Abstract
This article estimates the rate of surplus value of the Portuguese economy between 1995 and 2022 based on Marx’s labor theory of value. Drawing on national accounts and input-output tables, we calculate the monetary expression of labor time (MELT) and trace its evolution alongside working hours, real wages, and productivity. Our findings reveal a rising rate of exploitation, particularly during the post-2008 austerity period, and highlight the growing appropriation of income by capital. The results demonstrate the empirical relevance of Marxist value theory for understanding long-term class dynamics in a peripheral European economy.
1. Introduction
Classical economists such as Adam Smith and David Ricardo laid the groundwork for the labor theory of value, emphasizing labor as the primary source of value in an industrializing economy. While Ricardo used the theory to explain long-run price formation, Karl Marx reoriented it to critique capitalism, focusing on the appropriation of surplus value. Under capitalism, workers produce more value than they receive in wages; this surplus is appropriated by capitalists and constitutes the source of profit. The concept of surplus value thus lies at the core of Marx’s analysis of exploitation and class conflict and provides the theoretical foundation for the empirical analysis developed in this article. 1
The labor theory of value presents significant challenges for empirical research. Quantifying “socially necessary labor time,” is complex, especially given differences in skill levels, tools, and technologies across industries. Modern production also involves extensive supply chains, complicating the estimation of indirect labor. Several authors have contributed to making value theory empirically operational. Duncan Foley has made significant contributions to the development of a more nuanced and empirically relevant approach to the labor theory of value, providing links between value categories and national accounts and offering a macro framework for estimating the monetary expression of labor (Foley 2000, 2013). Anwar Shaikh has undertaken extensive empirical tests of the labor theory of value, demonstrating the close correspondence between labor values and market prices across sectors, finding that, on average, labor values were surprisingly close to market prices (Shaikh 1998, 2016). Cockshott et al. (2014), using econometric methods, likewise find strong correlations between embodied labor and prices. They compared labor values with factors like energy costs and found labor to have a stronger correlation with price. While Foley’s “New Interpretation” (Foley 2000) and Shaikh’s empirically driven validation of the labor theory of value provide valuable contributions to Marxian value theory (Shaikh 2016; Shaikh and Tonak 1994), our analysis follows a different empirical tradition. Specifically, we adopt a macroeconomic framework grounded in the estimation of the monetary expression of labor time (MELT), as developed by Gouverneur (1990), Cockshott et al. (2014), and more recently Basu (2018). This approach allows us to calculate the rate of surplus value using national accounts and input-output tables, focusing on the evolution of labor exploitation in the Portuguese economy over time. 2
While both the “Standard Interpretation,” developed by authors such as Shaikh, Pasinetti, and Morishima, and the “New Interpretation” (NI), advanced by Foley, Duménil, and Lipietz, aim to make Marx’s value categories empirically tractable, they rest on different theoretical premises. The “Standard Interpretation” treats abstract labor time as the starting point of value formation, emphasizing the transformation from labor values to market prices, whereas the NI regards abstract labor as the result of the monetary and social validation of labor in exchange. Consequently, the two approaches often reach divergent conclusions about the measurement of value and exploitation. In this article, our empirical strategy aligns more closely with the NI in its use of the MELT as the key conversion factor between monetary and labor magnitudes, while methodologically following Gouverneur’s macroeconomic formulation.
Building on this tradition, the present article uses a Marxist empirical approach to estimate the rate of surplus value for the Portuguese economy between 1995 and 2022. Based on methodologies used in Cockshott et al. (1995), whose empirical testing of the labor theory of value sparked debate (Cockshott et al. 1996; Maniatis 1996), as well as Basu (2018), Desai (1991), and Gouverneur (1990), we estimated the MELT. From this, we calculate the rate of surplus value of the Portuguese economy and assess its evolution in relation to working hours, real wages, and productivity. The article is structured as follows: section 2 presents the methodology and data, section 3 discusses the results, and section 4 concludes.
