. One needs a factory and capital tools. There are depreciations expenses to consider, after all, factories face the need to upgrade according to local EPA regulations and safety factors. Machinery had a useful life and must be replaced. Often times new machinery warrants purchase because it will lower the cost of labor and thus the old machinery will need to be sold at a discount. the same for a service industry. It is the Capitalist who takes the risks, not the workers. If the capitalist fails in his risk taking he may lose all his capital, the workers only lose their jobs. So we can see that the above assertion is wrong. Only a fool would insist that he were right in that assertion.