What Guarantees the Ruin of Economy? 9 страница
And team contract can be effective only within the salary-bonus system of labor remuneration. Such a contract assigns work to a team which is a small integral collective where work is distributed and co-ordinated between the members in an informal way, on the basis of personal comradeship, mutual aid and respect.
Normally the salary-bonus system of labor remuneration should include the entire staff of an enterprise. But the way it is applied to staff members engaged in management activity should be different from the way it is applied to production personnel and support personnel:
· within this system production and support personnel is paid for conscientiously following the orders of executives and coming forward with initiatives beneficial for the common cause (of a team, shop, department, the entire collective) primarily within the boundaries of their main and complementary professions and the posts they occupy;
· management personnel is paid primarily for ensuring a certain production output[96] calculated per one subordinate and for increasing this index[97], as well as for achieving economy in comparison with basic levels of consumption in subordinate collectives. Such economy can include saving on raw materials, component parts, energy, agents, tooling, working capacity resource of equipment etc. (according to the concrete functional specialization of the collectives he or she heads). Naturally it must be done while quality and safety standards are adhered to and improved.
A collective works in modern production. To control any collective activity means to distribute an individual personal responsibility for quality and timeliness of performing different fragments of the common work among staff members and making these fragments liable to an objective check according to «done — not done» index (in compliance with the standard).
In accordance with these specific features of modern production and its control which are of an objective nature what should be remunerated is a man’s ability to be responsible, to conscientiously perform actual assigned work and to come forward with initiatives while being responsible for the fragments of work assigned and for coordinating work on the whole. Additionally all the staff members of an enterprise should clearly see that the salary is paid for performing the functions of one’s post at a minimum standard and that bonuses are paid for conscientiously deviating from the minimum standard by exceeding it in the course of daily work in a collective with an atmosphere of comradeship and friendliness.
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Modern production is of such a nature that controlling it requires to use the salary-bonus system of labor remuneration. But it can stimulate labor efficiently only if it is accompanied by a high standard of mutual trust and comradeship among subordinates and executives which exists in the collective and is proven by experience and if subordinates and executives are equally interested that they succeed in their common cause.
When this fact is understood the answer to the question on what the ratio of minimum and maximum income among an enterprise’s staff should be becomes clear. In every historic era, in every society there is an optimum «maximum income» / «minimum income» ratio within a collective which changes in the course of time. The «optimum» ratio of «maximum income» / «minimum income» involves a wage rates scale which encourages employees to improve their qualification and to acquire several professions. This should make the enterprise more efficient in production and ensure an increase in the «profit per employee» index.
If the ratio «available maximum» / «income actually received by staff» is small this means many employees regard making additional efforts for improving qualification and acquiring several professions as redundant troubles which do not improve their well-being and result in nothing but uselessly spent time and strength.
Besides, historic circumstances can lead to a lack of highly qualified professionals in certain trades (a lack compared to the demand). This allows people who have mastered these professions (which differ for every historic era) to demand exclusively high salaries for taking part in the society’s working unity. In the historic reality when labor resources are distributed among industries by means of free market regulation such opportunity is realized in exclusively high salaries of certain professional corporations. Their salaries sometimes exceed the amount, which provides for consumption in a morally healthy life-style (and paying for services which neutralize the damage to health caused by hazardous industry). In some cases the state’s social order supports the system of exclusively high salaries first of all in the management sphere and other «clean» activities. It is done through granting privileges in access to basic and professional education to certain social minorities and preventing the majority from getting such education.
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This system is characterized by the majority’s ignorance which prevents production from improving its efficiency by denying any chance of developing new technologies and improving business organization. But besides that this macroeconomic factor curtails the options for encouraging conscientious labor in a collective (i.e. on the microeconomic level). Let us explain how this happens. The ratio of «income of highest-paid group of employees» / «minimum or average income» is large due to some groups of professionals being paid exclusively high salaries which results both from macroeconomic and non-economic factors. Also the income of the highest-paid part of the collective exceeds the level sufficient for an employee and his family to live a morally healthy life in the opinion of those whose income is about average (especially if average or below the average income is barely enough for satisfying the needs of a man and his family). Then the members of collective who have the highest income are regarded by the rest of staff as parasites who live on unearned income, i.e. from somebody else’s labor, reaping the fruits of work done by the rest of the collective.
This is just the same attitude that employees normally have towards capitalists (the owners of the enterprise) if they take no real part in the collective’s work. If they are merely parasites receiving their share of the enterprise’s income, and often a considerable one. And legislature of most countries permits it by tolerating private property of collectively used means of production and not obliging the proprietor to work by himself.
