Real wages and exploitation: A multi-period analysis of income distribution and productivity

Abstract

This paper investigates the relationship between income distribution, exploitation, and real wages within a multi-year production framework. Specifically, it analyzes how variations in the distribution of national income between wages and profits affect average labor productivity and the real wage. A theoretical model is developed in which productivity growth depends on the profit share, allowing the calculation of real wages and the time required for different income distributions to yield equivalent purchasing power. The analysis shows that, under certain conditions, the same real wage can arise in a situation with exploitation and in one without it. In these cases, as a general rule, the two wage levels involved determine an interval of wage levels where the real wage exceeds that corresponding to the zero-exploitation scenario. The results further demonstrate that the effect of increasing profit, or equivalently the exploitation rate, on real wages depends on the duration of the reference period, productivity growth, and wage share. In some cases, higher profit can coexist with higher real wages due to productivity gains. The study contributes to classical and Marxian distribution theory by extending linear production models to a multi-period setting and by clarifying the dynamic interaction between productivity growth and income distribution. These findings provide new insights into the conditions under which exploitation and improvements in workers’ purchasing power may coexist.