2. Methodology and Data
To calculate the surplus value rate empirically, we begin with Marx’s categories of constant capital (C), variable capital (V), and surplus value (S). Constant capital (C) refers to the non-human input used in production. It includes items like machinery, buildings, raw materials, tools, and fuel. This is the past labor materialized in the means of production. It transfers its value to the new product without creating new value. Variable capital (V) refers to the wages paid to the workers. Marx argued that only living human labor can create new value. The variable capital represents the cost of buying the worker’s labor power, which is used to create new value during the production process. Surplus value (S) represents the difference between the value the worker creates and the wages they are paid.
According to Marx, the value of production is given by the formula:
In Marx’s theory of value and exploitation, the rate of surplus value holds significant importance. It is a metric that reveals the intensity of exploitation workers face under capitalism. The rate of surplus value s* is a ratio expressed as:
S stands for surplus value, the extra value workers create beyond their wages, and V represents variable capital, that is, the wages paid to workers. This ratio tells how much surplus value is extracted from each unit of wages paid. A higher rate of surplus value signifies a greater degree of exploitation. For example, a rate of 2 means that workers create two times the value of their wages, resulting in a larger profit for the capitalist. The rate of surplus value is crucial because it quantifies the extent to which workers are underpaid for their labor. A high rate highlights the imbalance between the value workers create and what they receive. Moreover, it explains the key driver for capitalist behavior. Businesses strive to increase the rate of surplus value to maximize profits. This can lead to strategies like extending working hours or implementing labor-saving technologies (which might reduce the workforce but increase individual worker output). Finally, it sheds light on the source of capitalist profit. Profit does not arise from some magical economic force, but rather from the surplus value extracted from workers’ labor.
The value of a commodity consists of the quantity of social labor it contains. However, this quantity is not observable. Commodities therefore have two inseparable aspects. On the one hand, they have a visible price, expressed in a monetary unit (euro). On the other, unobservable side, they have value expressed in hours of work. The MELT, represented by the symbol E, relates the monetary and labor-time dimensions of value by assigning a monetary equivalent to one hour of abstract labor. 3 As a macroeconomic magnitude, MELT varies across countries and over time (Gouverneur 2005). The calculation of E for each country represents an approximation to the true value, not only because no economy is perfectly closed, but also due to various empirical and theoretical limitations—including the heterogeneity of labor, differences in productivity across sectors, indirect labor embedded in imports, and the challenge of fully capturing abstract socially necessary labor through available statistical data (Basu 2018):
“Aggregate monetary value added” refers to the income generated in the market sector, proxied by net domestic product minus the remuneration of non-market sectors (e.g., public administration, education, health). “Labor time added” refers to the total hours worked in the market economy. This follows the empirical formulation in (Gouverneur 1990) and aims to isolate value-generating activities within the market sector. This E is equivalent to the MELT as defined in the New Interpretation (Duménil 1983; Foley 1982), even if we follow Gouverneur’s empirical methodology.
Although the empirical formulation employed here is consistent with the NI in its use of the MELT to convert nominal magnitudes into labor-time equivalents, it differs in emphasis and empirical grounding. In the NI, the MELT serves primarily as a theoretical device ensuring the macro-consistency of Marx’s value categories (e.g., total value equals total price, total surplus value equals total profit). By contrast, the present approach, following Gouverneur (1990), estimates MELT empirically from national accounts and input-output data, focusing on value creation within the productive market sector. In this sense, our method may be regarded as a pragmatic adaptation of the NI framework, aiming at operational measurement rather than theoretical reconstruction.
