Political Economy - wages in socialist economy

Marx-Engels |  Lenin  | Stalin |  Home Page

  Political Economy

Wages and the Economic Law of Distribution According to Work

Lenin taught that socialism presupposes “social labour accompanied by the strictest accounting, control and supervision on the part of the organised vanguard, the most advanced section of the toilers. Moreover, it implies that standards of labour and; the amount of remuneration for labour must be determined." (Lenin, “Report on Subbotniks Delivered at the Moscow City Conference of the R.C.P.", Selected Works, 12-volume edition, Vol. VIII, p. 239.) The workers in State enterprises receive this remuneration for labour in the form of wages.

Wages in socialist economy are by their very nature quite different from wages under capitalism. Since labour-power has ceased to be a commodity in socialist society, wages are no longer the price of labour-power. They express, not the relati6n between the exploiter and the exploited, but the relation between society as a whole, in the shape of the Socialist State, and the individual worker who is working for himself and for his society.

Since under capitalism wages are the price of labour-power, they usually fluctuate, unlike the price of other commodities, below value. They do not always enable the workers to satisfy even the minimum of their requirements. With the abolition of the system of hired labour, the law of value of labour-power has completely lost its validity as the regulator of wages. The basic economic law of socialism necessitates the maximum satisfaction of the constantly growing material and cultural requirements of the whole of society. The emancipation of wages from the limitations of capitalism enables them to be extended “to that volume of consumption, which is permitted on the one hand, by the existing productivity of society . . . and on the other hand, required by the full development of his (the worker’s) individuality". (Marx, Capital, Vol. III, Kerr edition, p. 1,021.) Real wages constantly rise in accord with the growth and perfecting of socialist production. The requirements of the basic economic law of socialism with regard to stimulating production and raising the well-being of the working people are given effect through the law of distribution according to work. In accordance with this law, each worker’s share in the social product is determined by the quantity and quality of his work.

Wages are one of the most important economic instruments through which each worker in socialist society is given a personal material interest in the results of his work: he who works more and better also receives more. Consequently, wages are a powerful factor in the growth of labour productivity, enabling the personal material interests of the worker to be correctly combined with State (national) interests.

The money form of wages is necessitated by the existence in socialist economy of commodity production and the law of value. As has already been stated, the consumer goods, which are necessary to compensate for the expenditure of labour-power are produced and disposed of in socialist economy as commodities, subject to the operation of the law of value. The money form of wages allows of flexible and differential assessment of the worker’s share in the social product, depending on the results of his labour.

Thus, wages in socialist economy are the monetary expression of the worker’s share in that portion of the social product which is paid out by the State to workers by hand or brain in accordance with the quantity and quality of each worker’s labour.

The money wages of each worker by hand or brain are his individual wages. The source of the individual wages of the workers engaged in socialist production is the product created for themselves, and distributed according to work. However, the standard of life of the workers by hand or brain in socialist society is not determined by individual money wages alone. In addition to individual wages, large funds are allotted by the State and social organisations for the social and cultural needs of the working people, out of the product created by labour for society.

In conformity with the requirements of the basic economic law of socialism and the law of distribution according to work, the Socialist State plans the wage fund and the wage level for different categories of workers for each period of development.

The wage fund is the entire sum of money resources allotted in a planned way by the State for distribution according to work done over a given period of time (a year, a month, etc.). This applies to the national economy as a whole, and, to individual branches and enterprises.

In accordance with the requirements of the economic law of distribution according to work done, the policy of the Socialist State in the field of wages is based on the principle of all-round differentiation in the payment of labour. The practice of equalising wages, which ignores the differences between skilled and unskilled labour and between arduous and light work, is; incompatible with the economic law of distribution according to the quantity and quality of labour. It undermines the individual material incentive of the workers in relating to the results of their work and their striving to improve their qualifications. Since skilled work is work of a higher quality, it necessitates the training of the worker and is more productive than unskilled work. Consequently it is also paid more than unskilled work. Such a wage system encourages workers to improve their skill. Under socialism, given equal skills, heavier work is paid more than lighter work. Under the capitalist system on the contrary, workers employed in particularly arduous manual labour are, as a rule, paid considerably less, than other workers. Thus miners, who receive low wages in capitalist countries, are highly paid in socialist society where, moreover, arduous labour is constantly, and to an increasing extent, being lightened by the use of machinery.

