Labour Service

As Marx says, “Labour is value.” (Capital III, Chapter 49). But, as Marx also says in Capital I, for labour to be value creating, it must be purposive. That is, it must produce a use value, something that someone finds useful and wants. In Capital I, Marx sets out that such a use value, that is the result of labour, is a product, and to the extent that such products are exchanged against each other, on the basis of these relative values, they are commodities. But, what about the expenditure of labour that does not result in a physical product? Does that also create value? The question caused problems for Adam Smith, and other economists of the time. Marx's answer is straightforward, where labour is expended, not in the creation of a physical product, but where its product is the act of labour itself, which provides a labour service to the consumer, it is just as much value creating, as any other form of labour.

The issue caused problems for Adam Smith, because he had two different theories of value, although he did not recognise it. But, also Smith had two different definitions of productive labour, the first one correct, and the second one false. Smith represented an advance over the Physiocrats, in the fact that he took over from them the understanding that surplus value is created in production, but where for them, value was use value, and they only recognised the use values produced in agriculture as representing new value creation, Smith recognised that value was labour, and the measure of value was labour-time.

Smith, therefore, begins with a labour theory of value, and a theory whereby surplus value is created in production, which in itself is an advance over the Mercantilists who believed that the surplus value was produced as a result of exchange. So long as production and exchange is conducted by independent producers, each of whom exchange their output with other such producers, Smith's Labour Theory of Value is fine. Producer A expends 10 hours of labour producing a metre of linen, whilst producer B expends 10 hours of labour producing a litre of wine, and so A exchanges their linen for B's wine, and this amounts to A exchanging 10 hours of their labour-time, for 10 hours of B's labour-time.

This indeed is the basis of the exchange of commodities at their values, which also underpins the exchange of commodities, under capitalism, at their prices of production. Put another way, and a way that Smith also expresses it, the value of A's metre of linen, is the quantity of labour it can command, whether that labour is in the form of a litre of wine, or a quantity of some other commodity, which also represents 10 hours of labour-time.

But, Smith himself recognised that as soon as producers do not themselves own their means of production, this equality disappears, and this definition of value, also ceases to apply, or at least for Smith, it seems to cease to apply. In reality, it only seems to cease to apply, because Smith failed to recognise the difference between labour, as the essence and measure of value, and labour-power, which is the use value that the labourer possesses, and which is the commodity which the wage-worker sells.

If A has a litre of wine, which represents 10 hours of labour-time, it may appear to command the labour of 10 singers for an hour, but what, in fact, it commands is the product of those 10 singers, in the form of 10 hours of entertainment. The fact, that the product of this ten hours of labour is not a physical product, that it exists only in the form of the actual performance, so that it is consumed simultaneously with its production, does not change that.

Smith noted that when it comes to an exchange of labour with capital, or with landed property, this equality no longer existed. It appeared that the owner of capital, for example, was able to obtain command over a greater value than they were giving away in wages, because whilst they might give out, for example, £1 in wages, the value of the commodities produced by the workers they employed, might be increased by £2. The additional £1 of surplus value, was thereby appropriated by the capitalist. Smith, thereby also puts forward a second theory of value, which is based upon the cost of production of the commodity, and this cost of production breaks down into the revenues obtained by the different factors of production. This is also the basis of Smith's absurd theory, as Marx describes it, that the value of output resolves itself into these factor incomes of wages, profits, rent and interest. That absurd theory remains, however, the basis of modern bourgeois economic theory, and of the computation of the national accounts for output, income and expenditure.

Smith's correct definition of productive labour, was that labour which exchanges with capital, rather than revenue. In other words, it is labour which is productive of surplus value. But, Smith as a result of his dichotomous theory of value, also put forward a second definition of productive labour, which is that labour which produces a physical product. As Marx describes in Theories of Surplus Value, this is a relapse by Smith into Physiocratic theory. It does not matter whether labour produces a physical product, or a non-physical product, such as a labour-service, in determining whether the labour is productive or not, only whether that labour produces surplus value. As Marx puts it, the labour of a teacher working in an education factory, is just as productive as that of a worker whose labour is employed in a sausage factory.

