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Workers' share of profits

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ITGF posted on Sat, Mar 12 2011 3:51 PM

Is anyone here familiar with the Marxist argument that workers are entitled to a share of the employers' profits because they are being exploited, i.e. are not being properly compensated for their contribution?

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Drew replied on Sat, Mar 12 2011 8:48 PM

 

The anarcho-communists have a great plan, more like a dream.They know what they want, no doubt. They fail to take in consideration human nature.
 
 Most of them describe a society where everyone will "go with the flow", just like that.
I haven't met a anarcho-commie who preached  otherwise, so if any anarcho-commie reads this please surprise me.
 
Everyone will be altruistic and happy, or so it seems. You are finally free from the state only to realize that you have restrictions concerning use of your property. You are not allowed to produce and you have to share, you're still free but you still have to share. You are not allowed to "exploit"(whatever that means) and all that nonsense.
 
There will be no state to  take away your freedom,O_o.  Direct democracy is the watchword of tomorrow, although someone has to organize the votes and since this type of politics is too chaotic, a council will be elected. 
 
Like I said, you are a free man, all you have to do is give up whatever rights the council asks you to, share "stuff", give up your factory to the workers, redistribute wealth and be free.
All these great feats will be acomplished without a state.   Talk about semantics!lol
 
 
 
Socialism always leads to central planning. The central planners are honest and straight to the point, compared to their "Anarchist" brothers who hide behind labels of  "freedom" "peace""love".
They central planners have no shame lol. They will immediatly tell you that we should have a state that will force everyone to engage in the things they deem necessary for the greater good.smiley
 
There's nothing wrong with cooperatives, even though they can't really work. Provided the workers  invest in capital and not mug the actual owner.
 
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Employment

Besides trading material goods for material goods, it is also possible to trade the good labor for material goods, or to trade labor for labor. These trades can too raise the amount an individual earns with a day's labor. An entrepreneur is someone who incurs a personal investment in labor and/or goods for the purpose of selling transformed goods or services at a higher price. In doing so the entrepreneur takes on the risk of the success of the undertaking. The investment in labor is the creation of jobs which have a stable reward without the risk of losses.

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Isaac "Izzy" Marmolejo:

I would argue that Nero, one can determine wages by MRP...

 

Yes, you can determine wages, you can measure them like you can measure temperature with a thermometer. But that's not what sets wages. Wages are an outcome of the market.

"They all look upon progressing material improvement as upon a self-acting process." - Ludwig von Mises
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@Nero, of course wages are an outcome of the market, but isnt MRP using the market to determine wages?

My Blog: http://www.anarchico.net/

Production is 'anarchistic' - Ludwig von Mises

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filc replied on Sat, Mar 12 2011 9:35 PM

filc:
On the other hand workers do in a way recieve their share of profits.

EmperorNero:
No, they are not. Saying that labor is paid a share of the profits is like saying that raw materials are paid a share of the factories profits.

Profits being interest, in a way they do. I think however you either mis-understood me or  missed my point. Or your not understanding the question of the OP. The issue here is "sharing profits". The issue is not how wage rates are set on the market. The issue is focusing on "Exploitation Theory". Do you know who I was referencing with my above post?

Profit(Interest) is relevant to the discussion because to a marxist/socialist/syndicalist it must be shown why the laborer does not recieve a cut of the interest at the point of maturity. The Marxist beleives that the laborer is due some of that return. We could somewhat ignore the gripe about interest and focus superficially on other points. Points such as:

  • But the laborer entered the labor contract voluntarily!
  • But it's not the laborer's capital!
  • But the laborer isn't sharing in the risk!

However, any good socialist will simply dissmiss these points as being red-herrings, and they would be correct. They will also simply state that those problems are just bad products of a bad a system.

Even if these points were legitimate none of them address the issue raised by a marxist as pointed out in the OP. Ultimately the problem here is a misunderstanding of what is interest. All other points are really just red-herrings, side points, and not relevant to the discussion.

If you cannot comprehend my point you will never be able to explain to the socialist why exploitation theory is fallacious. This is some fairly old yet critically paramount Austrian stuff. When arguing with a socialist he will quickly dissmiss your points and claim you are throwing a red-herring(Which you are).

Also your raw materials analogy makes no sense whatsoever. It's not clear what you were trying to say.

EmperorNero:
Iron or wheat costs what the market determines that it costs, that has nothing to do with how much profit the factory that buys it makes.

