What Serves the Capitalists Best: Racist Pay Differentials or Racist Divisions?

by Bill Sacks

in September 24, 2021 (updated from original written in 2017)

As an indicator of racism in the US, some writers refer to the total amount of extra profits that the capitalists accrue from paying black and other minority workers (as well as women workers) less than white (male) workers in the US. Moreover, wage inequality is often expressed without reference to the even more intensely exploited workers of the so-called “global South” (or “third world” or “developing nations” or some other euphemism), who are subject to near-slave-labor conditions by local capitalists. The local capitalists are forced to act this way by conditions imposed on them by their imperialist overlords, whether they want to or not. Just because they are forced into this position, however, does not make them allies of the working class. This was a fatal error made by the Bolsheviks and Chinese Communists who called them “national bourgeoisie” and who mistakenly thought they would side with the working class against the imperialist invaders.

Under these conditions the wages of “global South” workers (and a portion of the working class in the imperialist countries as well) often sink well below what is needed for subsistence and survival of the worker and her/his family, what Marx called the (exchange) value of labor power, or in more modern terms, the basket of necessities. When this happens, it can rightly be termed “superexploitation” to differentiate it from wages that meet or exceed the value of labor power, as John Smith has done in his book Imperialism in the Twenty-First Century. In contrast, some authors use the term “superexploitation” casually to simply refer to much lower wages, which is a quantitative distinction. We suggest that Smith’s use of the term to refer to a qualitative difference – below the level of survival versus at or above the survival level – is more precise and therefore less confusing.

The estimated total racist differential wage (and its flip-side, added profit) that is usually estimated for US workers is something like $300 billion a year, and far greater for superexploited workers around the world (see Figure 1). Accurate or not, it is a quantity that is difficult to calculate because it is comprised of two separate parts that are not always (or rarely) estimated separately: 1) job category discrimination and 2) unequal pay for equal jobs. The total wage deficit of black workers is defined as the difference between what they actually earn compared to what their total wage would be if racism were absent – i.e., if black workers received the same median income as white workers, with no job discrimination and with equal pay for equal work.

Figure 1

Continued emphasis on the very concept of extra profits from racism, when taken out of context as it often is, is misleading for three reasons (examples given for US but even more overwhelmingly applicable in general to the global working class):

  • First, it diverts attention from the fact that all wages are lowered by the weakening and divisive effect of racism (and sexism) on the working class – wages for white (males) as well as for all others. And added profits from the lowering of all wages would be far larger than the estimated $300 billion or so per year. However, the lowering of all wages would be even more difficult to calculate, since the level relative to which wages are lowered would depend on the strength of united workers in the class war (as long as capitalism exists) and should be taken to be the entire product of the labor of the working class when freed altogether from capitalist exploitation (communism).
  • Second, it unwittingly implies – without intending to or explicitly saying so – that “normal” profits (if racism were absent) would be okay. This masks the fact that all profit, and indeed all (exchange) value, comes out of the labor of workers, and profit (basically surplus value) should be understood as stolen from the working class, who, in the absence of capitalist exploitation, would have this portion of produced value available for social needs such as schools, hospitals, and roads. [One might dispute whether surplus value is stolen, since its extraction, no matter how it is understood, is legal in capitalism. But legality does not determine reality, particularly since legality is itself determined by representatives of the capitalist class.] By failing to say that all profits represent theft, we inadvertently mimic the liberal error of calling some profits, like the added profits from racism or sexism, “excessive,” when all profits should be deemed “excessive,” as they represent value stolen from the working class, to the last penny, and used by the capitalist thieves for their own profit needs, political and social control, and personal desires.
  • Third, and most importantly, the main driver of racism, in terms of both function and intent, is not the extra profits, but rather that it divides and weakens the working class. It 1) sets worker against worker, 2) unites workers of one color (or sex) with capitalist bosses of the same color (or sex), and 3) prevents workers of all colors from uniting against the capitalist class and its profit system.

Thus continual reiteration of this dollar figure may be an easy shortcut, but it distorts and hinders understanding. Without further context, this easy-to-understand and more-easily-quantifiable additional-profit-from-racism (differential wage) diverts attention from the main motivation for racism on the part of ruling classes around the world – division and weakening of the working class of each nation, and the entire global working class. It risks appearing as though only black and other nonwhite workers are hurt by this racist wage differential and keeps in the background, or completely hides, the fact that it also massively attacks white workers of the imperialist nations as well. It’s perfectly legitimate to include the dollar estimate of the wage differential (added profits) at the end of a list of the other more important points, but not to substitute for them, as is often done for brevity.