Therefore assigning levels of income among staff, i.e. arranging the wage rates scale, is a task having no single solution effective for any circumstances. Under normal macroeconomic conditions any salary should guarantee that a person’s needs can be provided for, including the ability to start a family life and use one’s income to take part in the family’s further development. This circumstance determines the minimum, which it is practically necessary to pay.
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The issue of maximum remuneration is a more complicated one as on the one hand the chance to reach a higher level on the wage rates scale must be an incentive to work in the collective efficiently, and on the other hand the income of highest-paid staff members (as well as the owners of the enterprise) should not be regarded as unearned income by the collective.
In other words the optimum ratio of high-paid and lower-paid workers’ income at any enterprise is determined by the level of technology and organization that it has reached, its future progress, equivalent indices of competitors, as well as by moral and ethic qualities of the collective and the society on the whole.
The role of an efficient incentive, which the salary-bonus system of labor remuneration plays, can be undermined or even totally invalidated by the three following circumstances. First, exclusively high salaries and bonuses. They are regarded by the collective as parasitism on the labor of others, which a certain “elite” of the enterprise indulges in. Second, when payment of bonuses does not result from conscientious labor actually making them a guaranteed part of income. Third, paying bonuses for labor achievement of some people to other people, chiefly to their superiors and their hangers-on.
The problem of distributing staff within the wage rates scale should be regularly given a new solution depending on the enterprise’s technical and technological development, the relationship between employees of different categories and the attitude that the «gold fund» workers of the enterprise (managers, specialists and workers important in the future perspective) have towards the business. These issues belong to coordinating the enterprise’s financial and personnel policy and lie beyond the scope of this work.
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Having made this digression let us go back to the book by H. Ford:
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«For the day’s work is a great thing — a very great thing! It is at the very foundation of the world; it is the basis of our self-respect. And the employer ought constantly to put in a harder day’s work than any of his men (put in bold type by the authors)[98]. The employer who is seriously trying to do his duty in the world must be a hard worker (put in bold type by the authors). He cannot say, “I have so many thousand men working for me.” <only a slave-owner dares to say so> The fact of the matter is that so many thousand men have him working for them — and the better they work the busier they keep him disposing of their products. (Separate paragraph is provided by the authors)[99]
Wages and salaries are in fixed amounts, and this must be so, in order to have a basis to figure on. Wages and salaries are a sort of profit-sharing fixed in advance, but it often happens that when the business of the year is closed, it is discovered that more can be paid. And then more ought to be paid. When we are all in the business working together, we all ought to have some share in the profits — by way of a good wage, or salary, or added compensation (put in bold type by the authors). And that is beginning now quite generally to be recognized.
There is now a definite demand that the human side of business be elevated to a position of equal importance with the material side. And that is going to come about (put in bold type by the authors). It is just a question whether it is going to be brought about wisely — in a way that will conserve the material side which now sustains us, or unwisely and in such a way as shall take from us all the benefit of the work of the past years. Business represents our national livelihood, it reflects our economic progress[100], and gives us our place among other nations. We do not want to jeopardize that. What we want is a better recognition of the human element in business. And surely it can be achieved without dislocation, without loss to any one, indeed with an increase of benefit to every human being. And the secret of it all is in recognition of human partnership (put in bold type by the authors). Until each man is absolutely sufficient unto himself, needing the services of no oilier human being in any capacity whatever, we shall never get beyond the need of partnership.
Such arc the fundamental truths of wages. They are partnership distributions <and the second aspect of this issue consists in the price level on products directly consumed by people that have formed in the macroeconomic system>.
The wage carries all the worker’s obligations outside the shop; it carries all that is necessary in the way of service and management inside the shop. The day’s productive work is the most valuable mine of wealth that has ever been opened. Certainly it ought to bear not less than all the worker’s outside obligations. And certainly it ought to be made to take care of the worker’s sunset days when labor is no longer possible to him — and should be no longer necessary. And if it is made to do even these, industry will have to be adjusted to a schedule of production, distribution, and reward, which will stop the leaks into the pockets of men who do not assist in production. In order to create a system which shall be as independent of the good-will of benevolent employers as of the ill-will of selfish ones (put in bold type by the authors)[101], we shall have to find a basis in the actual facts of life itself.