Correct but this is still a red-herring from the issue pointed out in the OP. We are talking exploitation theory here, not about how wages rates are set on the market. Where in my response did you think I was arguing over how wage-rates were set? I am merely directly addressing the issue raised by the OP. Do you disagree?

See below....

(Böhm-Bawerk pp. 263–64, italics original):
The completely just proposition that the worker is to receive the entire value of his product can be reasonably interpreted to mean either that he is to receive the full present value of his product now or that he is to get the entire future value in the future. But Rodbertus and the socialists interpret it to mean that the worker is to receive the entire future value of his product now.

Read also:

http://mises.org/daily/1680

 

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filc replied on Sat, Mar 12 2011 9:36 PM

resist272727:

Anything based on the Labor Theory of Value is utter bullshit and can be dismissed immediately.

Why?

[Edit, I very much dislike circle jerking.]

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Deep stuff here.

1. The way I see it, Nero is saying that a worker is just one more "raw material" that goes into making a product. And just as the provider of steel say, is clearly not entitled to the profits of a car manufacturer, so too an auto worker has no right to demand a cut of the profits. He gets what he is worth, just as the steel mill gets what the steel is worth. Supply and demand get both the steel mill and the auto worker exactly what they are deserve.

With this analysis, who cares where profits "come from'? What counts is why the worker is getting paid what he is getting, and that is determined by impartial market forces. Nothing to do with exploitation.

Makes a lot of sense to me.

2. Filc, I don't really grasp what you are saying. Why do you see Bohm Bawerks interets analysis as the only possible reply to the cry of exploitation. Why are all the other factors, such as risk etc. mere sideshows? What do you see wrong with Nero's reasoning?

3. [Later]: After looking at the Wiki, I get it. If we define "exploitation" in the way its defined there, under the assumption that the value of an object lies in the labor put into it, then of course the only thing that counts, by assumption, is labor input. No matter how you shake it, risk or no risk, the car has risen from its prefactory price as a pile of nuts and bolts to its post factory price as a sleek new car due to only one thing: the labor input. So that the laborer is always getting screwed. His labor is much different than all the other inputs, such as the steel, because only his labor makes all the other inouts more valuable.

Of course, by this kind of thinking, the fact that the worker gets paid less in exchange for not having to share in the risk does explain how he is not exploited to some extent. As does the fact that he has to pay for the right to use the factory resources to do his work. I mean, let's say he is a self employed carpenter. Can he go into home depot and say give me allthe tools I want for free, because all the value of the things I make with them are from my labor? Non sequitor. Same if he works for someone in a factory.

4. A question that occured to me. Even if we reject the LTV and accept that value is subjective, is it not right to say that the increase in price caused by changing a pile of steel into a car comes from labor, and thus we need recourse to Bohm Bawerks argument? Or, once we reject the LTV, does Bohm Bawerks explanation become unnecessary?

 

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filc replied on Sat, Mar 12 2011 10:11 PM

Smiling Dave:
The way I see it, Nero is saying that a worker is just one more "raw material" that goes into amking a product. And just as the provider of steel say,

But is not the capitalist and entrepreneur just one more "raw material" that goes into making a product? Are they not all sometimes required in the recipe?

Smiling Dave:
2. Filc, i don't really grasp what you are saying. Why do you see Bohm Bawerks interets analysis as the only possible reply to the the cry of exploitation. Why are all the other factors, such as risk etc. mere sideshows? What do you see wrong with Nero's reasoning?

Because the critique is about interest. So the explanation needs to be about interest. Other responses are red-herrings. A logical fallacy is not a suitable way to respond to a criticism IMHO. 

I am not saying Nero's points aren't legitimate. I am stating that they don't address the actual issue. His points are really points to other criticisms but not about why laborers don't share the interest.

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filc:
Profits being interest, in a way they do. I think however you either mis-understood me or  missed my point. Or your not understanding the question of the OP. The issue here is "sharing profits". The issue is not how wage rates are set on the market. The issue is focusing on "Exploitation Theory". Do you know who I was referencing with my above post?

Profit(Interest) is relevant to the discussion because to a marxist/socialist/syndicalist it must be shown why the laborer does not recieve a cut of the interest at the point of maturity. The Marxist beleives that the laborer is due some of that return.

filc, I do understand the question. My comments were on topic, I apologize though if I buried the lead. The all-important point was: How wage rates are set determines whether profits are "shared" or not. And whether profits are "shared" or not determines whether exploitation theory is nonsense. That's why I am talking about how wage rates a set. If wages are some "share" of a factories profits then it makes sense to ask what share the worker is entitled to. But we know that wages are not a share of the profits, wages are determined by supply and demand. Like the price of raw materials. I am telling you that the whole assumption of profits being shared is bunk in the first place. Therefore it doesn't even make sense to ask what share of profits the worker is entitled to. There is no sharing of profits at all. When you argue why the capitalist is entitled to some of the profits you are implicitly accepting the Marxist assumption of labor having an objective value.

