Real GDP per capita: surely capitalism can afford...

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Jacob Richter
Real GDP per capita: surely capitalism can afford...

“Sliding Scale of Wages”: Cost of Living Adjustments and Living Wages

“The state guarantees a livelihood to all workers and provides for those who are incapacitated for work.” (Karl Marx and Frederick Engels)

Shortly after writing the Communist Manifesto, Marx and Engels were tasked by the Communist League in Germany to draft a list of seventeen demands that would be released as the underrated Demands of the Communist Party in Germany.  Notwithstanding issues arising from potential interpretations of this demand – originally for minimum wages to be at “living wage” levels – to mean the unconditional basic income demand critiqued [by some Marxists], consider this American analysis of the “iron law” (to borrow again from Lassalle) of the disproportionate immiseration of labour at work, courtesy of William Tabb of the Monthly Review:

Today, people worry that their children will not enjoy the same standard of living that they have.  They know that the benefits of growth are going overwhelmingly to the wealthy and not to working people.  The statistics support such an understanding.  For a quarter of a century, from 1980 to 2004, while U.S. gross domestic product per person rose by almost two-thirds, the wages of the average worker fell after adjusting for inflation.


Despite globalization, manufacturing output is not declining in the United States. It has been expanding, growing faster than the rest of the economy in recent years. It is manufacturing employment that is shrinking.


Credit card debt ensnares a large part of the working class.  In 2004, 1.6 million people filed for personal bankruptcy, twice the number of a decade earlier, and half of those filed after a major medical expenditure.  Other prominent causes of debt were divorce and job loss.

On the whole, life grows ever more insecure for working people. Capital’s share of all corporate income is the highest and the compensation of employees is the lowest that they have been in twenty-five years.

All of the above is under the assumption that inflation figures reported by the privately owned United States Federal Reserve are accurate.  That “accuracy” should be questioned after the 2000 change in inflation “measurement” from a higher one based on the consumer price index to a lower one based on chain weighting.

In neighbouring Canada, recent studies by the “social-democratic” Canadian Centre for Policy Alternatives concluded the obvious from a sample of the Greater Toronto Area, Metro Vancouver, and Greater Victoria: that existing minimum wage levels are insufficient for a decent standard of living (that standard, in 2008 Canadian dollars, being $16.60 per hour in the Greater Toronto Area, $16.74 per hour in Metro Vancouver, and $16.38 in Greater Victoria, all on the assumption of year-round work on a full-time basis).

[Note: As for the relevance of this outside North America: present-day Germany, in spite of the “generous” social welfare system for its legal citizens, does not have a unified minimum wage law!]

Before moving on, a similar yet fundamentally different demand was raised by Trotsky in The Transitional Program, one calling for a “sliding scale of wages”:

Neither monetary inflation nor stabilization can serve as slogans for the proletariat because these are but two ends of the same stick.  Against a bounding rise in prices, which with the approach of war will assume an ever more unbridled character, one can fight only under the slogan of a sliding scale of wages.  This means that collective agreements should assure an automatic rise in wages in relation to the increase in price of consumer goods.

This is a fundamentally different demand from the original formulation by Marx and Engels, in that the demand is not leveled at the bourgeois-capitalist state at all, but rather at the lower level of union dealings.  Yet more economism, and this at the very foundations of that 1938 document!  On top of this not-so-transitional anachronism, many companies give their non-minimum-wage employees cost-of-living adjustments to their respective remunerations on an annual basis – though not necessarily consistent ones, especially during this period of decreasing rates of industrial and financial profit.  For example, according to CBC News in Canada:

The [Conference Board of Canada] is forecasting wage gains in the 3.9 per cent range for 2009, down slightly from 2008's actual salary rise of 4.2 per cent.

The conference board, however, said that with the growing global financial crisis, companies are more likely to squeeze wages even further in the coming year.

Indeed, the board might now be looking at pay rises that could be around three per cent.

"Turmoil in the financial markets and the possibility of a global economic downturn will put downward pressure on wage increases in 2009," said the board in its annual survey of pay trends.

In June, the Conference Board contacted 2,379 companies about their compensation plans and received 395 responses.


High-tech companies said they will boost pay by four per cent while communications firms will only be seeking to hike compensation to their employees by 3.1 per cent.

Unionized employees, who tend to work in lower paid professions, should see their pay envelopes rise by 3.2 per cent, less than the overall average, the survey said.

