What is surplus-value?
Surplus-value is the value produced by workers over and above the necessary labor needed to sustain a worker from day to day. The greater the ratio of surplus labor to necessary labor, the greater the rate of exploitation of the worker by the capitalist. This rate of exploitation is called the rate of surplus-value, and it is calculated by dividing the surplus labor hours by necessary labor hours per day. In mathematical terms, this works out to s' = s/v, where s’ = rate of surplus-value, s = surplus labor hours, and v = necessary labor hours (the variable capital).
Necessary and surplus labor:
Necessary labor is how much you need to work in order to break even on the value of your day’s needs, or in Marxist terms, the means of subsistence. Each worker must be able to afford the means of subsistence, so they work at least long enough to earn that. The means of subsistence, like all commodities, can be measured by the labor-hours put into them. Assuming prices reflect labor time (which, under competitve capitalism, they should), the worker works to earn his or her means of subsistence for as many labor hours were embedded into that “basket of goods” they consume.
However, this is not the only labor a worker is required to perform. You may have paid for your daily expenses by hour six of a workday, but there is nothing preventing a capitalist from forcing you to work more without further compensation. The capitalist can either make the “working day” much longer, more intense, or pay lower hourly wages so you must work longer hours to obtain your means of subsistence than you would under a fair pay scheme. The capitalist merely must provide you with wages that allow you to reproduce yourself by the next day—not for how much value you create while working. They have purchased your capacity to work for a given sum—namely, your wages, or their variable capital—and thus the value you create while working is irrelevant to your pay, as it belongs to the capitalist who put you to work in the first place.
Why does it matter?
Surplus-value and the rate of surplus-value both matter because it is a glimpse of how exploited workers are by their employers, as well as a numerical calculation of this exploitation, rather than a qualitative observation. It matters because millions and millions of people are being exploited in this manner daily, and they deserve to understand their exploitation in order to better rise against it. Knowledge is power, particularly in a system that relies on not questioning basic assumptions about how the system works.
How does surplus-value relate to profits?
Profits are a portion of surplus-value. Labor is the only part of the production process which creates value, rather than merely passing value through the process, as in the means of production, or constant capital. Surplus-value created by workers then goes to pay for rent and interest, and the remainder after that is profit.
Why does it exist?
The vast majority of individuals are separated from the means of production, which forces them to sign contracts with corporations whose explicit and only purpose is to expand monetarily, using workers as an instrument by which to achieve that goal. Working workers harder or longer is no different from running a machine longer; they are both simply inputs into the process of M-C-M'—money - commodities - money—in which surplus-value makes up the difference between M and M’. There would be no profit except for the ability of humans to create useful things with their labor, and this ability is used in a capitalist setting to produce value and surplus-value via commodity production.
How can we be active in reducing it?
Under a socialist economy, we would still produce a surplus as compared to the needs of actual workers. However, the allocation of that surplus will look vastly different in a socialist economy. As a reminder, the surplus in a capitalist economy goes toward:
- Interest payments (finance capital)
- Rent payments (landlords)
- Profit (the capitalist, the stockholders)
Whereas under a socially planned economy, the allocation of surplus would roughly look like:
- Non-workers whose needs must still be met (e.g., children, the disabled, the elderly).
- An extra stockpile in case of disaster or other emergencies.
And since the goal of a socialist economy is not explicitly to produce more surplus-value, the surplus will be lower, and production of the surplus in these applications will be accomplished in far, far, fewer working hours than what we deal with today.