BALANCING CAPITAL AND LABOR

This essay looks into the relationship between capital and labor, the
imbalance created between them, and regaining homeostasis.

In a capitalism, capitalist thrive on the exploits of resources

including labor. A capitalist would take as much profit as he can by
reducing his production expenses. Since labor is part of production
expenses, wages may be reduced in order to increase profits and
consequently capital, hence, the capital and labor imbalance.

In a series of pamphlets, Karl Marx (1847) poses a question, “What

is it that takes place in the exchange between the capitalist and the wage-
laborer?”

Marx argues that to say that the interests of capital and the interests
of the workers are identical, signifies only this: that capital and wage-
labor are two sides of one and the same relation. The one conditions the
other in the same way that the usurer and the borrower condition each
other. As long as the wage-laborer remains a wage-laborer, his lot is
dependent upon capital. That is what the boasted community of interests
between worker and capitalists amounts to. If capital grows, the mass of
wage-labor grows, the number of wage-workers increases; in a word, the
sway of capital extends over a greater mass of individuals. Let us
suppose the most favorable case: if productive capital grows, the demand
for labor grows. It therefore increases the price of labor-power, wages.

He explains, “The laborer receives means of subsistence in

exchange for his labor-power; the capitalist receives, in exchange for his
means of subsistence, labor, the productive activity of the laborer, the
creative force by which the worker not only replaces what he consumes,
but also gives to the accumulated labor a greater value than it previously
possessed. The laborer gets from the capitalist a portion of the existing
means of subsistence. For what purpose do these means of subsistence
serve him? For immediate consumption. But as soon as I consume means
of subsistence, they are irrevocably lost to me, unless I employ the time
during which these means sustain my life in producing new means of
subsistence, in creating by my labor new values in place of the values
lost in consumption. But it is just this noble reproductive power that the
laborer surrenders to the capitalist in exchange for means of subsistence
received. Consequently, he has lost it for himself.”

Marx asserts that capital can multiply itself only by exchanging

itself for labor-power, by calling wage-labor into life. The labor-power of
the wage-laborer can exchange itself for capital only by increasing
capital, by strengthening that very power whose slave it is. Increase of
capital, therefore, is increase of the proletariat, i.e., of the working class.

1
 This relationship arose from the birth of capitalist economy.
Tushar Seth, in his article “Capitalist Economy: Meaning and Features of
Capitalist Economy” published in www.economicsdiscussion.net,
discusses the meaning of capitalist economy. According to him capitalist
economy is one of the oldest economic systems and its origin is at the
time of mid-eighteenth century in England in the wake of Industrial
Revolution. It is that system, where means of production are owned by
private individuals, profit is the main motive and there is no interference
by the government in the economic activities of the economy. Hence, it is
known as free market economy.

Merriam-Webster online dictionary describes capitalist economy as

one that encourages private actions and ownership.

Capitalist economy is what capitalism about. Merriam-Webster

defines capitalism as “an economic system characterized by private or
corporate ownership of capital goods, by investments that are determined
by private decision, and by prices, production, and the distribution of
goods that are determined mainly by competition in a free market”

Seth mentioned that according to Ferguson, “Capitalism is a free-

market form or capitalistic economy may be characterized as an
automatic self-regulating system motivated by self-interest of individuals
and regulated by competitions.”

Capitalism is practiced enthusiastically by capitalists, people who

use capital to increase production and make more goods and money.
Capitalism works by encouraging competition in a fair and open market.

In capitalism, the economy relies on production. Online

Encyclopedia Britannica explains that the productive factors are
commonly classified into three groups: land, labor, and capital. The first
represents resources whose supply is low in relation to demand and
cannot be increased as the result of production. The income derived from
the ownership of this factor is known as economic rent. The factor of
labor represents all those productive resources that can be applied only at
the cost of human effort. The wage or salary is the form of payment for
the use of this factor. The effort which the economist regards as
qualifying may be either manual or mental, although in earlier periods,
and apparently under communism, manual labor alone was considered a
productive factor. The final category, capital, is a more complex one. In
the simplest sense, it refers to all the “produced” instruments of
production—the factories, their equipment, their stocks of raw materials
and finished goods, houses, trade facilities, and so on. The owners of
capital receive their income in various possible forms; profits and interest
are the usual ones.

Capital in economics is a word of many meanings. They all imply

that capital is a “stock” by contrast with income, which is a “flow.” In its

2
broadest possible sense, capital includes the human population; nonmaterial
elements such as skills, abilities, and education; land, buildings, machines,
equipment of all kinds; and all stocks of goods—finished or unfinished—in
the hands of both firms and households.

Merriam-Webster online dictionary defines capital as “stock of

accumulated goods especially at a specified time and in contrast to
income received during a specified period; the value of these
accumulated goods; accumulated goods devoted to the production of
other goods; accumulated possessions calculated to bring in income.”

Enclopedia Britannica defines labor in the context of economics as

the general body of wage earners. Labor means any valuable service
rendered by a human agent in the production of wealth, other than
accumulating and providing capital or assuming the risks that are a
normal part of business undertakings. It includes the services of manual
laborers, but it covers many other kinds of services as well.

At some point, the tilts to one thing. Measures must be taken to

prevent this and maintain the equilibrium between capital and labor.
These measures may include mandatory minimum wage, minimum labor
standards, and union and representation.

