Classical Political Economy: the subsistence wage and concerns about guaranteed employment

Abstract

In the theoretical framework of classical political economy, including the revisions of Marx and the more recent work of Piero Sraffa and others, the concept of the subsistence wage figures prominently. Here, following a recounting of this concept and demonstrating its significance not only for classical theory but also for larger social concerns, I argue that the "base wage" ­as it is sometimes termed­ as articulated within a "Job Guarantee" program, is ­or should be­ comparable to the subsistence wage but requires modification to make it ­roughly­ equivalent. It will be demonstrated that adherents of the classical approach did not rest their wage theory on a quasi-neoclassical supply-demand approach ­with some primitive marginal productivity notion lying behind a supposed demand for labor schedule­, but understood wages as socially determined where institutional and historic forces established a normative standard around which market wages gravitated. Such an approach was shared by, among others, Thorstein Veblen and John Maynard Keynes.