Reserve army of labour is a concept in Karl Marx's critique of political economy.Francis Green, "The Reserve Army Hypothesis: A Survey of Empirical Applications," in Paul Dunne (ed.), Quantitative Marxism, Cambridge: Polity Press, 1991, pp. 123–140. It refers to the unemployed and underemployed in capitalist society. It is synonymous with "industrial reserve army" or "relative surplus population", except that the unemployed can be defined as those actually looking for work and that the relative surplus population also includes people unable to work. The use of the word "army" refers to the workers being conscripted and regimented in the workplace in a hierarchy under the command or authority of the owners of capital.
Marx did not invent the term "reserve army of labour". It was already being used by Friedrich Engels in his 1845 book The Condition of the Working Class in England. What Marx did was theorize the reserve army of labour as a necessary part of the capitalist organization of work.
Prior to what Marx regarded as the start of the capitalist era in human history (i.e. before the 16th century), structural unemployment on a mass scale rarely existed, other than that caused by natural disasters and wars., chapter 2. In ancient societies, all people who could work necessarily had to work, otherwise they would starve; and a slave or a serf by definition could not become "unemployed". There was normally very little possibility of "earning a crust" without working at all, and the usual attitude toward beggars and idlers was harsh.Garraty, p. 14. Children began to work at a very early age.
Marx's discussion of the concept Although the idea of the industrial reserve army of labour is closely associated with Marx, it was already in circulation in the British labour movement by the 1830s. Engels discussed the reserve army of labour in his famous book The Condition of the Working Class in England (1845) before Marx did. The first mention of the reserve army of labour in Marx's writing occurs in a manuscript he wrote in 1847, but did not publish:
The idea of the labour force as an "army" occurs also in Part 1 of The Communist Manifesto, written by Marx and Engels in 1848:
Marx introduces the concept of the reserve army of labour in chapter 25 of the first volume of Capital: Critique of Political Economy,Karl Marx, Das Kapital, chapter 25 twenty years later in 1867, stating the following:
His argument is that as capitalism develops, the organic composition of capital will increase, which means that the mass of constant capital grows faster than the mass of variable capital. Fewer workers can produce all that is necessary for society's requirements. In addition, capital will become more concentrated and centralized in fewer hands.
This being the absolute historical tendency under capitalism, part of the working population will tend to become surplus to the requirements of capital accumulation over time. Paradoxically, the larger the wealth of society, the larger the industrial reserve army will become. One could add that the larger the wealth of society, the more people it can also support who do not work.
However, as Marx develops the argument further it also becomes clear that depending on the state of the economy, the reserve army of labour will either expand or contract, alternately being absorbed or expelled from the employed workforce:
Marx concludes as such: "Relative surplus-population is therefore the pivot upon which the law of demand and supply of labour works". The availability of labour influences wage rates and the larger the unemployed workforce grows, the more this forces down wage rates; conversely, if there are plenty jobs available and unemployment is low, this tends to raise the average level of wages—in that case workers are able to change jobs rapidly to get better pay.
Composition of the relative surplus population Marx discusses the army of labor and the reserve army in Capital Volume I, Chapter 25, Section IV. The army of labor consists in those working class people employed in average or better than average jobs. Not every one in the working class gets one of these jobs. There are then four other categories where members of the working class might find themselves: the stagnant pool, the floating reserves, the latent reserve and pauperdom. Finally, people may leave the army and the reserve army by turning to criminality, Marx refers to such people as lumpenproletariat.Duggan, Marie Christine (2013) "Reserve Army of Labor and Migration" in the Encyclopedia of Global Human Migration, edited by E. Ness, Wiley Publishers.http://onlinelibrary.wiley.com/doi/10.1002/9781444351071.wbeghm451/abstract The stagnant part consists of marginalised people with "extremely irregular employment". Stagnant pool jobs are characterized by below average pay, dangerous working conditions and they may be temporary. Those caught in the stagnant pool have jobs, so the modern definition of the employed would include both the army of labor plus the stagnant pool. However, they are constantly on the lookout for something better. The modern unemployed would refer primarily to the floating reserve, people who used to have good jobs, but are now out of work. They certainly hope that their unemployment is temporary ("conjunctural unemployment"), but they are well aware that they could fall into the stagnant pool or the pauper class. The latent part consists of that segment of the population not yet fully integrated into capitalist production. In Marx's day, he was referring to people living off of subsistence agriculture who were looking for monetary employment in industry. In modern times, people coming from slums in developing countries where they survive largely by non-monetary means, to developed cities where they work for pay might form the latent. Housewives who move from unpaid to paid employment for a business could also form a part of the latent reserve. They are not unemployed because they are not necessarily actively looking for a job, but if capital needs extra workers, it can pull them out of the latent reserve. In this sense, the latent forms a reservoir of potential workers for industries. Pauperdom is where one might end up. The homeless is the modern term for paupers. Marx calls them people who cannot adapt to capital's never ending change. For Marx, "the sphere of pauperism", including those still able to work, orphans and pauper children and the "demoralised and ragged" or "unable to work".