Minimum Wage

Marx, in his ‘Das Kapital’, argues that the capitalist on an average

takes twelve hours work from the worker and pays him wages equal to
six hours work.

Merriam-Webster online dictionary defines wage as “a payment

usually of money for labor or services usually according to contract and on
an hourly, daily, or piecework basis —often used in plural; the share of the
national product attributable to labor as a factor in production

In the Philippines, RA No. 602 also known as Minimum Wage law

was enacted to set the guidelines in setting up minimum wage.
By virtue of RA No. 6727 also known as Wage Rationalization Act,
National Wages and Productivity Commission was created tasked to fix
minimum wages rate and to promote productivity-improvement and gain-
sharing measures to ensure a decent standard of living for the workers and
their families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through
industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth.
International Labour Organization (ILO), a United Nations (UN)
agency, is tasked brings together governments, employers and workers of its
187 member States, to set labor standards, develop policies and devise
programs promoting decent work for all women and men.

3
 According to International Labor Organization (ILO), minimum
wages have been defined as “the minimum amount of remuneration that an
employer is required to pay wage earners for the work performed during a
given period, which cannot be reduced by collective agreement or an
individual contract”.
ILO maintains that this definition refers to the binding nature of
minimum wages, regardless of the method of fixing them. Minimum wages
can be set by statute, decision of a competent authority, a wage board, a
wage council, or by industrial or labor courts or tribunals. Minimum wages
can also be set by giving the force of law to provisions of collective
agreements.
ILO further argues that the purpose of minimum wages is to protect
workers against unduly low pay. They help ensure a just and equitable share
of the fruits of progress to all, and a minimum living wage to all who are
employed and in need of such protection. Minimum wages can also be one
element of a policy to overcome poverty and reduce inequality, including
those between men and women, by promoting the right to equal
remuneration for work of equal value.
Minimum Labor Standards

Presidential Decree No. 442, as amended, also known as Labor Code

sets the minimum standards of workers’ rights and privileges as well
working condition.

Article 3 of the Labor Code embodies its very essence, to wit:

Article 3. Declaration of basic policy. The State shall afford

protection to labor, promote full employment, ensure equal
work opportunities regardless of sex, race or creed and
regulate the relations between workers and employers. Xxx

Aside from minimum wage regulations, provisions of Labor Code

include rest period, hours of work, computation of additional compensation,
employment of women and persons with disabilities, employment of minor,
employment of househelpers, occupational safety, medical benefits, health
and social benefits.

Union and Representation

Article 3 and Article of the Labor Code summarize the basic State
policy on union and representation, to wit:

Article 3. Declaration of basic policy.

xxxThe State shall assure the rights of workers to self-

organization, collective bargaining, security of tenure, and
just and humane conditions of work.

4
 Article 211. Declaration of Policy.

It is the policy of the State:

To promote and emphasize the primacy of free collective

bargaining and negotiations, including voluntary arbitration,
mediation and conciliation, as modes of settling labor or
industrial disputes;

To promote free trade unionism as an instrument for the

enhancement of democracy and the promotion of social
justice and development;

To foster the free and voluntary organization of a strong and

united labor movement;

To promote the enlightenment of workers concerning their

rights and obligations as union members and as employees;

To provide an adequate administrative machinery for the

expeditious settlement of labor or industrial disputes;

To ensure a stable but dynamic and just industrial peace; and

To ensure the participation of workers in decision and policy-

making processes affecting their rights, duties and welfare.

To encourage a truly democratic method of regulating the

relations between the employers and employees by means of
agreements freely entered into through collective bargaining,
no court or administrative agency or official shall have the
power to set or fix wages, rates of pay, hours of work or
other terms and conditions of employment, except as
otherwise provided under this Code.

These policies ensure that the voice of the workers is heard

and give them opportunity to have participation in the policy-
making process on issues concerning their rights as laborer.

In conclusion, the protection, rights, and privileges afforded by the

State and other International Conventions is the key to maintaining the
balance between labor and capital. As labor is not indispensable and
important factor in production, this sector must be protected in order to
promote healthy relationship between the two and encourage their growth
to maintain the reasonable distribution of wealth and continuous free
flow of economy.

5
Relation of Wage-Labour to Capital. Karl Marx. 1847.
https://www.marxists.org/archive/marx/works/1847/wage-labour/ch06.htm

Capitalist Economy: Meaning and Features of Capitalist Economy. Tushar

Seth. http://www.economicsdiscussion.net/economic-problems/capitalist-
economy-meaning-and-features-of-capitalist-economy/2062

Merriam-Webster. Capitalism. https://www.merriam-

webster.com/dictionary/capitalism

Merriam-Webster. Capital. https://www.merriam-

webster.com/dictionary/capital

Merriam-Webster. Wage. https://www.merriam-

webster.com/dictionary/wage

Encyclopedia Britannica. Factors of Production.

https://www.britannica.com/topic/factors-of-production

Encyclopedia Britannica. Capital and Interest.

https://www.britannica.com/topic/capital-economics#ref34178

How to define a minimum wage? International Labour Organization.

https://www.ilo.org/global/topics/wages/minimum-wages/definition/lang--
en/index.htm

Republic Act No. 602 also known as Minimum Wage Law. April 6, 1951

Republic Act No. 6727 also known as Wage Rationalization Act. June 9,
1989

Presidential Decree No. 442, as amended, also known as Labor Code. May
1, 1974

1987 Philippine Constitution.