In order for a comprehensive demand for an equally comprehensive labour reform in this area to be formulated properly, that demand must take into consideration, on top of “living wage” levels and accurate inflation measurements for proper cost-of-living adjustments on an annual basis (thereby being historically consistent with capitalist production’s ability to increase real gross domestic product per capita), at least three more concerns – those being benefits, executive vs. non-executive compensation (including pensions), and deflation.  Practically no company gives similar cost-of-living adjustments to its employees’ benefits, unless they happen to be executives, with their bloated compensation schemes (including severance pay).  While protection against deflation would go against the idea of a fully sliding scale, certain inflation-indexed government bonds in the United States are protected against deflation for the sole benefit of the money-capitalists.

What about unemployment, then?  Fear-mongering “free market” opponents of the minimum wage always raise the bogeyman of unemployment, and with the aforementioned demand will raise it even higher.  Before rebutting that fear-mongering, however, Trotsky had his own economistic solution to accompany his “sliding scale of wages”:

The right to employment is the only serious right left to the worker in a society based upon exploitation.  This right today is left to the worker in a society based upon exploitation.  This right today is being shorn from him at every step.  Against unemployment, “structural” as well as “conjunctural,” the time is ripe to advance along with the slogan of public works, the slogan of a sliding scale of working hours.  Trade unions and other mass organizations should bind the workers and the unemployed together in the solidarity of mutual responsibility.  On this basis all the work on hand would then be divided among all existing workers in accordance with how the extent of the working week is defined.  The average wage of every worker remains the same as it was under the old working week.  Wages, under a strictly guaranteed minimum, would follow the movement of prices [...] Property owners and their lawyers will prove the “unrealizability” of these demands.

However, as remarked by Mike Macnair in 2007:

The core ‘transitional demands’ of Trotsky’s 1938 Transitional programme – sliding scale of wages and sliding scale of hours – if fully implemented, amount to the immediate abolition of money.  Replacing the minimum programme with one ‘transitional’ to the maximum programme then turns out to mean... transitional to the ‘war communism’ regime of the Russian civil war, or to a Maoist ‘cultural revolution’ or Cambodian ‘year zero.’

The proper solution for this comprehensive demand for an equally comprehensive labour reform, then, is for the bourgeois-capitalist state to be pressured into setting unemployment insurance benefits themselves at “living wage” levels and then applying both inflation indexation and deflation protection!  Because of the temporary nature of unemployment insurance benefits, this comprehensive demand avoids the problem posed by the unconditional basic income demand.

Does this reform facilitate the issuance of either intermediate or threshold demands?  Considering the sorry state of unionized labour, not least of which due to the outright class collaborationism of the “yellow” tred-iunionisty in full control over most union bureaucracies (which in turn happen to be oversized), this comprehensive demand strikes at the very heart of “yellow” tred-iunionizm by rendering collective bargaining for wage increases here and there practically obsolete.  The oversized union bureaucracies would be forced to cut back on their respective sizes and adapt to functioning in the role of what Marx and one Jules Guesde called a “workers' statistical commission” on the “legal minimum wage” in their joint 1880 work known otherwise as the Programme of the French Workers Party (as a minimum demand and not a pseudo-“transitional” one), and any internal struggle for the democratization of unionized labour would reach new heights [...]

Does this reform enable the basic principles to be “kept consciously in view”?  In addition to internal struggles for the democratization of unionized labour, the trimmed-down unions themselves would have to assume a more political character.  Meanwhile, more doors would be open for non-unionized workers to form a more open class struggle for the emancipation of labour [...]


Demands of the Communist Party in Germany by Karl Marx and Frederick Engels [[url=[/url]]">]http://www.mar...

Wage Stagnation, Growing Insecurity, and the Future of the U.S. Working Class by William Tabb [[url=[/url]]">]

Monetary Policy Report to the Congress, February 2000 by the Federal Reserve Board [[url=[/url]]">

A Living Wage for Toronto by Hugh Mackenzie and Jim Stanford

Working for a Living Wage: Making Paid Work Meet Basic Family Needs in Vancouver and Victoria – 2008 by Tim Richards, Marcy Cohen, Seth Klein, and Deborah Littman [[url=[/url]]">

The Death Agony of Capitalism and the Tasks of the Fourth International by Leon Trotsky [[url=[/url]]">]http://www.mar...

Wage gains to slow in '09, new survey says by CBC News [[url=[/url]]">]http://www.cbc....

For a minimum programme! by Mike Macnair [[url=[/url]]">]

Programme of the French Workers Party by Karl Marx and Jules Guesde [[url=[/url]]">]htt...

Sliding scale of wages [[url=[/url]]">]http://w...