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Originally Posted by KMA-628
Sorry, I have to use numbers, it makes more sense to me.
Scenario: SERVICE TYPE INDUSTRY
Let's say I charge my customers $25.00/hr for the labor my employees provide (negate taxes, etc.)
Worker "A" is an average producer and gets paid $12.50/hr for an eight-hour day (no overtime). If I can keep at least seven of his working hours billable, I will gross $175.00 for Worker "A". My net profit would be $75.00/hr.
Worker "B" is an above-average producer and gets paid more an hour than Worker "B" (let's say $17.00/hr). I can only charge my customers $25.00/hr. I can't say that the price would be $25.00 an hour if you get my average tech or $35.00/hr if you want my above average tech (even if I try and tell them that the time on site would be less so their bill would probably be less--nobody is going to believe me anyway).
The law of averages says that of my techs, some will be average, some below-average and some above-average. There is no way for me to only keep "above-average" techs. There just aren't enough people out there to fill this role. When I was running crews in this type of situation, one out of five techs was "above-average", the one "above average" tech did get paid more, but our hourly rate was the same, regardless of which tech showed up on site. (plus they were union, so there was nothing I could do there--ever try and get a union worker to voluntarily be more productive, regardless of the pay? I was on a site in Mass. where the union stipulated what the techs made, that they got at least XX hours of overtime and nobody could set requirements for them--i.e. pull 1500 ft of wire a day, they could only be told to pull 1500 ft of wire, time limits were not allowed)
In other words, this idea could not work in a service-type industry. The first step would require that American unions be abolished, which will never happen.
Scenario: Manufacturing Plant
Worker "A" is an average worker and gets paid $10.00/hr. His average output is 5 units an hour and I sell the units for $75.00 a piece. Each piece costs me $50.00 in parts to make. On an eight-hour day (again, I don't want to pay overtime, it kills my profit) I will make a net profit of $920.00 on Worker "A" for one work day (taxes, variable costs excluded). My per unit net profit is $23.00.
Worker "B" is far more productive and gets paid $15.00/hr. His average output is 8 units/hr. and works for 3 hours (that is an increase in productivity of more than 50% which would be pretty fantastic). For Worker "B"'s workday, I make a gross profit of $1,800.00. After paying costs and paying labor, my net profit is $550.00. My per unit net profit is $23.13
An increase of $0.13? Statistically, paying either worker in either of the above fashions means the same thing to me. I make the same amount of profit either way.
However, our average guy, Worker "A", brings home $100.00 per day gross.
Mr. Above Average, the guy who increased his productivity over 50%, brings home less than half-that.
Let's say both guys are single.
It pays better to be average, huh?
What are the chances that I could average a 50% increase in productivity for every worker that the plan is offered to? Every percent point drop in productivity means a similar drop in profit to me as the owner.
What would be an acceptable increase in productivity?
As the owner of the plant, I don't care, my per unit profit stays the same regardless and the money I will make each year stays the same (as long as the increased productivity of the workers getting higher pay/less hours never falls below 50%)
/sorry, it sounds nice, but I don't see the numbers working. Unless, of course, I am wrong with my numerical assumptions (which I thought were on the optimistic side).
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It doesn't serve our interests to create examples and counter-examples to illustrate how it could or could not work. I was giving you a glib example of the argument in Rifkin's book of how it
does work in the European model. I'm not opposed to you pointing out what you think are problems, but how can you know whether he addressed those issues without reading his complete argument?
My post was intended to encourage you to read Jeremy Rifkin's book wherein he outlines the historical evidence for what I typed, not argue the hypotheticals you are now raising. I mean, maybe I could go point for point, but why? He already did it
I should point out, however, that even in your example it doesn't "pay to be average." In your second example, worker B works almost two-thirds less time than worker A and makes only half as much. If you increased his hours to 6 (still less than 8, which worker A does), he makes as much as worker A. But the Eurpean model is that worker B prefers to take a pay cut and only work a fraction of the time.
That was the premise of me and Rifkin's argument: that people would prefer to make a wage that allows them to have more time out of the factory, rather than the goal itself being making more money.
So yes, I would prefer to work 3 hours and earn $50 bucks than work 8 hours and earn $100.
And I wouldn't even need to double my output to do that: a 50% increase in productivity is not working twice as hard--that would be a 100% increase in productivity.