In accordance with the economic necessity of giving the greatest encouragement to work in the key branches of the national economy, higher wages are fixed for workers in such branches of heavy industry as metallurgy, coal, oil, engineering, etc. Other things being equal, the workers, engineering and technical personnel are also more highly paid in enterprises and construction sites situated in economic regions which are of special importance to the economic life of the country, or in remote and sparsely inhabited districts. In this way, wages become one of the economic instruments for effecting planned distribution and re-distribution of skilled labour among enterprises and branches of social production, in keeping with the requirements of the law of planned development of the economy.

The wage policy of the Socialist State involves a struggle against petty-bourgeois equalising tendencies and backward, anti-State and anti-mechanisation influences.

Such economic practices as failure to effect the necessary wage differentiation contradict the economic law of distribution according to work. Without such differentials skilled workers fail to obtain wage advantages over unskilled workers. The same applies to persons engaged in arduous work compared with workers engaged in lighter work or in normal working conditions. The absence of the necessary differentials leads to equalisation and hinders the introduction of new techniques and advanced methods of organising production.

Violation of the correct correlation of wages as between workers, middle rank technical personnel and engineering cadres causes the wages of engineering and technical personnel, in some enterprises and even in whole branches of the economy, to be lower than those of skilled workers. Economically unjustified wage increases in individual branches and in economic regions which are not of the first importance in the national economy hinder wage incentive measures in those branches and districts which occupy key positions in the economy of the country.

The trade unions play an important role in applying wage policy. They actively participate in the work of the State institutions in the working out of measures involving labour organisation and wages, directly administer social insurance, support the experience and initiative of innovators in production, promote the development of socialist emulation and higher labour productivity; improve cultural and welfare services and working conditions. With the active participation of the trade unions, a collective agreement between the management and the workers of each enterprise is concluded every year. The collective agreement regulates all questions affecting work, wages and living conditions. It binds both parties to take the necessary measures to secure the correct remuneration of labour and the growth of its productivity, and also the satisfaction of the growing cultural and living requirements of the workers in socialist enterprises.
Forms of Wages. The Tariff System

The various systems of wages in socialist economy represent the concrete ways in which the requirements of the economic law of distribution according to work are satisfied.

The piece-rate system is the main wage system in State socialist enterprises. In 1954 more than three-quarters of all industrial workers were on piece-rates.

In socialist economy piece-rates provide the worker with the maximum interest in the results of his work. They differ fundamentally from capitalist piece-rates which are based on unbearable intensification of labour and lead to higher rates of surplus-value; while increasing the intensity of work, the worker’s wages are lowered.

In socialist society, the size of each worker’s earnings depends directly on the quantity and quality of his work. By securing increased earnings as output per unit of time increases, piece-rates encourage higher labour productivity. They stimulate full and rational utilisation of machinery, equipment, raw materials and working time, the introduction of technical improvements and the best organisation of work and production. Piece-rates also assist socialist emulation, since high labour productivity brings high earnings.

The direct piece-rate system is the one most extensively used. Under this system wages depend on the worker’s output in a given period, measured in number of articles, weight, length, etc. Each unit of output is paid for at the same rate for the given type of work. The worker’s wage increases in direct proportion to the increased quantity of his output of goods of the prescribed quality.

Under the progressive piece-rate system of wages, the worker is paid the same fixed rate for the fulfilment of the standard quota, but at other, higher and progressively increasing rates for output above the quota. The greatest progression in rates is laid down for the key trades, for workers employed in underground work, hot workshops and other arduous conditions. The effectiveness of the progressive piece-rate system is lowered if there are so many pay scales that they hinder calculation and assessment of the wage, and the establishment of a direct and visible link between wages and labour productivity.. Its effectiveness is also lowered if there are unjustifiably sharp differences in the rates for output above the quota in different branches of the economy.

Under the piece-rate bonus system, the direct piece-rate is supplemented by bonuses for achieving certain indices: economy of fuel and power, lower production costs, reduction of spoilage, output of higher grade products, etc. In some enterprises bonuses for certain qualitative indices are also applied in conjunction with the progressive piece-rate system.

