First noted by John Locke in his Second Treatise on Government, labor is a source of value. Stated simply, the work a person does is worth money or a wage. This is a fundamental, arguably the fundamental principle, in the capitalist economic system. Most critics of the system argue capitalism exploits the worker because he is not paid and cannot be paid the full value of his labor, because this is the profit for the capitalist or employer. In describing a utopian capitalist world, Robert Heilbroner writes, The laborer who contracts to work can ask only for a wage that is his due.
What that wage will be depends… on the amount of labor time it takes to keep a man alive. (157) However, for profit to exist for the capitalist or employer, the worker must work for longer than just his subsistence for the same wage. This, what Marx calls, surplus value, is the profit. However, what I have just described is the utopia of capitalism, at least for the worker and leads into what may be the single worst consequence of the failure of government regulation during early capitalism and today, a failure to regulate the workday and enforce a living wage.
A living wage, most simply, is a wage that allows a person to support themselves and their family. The text How the Other Half Lives by Jacob Riis will serve as evidence of the consequences of lack regulation of the wages and the workday in early capitalism, as well as help to demonstrate how the same reality exists today for many. he has done what he could with merciless severity where he could to smother every symptom of wakening intelligence in his slaves.
In this effort to perpetuate his despotism he has had the effectual assistance of his own system and the sharp competition that keep the men on starvation wages (140) Riis description of an early capitalist, the sweater of Jewtown thus highlights the problem. In the days of laissez-faire capitalism, the capitalist could and would keep the worker on starvation wages. In unregulated capitalism, there is no structure in place to limit the exploitation of the worker. The capitalist world that Heilbroner describes does not exist. The worker is not paid and does not have to be paid his subsistence.
The results are obvious yet striking. Riis describes a family of cigarmakers earning $11. 25 a week, with a rent to pay of $10 a week. (152) This says nothing of food, clothing, and other necessary expenditures. What this leads to is abject poverty and starvation, which Riis describes in great detail in his book such as a family of nine living ten square feet of space. (90) In order to survive, a family must look to other means such as putting their children to work, prostitution, crime, or in the most horrendous of cases, cutting expenditures, children.
Many capitalists contend if one works hard, one will get ahead. However, in the day of unregulated capitalism, working more hours does not mean overtime, often just creates more surplus value, more profit to the employer. Even with the advent of the minimum wage the problem still exists today. Presently, the federal minimum wage stands at $5. 15 an hour. According to the Department of Labor, 40% of those who earn a minimum wage are the sole provider for their families, which would place them under the poverty level.