"They all look upon progressing material improvement as upon a self-acting process." - Ludwig von Mises
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Phaedros replied on Sat, Mar 12 2011 10:25 PM

Fllc:

I think you're missing something here honestly. What Nero is saying, and everyone else I think, is that labor is a commodity whose price is determined on the market. That's it. That's all you need.

Tumblr The welfare of the people in particular has always been the alibi of tyrants. ~Albert Camus
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filc replied on Sat, Mar 12 2011 10:32 PM

EmperorNero:
How wage rates are set determines whether profits are "shared" or not.

And I see this is a non-sequitur. As even today laborers share company profits all the time. The difference between earning the interest and not, depends at which point the laborer is paid and in what type of installments. Vis receiving one lump sum at the end of a production cycle or regularly scheduled installments during a production cycle.

It also shows that you seem to be disatisfied with Bohm-Bawerk's critique of exploitation theory. I wonder why his explanation is not adequate enough? Your explanation does not reveal the behavior of originary interest and how/why it appreciates over time. This is a key/critical component to Austrian Economics and a core tenant of AE's capital theory.

EmperorNero:
If wages are some "share" of a factories profits then it makes sense to ask what share the worker is entitled to.

They are handed out as shares. Stock options ect... It's a fairly common practice in large companies and in small startups. What shares they get depends on the agreements they sign with their employer. How much of a share they should get(if any at all) is up to the business. 

EmperorNero:
If wages are some "share" of a factories profits then it makes sense to ask what share the worker is entitled to.

No it doesn't. How much share the worker is entitled to depends on the business and it's policies. Some business's may offer a greater amount of shares earlier on to attract employees. Others may be more stingy. If a business chooses to follow this practice how much they share will be driven by the market. Some of these business's offer less in the way of salary but stock options to compensate. Other business's offer large salary compensation but no stock options. It's all market driven(just as you said)

EmperorNero:
But we know that wages are not a share of the profits, wages are determined by supply and demand.

This is a non-sequitur. Just because wages are detirmined by supply and demand does not mean that a laborer can't share in the profit at the end of a production cycle. We're talking about money here. Money earned in a wage is no different than money earned on interest. How it is earned is different yes but it's function as money is the same. They are not "differnet" objective things. Money is money. 

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Phaedros replied on Sat, Mar 12 2011 10:32 PM

There's another fallacy here that is in the assumption that a worker can only get his livelihood through wages when in reality working for wages represents those things the worker cannot produce himself. I.e. It assumes that workers are only consumers and not consumers and producers at once.

Tumblr The welfare of the people in particular has always been the alibi of tyrants. ~Albert Camus
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filc replied on Sat, Mar 12 2011 10:34 PM

Phaedros:

Fllc:

 What Nero is saying, and everyone else I think, is that labor is a commodity whose price is determined on the market. That's it. That's all you need.

And that is besides the point entirely. This has nothing to do with the OP.

[EDIT] Honestly I have pointed out 1 non-sequitur and a few red-herrings. Why is everyone so quick to cling to logical fallacies and so reluctant to adopt the Austrian position via Bohm-Bawerk's critique's?

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Phaedros replied on Sat, Mar 12 2011 10:37 PM

When you buy a car can the car share in the benefits of having that car? Or can an apple share in the energy it provides the person who eats it? I mean this might sound bad to a socialist on an emotional level, but it's reality.

Tumblr The welfare of the people in particular has always been the alibi of tyrants. ~Albert Camus
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Phaedros replied on Sat, Mar 12 2011 10:39 PM

Just because you say it's a non-sequitor doesn't make it so. The OP is asking whether or not the worker is exploited because they are not justly compensated (reminiscent of medieval and previous "just price" which Rothbard has shown was determined to be the market price). If labor is a commodity whose price is determined by supply and demand then whatever a laborer chooses to work for is the "just price" and therefore they are duly compensated. 

You can say you think they should be paid more or feel that they should be paid more, but that is an emotional argument (or a value judgment).

Tumblr The welfare of the people in particular has always been the alibi of tyrants. ~Albert Camus
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