(…)
If only the man himself were concerned, the cost of his maintenance and the profit he ought to have would be a simple matter. But he is not just an individual. He is a citizen, contributing to the welfare of the nation. He is a householder. He is perhaps a father with children who must be reared to usefulness on what he is able to earn. We must reckon with all these facts. How are you going to figure the contribution of the home to the day’s work? You pay the man for his work, but how much does that work owe to his home? How much to his position as a citizen? How much to his position as a father? The man does the work in the shop, but his wife does the work in the home. The shop must pay them both. On what system of figuring is the home going to find its place on the cost sheets of the day’s work? Is the man’s own livelihood to be regarded as the “cost”? And is his ability to have a home and family the “profit”? Is the profit on a day’s work to be computed on a cash basis only, measured by the amount a man has left over after his own and his family’s wants are all supplied? Or are all these relationships to be considered strictly under head of cost, and the profit to be computed entirely outside of them? That is, after having supported himself and family, clothed them, housed them, educated them, given them the privileges incident to their standard of living, ought there to be provision made for still something more in the way of savings profit? And are all properly chargeable to the day’s work? I think they are (put in bold type by the authors). Otherwise, we have the hideous prospect of little children and their mothers being forced out to work[102].
(…)
County-wide high wages <in comparison with the given price of products which are consumed by people> level spell country-wide prosperity, provided, however, the higher wages are paid for higher production.
(…)
In this first plan the standards insisted upon were not petty — although sometimes they may have been administered in a petty fashion. We had about fifty investigators in the Social Department; the standard of common sense among them was very high indeed, but it is impossible to assemble fifty men equally endowed with common sense. They erred at times — one always hears about the errors. It was expected that in order to receive the bonus married men should live with and take proper care of their families. We had to break up the evil custom among many of the foreign workers of taking in boarders — of regarding their homes as something to make money out of rather than as a place to live in. Boys under eighteen received a bonus if they supported the next of kin. Single men who lived wholesomely shared (put in bold type by the authors: in essence H. Ford financed the moral and healthy way of living). The best evidence that the plan was essentially beneficial is the record. When the plan went into effect, 60 per cent. of the workers immediately qualified to share; at the end of six months 78 per cent. were sharing, and at the end of one year 87 per cent. Within a year and one half only a fraction of one per cent failed to share» (Ch. 8. “Wages”).
In other words, Ford introduced an 8-hour working day and secured payment by the hour at his plants and railway. He kept perfecting his business drawing on this organizational scheme and paid out bonuses to the whole staff out of the profits gained from those improvements. His system of bonus payments consisted in financially encouraging (remunerating) conscientious work and beneficial initiative. And this system was aimed at ensuring the collective’s welfare and satisfying the society’s demand for the manufactured products, not on satisfying the insatiable greed of investors who constitute the minority in the society. H. Ford says the following on that subject:
«Our profit, because of the rapidity of the turnover in the business and the great volume of sales, has, no matter what the price at which the product was sold, always been large. We have had a small profit per article but a large aggregate profit. The profit is not constant. After cutting the prices <this was Ford’s social and economic strategy[103]>, the profits for a time run low, but then the inevitable economies begin to get in their work and the profits go high again. But they are not distributed as dividends. I have always insisted on the payment of small dividends and the company <i.e. «Ford Motors»> has today no stockholders who wanted a different policy [104] . I regard business profits above a small percentage as belonging more to the business than to the stockholders.
The stockholders, to my way of thinking, ought to be only those who are active in the business and who will regard the company as an instrument of service rather than as a machine for making money. If large profits are made — and working to serve forces them to be large — then they should be in part turned back into the business so that it may be still better fitted to serve, and in part passed on to the purchaser (put in bold type by the authors). During one year our profits were so much larger than we expected them to be that we voluntarily returned fifty dollars to each purchaser of a car. We felt that unwittingly we had overcharged the purchaser by that much. My price policy and hence my financial policy came up in a suit brought against the company several years ago to compel the payment of larger dividends. On the witness stand I gave the policy then in force and which is still in force. It is this:
In the first place, I hold that it is better to sell a large number of cars at a reasonably small margin than to sell fewer cars at a large margin of profit. I hold this because it enables a large number of people to buy and enjoy the use of a car and because it gives a larger number of men employment at good wages. Those are aims I have in life. But I would not be counted a success; I would be, in fact, a flat failure if I could not accomplish that and at the same time make a fair amount of profit for myself and the men associated with me in business.
(…)
Profits belong in three places: they belong to the business — to keep it steady, progressive, and sound. They belong to the men who helped produce them. And they belong also, in part, to the public. A successful business is profitable to all three of these interests — planner, producer, and purchaser.
People whose profits are excessive when measured by any sound standard should be the first to cut prices. But they never are. They pass all their extra costs down the line until the whole burden is borne by the consumer; and besides doing that, they charge the consumer a percentage on the increased charges. Their whole business philosophy is: «Get while the getting is good». They are the speculators, the exploiters, the no-good element that is always injuring legitimate business. There is nothing to be expected from them. They have no vision. They cannot see beyond their own cash registers.
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