Compensating wage differentials theory

For Marx, market transactions occupy a middle layer in the hierarchy of capitalist social relations the injustice of the system becomes apparent only below and above it, within the coercive production process by which labor-power, the ability to work, is transformed into actual labor, and at the level of the entire structure, where surplus value is transformed into profit. Although Marx disputed the invisible hand postulate on the grounds that day-to-day price fluctuations are not an adequate guide to production and distribution, he never claimed that market relations themselves are responsible for exploitation. The grisly record of injuries and diseases in British factories impressed Marx as characteristic of capitalist production - workers as raw material for the owners to use up - yet his bifurcated vision crippled Marx when he confronted Smith on this issue. The theory of compensating wage differentials pertains to the labor market, that realm of Freedom, Equality, Property and... 

The moral the theory of compensating wage differentials is based on a... 

Duncan, Greg J. and Bertil Holmlund. 1983. Was Adam Smith Right after All Another Test of the Theory of Compensating Wage Differentials. Journal of Labor Economics. October, 1 366-79. 

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