Unemployment Benefits, the Social Wage, and Marxist Theory

Corrections made/edited on 1/12/14:

The latest Congressional budget deal includes a termination of emergency unemployment benefits. Despite the fact that the economy is still mired in recessionary labor market conditions, any worker who has collected unemployment benefits for the past 26 months will have these benefits terminated on December 29th. This will impact 1.3 million workers immediately and close to 5 million by the end of 2014.

This is bad policy for a number of reasons. First, it will have a negative macroeconomic impact by removing the spending and consumption by those workers losing benefits. Second, it may force more workers to desperately compete for lousy low paying jobs -- there are three workers seeking employment for every available job -- even though increasing labor market supply will not create its own demand, but will place further downward pressure on wages. Third, and alternatively, it may result in workers dropping out of the labor force (job search is a program requirement) and no longer being added to the unemployed mass. This could produce a an even more misleading unemployment statistic that underestimates the level of economic deprivation.

So why would such a policy be implemented? Marx’s analysis of the “reserve army of labor” provides one answer. The system of capitalism benefits from conditions that disallow any alternative to labor market participation. The “social wage”, as it is sometimes called, provides income independent of employment and thus allows one to survive economically without the necessity of working for a capitalist or accepting any job. Capital prefers no alternative to the labor market, with the reserve army of under and unemployed workers used to moderate wage costs and undermine worker bargaining power. In short, it is to the advantage of capital to have as many people flooding the labor market as possible so that the surplus labor pool is as large as possible. Conversely, what is least advantageous, and to be avoided at all costs, is full employment.

Not all forms of the social wage are opposed by corporate capital. Some – such as food stamps -- provide government assistance that makes up for the low wages provided by employers such as Walmart and the larger fast food/retail sector. Thus, this type of social wage subsidizes the low wage regime of highly profitable corporations. Again, Marx contributes a conceptual tool for the understanding of these contradictory interests of capital to oppose social wage policies that remove people from the labor market, on the one hand, but support those forms of public assistance that allow poverty level compensation, on the other. The latter, according to Marxist theory, allows for the “reproduction of labor power” which requires sufficient resources to maintain and sustain the ability of workers to return to work the next day. Food, shelter, and rest – usually secured in the household – are the central elements reproducing labor power. The unpaid domestic labor of women long provided this low wage subsidy.

The government has done almost nothing to create jobs and this latest move will simply remove assistance to those who have lost jobs due to no fault of their own. This introduces another political danger -- associated with the neo-Marxist theory of James O’Connor in the classic work The Fiscal Crisis of the State – and that is increasing illegitimacy of the US political economy that spends billions bailing out and supporting private capital, but turns to austerity when it comes to supporting the needs of workers. Will the accumulated effect of these policies translate into a radicalization of labor?

More on this thesis in a future post.