It is important to acknowledge that the use of aggregate data from the market production sector may introduce biases into the estimation of E. This sector includes not only value-producing activities in the Marxist sense but also rent-generating sectors such as real estate, agriculture, and financial services. These sectors may incorporate significant non-labor-based income flows, such as land rent, monopoly profits, or financial returns, that are not directly linked to the expenditure of living labor. As such, our estimation of E and, consequently, the surplus value rate may be inflated by these effects. Ideally, these sectors should be excluded or adjusted for, but the limitations of available national accounting data prevent a fully disaggregated treatment. This issue is particularly salient in international comparisons. For example, the high surplus value rate observed for the United Kingdom, as reported by Gouverneur (1990), may reflect such rentier effects, especially from the financial sector. The new value created (denominator of E) corresponds to the sum of all the hours of work present in the market production sector.
The rate of surplus value is the ratio between the surplus value to necessary labor. However, it can also be expressed as the ratio of hours worked to nominal wages multiplied by the monetary expression of labor time (E) minus one:
Let:
Starting from these definitions:
Rearranging terms, the rate of surplus value (s*) can be expressed in terms of MELT (E) as:
Thus:
which links the total hours worked H, total wages W, and the rate of surplus value
Considering
This last equation shows that the evolution of the rate of surplus value depends on the impact of three variables: present labor, real wages, and the average value per means of consumption. The average value per means of consumption represents the inverse of labor productivity and typically declines over time. As technological progress advances, the labor time required to produce each unit of output tends to diminish. In this sense, all else being equal, an increase in productivity increases the rate of surplus value. Moreover, all else constant, the rate of surplus value increases with the duration of working time and decreases with real wages.
To calculate the value of E and the rate of surplus value, we use the input-output matrices of the Portuguese economy and the data from national accounting of the Portuguese National Institute. We use the gross value added, and the worked hours and wages related to the market sector and the various sectors of public administration (central and local, defense, social security, education, health, and social action).
Table 1 presents the average values for the macroeconomic variables used to calculate MELT and the rate of surplus value during the study period. For the monetary expression of labor-hour value, an average value of 11.72 euros at 2016 prices was determined, along with a surplus value rate of 59 percent. For an 8-hour workday, this represents 5.09 hours of necessary labor and 2.91 hours of surplus labor. 4
Average Values of the Variables Used in the Calculation of MELT and the Surplus Value Rate, 1995–2022.
3. Results and Discussion
The values of E, the rate of surplus value, and the main conditioning variables calculated for the period between 1995 and 2022 are presented in Table 2. All figures are expressed in constant 2016 euros. Figure 1 shows the joint evolution of E and the hourly wage, revealing three distinct phases.
Monetary Expression of Labor Time (E), Real Wage, Rate of Surplus Value and Apparent Labor Productivity 1995–2022.
Source: Instituto Nacional de Estatística (2024) and authors’ calculations.
Evolution of the monetary expression of labor time (E) and hourly wage. Source: Instituto Nacional de Estatística (2024) and author’s calculations.
In the first phase (1995–2000), the hourly wage gradually converged toward the monetary expression of labor time (E), reflecting the relatively favorable macroeconomic environment that preceded Portugal’s adoption of the euro. During this period, real wages grew faster than productivity, and the labor share of income increased slightly. Consequently, the rate of surplus value declined, indicating a moderate improvement in workers’ relative position.
The second phase (2000–2016) marks a prolonged period of divergence between E and the hourly wage, particularly acute after 2010. This interval encompasses the euro-area debt crisis, and, in Portugal, the Troika-imposed adjustment program (2011–2014). Wage restraint and internal devaluation policies sharply reduced real wages, while productivity gains and fiscal consolidation shifted income distribution toward capital. As a result, the rate of exploitation of labor increased substantially during this period.
The third phase (2016–2022) begins with a gradual reconvergence between E and the hourly wage, consistent with real wage recovery and the easing of austerity policies under center-left governments. However, the convergence was only partial, and the wage gap widened again in 2022 amid a surge in inflation linked to post-pandemic supply shocks and the war in Ukraine. It remains uncertain whether this marks a temporary fluctuation or the start of a new trend.
These three phases summarize the main distributional dynamics of the Portuguese economy since the mid-1990s: modest wage-led growth before the euro, strong profit-led adjustment during the crisis years, and partial recovery of labor thereafter.
