The underlying real relation is exposed, but is not elaborated by Ricardo, because he fails to distinguish between labour and labour-power. So, he writes,
“Nominal wages are “the number of pounds that may be annually paid to the labourer” but real wages are “the number of day’s work, necessary to obtain those pounds” (David Ricardo, l.c., p. 152).” (p 401)
In other words, the worker is paid wages, whether in actual means of consumption or as a money equivalent of those means of consumption. This is the real wage. Now, if we examine how much labour is required for the production of these means of consumption, or equally for the gold money paid to the worker as money wages, it may equal 50 hours. But, in order to obtain these wages, the worker has to work 100 hours. It appears that the worker has been paid wages for the provision of 100 hours of labour, and the wages received for this 100 hours of labour undertaken is thereby only a nominal wage. The worker has provided 100 hours of labour, but received in exchange only the equivalent of 50 hours of labour.
In other words, the worker is paid wages, whether in actual means of consumption or as a money equivalent of those means of consumption. This is the real wage. Now, if we examine how much labour is required for the production of these means of consumption, or equally for the gold money paid to the worker as money wages, it may equal 50 hours. But, in order to obtain these wages, the worker has to work 100 hours. It appears that the worker has been paid wages for the provision of 100 hours of labour, and the wages received for this 100 hours of labour undertaken is thereby only a nominal wage. The worker has provided 100 hours of labour, but received in exchange only the equivalent of 50 hours of labour.
“If the value of the means of subsistence changes, then the value of the real wages changes. Assume that the means of subsistence of the labourer consist only of corn, and that the quantity of means of subsistence which he requires is 1 quarter of corn per month. Then the value of his wages [for one month] equals the value of 1 quarter of corn; if the value of the quarter of corn rises or falls, then the value of the month’s labour rises or falls. But however much the value of the quarter of corn rises or falls (however much or little labour the quarter of corn contains), it is always equal to the value of one month’s labour.” (p 401)
In other words, as Marx describes in Capital III, and in Theories of Surplus Value, Part I, social reproduction requires that the means of production, and the workers' means of consumption are reproduced on a “like for like” basis, i.e. they must be physically replaced “at least in effectiveness”. But, the labour required to reproduce these means of production and means of consumption, depends upon whether and how social productivity has changed. Assuming that social productivity rises, the labour required for their production will be less than was required for the production of the commodities consumed. That is why the value of the constant and variable capital has to be determined by its current reproduction cost, not its historic cost.
The real wage of the labourer, in Marx's example, is 1 quarter of corn for the month. That is what is required for the reproduction of the worker. It is the minimum that must be paid to the worker irrespective of whether it requires 1 week, 3 weeks or 5 weeks labour to produce this quarter of corn. In other words, the value of the worker's labour-power, for a month, may be 1 week, 3 weeks or 5 weeks labour, depending upon the level of social productivity. Irrespective of this value, the worker will provide the capitalist with 1 month's labour, so that correspondingly, the capitalist will make 3 weeks, or 1 week of surplus value, or, in the last case, will make a loss equal to 1 week of labour.
“And here we have the hidden reason for Adam Smith’s assertion, that as soon as capital, and consequently wage-labour, intervenes, the value of the product is not regulated by the quantity of labour bestowed upon it, but by the quantity of labour it can command. The value of corn (and of other means of subsistence) determined by labour-time, changes; but, so long as the natural price of labour is paid, the quantity of labour that the quarter of corn can command remains the same.” (p 401-2)
And, this opens the door, therefore, for Smith to measure value not directly in terms of labour, but indirectly in terms of corn, because corn then becomes a proxy for the value of labour.
“Labour has therefore, a permanent relative value as compared with corn. That is why for Smith too, the value of labour and the value of corn ([representing] food [in general]. See Deacon Hume) are standard measures of value, because so long as the natural price of labour is paid, a given quantity of corn always commands [the same] quantity of labour, whatever the quantity of labour bestowed upon one quarter of corn may be. The same quantity of labour always commands the same use-value, or rather the same use-value always commands the same quantity of labour.” (p 402)
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