CHAPTER 19
Inequality, Exploitation, and Economic Institutions
LEARNING OBJECTIVES
Define and describe surplus labor.
Discuss what constitutes exploitation and how exploitation occurs in various economic
systems over time, including in contemporary capitalism.
OUTLINE OF CHAPTER
I. Employee Compensation and Corporate Profit
II. Putting Numbers on a Raw Deal
III. Are Lisa and Paul Exploited?
VIII. What is the degree of Exploitation in America?
IX. Causes of Conflict
X. What Determines the Rate of Exploitation?
KEY TERMS
exploitation
a situation in which one group or class appropriates the labor of another group or class without
paying the market price for all the commodities produced by that labor
intensity of labor
the effort an employee exerts each hour
monopsony
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Define and describe surplus labor.
1. What is surplus labor? Give an example.
2. How is surplus labor different from necessary labor?
Necessary labor is the hours worked to produce an amount equal to the value of her
3. Explain how surplus labor relates to profits for the employer.
Discuss what constitutes exploitation and how exploitation occurs in various economic
systems over time, including in contemporary capitalism.
4. What is exploitation as discussed in this chapter? Does an employee need to be making
low wages to be exploited?
Exploitation means that one group or class appropriates the labor of another group or
5. Does exploitation depend on the absolute value of your wage or salary? Why or why
not?
Exploitation depends on the difference between the market price of the commodities
6. Why does exploitation necessarily occur in a capitalist economy? What happens to the
employer if there is no surplus labor? To the employee?
7. Was there exploitation in the prehistoric communal society? Why or why not?
8. What put a limit on the rate of exploitation in a slave economy?
Define and use measures of exploitation.
9. Assume an employee works five hours producing an amount of product equal in value to
her wage and then spends another three hours producing an amount of product over and
above the value of her salary. What is the number of hours of necessary labor? Surplus
labor? What is the rate of exploitation? Explain in words what the numbers mean.
10. What does a rate of exploitation mean?
11. If you were an employer, would you want a high or low rate of exploitation? Explain.
A low rate of exploitation would mean less surplus. An employer seeking to maximize
List and discuss the sources of conflict between employers and employees and the rate of
exploitation.
12. Explain why employers and employees bargain or struggle over necessary and surplus
labor. What are the three main sources of conflict?
Conflicts over wages and salaries; conflicts over the number of hours in the workday;
13. essary labor? Profits for the
employer?
14. Even if employee compensation rises and the number of hours of work remains
unchanged, why might an employer still make the same amount of profit or even
increase profits?
15.
above a wage ceiling?
A wage floor is the lowest possible wage or the subsistence wage. Payment below this
Give a brief overview of the history of labor conflicts.
16. What factors would give employers power as they bargain with employees over
compensation, hours, and effort? Explain.
17. What factors would give employees power as they bargain with employers over
compensation, hours, and effort? Explain.
Labor unions, the safety net, and noneconomic institutions such as the pro-labor or pro-
18. When was union membership at its highest level? Why?
Unionization was 35% of employees in 1955.
19. What has happened to union membership since the 1950s? Why?