In other words, the value per hour that workers add to commodities with their labor grows faster than the hourly wage. Therefore, the rate of economic exploitation of the labor factor increases. The steady increase in E implies that one hour of labor has become associated with a higher monetary value. However, because this increase outpaced wage growth, it contributed directly to the rising rate of surplus value.
Figure 2 illustrates the evolution of the surplus value rate of the Portuguese economy between 1995 and 2022. The actual figures can be seen in Table 2. The rate begins to decrease until 1999. It increases significantly from 2000 onwards, reaching a peak of around 93 percent in 2013. In a third phase that continues until 2021, the surplus value rate decreases to 51 percent, then rises to end at 56 percent in 2022. The evolution of the surplus value rate reflects the relative trajectories of the MELT and the wage rate. When the gap between these variables widens, the surplus value rate increases, and when it narrows, the rate decreases.
Evolution of the rate of surplus value. Source: Instituto Nacional de Estatística (2024) and author’s calculations.
The values of the surplus value rate we obtain reflect part of the literature, though not all. In Gouverneur (1990), with whom we share part of the methodology, the rate of surplus value is calculated for several countries (Germany, the United Kingdom, France, the Netherlands, Belgium, and Italy) between 1970 and 1986, yielding values between 36 percent and 45 percent. Cockshott et al. (1995), concentrating on the United Kingdom between 1979 and 1989 and employing a different methodology, estimate the rate of surplus value between 50 and 180 percent. Other studies, particularly for the United States, also report higher levels (Mohun 2014; Paitaridis and Tsoulfidis 2012; Tsoulfidis et al. 2019). Comparable empirical analyses in Southern Europe remain scarce; for Greece, Tsoulfidis and Tsaliki (2014) report very high and cyclical rates of surplus value, reflecting rental sectors and labor-compression dynamics. Several factors can account for these divergences. First, Portugal’s income distribution in the mid-1990s was compressed, with a high labor share and modest profit rates. Second, our approach, while excluding the non-market sectors, still relies on aggregate data that may dilute class-specific income flow (e.g., by including part of unproductive or rentier activity within the market sector). Third, differences in methodology, especially the treatment of non-productive labor, taxation, and imputed incomes, can lead to divergences across studies. As such, the surplus value rates we report, mostly between 50 and 90 percent, are consistent with the structural and institutional features of the Portuguese economy during the period.
In the case of the Portuguese economy, the period of robust growth in the rate of surplus value between 2000 and 2015 corresponds to a phase of great external conditioning in which Portugal was subject to successive procedures for excessive deficits. Between 2011 and 2014, as we have seen, Portugal was subject to an adjustment program prescribed and subsequently monitored by the Troika (European Commission, ECB, and IMF). This program entailed a strong internal devaluation that had a strong impact on unemployment and real wages.
The second half of the 2010s marked a recovery in favor of labor factor. The surplus value rate decreased from 2015 until reaching a minimum value of 51 percent in 2021, before increasing slightly again in 2022. The sudden increase in the surplus value rate in 2022 marks a notable departure from the previous trend. While this reversal does not correspond to a change in government or a shift in domestic political orientation, it may be partially explained by the broader post-pandemic economic environment. In particular, the sharp rise in inflation, driven by supply chain disruptions and energy price shocks exacerbated by the war in Ukraine, likely eroded real wages despite nominal increases. Meanwhile, labor market conditions remained relatively tight, and productivity gains were modest, resulting in an apparent increase in exploitation. Although further investigation is required, these factors may help account for the uptick in the surplus value rate observed in 2022.
A closer look at the political context suggests that the evolution of the rate of surplus value may partially reflect changes in domestic economic policy associated with shifts in government. Notably, the two periods of declining surplus value, from 1995 to 2000 and from 2015 to 2021, correspond to center-left governments led by the Socialist Party (PS), which were marked by more favorable labor policies and real wage growth. In contrast, the period between 2002 and 2015, dominated by center-right governments under the Social Democratic Party (PSD), except for 2005–2011, saw a sharp increase in the rate of surplus value, driven by wage stagnation and internal devaluation policies, especially under the Troika’s supervision. While further research is needed to disentangle causality, this correlation reinforces the importance of political dynamics in shaping the distributional outcomes observed.