In circumstances where production conditions make it impossible to apply individual piece-rates (for example, simultaneous servicing of large machines or aggregates by several workers), team or group piece-rates are applied. The individual members of the team receive a share of the collective earnings after allowing for the time worked and the skill of each worker.

Stressing the need for consistent application of the principle of material encouragement of efficient workers, the 18th Conference of the C.P.S.U. (B) decreed that “the bad practice of equalising in the sphere of wages must be finally eliminated, and the piece and bonus systems must become, in still larger measure, the most important means of raising labour productivity, and hence also, of the development of our entire national economy". (The C.P.S.U. in Resolutions and Decisions of its Congresses, Conferences and Central Committee meetings, Pt. II, 7th Russian edition, p. 975.)

The time-rate system is used in those occupations where piece-rates can either not be applied, or where they are economically unsuitable because of the nature of the job (time-keepers, safety personnel, work on manufacture of unique apparatus, control and inspection work, etc.). Time wages take the form of both plain-time and time-plus-bonus payment.

The Plain-time system is built up on differential principles, depending on the duration of working time and skill of the worker. In order to increase the material incentive of the workers employed on time-rates, the time-plus-bonus system is applied. Under this system the worker receives a bonus, in addition to the scale paid for the unit of time worked, for the achievement of various quantitative or qualitative indices: reduction of time spent on repair of equipment, economy of raw material, fuel or power, operation of mechanisms without breakdowns, reduction of spoilage, etc.

The time-plus-bonus system is widely applied to managerial, engineering and technical staff. The basic wage of this category of worker (the directors of enterprises, chief engineers, departmental managers, foremen, etc.) is his monthly salary, which varies with the size of the enterprise (department, shift, etc.), its national economic importance, his length of experience, etc. In addition to the basic salary, managerial, engineering and technical staff receive a definite percentage bonus-addition for fulfilment and over-fulfilment of the production plan by the enterprise, in terms of marketed output, provided that the planned output of gross output is fulfilled, and the prescribed assortment and planned production costs are observed.

The wages of teachers, medical workers and employees in State institutions also differ in accordance with the character of the work, educational standard, period of service and various other indices.

Comprehensive differentiation of wages, taking into account the worker’s skill, the productivity of labour and the quality of his output, is effected by means of the rating of work and a definite grading system.

Rating of work is the establishment of the standard time required to carry out a given job (time standard), or the size of output per unit of time (output standard). It is impossible to plan the economy without technical standards. Correct rate-fixing is one of the most important factors in managing the production process, improving labour organisation and raising its productivity, getting rid of equalising tendencies and developing socialist emulation. Technical standards are an important regulating factor in organising the broad mass of the working people around the advanced elements in production and bringing the backward ones up to the level of the more advanced.

Socialist methods of management require aiming at progressive and technically justified output standards, which are fixed at a level falling between those which have already been achieved by the majority of workers, and those which have been attained by the best workers and innovators, and the most advanced enterprises. Capitalist output standards are a method of unrestrained intensification of work which destroys the health of the workers and shortens their lives. In socialist enterprises, on the contrary, they are laid down in such a way that while progressive, they are at the same time fully within the reach of the whole mass of workers.

The introduction of progressive output standards is being achieved in the course of a decisive struggle against conservative elements who cling to out­dated and lowered standards, thereby retarding labour productivity and the successful fulfilment of plans. The so-called statistical-average standards, in particular, are examples of such backward standards, since they do not allow for progress in technique and production organisation. They are based on the worker with poor mastery of technique, and legitimise unproductive losses of working time. Continuous, technical improvement requires periodic upward review of output standards. Correct rating of work must reflect the growth in technical equipment and the rise in the cultural and technical level of the workers. The interests of socialist society and of the mass of the workers demand the introduction of progressive and technically justified standards which fully correspond to the modern level of production technique and act as a strong factor in raising labour productivity.

The evaluation of each type of work, depending on the skill of the worker, the nature of the work, and the conditions and peculiarities of the particular branch of production, is reached on the basis of the grading system. Wage levels in different branches of the economy and for different categories of workers are determined on the basis of this system.

The main elements of the grading system are schedules of grades, skill-grading handbooks and the scale of basic rates.

Wage differences in accordance with the workers’ skill are arrived at on the basis of the schedules of grades. Workers are divided, according to their skill, into several grades. The unskilled worker is placed in the first grade and his payment is taken as the unit of assessment. The higher the skill of the worker, the higher is the grade into which he is placed, and correspondingly the higher is his payment.

