"[I]t is clear that English manufacture must have, at all times save the brief periods of highest prosperity, an unemployed reserve army of workers, in order to be able to produce the masses of goods required by the market in the liveliest months."

The Reserve Army of Labor

One of the central features of capitalism is the oversupply of labor, a large mass of people that enter and leave the labor force according to the needs of capital. During an upswing in the business cycle, additional labor is necessary to utilize a business’s full capacity. As sales slacken during a recession, workers no longer needed are then dismissed. The reserve army of labor—with brief and very unusual exceptions—is always present. Under the exceptional conditions of the Second World War, there was full employment in the United States because it was necessary to expand the labor supply for the war effort. This was accomplished partially by bringing large numbers of women into the labor force. Full employment was reached at a time when 11 million people were in the armed forces and thus not part of the labor force.

When considering the surplus of workers in the reserve army of labor, it is important constantly to keep in mind two points. First, there is not an absolute surplus population, but rather a surplus in the context of a society ruled by the profit motive and the golden rule of accumulation for the sake of accumulation. Second, there would be no surplus of labor if everyone had enough to eat, a decent place to live, health care, and education, and workers had shorter work hours and longer vacations so they could have more leisure and creative time.

Business owners or CEOs protect and maintain the structural and mechanical parts of their operations, even when not fully utilized (or not used at all) because of insufficient demand. Capitalists take care of their buildings—factories, offices, and stores—and the various pieces of machinery and equipment are usually serviced and maintained regardless of business conditions. Workers, on the other hand, are disposable. Capital wants to obtain labor and use it when needed, and layoff workers when they aren’t needed. Treating labor as a disposable and/or easily replaceable part of the production process promotes capitalism’s central driving force—the never-ending drive to accumulate wealth. It is of critical importance to the functioning of capitalism as a system because it enables individual capitalists to change course quickly in response to changing economic conditions.

What economic sense could it make for a capitalist to pay a workforce to do little or no work during a recession? What business sense would it make for a farmer to pay a person year-round when all that’s needed is extra labor during a short harvest period? The argument could be made that there are certain individuals that have key skills and employers would be well served by paying these persons through a slack period to insure that they would be available when demand for the product or service begins to grow again. To some extent this happens, but the reserve army also includes technical workers—computer scientists, engineers, and technicians—so it is possible to find ready replacements for many seemingly irreplaceable workers.

Members of the reserve army—a mass of people living in insecurity or fearful of future job prospects—can be thought of as belonging to one of the following broad categories:

1. the unemployed (including those officially recognized as unemployed because they have recently looked for work as well as those that have stopped looking because they can’t find jobs);
2. part-time workers that want to work full-time;
3. people making money independently (self-employed) doing various odd jobs or getting occasional work while desiring a full-time job;
4. workers in jobs that are likely to be lost soon (due to economic downturn, increased mechanization, or their jobs moving to countries where workers earn lower wages). Although not unemployed, these workers usually know that they are in a precarious situation and behave accordingly. Agricultural labor displaced by increased productivity in the countries of capitalism’s center no longer provides large numbers of reserve army members. However, people displaced from agriculture in the periphery are a huge potential source of reserve labor for their own countries and, as immigrants, for the center;
5. those not counted among the economically active population but available for employment under changed circumstances (such as prisoners and the disabled).

Through much of U.S. history, employers had the right to terminate employment at will. As far as capital is concerned, this is the most desirable situation because it provides the highest level of flexibility to control labor and labor costs. The wording of an 1884 Tennessee Supreme Court decision is an indication of the extent of capital’s rights during this period:

Men must be left, without interference to buy and sell where they please, and to discharge or retain employees at-will for good cause or for no cause, or even for bad cause without thereby being guilty of an unlawful act per se. (Payne v. Western & Atlantic Railroad, Tennessee 1884)

The doctrine of firing workers at will applied to most workers, except where union contracts stipulated otherwise. However, legislation at the state level and legal findings in state courts gradually modified this right of capital for many states. This made it more expensive to fire workers with implied contractual rights to continued employment—when not done for reasons of financial need—often resulting in lengthy legal battles and/or severance pay. Capital has responded with techniques to overcome this handicap such as increased use of temporary, part-time, and contract labor, the privatization of government functions, and outsourcing portions of industrial and service operations to other locations at home and abroad. All of these contingent or nonstandard work arrangements have the advantage for capital that they further weaken its already weak obligations to workers.

The Supply of Workers for the Reserve Army

The reserve army has not remained the same over the years. The details of its composition and sources of supply have varied through history, according to local conditions and the economic relations between the countries of capitalism’s center and periphery. The supply of people for the reserve army is generally provided through the normal workings of capitalist development—job growth is rarely great enough to keep pace with both population growth and the employment needed for those workers displaced by increased labor productivity. Sometimes land is taken for development—for dams, roads, and factories—forcing displaced farmers to seek employment in cities. Productivity growth, the mantra of many academic economists, is supposedly good for both capital and labor. It is maintained that as productivity increases, higher wages for workers are possible while at the same time higher profits can go to owners of capital. However, the reality of increasing labor productivity under capitalism usually has been quite different.

Using new technologies to increase production with less labor, early capitalist management of agriculture in Western Europe became more profitable than relying on rents paid by tenant farmers. Tenants and laborers were forced off the land, expanding the number of those who had no alternative but to sell their labor power and participate in the huge migration to cities during the initial growth of capitalism. During early stages of its development, the United States had no such internally available reserve of labor. Before the mid 19th century most of the new immigrants from Europe became farmers and craftspeople. With little industrial development, there was no need for a sizable reserve army. Where large numbers of workers were needed—on cotton and tobacco farms in the South—slaves provided the labor. Workers were subject to the master’s whip rather than the fear of unemployment.

