A worker gets a job, works for a day or a week and receives a wage. It can look as though the capitalist simply bought a certain amount of labor and paid for it. Marx showed that something different is happening.
The worker sells labor power, not labor
The worker does not sell labor. The worker sells labor power — the ability to work for a certain period of time. That distinction is the key to understanding capitalist exploitation.
Labor power can become a commodity only under particular social conditions. Workers must be legally free to sell their ability to work, but they must also be separated from the land, machinery, factories and other means of production they would need to produce independently. They are therefore free in one sense and compelled in another: not legally owned by a slaveholder, but, without access to the means of production, forced to sell their labor power in order to live.
Labor power has a value
Like other commodities, labor power has a value. That value is tied to what is necessary to produce and reproduce the worker’s ability to work: food, clothing, housing and the other necessities of life, as well as the raising and education of new generations of workers. What counts as necessary changes historically and differs from one society to another.
The wage is the money form in which the value of labor power appears. Wages can rise above or fall below that value, and workers struggle constantly over wages, hours and conditions. But to uncover the basic workings of capitalism, Marx begins by assuming the capitalist pays the worker the full value of labor power.
The question then becomes: if the capitalist pays for everything at its value, where does profit come from?
Living labor creates new value
The answer lies in what happens after labor power has been purchased. Labor power has a special quality that no machine, building or raw material possesses: when workers put it to use, they create new value.
A machine helps workers produce things, but the machine itself does not create new value — its own value is gradually passed on to the products made with it. Raw materials likewise pass their existing value into the finished commodity. Living labor does something different: it adds new value. And workers can create more value during the working day than the value of the labor power for which they are paid.
Surplus value is unpaid labor
Suppose that during part of the working day a worker produces an amount of new value equal to that day’s wage. The worker does not stop working at that point. For the rest of the day, the worker keeps producing new value — but no additional wage is paid for that portion.
Marx called the first part necessary labor, because it produces value corresponding to the worker’s labor power. He called the rest surplus labor, and the value created during it surplus value. The capitalist owns the commodities produced during the entire working day, so when they are sold, the capitalist receives the value created during both the paid and the unpaid portions of the worker’s labor.
Exploitation happens in production
This is the basis of capitalist exploitation. It does not depend on the capitalist secretly stealing part of the worker’s paycheck or refusing to pay the agreed wage. Those things happen, but Marx’s point goes deeper: even when the worker receives the full value of labor power, the capitalist still receives more value from the worker’s labor than was paid out in wages.
The exchange can therefore look perfectly fair on the market — the worker sells labor power and the capitalist pays its price. The exploitation takes place in production. Wages help conceal it: a paycheck appears to pay for all the work performed during the day, and the division between the part of the day in which workers reproduce the value of their wages and the part in which they work for the capitalist without equivalent payment disappears from view.
Surplus value is the source from which the capitalist class draws its income. Once the commodities are sold, it is divided into different forms — industrial profit, commercial profit, interest, rent and other claims on the wealth workers produce.
This is why the struggle over the working day has always been a class struggle. Capitalists seek longer hours, greater intensity of work and higher productivity because each can increase the surplus labor they receive. Workers fight for higher wages, shorter hours, safer conditions and greater control over the labor process because these struggles limit the amount of their lives subordinated to capital.
Under capitalism, the worker’s ability to create becomes a commodity, and the products of labor belong to someone else. Marx’s discovery of surplus value showed what lies beneath the apparent equality of the wage bargain: workers produce the wealth, while the owners of capital appropriate the surplus.
Additional reading
Capital, Volume I, Chapter 6: The Buying and Selling of Labour-Power — by Karl Marx (1867). Marx explains why labor power becomes a commodity under capitalism and what determines its value.
Capital, Volume I, Chapter 9: The Rate of Surplus-Value — by Karl Marx (1867). Marx develops the distinction between necessary labor and surplus labor and shows how surplus value arises from the working day.
Value, Price and Profit — by Karl Marx (1865). A shorter introduction to wages, labor power, surplus value and profit.