I reviewed the Botwinnick book when it first came out (Monthly Review, Feb. 1996). Howard and I gave a presentation once at a Labor Notes conference, and I once stayed a night at his home in Ithaca, NY. Here is my review. Sam asked me to send him my review. We do cover some of the same ground.
Fortunately, a radical economist, a proponent of classi- cal Marxian economics, has developed a comprehensive the- ory of labor markets which easily accommodates the discoveries of the first two books [I also reviewed Myth and Measurement by Card and Krueger and The Wage Curve by Blanchflower and Oswald] . Labor organizer turned economist, Howard Botwinick, has written a seminal book in labor economics. Drawing upon the theoretical work of his teacher, Anwar Shaikh of the New School for Social Research, Botwinick in Persistent Inequalities has built what has eluded radical economists, namely, a fully determinate model of labor markets. As we have seen, reality in capitalist labor markets con- fronts neoclassical economics with many anomalies. These provided radical economists with an incentive to devise non- neoclassical theories which could explain them. Many radicals theorized that labor markets were of two types: primary and secondary. In the former, firms enjoyed monopoly power and this gave workers room to improve their wages and working conditions. Employers, too, had an incentive to pay higher wages, to avoid turnover and the accompanying hiring and training costs associated with the greater skill requirements of work in the primary sector. In the secondary market compe- tition among employers made profits and wages lower. Skilled workers were not required, so turnover was almost costless for both employers and employees. Secondary market workers moved from job to job developing habits which made them unemployable in the primary sector. Unions would not be effective here because of the low profits, intense employer competition, and high employee turnover. This theory helps to explain some of the neoclassical anomalies. For example, workers of equal potential produc- tivity will earn different wages if they are in different markets. If we suppose that minority workers and women are concen- trated in the secondary market, this theory can explain race and gender wage differences. In the primary market, higher wages may not reduce employment, because they may in- crease productivity. Wages, then, can be dependent upon the class power of workers, which, of course, willbe greater in the primary market. A ready reserve of workers in the secondary market combined with lower profits reduce labor's power and keep wages low. Unfortunately, a dual labor market (labor segmenta- tion) theory cannot explain the success of unions in compet- itive markets such as trucking and longshoring. Nor can it tell us the upper limits of wage rates in the primary sector, since they depend upon the ambiguous concept of class power. It cannot tell us why there are many minority and female work- ers in the primary sector nor how some previously secondary markets such as steel and autos became primary labor mar- kets. Some prominent radical economists, notably Samuel Bowles, Herbert Gintis, and Michael Reich, have moved deci- sively toward the noncompetitive models espoused by Card and Krueger and Blanchflower and Oswald. These are built essentially upon the neoclassical assumption that social out- comes are the result of the self-interested choices of individual market participants. A fuller accounting of the factors which enter into these choices gives outcomes more in accord with radical sentiments: higher minimum wages and labor unions may not be as socially costly as the traditional neoclassical theory has implied. However, none of these formulations indicts capitalism itself, with whatever liberal reforms are appended to it, as incapable of the liberation of working people. Therefore, it is legitimate to ask whether these are radical theories at all. Botwinick begins with the observation that the postu- lates of neoclassical economics are not assumptions but rather idealizations, ends toward which society must strive if it is to reap efficiency in itssystem of production. An objective theory must begin with assumptions which abstract from reality's complexity but which capture essential features of the reality to be examined. Following Marx, Botwinick uses the method of successive approximation. He begins with an economy in which there are no differences between individual capitals (firms) and then moves to one in which there are only inter- industry capital differences and finally toward one in which there are both interindustry and intraindustry differences. This method allows him to examine all of the causes of wage inequality, from the most general to the most specific. In the most abstract model, firms accumulate capital on the basis of the surplus labor time which they extract from their workers. Workers can win higher wages if they organize, but if their wages increase faster than the rate of accumula- tion, profits will fall. To prevent this, firms introduce the detailed division of labor and mechanization to create a reserve army of labor. Since different groups of workers will be unequally threatened by the reserve army of labor, because of skill or location for example, unequal wages may develop for workers otherwise equal. The same result can be seen if we look at accumulation from the perspective of the members of the reserve army. Otherwise equal potential workers will have different access to employment; for example, some will get part-time jobs and others full-time depending on their location or luck, and therefore they will have different wages. Unionized workers may foster wage inequalities by devising mechanisms which protect them from competition from the reserve army. At this level of abstraction it is important to understand that wage increases are possible, but they are limited by the rate of accumulation and