As industry grew in the North, a continuous stream of labor was attracted and actively recruited from abroad. Each new wave of immigrants entering the reserve army of labor—the Irish in the 1850s, the Chinese in the western states in the 1870s, the Italians and Eastern Europeans of the early 1900s, and the “undocumented” Latin Americans of the last half century—served simultaneously to put the fear of unemployment in existing workers and to distort consciousness and solidarity with the poison of racism. The African Americans migrating to the North during and after the two world wars and the farmers leaving the land after the Great Depression and Second World War provided additional workers for the reserve army in the United States.

In the period immediately after the Second World War, increasing productivity coincided with increasing wages in the United States. Gains in hourly wages in manufacturing during the rapid economic growth from the 1950s to the early 1970s generally paralleled gains in productivity. However, during the era of slow growth in the 1980s and much of the 1990s, real hourly compensation stagnated while productivity increased greatly. Some of the financial gains of increased productivity go to labor only if workers fight for better pay and benefits and are successful in their struggle. With the weakened position of labor throughout much of the center of the capitalist world economy, and with workers having pitifully little power in most countries of the periphery, little of the increased income created by productivity growth now accrues to labor.

Regardless of the potential for workers to share some of the income generated by increased productivity, more efficient production creates problems for labor. With greater labor productivity—whether produced by new machines or more effective management techniques for controlling labor (“doing more with less,” as they say nowadays)—fewer or less-skilled workers are needed for a given level of output. Thus, productivity growth is a constant threat to employment security, especially with respect to well-paying jobs in mature industries in which total output is not growing rapidly. Layoffs resulting from productivity gains are, therefore, a supply source for the reserve army of labor. The increase in U.S. labor productivity in manufacturing industries has been substantial. From 1955 to 2000 manufacturing production increased close to 400 percent, while employment increased by around 10 percent. While some of the increased production involved the use of components manufactured in other countries, increasing labor productivity was responsible for most of the growth in production while worker numbers barely budged.

Much has been made of the decrease in manufacturing jobs in the United States—in absolute numbers and relative to all employment. The peak manufacturing employment of 21 million workers occurred in 1979, and then decreased by about 10 percent through 2000 (as productivity increased) and another 10 percent in the 2001-2002 recession and “jobless recovery.” However, little notice has been given to the worldwide decrease in manufacturing jobs, resulting from increasing productivity and global overcapacity. A study of 20 large economies found an 11 percent decrease in manufacturing workers—some 22 million people—between 1995 and 2002 (Wall Street Journal, October 20, 2003). Decreases occurred in other core countries (Japan down by 16 percent) and in the periphery (Brazil down 20 percent). Even China had a decrease in factory workers (15 percent), as the number of people laid off from shrinking government-owned industries was larger than the number hired by the rapidly expanding export-oriented industries.

Another source of labor for the U.S. reserve army has been provided by the decrease in welfare benefits. It was clearly implied during the Reagan administration that not only were the rich not rich enough (thus the “need” to reduce their taxes so they would invest more), but the poor were not poor enough. One of the purposes of welfare “reform”—brought into reality by President Clinton—was to force those on state assistance to join the labor force and accept very unpleasant and/or low paying jobs. This stimulation of the supply of labor is undertaken while ignoring the creation of greater demand for labor—more jobs.

New features of the reserve army have arisen along with the current phase of imperialism. With greater internationalization of finance and more active flows of capital from one country to another, the fixed assets of giant corporations have spread globally. Thus, the reserve army of labor in the periphery is now more directly available to capital from the center. This has led to an increasing relative surplus population in the United States and other rich countries. As bosses seek low-cost production facilities in the periphery—directly using labor from the reserve army in those countries—workers in the center are laid off. As mentioned above, immigrant workers from the periphery, many having left rural homes, have also entered directly into the domestic reserve armies of the United States and Europe.

Workers may move from one segment of the reserve army to another, sometimes gaining employment and sometimes losing jobs, sometimes being so discouraged with the poor job market that they stop looking for work, then renewing their job search under more favorable conditions. A recent newspaper article illustrated the unpredictable changes for someone in a state of employment flux. It described a person who lost his job and looked for work for a while, then stopped looking (and was therefore no longer officially unemployed), then earned a little money through self-employment, and then got a temporary job at less pay than the original job he lost, “with no paid holidays, no sick leave, no pension plan, no health insurance, no future” (Los Angeles Times, December 29, 2003). There are, of course, many relatively secure jobs—such as those in local, state, and federal governments, and in schools. But as outsourcing of jobs and privatization of services become common and with state budgets under severe strains—even some of these jobs are growing insecure.

A Weapon of Capital

The reserve army provides many benefits to capital, principally by employing workers only when it is possible to profit from their labor. However, it is also a tool of control over labor. Having a large pool of unemployed labor ready to take the place of workers helps to keep wages from growing rapidly. However, the reality of workers knowing that they can easily lose their jobs during a recession, or if a factory moves to a lower-wage country, helps to create a docile labor force. A very large number of people have personal knowledge of how insecure their jobs really are. For example, during the three-year period from the spring of 2000 to the spring of 2003, nearly 20 percent of all U.S. workers—and close to one out of four workers earning less than $40,000 per year—were laid off from either full- or part-time jobs. On an annual basis, over 30 million jobs are lost, and roughly the same number created—a yearly turnover equivalent to about 20 percent of all jobs! Given this level of job turnover, the atmosphere of potential job loss reaches many workers who haven’t lost jobs. When family or friends become unemployed, those still employed feel insecure and are less militant.