Labour Market Theory: A Constructive Reassessment

Citation

Sanyal, A. (1999), "Labour Market Theory: A Constructive Reassessment", International Journal of Social Economics, Vol. 26 No. 5, pp. 219-221. https://doi.org/10.1108/ijse.1999.26.5.219.1

This interesting monograph persuasively argues that methodological ingredients of Marx′s labour theory can serve to provide a better understanding of capitalist labour markets than other paradigms in current use. The work builds up on a thorough survey of competing paradigms spanning five chapters of the book. The survey is fairly exhaustive and can be of use to both mainstream and radical students of the labour market. It is meant to highlight the weaknesses and inconsistencies of method of mainstream theory. The labour theory of value is then presented as an alternative capable of avoiding precisely those methodological pitfalls and generating deeper insights. The book also contains two chapters based on concrete experience of collective bargaining and the impact of minimum wage legislation in some countries.

A basic problem of labour market theory stems from the fact that labour markets, at least apparently, do not conform to the law of one price. Logically there are two ways to respond to the problem. One is to suggest that the problem is only apparent, i.e. labour units are heterogeneous incorporating different abilities and skills, as in human capital theory. The problem with this response is that even after controlling for economic factors, wage differentials leave too large residues to be called statistically insignificant. The second response, in view of this, is to step out of economic determinism, hypothesise that there is social discrimination across the labour market leading to differential economic outcomes, and explore them. While this is the more promising avenue, unless there is a sound methodology guiding this line of research, separating social discrimination from economic differentiation becomes difficult. In particular, much of the research along this line has proceeded on the neoclassical belief that market outcomes would be identical for similar type of labour if there were no social discrimination. But, because social discrimination before entering the labour market results in post‐entry labour market attributes that are differently valued by the economic system, this route would generally result in exaggerating or understating the extent of social discrimination. This is particularly apparent in econometric work. The relative extent of social discrimination or even its existence in these works depends on the imagination of the researcher in finding out a set of economic factors to be controlled for. Ben Fine′s critique of this part of the literature abounds in illustrations of this problem and is full of critical insight.

The problem, however, is that even if we could bypass subjectivist econometrics, it would not be of much help. We wish to understand social discrimination in order to intervene into it. And for that, we need to understand not its extent but the underlying process. The process needs to be understood in all its parts:

1. 1

   what leads to discrimination across attributes in the first place;

2. 2

   what makes it repetitive and thus creates a labour market structure; and

3. 3

   how is the structure reproduced through time even as routine production, exchange and accumulation go on in the system?

Ben Fine argues that elements of Marx′s method can be utilised to understand these processes.

This raises an interesting question in Marxist theory: can a capitalist economy reproduce a structured labour market? Does not the exchange of commodities tend to establish an equivalence of different types of labour as aliquot parts of a homogeneous social whole? The author′s answer is extremely interesting. Different types of labour can have different labour costs of reproduction. Items of the consumption basket and their quantity norms can be physically different for different parts of the work force due to historical reasons (black labour, immigrant labour) or due to trans‐systemic reasons (culture, women in the family). More importantly they may systematically differ in value terms depending on how much of it is delivered by the family, the state and the market respectively. Given this differentiation, the tendency of the market to establish equivalence of socially necessary labour among commodities will take appropriate account of the difference in the value of labour of different types embodied in different products. The result is not a uniform wage rate (even in labour value terms) across types according to their technical productivity equivalence. It implies that a given structure may survive indefinitely under conditions of capitalist production and exchange. Further, new structures may arise afresh during the capitalist era itself. The state′s welfare action, for example, may create strata of labour whose cost of reproduction is distinct from others. The difference in perquisites offered between the state sector, the private sector and within each between the blue and white collars, the mode of delivery of them, including education and health services, together have potential of creating new structures in the present phase of capitalism.

Just as these structures are vulnerable to being pulled down by market forces and competition, they may, in other instances, be strengthened by social and political action and even by strategic action of market participants themselves (corporate competitive strategy, trade unions). The role that the labour theory of value plays here is in generating the insight that a structured differentiation is both consistent with capitalism and can survive in it. It also serves to highlight the political divergence from the neoclassical view. The latter would expect that differentiation beyond what the market considers legitimate (reflecting productivity or human capital differences) is a result of discrimination. This implies that extra‐market forces alone are discriminative. Market reforms and removing impediments to market determination should then be the long run agenda to fight social discrimination. The labour theory view proposed by the author on the other hand views discrimination and structure as capable of coexisting with the most reformed of markets, and the political action against discrimination can not be uncritical market reform.

The author′s central thesis contained in chapters 7and 10 appears to be at a different level of abstraction than the rest of the book. Given the importance of the thesis we should look forward to application of these ideas at a more concrete level in the near future.