But, the technological revolution, does change the underlying relations of demand and supply for labour-power. As in the 1860's, 1920's and 1970's, it is first manifest in a clearing out of actual labour, as unemployment rises, but, then, it is manifest in the fact that higher levels of social productivity, enable production and employment to rise, but without the former excess demand for labour causing wages to rise. As he puts it in Capital I,
“If it be said that 100 millions of people would be required in England to spin with the old spinning-wheel the cotton that is now spun with mules by 500,000 people, this does not mean that the mules took the place of those millions who never existed. It means only this, that many millions of workpeople would be required to replace the spinning machinery. If, on the other hand, we say, that in England the power-loom threw 800,000 weavers on the streets, we do not refer to existing machinery, that would have to be replaced by a definite number of workpeople, but to a number of weavers in existence who were actually replaced or displaced by the looms.”
(Capital I, Chapter 15)
For the workers in those industries where such technology replaces labour, they may see a fall in nominal and real wages, but often, it takes the form of certain types of labour, particularly skilled, and semi-skilled labour being replaced by unskilled, machine minding labour. However, as described previously, even falls in nominal wages, can be consistent with rises in real wages. If the rise in social productivity, brought about by the new technologies, reduces the value of wage goods more than the fall in nominal wages, then real wages, and living standards would rise, particularly for those in employment, whilst this may go alongside deprivation for a pool of unemployed labour, as witnessed in the 1920's and 30's.
However, even as real wages rise, alongside nominal wages, relative wages fall. Taking the earlier example, the worker worked a 10 hour day, receiving wages of £10, and produced £10 of profit. Assume that this takes the form of output of 200 commodity units, each with a value of £0.10. The worker requires 100 units each day, to reproduce their labour-power, and, as Marx describes, this is a physical requirement, not a value requirement, i.e. it is a requirement for these 100 use values, not for a given amount of value.
If, productivity rises by 100%, so that 400 commodity units are produced, per day, the value of these units falls to £0.05 per unit. The workers still only require the same 100 units per day, to reproduce their labour-power, equal now to a nominal wage of only £5. The proportional share of output going to labour is reduced, but the proportional share going to capital rises correspondingly.
Nominal wages would fall to £5, but, nominal profits would rise to £15. However, real wages would be unchanged, as the £5 nominal wages buy the same quantity of wage goods (100 units) as before, whilst real profits rise from 100 units to 300 units. This is an extreme example, if taken over a year, for the purpose of illustration, but not so extreme if considered over several years. Workers would still resist any such fall in nominal wages, but that would not be the case in relation to real wages.
All that is required to achieve that is to devalue the currency/standard of prices accordingly. In other words, nominal wages of £10 could continue to be paid, provided the value of each £ is halved. The price of commodity units, then rather than halving from £0.10 per unit to £0.05 per unit, would remain unchanged, also. A total of 400 units would be produced, with a total nominal price of £40, rather than the previous £20, and nominal profits would become £30 rather than £15.
In that case, nominal and real wages would remain constant, but relative wages would have fallen. Previously, wages accounted for a half of the new value created, but now account for only a quarter, whereas profits account for three-quarters of new value. But, this also illustrates, why capital, in the era of social-democracy, was also able to increase not only nominal, but also real wages, whilst reducing relative wages. If, in the example, nominal wages, rather than remaining constant, rose to £12, they would buy 120 units of wage goods, a rise of 20% in both nominal and real wages. However, nominal profits would still rise to £28, and buy 280 units, a rise of 40%, on its previous position. Nominal and real wages would have risen, but relative wages would have fallen.
From the start of the twentieth century, the role of central banks has been to engineer such progressive devaluations of the currency/standard of prices, so as to facilitate this process, whereby, nominal wages could rise each year, usually, also, accompanied by a rise in real wages/living standards, but a fall in relative wages.
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