The description of the various jobs carried out in a particular branch of industry is laid down in the skill grading handbooks. These serve as the basis for assessing the skill of the worker, and for placing him in one of the grades in the schedule of grades.

The scale of basic rates prescribes the size of payment per unit of time appropriate to the different grades. The scale of basic rates enables the Socialist State to fix differential wages which take into account the national economic importance of each branch of industry, the degree of mechanisation of labour, the particular features of different economic areas, etc. The July, 1955, Plenum of the Central Committee of the C.P.S.U. revealed grave defects in the organisation of wages, especially in the rating of work and the, application of the schedule system. Thus, in a number of enterprises, reduced statistical average rates were in force; schedules and scales were out of date and lagged behind the increased level of wages; various additions to the scales and basic rates were impermissibly widespread; differences between the pay of workers placed in the lower and higher categories were insignificant. Multiplicity of wage systems complicates wage accounting, makes the wage system hard for the workers to understand, and gives rise to lack of co-ordination in the wages of workers engaged in one and the same kind of work.

All this reduces the incentive to the workers to improve their skill, produces equalisation of wages and hinders the growth of labour productivity.

A correct structure of the grading system enables wages to be organised in such a way that they will stimulate the growth of the productivity of labour and the workers’ incentives to improve their qualifications.

The July, 1955, Plenum of the Central Committee of the C.P.S.U., which exposed defects in the organisation of wages, decided that: “The Leninist principle of giving the workers a material interest in the results of their work must be consistently realised in the organisation of wages. Technically well-founded rates of work must be generally applied in the enterprises, rates which correspond to up-to-date levels of technical development and production organisation. The organisation of labour in the enterprises must be improved so as to provide all workers with the conditions needed to achieve a high degree of productivity of labour." (Decisions of the July, I955, Plenum of the C.C. of the C.P.S.U., p. 17.)
The Steady Rise of Real Wages in the Socialist System

In accordance with the basic economic law of socialism, the socialist system provides a steady rise of real wages.

The continuous growth of socialist production based on the highest technique and increased labour productivity is the most important economic factor in the rise of real wages.

To enable socialist society to thrive and develop, higher labour productivity must constantly run ahead of the growth of wages. Only under these conditions can society obtain the necessary resources for expanding production and reserves, and for ever fuller satisfaction of the growing needs of the working people. The continuous growth of labour productivity and social production is a secure foundation for the further rise of real wages; the rise of real wages increases the purchasing power of the working people, and this in its turn provides social production with a constant impelling force.

The continuous growth of socialist production leads to a systematic increase in the number of manual and clerical workers. In the U.S.S.R. their numbers increased from 10.8 millions at the end of 1928 to nearly 47 millions at the end of 1954-a more than four-fold increase, accompanied by a considerable increase in real wages. Under capitalism the need to maintain a reserve army of unemployed lays a heavy burden on working-class families and lowers the real wages of the working class as a whole. In socialist society the working class and society as a whole are freed from this need by the absence of unemployment. Increasing production makes work available to all able-bodied members of the family, and this considerably increases its total income.

The working people of socialist society are freed from those enormous losses in wages borne by the working class of capitalist countries as a result of various wage discriminations according to sex, age, nationality and race.

In socialist society the principle of equal pay for equal work without distinction of sex, age, nationality or race has been achieved for the first time. Child labour in socialist economy is prohibited. The genuine equality of women is guaranteed by equal pay for equal work, provision of leave at full pay during pregnancy, a wide network of maternity hospitals, creches and kindergartens, and payment of State grants to mothers of large families and to mothers without breadwinners. Any direct or indirect wage discrimination whatsoever because of the racial or. national origin of the worker is punishable as a serious crime.

The steady rise of wages in socialist society results also from the growth in the cultural and technical level of the workers and the raising of their skill. With the development of industrial techniques in the capitalist system, considerable strata of skilled workers are squeezed out by machines and transferred to lower paid, unskilled work. Moreover, workers who have been disabled by the capitalist intensification of labour are forced out of industry and into the ranks of the unemployed, to be replaced by healthier and stronger workers. In socialist society the growth of production is inseparably connected with rapid technical progress. The old occupations involving heavy manual labour are being replaced by new, more skilled and more highly paid ones, based on the latest techniques. In order to encourage steady and conscientious work in the same sphere of industry, the Socialist State pays out large sums every year m the form of long-service awards to various categories of workers in different branches of the national economy, cultural workers and State employees.

