Illustrations © byTony Biddle

Session 3

Work andTools

Readings:Chapters 5-6

Please Note• This curriculum material is

provided to support union, community, and non-profit organizations to undertake popular economics training.

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www.economicsforeveryone.com © Canadian Centre for Policy Alternatives, 2009

Key Topics Covered

• Work and production• Different kinds of work• Work and employment• Paid and unpaid work• Working with tools• Technology and tools• Defining capital

Key Terms Introduced

• work• production• value• value-added• employment• paid work• unpaid work• labour theory of value• productivity

• subsistence• surplus• tools• capital• physical capital• fixed capital• technique of production• technology• skills

What is Work?

• Any productive human activity.• The only thing that adds value to the

materials we harvest from nature.• Comes in many forms, many social

arrangements.• Not just a means to an end, or a

“necessary evil”…– Work can also be a source of meaning,

gratification, and social connection.

Job Well Done

• “Far and away the best prize that life offers is the chance to work hard at work worth doing.”

Teddy Roosevelt

Work and Employment

• Employment is just one form of work.– Work performed for someone else, under

their direction, in return for payment.

• A defining feature of capitalism:– Employment (or “wage labour”)

constitutes most of the work performed in the formal economy.

• Most people are wage labourers:– They must find and keep employment in

order to support themselves.

Forms of WorkUnder Capitalism

• Employment is not the only kind of work under capitalism.

– Though it is the most important.

• Other forms of work co-exist:– Managerial work of company executives.– Work of self-employed small business owners and

farmers.– Unpaid (“reproductive”) work performed in our

families & communities.

• The vast majority of work in capitalism is paid wage labour, or unpaid reproductive work (needed to get ready for wage labour).

Wage Labour:An Inclusive Definition

• A misleading ideology suggests that you’re not a “worker” unless you work in manual labour (factory, blue-collar, etc.).

• This is objectively false.• Workers with higher education, who work

in offices, who earn salaries, still fit the definition of a worker:

– Performing work for someone else, under their direction, in return for payment.

• They are still fully dependent on their employer, and still face an inherent tussle with them over the terms & conditions of work.

Spot the Worker

White-collar or blue-collar.Goods industry or service industry.

High-skilled or less skilled.Salaried or paid by the hour.

Private sector or public sector.

All these people work for someone else, in return for payment. All depend on

their employer. All can be disposed of when they are no longer needed.

“Outsourcing”Wage Labour

• Some employers have tried to convert paid workers into “contractors.”

• Does this mean they aren’t “workers” anymore?

• They are still workers:– They still depend on the employer for work.– They still perform that work under the employer’s

direction.– They still perform the work for payment.

• The only change: They are now paid worse, with no benefits, and are more insecure.

• More broadly, most self-employment is also poorly paid and insecure.

– Being “your own boss” is usually very hard.

Work and “Value”• Two sources of value in the economy:

1. “Free gifts of nature”: Things that can be harvested directly from the environment.

2. Value-added through work (productive human activity).

• Work is the only thing that adds value to the things we find in nature.

– All “value-added” depends on work.

The Labour Theory of Value

• Classical economists recognized that work is the source of value-added.

• David Ricardo developed a “Labour Theory of Value”:

– Prices of goods depend on the amount of labour required to produce them.

• Marx recognized this was wrong.– Under capitalism, profit is paid out, and

this also affects prices.– Two products requiring equal labour, but

paying different amounts of profit, will have different prices.

Working With Tools• Nobody works only with their bare hands.• Humans learned very early that working

with tools makes us more productive.– Even many animals know this!

• Tools allow us to:– Produce more output.– Produce higher quality output (goods and

services that we couldn’t produce without the right tools).

• Humans “learn by doing”:– The more we work, the more we find better ways

to work (including new tools).

Where Do Tools Come From?

• Like any other product, tools are produced by work.

– “Intermediate good”: Something that is produced to then produce something else (rather than consumed).

• Think of working with tools as a two-stage, “indirect” way of working:

1. First we work to produce the tool.2. Then we use the tool to perform our end task.

• But remember: Humans did all the work.– The tools themselves are not productive.

• And merely owning a tool is not a productive act.

Technology and Tools• “Technology” is the knowledge that we

work better, when we use tools.– Technology is not the “tools” themselves.

• Under new technology, our work can become more and more productive.

– But the tools themselves are not.• Even the most automated assembly

line depends fully on work for anything to happen:

– Work to produce the assembly line.– Work to maintain it in good working order.– Work to operate it (at least “press go”).

Example: A Farm• Without a tractor, farmers

are unproductive.• How to increase

productivity:1. Spend some time building

a tractor.2. Use the tractor to grow

crops.

The tractor does not do the work; it is not productive.

It’s knowledge that makes the farmers productive.

Demystifying “Capital”• “Capital” is just the economic term for “tools.”• Physical capital: real, tangible products used to

produce other products.– Distinct from “financial capital,” which is just

money.

• Fixed capital: long-lived, used in a workplace.– Structures: buildings, offices, stores.– Machinery and equipment: computers, assembly

lines, hand tools, transportation equipment.– Infrastructure: roads, bridges, utilities.

• Working capital: the value of raw materials, inventories, and other items used up in production.

Work and Surplus• Collectively, society must perform enough

work to meet its needs for survival, and to allow for production to occur again next year.

• Example: Growing corn.– Need enough corn to eat.– Plus some corn to replant as seeds.

• If society can produce more than enough to do that, it produces a surplus.

• The surplus can be reinvested, consumed, or wasted.

• Crucial issue: who controls the surplus?

Work, Profit, and Value• Neoclassical theory: Profit reflects a

payment to the “productivity” of capital.

– Attempt to justify capitalism as fair.– But the theory did not succeed: it cannot

be proven that produced goods (capital, tools, etc.) are themselves productive.

• Marx: Profit comes from exploitation, and is part of the surplus.

– Payment to owners of capital reflects their social power, not the productivity of tools.

• Sraffa: Wages and profits are inversely related; profit is paid from the surplus.

Historical Note:Piero Sraffa Italian economist based at Cambridge, U.K. Developed a theory of prices dependent on direct & indirect labour and payment of profit.

• With modern algebra, showed that wages and profits are inversely related, and that profits are paid from the economic surplus.

• This is the basis for a theory of “exploitation”, if desired (don’t need a labour theory of value).

Piero Sraffa

Theories of Capital and Profit

• In a system of private property, the tractor’s owner can charge rent for it.

– This assumes that the farmers cannot build their own tractor (due to patents, lack of knowledge, up-front costs).

• Neoclassical theory tried to argue that capital is productive (and hence profit is “justified”) on two grounds:

– The tractor itself is actually productive.– The owner “waited,” and should be paid

for that “patience.”• Neither approach succeeded.

The Surplus Approach toUnderstanding Profit

• Capital is not itself productive.• The owners of capital have social power.• That allows them to collect income

purely from their ownership status.– Not through actual work.

• That income is paid from the surplus.• Fluctuations in their power determine

fluctuations in profits.– Example: rise in profits under neoliberalism

reflects power of wealth-owners, not better productivity of their capital.

Session #3, Student Exercise:

What’s in Your “Toolbox”?

• Fill out a table that lists and estimates the value of all the different forms of capital that is used in your job.– Structures– Machinery and equipment– Supplies and materials

• Answer several questions evaluating how those “tools” affect your productivity and your security.

• See www.economicsforeveryone.com for copies of the full exercise set and instructions.

www.economicsforeveryone.com © Canadian Centre for Policy Alternatives, 2009