Karl Marx and the employment contract: from natural abstraction to formal subsumption

Marx develops two alternative theories of the employment contract: one treats it as an agreement of commodity exchange, and one as a relational arrangement. In the former theory Marx introduces the notion of 'labour power' as a physical stock of labour capacity. Then he argues that the worker, in exchange for a wage, sells a flow of labour whose use-value consists in the capacity to produce value. He calls this flow "abstract labour" and regards it as a "natural" abstraction, i.e. as an objective good which can be bought in the market as a commodity and used in a factory as a productive force. Exploitation emerges because the value of the flow of labour power is lower than the value-creating capacity of abstract labour. The theory produces various inconveniences, for example: an essentialist theory of value; a notion of value which makes it insensitive to changes in income distribution; and the transformation problem. Its origin, contrary to common opinion, is not just Ricardian. Saint-Simon's propensity to treat labour as a productive force had some influence on Marx's theory of abstract labour as a value-creating power. Hegel's influence is still more important. Marx, in fact, tries to justify the 'natural' character of labour abstraction by resorting to Hegel's doctrine of the 'posited presuppositions', by which a universal and abstract category effectively generates (posits) the empirical phenomena in which it shows itself. On the other hand this way of treating wage labour clearly originates from Hegel's propensity to reduce the employment contract to a contracts for services. In the second theory the employment contract does not consist of an exchange of commodities. Rather it is seen as an institution shaping the conditions for a formal subsumption of labour under capital. This kind of subsumption entails a relation of real subordination of the worker to the capitalist in the production process. Now wage labour is treated as a real abstraction not in a natural sense but only in a historical sense, i.e. as an effectual institution which is typical of capitalist social relations. Exploitation is seen as based on the power relationship by which the capitalists use labour activity in the production process. The theory is not fully elaborated by Marx, but is developed well enough to make it the earliest anticipation of the modern theory of the employment contract as an institution which generates an authority relationship. Furthermore, it is not exposed to criticisms of essentialism and hypostatisation, whilst it is apt to uphold a consistent and enlightening theory of value and exploitation