Summary
Both Marxist and orthodox economics uses the term “real wages”, but there is subtle, yet fundamental, difference in what they mean by it.
Orthodox economics sees wages as the price of labour, whereas, for Marxists, they are the price of labour-power.
For a Marxist, the “real” in real wages indicates what wages actually are, the commodities required for the reproduction of labour-power, and, consequently, a physical quantity of use-values – food, shelter, clothing, education, healthcare and so on. Money wages are simply the equivalent form of the value of these necessary commodities
Money wages may rise above or fall below this level, dependent upon the conditions of the demand and supply for labour.
High demand for labour causes money wages to rise, which leads to a corresponding fall in money profits, not, as orthodox economics claims, an increase in commodity prices. The capitalist state seeks to protect profits, and uses central banks to devalue the currency/inflate prices, so that the higher money wages do not buy a correspondingly larger quantity of commodities, i.e. do not obtain a correspondingly larger proportion of production, at the expense of profits. In short that relative wages do not rise proportionally.
That, however, leads to an inflationary spiral.
When relative wages rise to such an extent that a crisis of overproduction of capital occurs, capital itself responds, via a technological revolution, which creates a relative surplus population. Relative wages fall, however, that may occur, despite the fact that, for those in employment, money wages, and real wages may rise. In other words, for those in work, money wages may rise, and their standard of living may also rise – whereas those unable to obtain employment suffer deprivation – but, the rise in productivity means they perform less necessary labour, and more surplus labour, i.e. relative surplus value rise.
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