Friday, February 27, 2009

The Cost of the Wage

The wage has become a thing that is almost universally considered necessary. When looking at current capitalism it is ubiquitious and it's domain is growing. However, more importantly, looking at almost every future picture of the organisation of production that is currently popular, we find the wage to be central. From economic proposals as diverse as Schweickart's Economic Democracy [1] to Hahnel and Albert's Parecon [2] we have as a core feature of the system, the wage.

While a mainstay of critiques by traditional libertarian communists and anarchist communists [3], the repercussions of the wage have been insufficiently evaluated in most modern libertarian socialist literature. These repercussions must be seriously evaluated in relation to a different system. A system of freely given labour, one in which satisfaction of demand is not dictated by the mode or type of ones labour.

What is a Wage

At it's core, the wage is a mechanism for creating differences in the amount of consumption that people are entitled based on the way in which they work. The evaluation of the way in which they work can vary. Under modern capitalism, the wage is set entirely by market forces. In some envisioned socialist systems, the wage is set based purely on the number of hours worked. In Parecon the wage is set based on a combination of market forces and percieved "effort". Each of these will be dealt with in turn.

Labour Notes

The idea of remunerating labour based strictly on hours worked is an old idea. In addition it seems to have some basis in the Marxian Labour Theory of Value (LTV). If the value of goods is in their labour content (as it is in LTV), it gives a reasonably strong argument that people could be fairly remunerated in terms of labour time.

This idea however has at least three serious problems. The first is that the LTV is a macro-economic theory of value, that is, it doesn't talk about individual products made by individual firms but rather broad emergent trends. Therefor different prices of goods will diverge from the actual labour time by product and sector.

In addition, the fact that labour time is in aggregate the value of a product is an emergent property of capitalism, not socialism. It requires that capitalists are continually trying to undercut each other in competition and buyers are always trying to find the best price.

Lastly, if factories started using labour time vouchers, and some factory produced goods and sold them at their labour time, what would happen if people didn't buy them? Then they would have to reduce the price. Then who would be paying the difference between the products sold and the full remuneration for labour time? It would have to be coordinated by a central clearing house that assured that workers were paid by their time and not the amount that the good sold for.

Supposing that the workers decided to start doing a slow down. This means that they would be remunerated the same for their time, but would produce less. Then the price of the good would rise in the market and more scarcity but the same remuneration. Sectors that did this would exhibit price inflation. Now we have a wage, one that requires that you show up, but doesn't incentivise you to do anymore than if you didn't have a wage at all. It is more complicated than no wage, and serves no function.

Remuneration for Productivity

If productivity is the quantity rewarded then we are in a situation in which the differential becomes the important quantity again. Even with the total non-existence of profit we end up with competition. The worker who is able to produce 10 times as much of a good as another worker will get rewarded for their differential productivity. This immediately incentivises them to hide any productive knowledge from others in order to avail of the incentives that one would get for exceptional productivity. Surely a world where every worker would attempt to withhold productive knowledge is not one that we would like to generate.

Remuneration for Effort

Remuneration for effort is often held up as a remedy for this problem. The problem then becomes who gets to decide who is working well and expending effort. If you have a lot of people in a workplace, who is going to track this? Are you going to be putting quotas on individual workers? When quotas were instituted in the USSR they had all sorts of unintended effects, from having thousands of 1/2" nails to getting a few nails several feet long, all with the intention of satisfying the policy details, but not actually producing things of use-value.

Witholding of Labour

In a system with some form of remuneration tied to the distribution of goods we have the problem of the witholding of labour. Even in the system of labour notes, a particular key sector of society could strike to try to get a greater share or better treatement from society. The one solution to the problem of slowdown, the witholding of labour and sabotage is to ensure that work is done on a voluntary basis. At this point the collective responsibility is to provide opportunities for productivity. This turns the problem on it's head, allowing labour to be an opportunity to participate rather than a burden to bear.

The Attribution Problem

“Not everything that can be counted counts, and not everything that counts can be counted” -Albert Einstein

At the core of Kropotkin's critique of the wage system is the impossibility of attributing the usefulness of work. The benefits of production are difficult to see with commodity production. As we move to intermediate commodity production used in production of other goods it becomes even more complex. However, when one starts looking at the effects of knowledge production, tracking the benefit becomes nearly impossible even in principle. What is the benefit recieved from the invention of Algebra, without which no engineering would be possible? How could that possibly be quantified? Such questions make a mockery of the notion that attributing the productive increase of an activity can serve as a means to decide a fair wage.

The Wrong Incentives

The incentives that are provided by either remuneration for effort or remuneration by time encourage the wrong behaviour. The hours worked, or effort expended becomes a parameter which one must game in order to be remunerated. The end goal is never to produce the most socially desirable outcomes or to fulfil needs, or to be safe or happy, but always to fulfil some policy demand, whether it be piece work, quotas, hours or the appearance of being an efficient or hard working person, something which is necessarily a subjective measurement by others. The end result of such policy oriented systems are adherence to the structural laws.

The only effective way to ensure the adherence to the specific meaning of the regulations is to create a managerial cast with the capacity of enforcing sanctions. This tendency has manifested itself repeatedly. In the Russian Revolution the Bolsheviks began calling for managerial control over the factories to ensure productivity [4]. This repeated itself in Hungary and Poland [5]. Indeed even in modern times with the National Health Service in Britain we've seen these systemic problems of attempting to use performance measures.

The Right Incentives

Communism is unique in that it supplies the appropriate incentives for a just, egalitarian and free society. It demands that work be sufficiently satisfying and pleasurable that people are willing to do it. It is production were people find fulfilment by cooperation and play. The incentive structure strongly rewards the reduction of all undesirable labour towards total elimination. Nobody will be forced to work in some terrible activity.

Communism gives a powerful incentive to share information. The ability to reduce unnecessary or undesirable work to nothing is potentiated by the total freedom to communicate. These two factors are self reinforcing in a way that moves our society towards one in which people will truely be free.

[1] David Schweickart, Economic Democracy
[2] Michael Albert, Hahnel, Parecon
[3] Peter Kropotkin, The Wage
[4] Paul Averich, The Russian Anarchists
[5] Andy Anderson, Hungary '56

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