For division of labor within an economy.

For centuries, theorists, like Karl Marx, have discussed the impact of capitalism and division of labor within an
economy. With the writing of Capital by Karl Marx came a clearer understanding
of the systemic structure of a capitalist economy based on private ownership of the means of production. In Capital,
Karl Marx rationalizes that individuals in different social classes are hugely
impacted by economic structures resulting in sizeable income inequalities, with
the bourgeoisie obtaining the greatest percentage of benefit from increased
productivity through the exploitation of the proletariat. Before 1973, the trend in growth of
wages in relation to productivity is constant mainly due to the power of
collective bargaining by unions to negotiate an equal percentage increase of
wages relative to percentage increases of productivity plus percentage increase
of consumer prices. Post 1973, the data shows a widening gap between increases
in productivity relative to hourly wages. This trend continues for decades and
can be attributed to the deregulation of key industries in the early 1970’s;
implementations of policies that prevented the adoption of laws that would
essentially update labor management practices to pursue collective bargaining
and the erosion of unions. Under these circumstances, the loss of power of laborers,
the minimum wage has failed to keep pace with productivity. Through the
analysis of the data presented in figure 1, Karl Marx’s general law of
accumulation is relevant to understanding the post 1973 wage inequalities.

The golden era was a time of economic prosperity in the
United States spanning from the end of World War II and continuing until 1973
marking growth of the middle class. The economic growth is often attributed to
the development and expansion of infrastructure and private sectors. For
example, automotive production quadrupled during this time with technological
advancement while the Federal Aid Highway Act of 1956 facilitated 41,000 miles
of road construction allowing for greater ease of transportation of manufactured
goods and accessibility for Americans. Additionally, record low mortgage rates
incited a housing boom, consequently growing suburban neighborhoods. These key
industries triggered a steady increase in productivity during this time period,
and thus contributing to the constant parallel line trend seen in figure 1
comparing the productivity and hourly compensation. According to Solow, the
negotiated Reuther’s Treaty of
Detroit of 1950 enabled wages to increase at the same percentage rate of
productivity and consumer prices. The United Automobile Workers negotiated a
contract with the United Autoworkers and General Motors “average annual rate of
wage increase would be the percentage increase in productivity plus the
percentage increase in consumer prices” (Solow).

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During the golden era, capitalism
thrived ultimately disproving, during this period, Marx’s belief that
capitalism would lead to self-destruction. However, Marx’s argument against a
capitalist society is supported through the growing gaps in what he refers to
as class distribution during the later years, after 1973, of an expanding
economy. Post 1973 productivity grows in comparison to hourly compensation increase
which can be explained through Marx’s theory of innovation and class distribution.
As time passes, technology improves thus increasing productivity with the
implementation of newer more efficient machineries and replacing slower
inefficient manual labor, and thus contributing to the stagnation of wages. The
continued expansion of the automotive industry is an example of this continued
improved mechanization of factories within the private sector.

Karl Marx’s general law of accumulation
is extremely relevant to economic trends observed in the United States after
World War II, figure 1. Capitalism is always expanding through accumulation
enabling reinvestment in competitive markets by capitalists. Marx expounds on
the general law of accumulation as causing a wide inequality of wages produced
by a vastly wealthy capitalist economic system, consequently the laboring class
suffers economically because the wealth concentration remains limited to the
bourgeoisie. Essentially the wealthy get wealthier while the proletariats
continue to make enough money to subsist, leaving no excess money to retain and
invest for economic growth. Marx argues that the capitalists and laborers    are intrinsically dependent on each other.
The post 1973 trends where wages did not increase at the same rate of
productivity provides evidence that, according to Marx, the general law of
capitalist accumulation creates both wealth and poverty.

The
post 1973 trend of high productivity growth with minimal hourly compensation of
workers allows for the exploration of Marx’s theory of class distribution of
income because with such high increases in productivity one has to wonder where
did the profits go if hourly wages did not increase. Marx develops this theory
of distribution to show that the distribution of income is ultimately governed
by conditions of exploitation between capitalists and laborers. He argued that capitalists are great liberators
because their historical mission is to revolutionize the methods of production;
although he also considers them to be the classic exploiters, ultimately
responsible for the exploitation of laborers. Marx characterizes a class through the
ownership of property. He further develops this idea of class distribution with
the construction of two main categories to classify people within a capitalist economy:
the bourgeoisie or capitalist and proletariats or laborers.  The capitalist source of income is profit
whereas laborers income is obtained through an exchange of their labor for a
wage. In the early 1970’s, CEO’s lobbied politicians to implement policies that
prevented the adoption of laws that would allow improvement of labor management
to pursue collective bargaining. This in turn, led to the erosion of unions as
key industries, such as telecommunications and airlines, were deregulated
(Mishel).

Additionally, the substantial wage increases of
the top ten percent and the erosion of the collective bargaining power of
workers apparent in the years following 1973 can be seen as one of the main
causes of rising wage inequality that Marx predicted. Prior to 1973, due to the
Treaty of Detroit, collective bargaining agreements set the standard for union
and non-union wages. Unions not only provide higher wages and benefits through
negotiated contracts, they also support laborers’ rights, and thus decrease
potential exploitation prevalent in a capitalist economy. Furthermore, union membership
promotes education to laborers, safety enforcement in the workplace, and forty-hour
work weeks with overtime pay. Marx would agree that the loss of labor power due
to the decrease in union membership hurt all workers as it allowed for capitalists
to increase their wages at the expense of the laborers wages. Without
collective bargaining power, all workers lose.