The consistent policy of the Socialist State of reducing prices for consumer goods and raising the purchasing power of money is a major factor in the steady growth of real wages.

The reduction of retail prices for the chief consumer goods, between 1947 and 1954, lowered the general level of these, prices 2.3-fold, and gave the population a gain of several hundred milliards of roubles. In the same period the rise in prices in the capitalist countries raised the cost-of-living index, according to official data, 21 per cent in the U.S.A. and 40 per cent in Great Britain.

With the nationalisation of the land, the enormous tribute which under capitalism the owners of urban land extract from society, in the form of land rent, has disappeared. In capitalist countries the cost of rent, heating and lighting absorb about one-quarter of earnings, in the budget of a worker’s family. Under socialism, thanks to the social ownership of the land, the urban housing fund and municipal amenities, rents and other municipal services occupy a very small place in the budgets of workers’ families. In the U.S.S.R. they account for an average of little more than 4 per cent, and are thus a real factor in raising the level of real wages.

In the Soviet Union the extensive scale on which housing is being built systematically improves the living conditions of the working people. Between 1946 and 1954 alone about 2,370 million square feet of housing space[1] were built and restored by State enterprises, institutions and local Soviets, and also by the population of towns and workers’ settlements with the assistance of State credits. In addition, about 4½ million houses were built and restored in rural localities. In order to satisfy the growing demands of the population for housing the work of house-building must be further developed on an extensive scale and the quality of housing improved.

The manual and clerical workers of socialist society are freed from the heavy burden which the working masses of the capitalist countries are compelled to bear as a result of the tax policy of bourgeois States. In the capitalist countries, high taxes sharply reduce real wages. In the U.S.S.R. the workers expend only an insignificant part of their wages on taxes. Moreover, taxes are used to meet the needs of the national economy and on social and cultural services.

The ever-increasing resources expended by the Socialist State on social and cultural measures in the interests of the whole people are a very important supplement to the individual money wage.

In socialist society social insurance of manual and clerical workers is compulsory, and is provided at the expense of the State. In the capitalist world on the other hand, social insurance is to be found in only a few countries, and in these the workers are obliged to pay a considerable portion of the insurance contributions from their own wages. Expenditure by the Soviet State on social insurance were 8.9 milliard roubles in the first Five Year Plan, 32.1 milliards in the second, 79.1 milliards in the fourth, and more than 92 milliard roubles in the first four years of the fifth Five-Year Plan.

In the U.S.S.R. the manual and clerical workers receive, at the expense of the State, social security pensions, free medical assistance, free or reduced-cost treatment in sanatoria and holidays in rest homes and children’s institutions, free education and vocational training, and student stipends. Every worker and employee has an annual holiday on full pay of not less than two weeks, while the workers in a number of trades have longer periods.

Between 1940 and 1954 expenditure out of the State Budget of the U.S.S.R. on social and cultural measures increased nearly three and a half times. State allocations for education increased from 22.5 milliard roubles to 65.6 milliards, for health services (including expenditure for this purpose out of social insurance funds) from 11.2 milliard roubles to 33.5 milliards, and for social welfare from 3.1 milliard roubles to 24.2 milliards. In addition, vast resources are expended on benefits to mothers of large families, and to mothers without breadwinners; in 1954, for example, such benefits amounted to 4.7 milliard roubles. In 1954 the population received from the State Budget, as a result of increased State expenditures in social and cultural services and other expenditure for the purpose of raising the material welfare of the working people, 146 milliard roubles.

In this way, many of the material and cultural requirements of manual and clerical workers are met out of expenditure by the State and social organisations on social and cultural services.

This is an important factor in the steady rise of real wages. As a result, the real wages of manual and clerical workers in the U.S.S.R. are approximately one-third larger than the sum which they receive annually as individual money wages.

