Freeman

ARTICLE

Organized Incentives Not to Work

MAY 01, 1958 by F. A. HARPER

Dr. Harper is a member of the staff of the Foundation for Economic Education.

When visiting Sweden recently to study the impact of their advancing socialism, I was sur­prised to find almost universal ac­ceptance of the principle of paying workers on a piecework basis. and I recall that early in World War II a political leader of the United States was severely criticized by our Russian allies because he op­posed bonuses to individuals for extra output in the war plants.

These anomalies were brought to mind recently by the assertion in an issue of the AFL-CIO Collec­tive Bargaining Report (Vol. 2, No. 12) that unions in the United States "ordinarily are opposed to wage incentive plans."

The AFL-CIO argues that in­centive pay "puts a strain on the entire collective bargaining proc­ess . . . creates friction between workers." It charges that such schemes are "based on the notion that workers will not perform an `honest’ day’s work unless they are `bribed’ by the promise of ‘extra’ money," and that employers, in hope of higher profits, promise monetary reward to induce workers to "produce more than a `fair day’s work.’ “Then comes the frank admission: "When workers are paid according to their individual efforts, the union’s function of securing high guaranteed wages for all workers be­comes more difficult. The local union’s ability to present a unified position for base rate increases is weakened."

In other words, incentive pay plans take over the presumed union function of getting a fair and reasonable wage and thus threaten the maintenance of union power. "Wage incentives de-emphasize the union’s role in secur­ing higher wages," according to the report, and "may threaten the union’s entire existence."

 

A Continuing Problem

There is no denial, of course, that incentive pay plans are often difficult to design. But this prob­lem is not peculiar to incentive pay plans. It is a problem with any plan of pay determination. Incen­tive pay involves the question of how much Jones produces relative to Smith, his co-worker. This is the same sort of question that is involved in deciding how much of a product is "produced" by tool operators vs. tool investors vs. the electrical power and telephone suppliers, etc.

Problems of accurate determina­tion of a fair wage exist, to be sure. But that only emphasizes that they should be solved as fairly as pos­sible. Incentive plans may be one way to do this.

It will be readily admitted that in some instances the fruits of an incentive pay system may not be worth its cost. Many of the points raised by the AFL-CIO report are important questions. But whether in an incentive pay system the cargo will be worth the freight, is a matter which management must judge in each case. To say that no industrial plants should design and use an incentive plan is as foolish as to say that all should use them. The former is the posi­tion of the AFL-CIO and of most other unions in the United States, whereas even socialist Russia and Sweden reject this form of equalism.

When unions oppose the general policy of extra pay for extra work, under incentive or piecework pay­ment, they are merely extending the practice of featherbedding which is so common in union con­tracts. The difference is only one of degree — equal pay for less work is like equal pay for no work at all.

 

Something for Nothing

Labor unions are not alone in demanding equal pay for less work. This is a policy which has been adopted again and again in our economy. Farmers demand a price for products not produced and a rent for land not farmed. Teachers demand about equal pay for un­equal jobs of teaching, with salary based almost entirely on hours spent in training and in the class­room rather than on proficiency at the task. Many other illustrations could be given, too.

The whole question of incentive pay needs a point of focus. And, to me, it is this: So long as economic goods and services are to be made available for exchange in our soci­ety, they will be made available either with or without incentive to the one who receives them.

There is no avoidance of this choice, no possible compromise. A person gets goods in exchange for something, or he gets them in ex­change for nothing. A "laborer" receives pay for working, or he receives pay for not working. What other alternative can there be?

On the question of incentive pay, it would appear that union leaders find it to their advantage in main­taining themselves in power to up­hold the principle of pay for not working. This is just another in­stance where personal rights are being sacrificed for the further­ance of personal power. When in­centive pay is denied in principle, the least diligent worker gets as an excess part of what the most diligent worker has earned but is not to be allowed to receive, accord­ing to the union policy propounded in this report.

It is a late day for individual justice in the United States when we have to look to Russia and Sweden for some leadership in re­jecting equalism — for leadership in upholding the rights of the more productive employee to re­ceive the fruits of his handiwork.

 

 

***

 

 

Ideas On Liberty
Toil Not — Eat Not

He that will not work, shall not eat, for the labours of 30 or 40 honest and industrious men shall not be consumed to maintain 150 idle loiters … When our people were fed out of the common store and labored jointly, glad was he could slip from his labours or slumber — neither cared they for the increase — presuming that howsoever the harvest prospered, the general store must maintain them so that we reaped not so much come from 30 men as now 3 or 4 doe provide for themselves.

Captain John Smith (1580-1631) –of the Jamestown settlement

ASSOCIATED ISSUE

May 1958

comments powered by Disqus

EMAIL UPDATES

* indicates required
Sign me up for...

CURRENT ISSUE

September 2014

For centuries, hierarchical models dominated human organizations. Kings, warlords, and emperors could rally groups--but also oppress them. Non-hierarchical forms of organization, though, are increasingly defining our lives. It's no secret how this shift has benefited out social lives, including dating, and it's becoming more commonplace even in the corporate world. But it has also now come even to organizations bent on domination rather than human flourishing, as the Islamic State shows. If even destructive groups rely on this form of entrepreneurial organization, then hierarchy's time could truly be coming to an end.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION