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Firstly, we understand the meaning of Exploitation.

According to Professor Pigou and Joan Robinson, labour is considered to be exploited when the wage rate paid to labour is less than the value of his marginal product which is equal to the physical product multiplied by the sale price of the product. This assumes perfect competition as the ideal situation and the wage rate determined under it is just fair and proper, because labour gets its reward according to its production. In any deviation from this perfectly competitive wage rate, it will be regarded as exploitation of labour. According to Professor Joan Robinson, the worker would get a wage according to the value of the marginal physical product. According to him, every deviation is considered as exploitation.

According to him, under conditions of perfect competition both in the labour market and product market, the wage rate is equal to both marginal revenue product (MRP) and the value of the marginal product (VMP). In other market, both the price of the product and its marginal revenue are equal, MRP (MRP  x  MR) and VMP (MPP x Price) are also equal, that shows there is no exploitation of labour. This will be clear shown in below mentioned Figure: 1

According to Joan Robinson and Pigou, labour or any factor is exploited when it is paid less than the value of marginal product (VMP). It should be known that value of marginal product is equal to price of the product multiplied by marginal physical product of labour. VMP = P x  MPP.

Suppose marginal physical product of labour is 100 units of a commodity and market price of the commodity is Rs. 30 per unit. In this case, value of marginal product of labour is Rs. 30 x 100 = Rs. 3000. If the wage rate is less than Rs. 3000, labour is being exploited. If wage rate is Rs. 2500, exploitation of labour is of the order of Rs. 500.

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