Marx then analyses the reserve army of labour in detail using data on Britain where he lived.
Criticism and debates
Economist criticisms Some economists such as Paul Samuelson have taken issue with Marx's concept of the reserve army of labour. Samuelson argues that much Marxian literature assumes that the mere existence of the unemployed drives down wages, when in reality is dependent upon contingent factors. (Are the unemployed easily available as replacements? Is the mere threat of replacement sufficient to get workers to accept a wage cut or does the employer have to demonstrate this is not an empty threat?) Samuelson argues that if prices also fall with money wage, then this does not mean real wages will fall. Samuelson also argues that wages will fall only until there are no more unemployed to bid it down: the reserve army can reduce wages only by decreasing its size. Samuelson's concludes that to mean that while the unemployed can reduce wages, they are incapable of reducing them to anywhere near subsistence levels before the unemployed all become employed.Samuelson, Paul "The Collected Scientific Papers of Paul Samuelson, Volume 1" MIT Press, 1996, pp.365-368
A similar argument was made by Murray Rothbard, who argued that if the reserve army lower wages by being absorbed into the ranks of the employed, then eventually it will disappear and be incapable of being a threat (that also means that the risk of perpetual impoverishment is averted). Rothbard observes that this is supported by modern market economics, which holds that unemployment lowers wages and thus ultimately eliminates itself. Thus, Rothbard concludes that the reserve army would ultimately cease to be a threat. Rothbard also argues that industries can experience an increase in demand for other works thanks to increasing productivity caused by technology, which will then decrease unemployment due to a greater demand for workers caused by expanding production capability.Rothbard, Murray, An Austrian Perspective on the History of Economic Thought: Classical economics, Ludwig von Mises Institute, 2006, pp.424-425
Immiseration Some writers have interpreted Marx's argument to mean that an absolute immiseration of the working class would occur as the broad historical trend. Thus, the workers would become more and more impoverished and unemployment would constantly grow.Kenneth Lapides, Marx's Wage Theory in Historical Perspective: Its Origins, Development, and Interpretation. Westport: Praeger 1998, chapter 12: "The 'increasing misery' debate", pp. 237-258; Thomas Sowell, "Marx's 'increasing misery' doctrine", American Economic Review, L, No. 1, March 1960, pp. 111–120.Thomas Sowell, Marxism: philosophy and economics. London: George Allen & Unwin, 1985, chapter 10. This is no longer credible in the light of the facts because in various epochs and countries workers' living standards have indeed improved rather than declined. In some periods, unemployment had been reduced to a very small amount. In the Great Depression, about one in four workers became unemployed, but towards the end of the post-war boom unemployment in richer countries reduced to a very low level. However, economic historian Paul Bairoch estimated in the mid-1980s that in Latin America, Africa and Asia "total inactivity" among the population was "on the order of 30-40% of potential working man-hours"—a situation without historical precedent, "except perhaps in the case of ancient Rome".Paul Bairoch, Cities and Economic Development. From the Dawn of History to the Present. London: Mansell, 1988, p. 466.
Other writers, such as Ernest Mandel and Roman Rosdolsky, argued that in truth Marx had no theory of an absolute immiseration of the working class; at most, one could say that the rich-poor gap continues to grow, i.e. the wealthy get wealthier much more than ordinary workers improve their living standards. In part, the level of unemployment also seems to be based on the balance of power between social classes and state policy. Governments can allow unemployment to rise, but also implement job-creating policies, which makes unemployment levels partly a political result.