Organic Composition of Capital - Measures

Measures

An empirical proxy measure for the technical composition of capital (TCC) is the average amount of fixed equipment and materials used per worker (Capital intensity), or the ratio of the average amount of equipment & materials used to the total hours worked. The value composition of capital (VCC) is usually measured by summing the value of fixed capital ("Cf") and intermediate expenditures (circulating capital or "Cc") and dividing the total by the value of labour costs (V). The estimation procedure is not simple, for example because compensation of employees includes more than wages and part of the tax levy constitutes an element of surplus value.

In modern national accounts, an empirical proxy of the flow of variable capital is the wage-payments associated with productive activity in an accounting period, and a proxy for constant capital (flow measure) is depreciation charges + intermediate consumption; a stock measure of constant capital would be the fixed capital stock plus the average value of inventories held during the period of account (usually a year). However, because the "circulating" component of constant capital (denoted "Cc") includes purchases of external services and other operating costs, the stock of Cc is sometimes measured as the flow of intermediate consumption divided by the average inventory level.

The variable capital actually tied up by an enterprise at any point in time will usually be less than the annual flow value, because wages can in part be paid out of revenues received from ongoing product sales. Thus, the capital reserves held by an enterprise for paying wages may, at any time, be only 1/10 or so of their annual flow value.

The most accurate quantitative estimates for the OCC refer to the outlays in specific sectors, e.g. manufacturing.