technical progress which lowers the value of labor power. In other words, labor unions can force wages up without risking a loss of employ- ment, but their ability to do so is not unlimited. When we move to a lower level of abstraction, we must consider capitalist competition. In neoclassical theory, this means that capitals constantly move from low to high profit markets, and workers move from low to high wage markets. As a result, in the long run firms are predicted to have equal profit rates and workers of equal abilities equal wage rates. Botwinick shows clearly that Marxian economics makes no predictions. Production in different industries naturally involves different technologies, that is, different levels of capital intensity. And technologies naturally develop at differ- ent paces in different industries. Within any given industry, firms will also have different technologies as new inventions are introduced by new firms and as different managers intro- duce different work organizations. These facts mean that, at any point in time, profit rates will vary between and within industries. Furthermore, capital moves from market to market in response to the profit rates made by the most advanced capitals, what Botwinick calls "regulating capitals." These are the most efficient capitals in an industry, those using the best technology and organizational techniques. Within any indus- try, it is not possible for each firm to replicate the cost struc- ture of the regulating capitals, because firms have fixed capital to depreciate and managers with different amounts of skill and luck. Therefore, within each industry, different profit rates will prevail; the regulating capitals will have the highest rate and the "subdominant capitals" various lower rates. Among different industries, unequal profit rates among the regulating capitals will elicit capital movements toward the industries with higher profit rates. There will thus be a ten- dency toward the equalization of profit rates among regulat- ing capitals. This equalization is only a tendency, however, because capitalist competition continuously changes the tech- niques and organization of production. Different profit rates within and between industries imply the possibility of different wage rates for workers with the same "productive" characteristics and willingness to work. Wage rates will depend upon the productiveness of the capital with which the workers labor, the strength of the threat which the workers face from the reserve army, and the degree to which workers organize to fight for higher wages. For exam- ple, a college-educated and highly motivated worker earning a high wage in a regulating firm in an above average profit industry will likely suffer a large wage cut if she is forced to relocate to a subdominant firm in a lower than average profit industry. She may even earn less than an unskilled, unionized worker in another regulating firm in a high-profit industry. The beauty of Botwinick's analysis is that, while class struggle enters into wage determination, wage rates are not completely indeterminate. There are concrete limits to wage increases. Suppose that the economy is experiencing a period of capital accumulation. Workers situated in the firms with regulating capitals could, with organization, win higher wage rates up to the point at which the regulating capital's cost advantage disappears. As the regulating capital's costs rise, the entry of new capital into the industry willslow down, increas- ing the relative price of its products. Workers in subdominant capitals will not be in so advantageous a position; if they win higher wages, nothing will happen to selling prices, so their profit rates will fall. Workers may still win higher wages, depending upon how costly it is for their employers to resist their wage push, and this, in turn, will depend upon the firms' access to the reserve army of labor. For example, unionized workers in a declining domestic industry with large fixed capital costs, for example steel, may keep their wages well above average as long as they can prevent the hiring of replacement workers during strikes and as long as their em- ployers find it more costly to move their capital than to pay the higher wages. Botwinick provides readers with clear nu- merical examples which illustrate the various limits to wage rate increases. Botwinick's work has important implications for the labor movement. At any given time, there will be excellent organizing opportunities. Many of our service industries today are likely to be regulating capitals and, therefore, good targets for unionization. So are low-wageworkers in highly capitalized industries. Unions need to pay attention to the cost structures and technologies of industries and firms and target those with the highest wage limits. Concessions should never be offered to regulating capitals, a fact realized by the Local P-9 workers at Hormel in Austin, Minnesota but not by the leaders of the national union. Today, many regulating capitals are in other countries, so it will be necessary to organize workers across borders and for each country's workers to show solidarity with those in every other nation. Finally, any threats to profit rates elicit division of labor, mechanization, and capital flight, all of which expand the reserve army. Independent political organization will be absolutely essential to force the govern- ments of all capitalist countries to keep unemployment low and to provide the unemployed with adequate incomes. -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. View/Reply Online (#9193): https://groups.io/g/marxmail/message/9193 Mute This Topic: https://groups.io/mt/83535999/21656 -=-=- POSTING RULES & NOTES #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. #4 Do not exceed five posts a day. -=-=- Group Owner: [email protected] Unsubscribe: https://groups.io/g/marxmail/leave/8674936/21656/1316126222/xyzzy [[email protected]] -=-=-=-=-=-=-=-=-=-=-=-
