Note: this is NOT the same as Karl Marx' "labor theory of value." That was a theory of the valuation of GOODS in terms of how much labor was required to produce them. I am talking instead about the value of labor ITSELF in terms of the MARKET value of goods -- so I begin by rejecting Marx' labor theory of value and using a more ordinary market concept for the value for goods. Under that concept, a good is worth what its customer will pay for it. The "value" of goods therefore becomes a variable rather than a constant, and there is no objective way to determine it other than the market itself. The same concept may be applied to labor directly and often is. Under that concept, an hour of a particular kind of work is "worth" what employers must pay for it. But because labor is often used to produce goods, which themselves are sold and so have a market value, another way to evaluate labor is in terms of the market value of the goods produced by it. This gives us two distinct concepts of labor valuation. It's pointless to ask which one is "right." Both are "right" in different ways and for different purposes. On the one hand, labor is worth what employers must pay for it, given any one set of conditions regarding the supply of labor, demand for labor, and bargaining strength of labor. We may call this the "market value" of labor. On the other hand, labor is "worth" what the goods produced by it are worth on the market, net of any non-labor costs of production. We may call this the "productive value" of labor. The following things may be said about the relationship between labor's market value and its productive value. 1) The market value of labor is determined by four factors: supply of labor, demand for labor, laws such as minimum wage, and organization of labor (collective bargaining). Nothing else has any impact on the market value of labor. 2) The market value of labor is always less than its productive value as long as labor is hired for wages. (Otherwise, it is impossible for a business to make a profit, as all of the market value of its goods must go for costs of production.) 3) There is no fixed ratio between the market value of labor and its productive value except that it must always be less than 1. Given one set of conditions, the market value of labor may be almost equal to its productive value. Given another set of conditions, it may be only a tiny fraction of its productive value. 4) Corollary to no. 2, changes in the productive value of labor (e.g., increases in productivity) do not produce any change in labor's market value, except when they make a change in one of the determining factors on labor's market value: supply, demand, laws, and organization. 5) It is in the interest of labor to make the difference between labor's market value and its productive value as low as possible. This maximizes the buying power achieved through an hour of work. This does not refer to wages as such, but rather to the ratio of wages to productivity. 6) It is in the interest of capital to keep the difference between labor's market value and its productive value as high as possible. This maximizes profit margins, by minimizing the buying power achieved through an hour of work. As with #5, it does not refer to wages as such, but rather to the ratio between wages and productivity. It can be achieved either by causing wages to fall or by causing productivity to increase, or by some combination.