For completeness here, the reason that all wages are lowered by racism is precisely the divisive function of racism that prevents effective struggles for wage increases – as well, of course, as effective struggle for improved living and working conditions (reforms – battles in the class war) and, more importantly, effective struggle to abolish the entire capitalist system (revolution – victory in the class war). Incidentally, in our opinion the term “class war” is clearer and more accurate than “class struggle,” as it implies the need to resolve and terminate the conflict by abolishing the capitalist system rather than having to continually fight to keep our heads above water, and to achieve better working and living conditions, throughout our whole lives, generation after generation.

The reason that the divisive function of racism takes precedence over the added profits (differential wage) is that the main necessity, and therefore main goal, of the capitalist class – whose entire existence as a class is based on the exploitation, the control over, and the oppression of the overwhelmingly larger working class – is to secure, without challenge, their economic and political power, which they maintain mainly through their exclusive control over the instruments of the state and all other social institutions. This is true in every country in the world today.

To counter the claim that white/male workers are BENEFICIARIES of racism and sexism (e.g., “white skin privilege”), let’s look at the many ways their lives are worsened by these forms of divisiveness

It is anything but obvious (to most non-Marxists) that racism hurts white workers, and sexism hurts male workers – a point that is crucial in any efforts to unite the entire working class globally. To make this clearer, it is useful to extend the added-profit calculation to include the amount of profits that are taken out of the labor of white or male workers as well as black or female workers (as well as that taken out of the labor of other nonwhite workers).

Let’s take the racist wage differential in the US first, though the gender differential is far larger, simply because of the greater number of women workers than minority workers (albeit overlapping categories). The total profit taken out of the hides of white workers, and the total profit taken out of the hides of black workers, each turn out to be a good bit larger than the added profits from the differential wage of $300 billion per year.

In summary (the details are included in the box below for those interested), the total profit stolen by US capitalists from the entire US working class, white and nonwhite, is about $1,400 billion per year, which includes the racial wage differential, some of which comes from the labor of Latin, Asian, immigrant and Native American workers. For simplicity we will speak only of white and black workers, though the figures would require slight amendment to include all nonwhite workers, but the concept remains the same. Of this total, the portion stolen from the labor of white workers is very roughly $900 billion, while that stolen from black workers each year is the other $500 billion or so per year, which is $200 billion in addition to the $300 billion racial wage differential (see Figure 2). In the absence of capitalism this total would belong to the collective and united working class in the US (and everywhere), and most of it would be used for social needs such as schools, hospitals, public transportation, roads, etc.

Figure 2

Since there are roughly four and a half times as many white workers, who together lose that $900 billion, as there are black workers, the share of each white worker’s productive efforts that lines the pockets of the capitalist class would be less than half that of each black worker, on average. So white workers individually are robbed of less labor than black workers individually (that is, they are each less intensely exploited), but collectively more is stolen from the white portion of our class, purely because of their far greater number.

Thus, as far as the capitalists are concerned, they gain more from exploiting white than black workers. And they are enabled to do so, and are able to maximize that total, by their maintenance of racist (and sexist) divisions that make it so difficult for our class to fight back in a united way, using all our potential strength.

Details of the wage deficits
Each year in the US the total profit (before taxes) is on the order of $2 trillion, or $2,000 billion, per year [this was originally written in 2017].

The proportion of US corporate profits that comes from the exploitation of workers in other countries – whether industrially developed, as in Europe, or lesser developed – many of whom are superexploited (paid below the value of their labor power or basket of necessities), is on the rise but today approximates 30% of that total, or some $600 billion (http://www.businessinsider.com/chart-of-the-day-foreign-profits-as-a-percent-of-total-profits-2011-5). So the remaining, and major, portion that comes from exploitation of workers within the US is around $1,400 billion each year.

Since white workers constitute the majority of the US work force, the total profit taken out of their hides is the majority of the $1,400 billion total per year – perhaps $900 billion per year in round figures (which is close enough for our order-of-magnitude point), with the other $500 billion taken from the exploitation of black (and other nonwhite) workers. Compared to the racial differential of roughly $300 billion, the labor of white workers contributes profits in a ratio of some 3 to 1 ($900 billion to $300 billion), and the labor of black workers contributes total (as opposed to the differential) profits in a ratio of perhaps 1.7 to 1 ($500 billion to $300 billion) – less due to their being smaller in proportion to white members of the working class, but increased by their higher average intensity of exploitation.