Figure 3 illustrates the evolution of the main determinants affecting the rate of surplus value identified in formula (5): hours worked in the commodity sector, productivity, and the wage rate. The measure of labor productivity used (inverse of average value per means of consumption) covers both present and past labor. It is therefore more comprehensive than the statistics available in the literature that usually divide value added only by present labor (number of workers or hours worked).
Evolution of the factors determining the rate of surplus value: working hours, real wages, and productivity. Source: Instituto Nacional de Estatística (2024) and authors’ calculations.
The evolution of working hours reflects a decreasing trend regarding shorter workweeks and a decline in the active population, combined with the increasing mechanization and automation of production processes. The sharp drop observed in 2020 corresponds to the lockdown resulting from the COVID-19 pandemic. The subsequent years, 2021 and 2022, did not see a full recovery in working hours, likely due to a combination of persistent effects of the pandemic, structural shifts in the labor market (such as increased remote or part-time work), and demographic changes that reduced the active labor force. Real wages grew steadily until 2011 and fell sharply till 2016 because of Troika’s adjustment plan (2011–2014). It then began a recovery path until 2022. Productivity presents two phases. During the first phase, it grew steadily until 2013. It then began a period of decline until 2020 with a small recovery in 2021 and 2022.
Looking at the period between 1995–2022, working hours decreased by around 14 percent. Real wages increased by 51 percent and productivity by 55 percent. The overall effect of these three factors resulted in an increase in the exploitation rate, which went from 52.07 to 56.43 percent. The period between 1995 and 2022 can be divided into two distinct phases, with 2007 serving as the demarcation point. In the first phase, between 1995 and 2007, wages grew above productivity. The rate of surplus value decreased (see Figure 2). Following 2007, a reversal occurred: productivity outpaced real wages. This divergence was particularly striking from 2007 to 2013 but then moderated before intensifying again after 2021. Consequently, the rate of surplus value surged between 2007 and 2015, only to recover slightly by 2021. In 2022, it increases again, although it is still too early to know whether we are facing a new growth trend or a cyclical movement.
Finally, the evolution of the surplus value rate reflects not only economic fundamentals but also institutional and political conditions. Periods of wage growth and relative labor gains, such as 1995–2000 and 2015–2021, coincided with center-left governments and more favorable labor market policies. By contrast, periods of fiscal consolidation and austerity, notably under Troika supervision, were marked by sharp increases in the surplus value rate, driven by real wage compression. These patterns suggest that class dynamics and exploitation are deeply shaped by the political economy of each period, highlighting the relevance of integrating institutional analysis into value-based empirical work.
4. Conclusion
This article estimated the rate of surplus value for the Portuguese economy between 1995–2022 using an empirical approach grounded in Marx’s labor theory of value. Building on the concept that value is created by socially necessary labor time, we calculated the MELT and used it to trace the evolution of the surplus value rate in relation to working hours, real wages, and productivity over nearly three decades.
Our findings reveal three distinct phases during this period: an initial decline in the rate of surplus value as real wages outpaced productivity gains (1995–2000); a prolonged increase in the degree of exploitation during the economic crisis and the Troika-led adjustment program (2001–2015); and a partial recovery in favor of labor from 2016 to 2022, albeit with signs of renewed divergence in the final year. These dynamics underscore how macroeconomic shifts, institutional interventions, and wage-productivity dynamics jointly condition the evolution of capitalist income distribution.
Importantly, while the broader Marxist tradition includes long-standing debates on the relationship between values and prices, particularly through the transformation problem, this article does not seek modeling prices of production or equalized profit rates. Our analysis remains firmly situated at the level of value and surplus value, using the MELT as a macroeconomic proxy to estimate exploitation, rather than price formation. This distinction is key to maintaining internal consistency with the empirical scope of the article.
