Iron Law of Wages


Also found in: Wikipedia.
The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Iron Law of Wages

 

a theory on wage payments to labor under capitalism developed by such bourgeois economists as

A. R. J. Turgot, D. Ricardo and T. R. Malthus and widely promoted by opportunists in the labor movement such as F. Lassalle. The theory was taken as the basis for the Program of the Socialist Labor Party of Germany (the Gotha program), adopted in Gotha on May 25, 1875. Marx emphasized the nonscientific and opportunist character of the program and wrote that it is a “thoroughly objectionable program that demoralizes the party” (K. Marx and F. Engels, SOCh, 2nd ed., vol. 19, p. 11).

According to the “iron law” theory, wage levels tend to fluctuate around the minimum necessary for providing the means of existence, influenced by the natural changes in the work force: as the birth rate among the workers rises, the supply of labor begins to exceed the demand for it, which leads to a decline in wage rates to the necessary minimum and even below it. The decline in the number of the working population resulting from this leads to a reduced supply of labor and thereby to a rise in wage levels. Thus, the theory is closely tied with Malthus’ population theory; it presents it-self, in fact, as a kind of unalterable economic and biological law. In effect the advocates of the theory try to relieve the capitalists of responsibility for the low standard of living of the proletariat. They preach passivity to the labor movement, suggesting that it cannot overcome this “natural” law of wages. In fact, wages under capitalism are not a natural phenomenon but a socioeconomic one (the monetary form taken by the value of labor power, its price). Historically this socioeconomic phenomen has a transitory nature and is governed by the economic laws of the capitalist mode of production.

The concept of the iron law of wages, constituting one of the varieties of petit bourgeois socialism, runs counter to the theory of scientific socialism and inhibits the revolutionary workers’ movement. This opportunist concept, which denies the importance that economic struggle plays in uniting and revolutionizing the working class, is widely promoted by the left extremist theoreticians who have penetrated the labor movement in the contemporary period. Present-day bourgeois economists such as P. Samuelson, W. Rostow, J. Strachey, and E. Browder, in their efforts to discredit Marxist-Leninist theory, equate Marx’ theory of wages with the concept of the iron law, although in fact Marx’ theory has nothing in common with that concept.

REFERENCES

Marx, K. “Kritika Gotskoi programmy.” In K. Marx and F. Engels, Soch., 2nd ed., vol. 19.
Marx, K. Kapital, vol. 1. In K. Marx and F. Engels, ibid., 2nd ed., vol. 23, pp. 5–11, 157–87, 545–75.
Lenin, V. I. “Gosudarstvo i revoliutsiia.”/) port. sobr. soch., 5th ed., vol. 33.
Mehring, F. “O ‘zheleznom zakone zarabotnoi platy’.” In the collection Pamiati Lassalia. [Kiev] 1925.
Afanas’ev, V. S. “Kritika sovremennykh burzhuaznykh teorii zarabotnoi platy.” In the collection Kritika burzhuaznykh ekonomicheskikh teorii. Moscow, 1960. Section 3.
Oekonomisches Lexikon, vol. 1. Berlin, 1967. Page 513.

V. S. AFANAS’EV

The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
A correct and calm outline of the rather accepted modern views on the iron law of wages and the wages fund doctrine closes the theoretical part of this "Division," the rest of which deals with aspects that are usually explained in reference to the theory of wages, albeit there actually is no deeper connection, for example, wage systems, the progress of the working classes, trade-unionism etc.
Classical economists developed the notion of an "iron law of wages," that wages paid to labor would trend toward a level of bare subsistence as capitalists endeavored to increase their profits in the face of diminishing returns to production.
He is less well known, nowadays, for its corollary, the iron law of wages. Malthus argued that any increase in wages results in an increased survival rate of the children of the working class, which in turn leads to an increase in the supply of labor that restores the prior wage rate.
If the influence of Malthus' iron law of wages on the nineteenth-century private-charity system has been largely forgotten, it is as though the influence of Smith was never known.
For example, Marx came to reject the "iron law of wages" developed by Ricardo and Malthus, accepted by most nineteenth-century economists as well as Marx himself in the Manifesto, according to which wages tend toward the bare minimum of physical subsistence.
On the other hand, classical political economy's cost of reproduction principle of wage formation, as an extension of labor-cost price theory, does not rule out exploitation insofar as wages in the long run tend to equate subsistence costs (the iron law of wages), regardless of labor productivity which tends to be higher than this subsistence level.
Yet instead of generalizing the iron law of wages, as an extension of labor value theory to other incomes, classical political economy used some kind of productivity or merit explanations of these incomes, especially profits.
The bureaucratic set-up which was assigned the job of solving labour problems was incompetent and it believed in old philosophies of dealing with labour by such cruel law as the Iron Law of Wages. The disarrayed and ill-equipped trade unionism has created a state of anarchy among labourers.