Today’s figures confirm that real wages are falling. They show that average earnings rose by 1.7% in the year to March, a period during which consumer prices rose 4%.
It’s easy to ascribe this to weak productivity growth, the sclerotic post-crisis economy and to rising commodity prices.
Such an explanation, however, misses something. It raises the question: why are these factors hitting wages more than profits? In the 1970s, for example, very similar forces caused a severe profit squeeze more than a wage squeeze.
The answer to this question, of course, lies in one word - class, understood in its proper, Marxian, sense. Capitalists today have the power to pass on economic pain to workers in a way they did not have in the mid-70s.
In this context, we should welcome a new paper (pdf) by Juan Carlos Cuestas and Bruce Philp. They show that the rate of surplus value in the UK - defined as the ratio of profits to wages, excluding the public sector and self-employed - is a reasonable empirical function of three factors: the unemployment rate, which shifts the balance of power in favour of capitalists; working class militancy; and - perhaps surprisingly - whether we have a Labour or Tory government.
Now, we can quibble with this. I’m not sure whether the phrase “surplus value” has any analytical force distinct from talk of the balance of class power or the profit-wage ratio. And it’s quite possible that this analysis omits some other variables, such as the way in which technological change in recent years has been biased in favour of capital.
Nevertheless, the important fact remains. This shows that a central feature of the economy - the growth of wages relative to profits - can, and should, be analyzed in Marxian terms. To omit this is to ignore some key elements of the economy.
It is rather unsatisfactory for Ed Miliband to talk about the “squeezed middle” without a Marxist perspective.