So, while something like $1,400 billion represents value stolen from the US working class as a whole, and while about $900 billion of that total comes from the labor of white (and nonwhite other than black) workers, and about $500 billion comes from the labor of black (and other nonwhite) workers, the wage differential (additional profits from racist wage differentials) is a smaller amount, $300 billion. Again, these figures are only rough estimates and vary from year to year, but the relative magnitudes are what count for the point we are trying to make here – which is that the added profits from racism (the wage differential – $300 billion) is smaller than the total robbery of either black or white members of the working class ($500 billion and $900 billion, respectively), figures that are as big as they are, largely because of the racism and sexism that divide and weaken us.

Furthermore, the racial differential is about 21% of the total domestic profit ($300 billion compared to $1,400 billion), while the overall lowering of the total wage is a much larger portion, even though within the context of capitalism it is incalculable, as it depends on the strength of the united working class, the size of the reserve army of labor (unemployed workers), and many other factors, and in the context of communism (working-class rule) the current lowering of the total wage would be 100% of the $1,400 billion. That is, the total profit of the capitalist class constitutes the total lowering of the collective income of the working class. Of course, in the context of communism, the working class would be enabled to produce far more in order to satisfy the personal and social needs not only of the working class in the US but of workers elsewhere in the world, and all workers everywhere would be able to share among all. The very goal of the dominant economic class (the capitalists), which is the making and maximization of profit, prevents us from basing production instead on the needs of our class. The goal of profit both replaces human needs as the basis and constricts our ability to produce even more toward the satisfaction of those needs, here and abroad.

And most importantly, this entire massive fund of corporate profits is firmly based on the divisive and weakening function of racism (and sexism) that both in the short run prevents workers from capturing more of the value we produce and in the long run prevents the working class from abolishing our exploitation altogether, through revolution to abolish capitalism. Furthermore, the portion of the working class that makes the most profit for the capitalist class, and is therefore more exploited in total, is the white members of the working class, aside from the gender differential.

By focusing on the relatively modest portion (~21%) of total profits represented by the wage differential, the understanding of, and attention to, the dominant portion of total profits remains hidden and ignored. The vital need for revolution and working-class rule will only become clear once the entire working class, black and white workers alike, recognize how badly we are being exploited every day. That we are all oppressed is something we feel on a daily basis, but that we are all exploited is a theoretical concept that is further removed from direct experience and on which only Marxists can shine a light. Furthermore, it remains hidden behind a smokescreen of pretension that, apart from exceptions, we earn a fair day’s wage for a fair day’s work.Only through the understanding of exploitation will millions of workers become clear that the oppression cannot be reformed away through the class war, since the capitalists can get away with greater or lesser degrees of oppression – which varies with the intensity of the class war – but the one thing that defines their system and that they cannot do without is exploitation.

Thus, racism and sexism are aimed at both white (and male) members of the working class as well as at black (and female) members of the working class, and, depending on which aspect is considered, white workers as a whole contribute more to the profits of the exploiters than do black and other minority workers – simply because white members of the working class, while less intensely exploited on average, significantly outnumber black workers.

Furthermore, and right to the point, white members of the working class contribute far more to the profits of the exploiters (i.e., are more underpaid) than they would contribute in the absence of racism, and this is the key point we want to make to all workers. Both white and black workers pay through the nose for racism, even if not equally. But who would tolerate being robbed just because someone else is robbed of a greater sum? The ruling class never fails to point out to white/male workers that they are less oppressed, urging them to believe that being less oppressed is a privilege. It’s the failure of white workers to realize they are being robbed (exploited) at all – the fruit of being deceived by racist ideology – that prevents the class unity needed for victory in the class war. Making that perfectly clear is the job of Marxists.

It is crucial that we be able to keep in mind two related aspects simultaneously: total numbers as well as proportions, total results of exploitation as well as intensity of exploitation. From an individual point of view the intensity of exploitation and oppression is more apparent, while from a collective point of view the total is more apparent. But both are vitally important to understand and explain at the same time, or understanding falters.

