As seen earlier, the capitalist obtains profit because of the difference between the value of the commodity they sell, its social cost of production, and what they actually pay for its production. But, what the worker is paid for the commodity they sell, labour-power, is always, on average, also what it costs them to produce. Labour-power is the only commodity which does not provide to its owner a surplus-value/profit. If the demand for labour-power rises so high that wages rise to a level where surplus value/profit is even significantly squeezed, this results in a crisis of overproduction of capital.
As described earlier, the rate of profit relevant to the capitalist is the annual rate of profit, and this is a function of the rate of turnover of the circulating capital. As productivity rises, due to an increased use of technology, so also the rate of turnover rises. As Engels describes in Capital III, if we take two identical capitals, but one turns over ten times faster than the other, although they produce the same rate of profit/profit margin (p/k), the capital that turns over faster will produce an annual rate of profit ten times larger.
Suppose that for the total social capital, and, therefore, given an average rate of turnover, the annual rate of profit is 30%. With a rate of turnover of 10, the average rate of profit/profit margin is just 3%. For some commodities, the profit margin is higher, and for some lower, depending on the rate of turnover in that sphere. Consequently, although the average annual rate of profit may appear to give a comfortable margin, a rise in wages may quickly erode the actual profit embodied in each commodity unit, where the margin is only 3% or less.
The overall mass of profit is a function of the high volume of output, and annual rate of profit a function of the fact that a relatively small amount of capital is advanced repeatedly to produce it, during the year. By the same token, a rise in wages that eats up the profit margin turns what was a large total mass of profit, into a large loss. Similarly, any change in market conditions can have a similar result.
This is the cause of crises of overproduction of capital, as described by Marx in Capital III, Chapter 15, and in Theories of Surplus Value, Chapter 21. That is capital expands faster than the supply of labour-power/social working-day. The demand for labour-power pushes wages higher, eventually squeezing surplus value. Capital is overproduced relative to the available working population. But, for the reasons set out earlier, capital is only advanced to produce profit. The first consequence of such overproduction is that capital is withdrawn or destroyed. Workers are laid off, and wages fall. But, secondly, firms engage in innovation so that they reduce their demand for labour, by introducing new machines. The demand for labour falls and a relative surplus population is created, so wages fall.
The same technological developments reduce the value of wage goods, and so reduce the value of labour-power, thereby, raising the rate of surplus value. It is not that absolutely less labour is employed. Unemployment rises, because as the population grows, a smaller proportion of it is required to produce a given quantity of additional output. A rising rate of surplus value, and increased mass of labour employed results in a growing mass of profit, and rising rate of profit, creating the conditions for the next expansion.
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