At any time, there is a given amount of unpaid labour in circulation in the form of goods or services representing more added value than workers were paid for. This given sum of unpaid labour represents total available profits. Each company tries to maximise its share of that total, and if a company does realise an above-average share, it means that some other companies receive less than average. The larger the company, the more likely it is to obtain a larger share of the available surplus, for reasons discussed later (see section C.5). The important thing to note here is that companies compete on the market to realise their share of the total surplus of profits (unpaid labour). However, the source of these profits does not lie in the market, but in production. One cannot buy what does not exist.
As indicated above, production prices determine market prices. In any company, wages determine a large percentage of the production costs. Looking at other costs (such as raw materials), again wages play a large role in determining their price. Obviously the division of a commodity's price into costs and profits is not a fixed ratio, which mean that prices are the result of complex interactions of wage levels and productivity.
Within the limits of a given situation, the class struggle between employers and employees over wages and benefits determines the degree of exploitation within a workplace and industry, and so determines the relative amount of money which goes to labour (i.e. wages) and the company (profits). Therefore an increase in wages may not drive up prices, as it may reduce profits or be tied to productivity; but this will have more widespread effects, as capital will move to other industries and countries in order to improve profit rates, if this is required.
The essential point is that the extraction of surplus value from workers is not a simple technical operation like the extraction of so many joules from a ton of coal. It is a bitter struggle, in which the capitalists lose half the time. Labour power is unlike all other commodities - it is and remains inseparably embodied in human beings. The division of profits and wages in a company and in the economy as a whole is dependent upon and modified by the actions of workers, both as individuals and as a class.
We are not saying that economic and objective factors play no role in the determination of the wage level. On the contrary, at any moment the class struggle can only act within a given economic framework. However, these objective conditions are constantly modified by the class struggle and it is this conflict between the human and commodity aspects of labour power that ultimately brings capitalism into crisis (see section C.7).
Usually wage increases lag behind productivity. For example, during Thatcher's reign of freer markets, productivity rose by 4.2%, 1.4% higher than the increase in real earnings between 1980-88. Under Reagan, productivity increased by 3.3%, accompanied by a fall of 0.8% in real earnings. Remember, though, these are averages and hide the actual increases in pay between workers and managers. To take one example, the real wages for employed single men between 1978 and 1984 in the UK rose by 1.8% for the bottom 10% of that group, for the highest 10%, it was a massive 18.4%. The average rise (10.1%) hides the vast differences between top and bottom. In addition, these figures ignore the starting point of these rises -- the often massive differences in wages between employees (compare the earnings of the CEO of McDonalds and one of its cleaners). In other words, 4.2% of nearly nothing is still nearly nothing!
Unsurprisingly, in a hierarchical system those at the top do better than those at the bottom. The system is set up so that the majority enrich the minority.