White workers are the main intended recipients of the deception embodied in racist ideology

As to the fictitious nature of both the “black race” and the “white race,” racism was invented, or at least greatly magnified and applied, by the slavocracy in the American colonies in the 1700s as a tool to divide white indentured servants from enslaved Africans and their descendants in the colonies. The main recipients of racist ideology (those for whom the deception was mainly intended) were white members of the working class (regarded by the rulers as “white trash” and intensely exploited and oppressed), even as the most immediate victims of racist practice were the enslaved as well as free Africans and their descendants. It may require some explanation to make this clear, but that doesn’t relieve us of the responsibility to do so.

Racist ideology, albeit not racist practice in the form of differential exploitation and oppression, is mainly, albeit not exclusively, intended for the consumption of white workers. It diverts the attention of white workers from their own exploitation and oppression (oppression is for the purpose of enabling exploitation) and sets them against their natural class sisters and brothers. The very invention of the “white race” was, and remains, entirely dependent on the invention of the “black race.” Neither false concept has any meaning without the other and both should be treated as inseparable concepts.

Furthermore, the many institutions that have grown up around this invented, scientifically imaginary distinction maintain this divisive effect, partly under their own momentum and partly because of infusions of deliberate discrimination from time to time. For example, during the 1930s under Roosevelt’s presidency, public housing was restricted to white people only, and that magnified the already existing residential segregation such that to this day neighborhoods are still almost entirely segregated. This has repercussions in terms of schools, streets, public transportation availability, garbage pickup, merchants, policing policies and practices, and so forth.

Within the labor movement, there have been unions, like the American Federation of Labor (AFL), that divided workers along racial and national lines. Thus in AFL led strikes in the latter 1800s and first half of the twentieth century, the bosses could enlist black and immigrant workers who were excluded from unions to act as strike breakers. In contrast, the Knights of Labor, the Industrial Workers of the World (IWW) and later the Congress of Industrial Organizations (CIO) enlisted all workers and were able to lead more successful worker actions. Today there are few unions (only 10% of the workforce) and many places of work with de facto segregation between lower and higher paid jobs, be it in retail, health care, schools or factories, so that the unity of workers remains undermined.

Also from time to time the ruling class’s state interferes in the opposite direction, when forced to by working-class rebellion such as the civil rights movement. Thus the Civil Rights Acts of the 1960s under Johnson that ended legal segregation in public facilities and made minimal headway against segregated neighborhoods. However, white flight in fact negated this minimal legal gain. It is important to note, however, that white flight did not require a racist attitude on the part of white families who moved out (although many, if not most, of them almost certainly did harbor such feelings), but only an attempt to maintain the value of their houses which was destined to decline because of the racism in the surrounding society. This is one example of the momentum gained by racist institutions and ideology without requiring racist attitudes at every turn. Yet the effect is the same oppression of black workers and at the same time it results in oppression of white workers of a very different sort (after all, feeling one has to move from a neighborhood one has lived in for a long time, merely in order to retain what one can of the value of one’s long-term investment in one’s home, isn’t a desirable situation).

The passage of the Civil Rights Acts was also to the advantage of the ruling class, in order to quell rebellions that were costing them in production and other expenses associated with disruptions of all sorts. In fact, the ruling class never does anything that isn’t to their own advantage, or at least always finds way to profit from actions forced upon them by mass protest, even if on occasion it also benefits certain members of the working class, or even the entirety of our class.

If we are to be able to unite the entire working class, black and white and all other nonwhite workers, into a powerful multiracial force against capitalism, we will have to pay closer attention to the more nuanced and expanded class-based explanations of racism, particularly, but far from only, to white workers and students. We can’t simply assume that our audience is comprised of black workers and students who need little explanation of racism based on their experiencing the oppression every day of their lives and knowing directly that racism is the cause.

However, even for black workers and students, one’s living experiences and the larger social context and function that they serve are two vastly different things. For example, granting that few white workers or students understand the ways that racism is responsible for their own oppression, how many black workers and students understand the ways that racism hurts white workers and students and that this harm to both is a basis for multiracial unity in the fight to defeat racism?

That’s why the working class’s daily experience – whether black or white members of the working class – will never, by itself, lead to a revolutionary outlook or movement, or even the need for unity between black and white workers and students in the class war. And that’s why this understanding requires the involvement of those who study and comprehend the history, economics, and politics of capitalism on the societal level – Marxists. All workers need our Marxist explanations, and shortcuts can only distort and withhold this understanding.

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