The rate of surplus value does not stabilize at a fixed level but evolves dynamically, shaped by the balance of class power, institutional arrangements, and technological change. In particular, the rate of productivity growth plays a crucial role. Rising productivity can create room for wage increases or reduced working hours without compressing profits. However, when productivity stagnates, as has been the case in Portugal and much of the EU since the 2008 crisis, employers face increasing difficulty in meeting workers’ wage demands, leading to rising tensions over income distribution. Under such conditions, the struggle over surplus value tends to intensify, potentially fueling greater social conflict between labor and capital.
By focusing on the empirical measurement of surplus value within a national accounting framework, this article contributes to a better understanding of the evolution of capitalist exploitation in Portugal. It highlights the role of political-economic cycles, labor market changes, and productivity trends in shaping the appropriation of value. In doing so, it offers a concrete application of Marxist value theory to contemporary empirical analysis, with relevance for broader debates on inequality, class power, and economic policy in peripheral European economies. Future research might expand this analysis through sectoral disaggregation or comparative cross-country studies, as well as incorporating forms of labor excluding national accounts, such as unpaid or informal work.
While this article does not assess the labor theory of value in the strict sense (e.g., through price-value comparisons or transformation models), it applies Marxian value categories to explore the macroeconomic dynamics of capitalist exploitation. The evolution of the rate of surplus value documented here, shaped by the interplay of real wages, productivity, and working time, reflects not only class struggle but also broader systemic pressures. Marx identified the rising rate of surplus value as one of the countertendencies to the falling rate of profit, a mechanism echoed by neo-Ricardian and Social Structures of Accumulation theorists in explaining cyclical crises. The sharp increase in the surplus value rate during the post-2009 austerity period in Portugal illustrates this dynamic, where internal devaluation restored profitability through real wage suppression, despite sluggish productivity growth, a pattern seen across much of the EU.
Footnotes
Acknowledgements
The author would like to thank the reviewers and editor of the Review of Radical Political Economics for their constructive comments and suggestions, which greatly improved this article.
Author contributions
Not applicable (since I’m the single author).
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
Ethical considerations
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1
Marx’s theory of value distinguishes between use value (the utility of a commodity) and exchange value (its market comparability), as well as between living labor (which creates new value) and dead labor (past labor embodied in means of production). Value is created by socially necessary labor time, and the division between necessary and surplus labor reflects the balance of power between wage earners and capitalists. Although not directly employed in our methodology, these categories provide the conceptual background for the measurement of surplus value.
2
This article does not aim to model price-value transformations, test the labor theory of value through price correlations, or estimate equilibrium profit rates, as in Shaikh or Foley. Instead, it adopts the labor theory of value as a theoretical foundation to empirically analyze the rate of surplus value as a macroeconomic measure of exploitation. In this sense, the focus lies not on validating the theory itself but on using its categories to understand income distribution and class dynamics in the Portuguese economy. A substantial empirical literature has tested the validity of the labor theory of value (e.g., Cockshott et al. 1995, 
). This article does not attempt another test but instead uses the categories of the LTV as a framework for calculating the rate of surplus value in the Portuguese economy.
3
We use the symbol E to denote the Monetary Expression of Labor Time (MELT), following the convention in the “New Interpretation” literature as developed by Foley (1982) and Duménil (1983), although our methodology is closer to that of .
4
These averages are reported only to provide an approximate sense of scale for the Portuguese economy over the entire period and to contextualize the ratios analyzed dynamically in . They are not intended for statistical inference or to suggest temporal stability. We acknowledge that several of the underlying series (e.g., gross value added, compensation of employees, and MELT) evolve significantly over time; however, presenting their averages offers a concise overview of magnitudes and proportional relationships that help interpret the yearly trends shown in Table 2.