The critical distinction between productive and unproductive labour lies in that the first is exchanged directly with capital and affords the capitalist the reciept of more labour time than paid out in wages, whereas unproductive labour is exchanged for revenue (i.e. out of the capitalists own profits) and does not produce surplus value. It consumes value rather than producing it. Malthus is cited as having said that the differentiation between productive and unproductive labour is the basis of all bourgeois political economy (pp 157)
Obviously this is from the standpoint of the capitalist class. Marx notes (pp 153) that if a worker spent all day working to keep himself alive, his labour would be productive for him in an absolute sense given that it reproduces himself, and presumably his power to labour. By other standards, it would not be productive. In a capitalist sense it would produce no new value, and thus would not according to Marx's notion be productive. The capitalist form is termed relative productivity because it produces a comparitive increase in value reloative to what is outlayed..
Adam Smith is commended for having advanced this point of view, even though he was mistaken in thinking with the Physiocrats that only agricultural labour created a surplus. Make is always clear on the character of value producing labour, and the perspective of the capitalist in respect to it:
"...the use value of labour-power to the capitalist as a capitalist does not consist in its actual use-value, in the usefulness of this particular concrete labour - that it is spinning labour, weaving labour, and so on. He is as little concerned with this a with the use-value of the product of this labour as such, since for the cpitalist the product is a commodty( even before its frist metamorphisis), not an article of consumption. What interests him in the commodity is that it has more exchange-value than he paid for it, and thereforethe use-value of the labour is, for him, that he gets back a greater quantity of labour-time than he has paid out in the form of wages. Included among these productive workers, of course, are all those who contribute in one way or another to the production of the commodity, from the actual operative to the manager or engineer (as distinct from the capitalist)." (pp 156)
"The determinate material form of the labour and therefore of its product, in itself has nothing to do with this distinction betweeen productive and unproductive labour"
This is familiar terrain and Marx goes on to talk of capital conquering the whole of production with the implication that all industry has become commodity production. Unproductive labour does not produce commodities rather it produces articles for immediate consumption, the purpose of which is not exchange. This form of unproductive labour consumes value, whether wages, capital or revenue.
Marx comments here too that Smith drops the analysis of productive labour from the perspective of its social form (i.e. its relation to capitalist production). Marx designates that Smith has two, contradictory, desginations of productive and unproductive labour. Smiths second explanation of 'productive labour' is that which realises itself in a commodity. This is Smiths attempt to account for non-agricultural productive work in respect to the Physiocrats. He proffers that some types of labour are productive in that they reproduce the fund that pays their wages - manufacturing, commercial - thereby, according to Marx contradicting his former assertion of the definiton of productive labour as that which creates new value. Only the first defintion is right for Marx.
Certain un-productive work enhances value but it is negligible.
So the difference between unproductive and productive labour lies in the charcater of the purchase of the labour, is it bought for its use-value and direct private consumption or for its value creating element? (pp 164-5)
Productive workers create the fund out of which they are paid. However consummable services add to the total value of comodities (pp169). Marx's criticism of Smith lies in that the latter understands that capital increase is only possible by increase in productivity or increase in quantity of labour. In both cases Smith believes that the increase can only be made by augmentation of the inital capital investment. 'Two vicious circles' dealt with by Smith by 'savings', the transformation of revenue into capital. Marx points out that not all profit is revenue as the working day can be increased - i.e. the capitalist need not outlay anymore investment, but simply extend the time worked. Here (170) the individual capitalist is described as a functionary of capital.
What follows is a historical description of the emergence of politcal economy in respect to the state and the changing justifications and attitudes towards what constitutes productive and unproductive work. This includes those who correctly propound Smith's first definiton, e.g. Ricardo 'of course' Marx says....and the vulgarisation of Smith's point of view, to ideological jusitfy and rationalise certain social relations.