A prostitute, who provides a labour service directly to customers is not a productive worker. But, that is not because the nature of the labour undertaken makes it so. If the prostitute works in a brothel, and is employed by a capitalist brothel keeper, that labour is then productive, not because the nature of the labour or the labour process has changed in any way, but because the prostitute now sells labour-power to the brothel keeper as a commodity, and the brothel keeper then employs that labour-power so as to create a new value in excess of the value of the labour-power bought. It thereby becomes productive of a surplus value, which can be accumulated as additional capital.

By contrast, as Marx sets out, a tailor produces a physical product, in the shape of a suit, a dress, or a pair of trousers. But, the physical nature of this product, in no way determines whether the tailor's labour is productive or unproductive. If the tailor is employed in a capitalist factory, producing these items, their labour is productive of surplus value. But, if the tailor comes to my home, and produces these things for me to consume, their labour is not productive, because it does not result in the production of surplus value.

The reason for a lot of the confusion, as Marx says, was that at the time the advance of capitalist production had meant that nearly all commodities, as physical products, were the consequence of capitalist production, whilst it was only labour services, such as those of domestic servants, gardeners, prostitutes and so on, which were provided directly by their producers. This gave the false impression that it was only these physical products that were capable of producing surplus value.

But, as Marx shows in his various examples, in Theories of Surplus Value, it is not the nature of the labour that is determinant, but the specific capitalist context within which it takes place. An actor employed by a capitalist theatre owner, is a productive labourer. They sell their labour-power to the theatre owner, at its value. The theatre owner then employs that labour-power, and creates new value in the shape of a performance, for which customers pay, and thereby realise, for the theatre owner, the value of this production, including the value of the surplus value produced by the actors. The surplus value is the difference between the value of the actor's labour-power, bought by the theatre owner, and the new value created by the actors by the expenditure of their labour.

In today's economy, unlike that of Marx's time, 80% of the economy comprises service industry. It is made up of workers who do not produce a physical product, but who undertake some form of labour service. Unlike in Marx's time, these services are provided by service workers who are themselves employed by capital, rather than selling that service directly to consumers. The number of cooks employed by households has fallen dramatically, for example, but the number of chefs and other cooks employed by a growing number of restaurants, has grown enormously, as an increasing proportion of household income has gone into the consumption of these kinds of service products, rather than physical products. The cook employed by a household, was an unproductive labourer, but the same cook employed in a restaurant is a productive labourer. They produce surplus value.

In fact, some of the greatest elements of new value creation, and of surplus value production, today comes from labour employed in such labour services, and the production of non-physical products. The following is the breakdown by the ONS for UK household expenditure in 2012.

Transport	65.70
Recreation and culture	63.90
Housing (net)1, fuel and power	63.30
Food and non-alcoholic drinks	54.80
Restaurants and hotels	39.70
Miscellaneous goods and services	38.60
Household goods and services	27.30
Clothing and footwear	21.70
Communication	13.30
Alcoholic drinks, tobacco and narcotics	12.00
Education	7.00
Health	6.60
Total COICOP expenditure	413.90
Other expenditure items	69.70
Total expenditure	483.60

The amount spent by households on entertainment in Marx’s day was very small, but today it is huge, going into the purchase of tickets for sporting events, music events, cinema and theatre productions, and billions into computer gaming and so on. One of the main reasons that video recorders and players took off so rapidly, and the same has been true of DVD players, and the Internet, was the production and consumption of pornography. Shopping itself has been turned into a recreational activity, with grand retail cathedrals constructed that also provide a range of services to the shopper, in the form of restaurants, wine bars, nail bars and so on, for the shopper to use, whilst out buying physical commodities.

It has always been the case, as Marx sets out in Theories of Surplus Value, that labour services were productive of new value, contrary to Smith's claims, but in today's economy, these labour services are also a huge source not just of new value, but also of surplus value.