The Socialist State holds all the levers affecting the material welfare of the working people and applies a policy of systematically raising real wages. As early as 1930, the real wages of the workers, taking into account social insurance and deductions from the net incomes (profits) of enterprises into the fund for improving living conditions, had risen to 167 per cent of 1913: In 1954 the average monthly wage of all manual and clerical workers in the U.S.S.R. was 206 per cent of the 1940 level. The retail price level in State, co-operative and collective farm trade, together with charges for rents and all forms of services, amounted in 1954 to 118 per cent of the 1940 level. Consequently the real wages of all manual and clerical workers and employees in the U.S.S.R. had increased between 1940 and 1954 by 74 per cent. When account is taken of the growth of State expenditure on cultural, social and living amenities, the real wages of manual and clerical workers had more than doubled in the same period. The real wages of manual and clerical workers in the U.S.S.R. in 1954 were approximately six times as high as before the Revolution.

This growth in the real wages of the workers of the U.S.S.R. compared with pre-revolutionary times has been brought about by a number of factors. Money wages have risen a great deal more than prices or the cost of services. The share of workers’ expenditure constituted. by rent and payment for municipal services, which before the Revolution amounted to a third of wages is now only about one-sixth of what it was. Besides their individual wages the workers of the U.S.S.R. receive considerable sums from the State in the form of social insurance benefits, various forms of aid, privileges, pensions, grants, holiday pay, free education, medical attention, etc. Before the Revolution the workers received hardly anything beyond their individual wages, and as a rule had no paid’ holidays. In calculating real wages it is to be taken into account that unemployment has been completely abolished in the U.S.S.R., so that all able-bodied members of the workers’ families can find work, which has led to a sharp reduction in the number of non-working members in these families. Finally, it must be kept in mind that the working day in the U.S.S.R. is considerably shorter than it was in pre-revolutionary Russia and so a worker receives a higher pay for each hour oflabour.

The steady rise in real wages brings improved nutrition of the working people in socialist society, increased consumption of manufactured goods by them, and an increase in their savings. Deposits of the working people in savings banks were 6’7 times more in 1954 than in 1940. In the conditions of socialist society, where the right to work, rest, material security in old age, or in the event of sickness and loss of earning capacity, is guaranteed, increased savings are a direct indication of the rise in living standards.

“Our revolution," said Stalin, “is the only one which not only smashed the fetters of capitalism and brought the people freedom, but also succeeded in creating the material conditions of a prosperous life for the people. Therein lies the strength and invincibility of our revolution." (Stalin, “Speech at the First All- Union Conference of Stakhanovites", Problems of Leninism, 1953, English edition, p. 670.

(1) In socialist society wages are the monetary expression of the worker’s share of that portion of the social product which is paid out by the State in accordance with the quantity and quality of each worker’s labour. Arising from the requirements of the basic economic law of socialism and the law of distribution according to work, the Socialist State plans the wages of the various categories of workers in each particular period. It does so in such a way that alongside the growth of the national economy and increased labour productivity, the wage level is systematically increased.

(2) Wages, correctly organised, are a powerful motive force of socialist production. They encourage workers to improve their skill, continuously to improve the technique and organisation of production, and to raise the productivity of social labour. Piece-rates in socialist society most efficiently combine the personal material interests of the worker with national economic interests. The following systems of piece-rates are used in socialist society: simple piece-rates, progressive piece-rates, and piece-rates-plus-bonuses. Time-rates depend on the length of time worked and the skill of the worker.

(3) The purpose of the grading system in socialist economy, is to organise wages in such a way that they stimulate the growth of the productivity of labour, especially in the key links in the process of production and encourage workers to improve their skill. Progressive and technically justified output standards correspond to socialist principles of management. The wage policy of the Socialist State is being carried out in the course of a struggle against petty-bourgeois equalising tendencies. This policy is based on all-round wage differentiation: higher pay for skilled and arduous work, and for workers m leading trades and branches of the national economy.

(4) The basic economic law of socialism determines a steady increase in real wages. Factors in raising real wages are: continuous growth of socialist production and productivity of labour in the complete absence of unemployment; systematic reduction of the price of consumer goods; the rise of the cultural and technical level of the workers, and of their skill; improved housing conditions of the working people. The individual money wage of manual and clerical workers is supplemented by large assignments from the State and from public organisations for social and cultural measures. These are an important means of raising real wages.

1.This figure includes only dwelling-space proper, i.e., it does not include kitchens, sculleries, bathrooms, lavatories, halls and passages.—Editor, English edition.