Millionaires and Wage Slaves
A Fair Day’s Pay for a Fair Day’s Work?

NOW, right now while our entire economy appears to be in turmoil and semi-paralysis, we have a rare opportunity to re-visit and revive some of the age-old arguments, battles even, which persist in dividing our society.... and perhaps with any luck, even agree on some basic conclusions.

Fact is, the vast majority of working people slog away in factories and offices for the best part of their lives with nothing but a meager pension at the end of it – and even that may be in doubt – while the "fat cats" walk away with millions for making no useful contribution whatsoever.

"A fair day's pay for a fair day's work" – a fine-sounding slogan but hardly a reality today.

So what is "A fair day's pay for a fair day's work"? Can it be calculated or objectively defined? The answer's "yes". And it's already happening throughout major industries.

For many years, government agencies and corporations large and small have been using a system of Job Evaluation to evaluate the work contributed by each employee. Indeed, they could hardly do without it. Each job is analyzed, and its essential characteristics and demands, such as training, responsibility, working conditions and physical/mental effort involved, are measured on a series of common scales. The job "value" is then directly related to remuneration.

If the system is fair and truly covers every aspect of real work contributed, the remuneration of top executives cannot be given exception. Indeed there is every reason to give the issue especial attention. Executive compensation has grown 940% since 1978, while typical worker compensation has risen only 12% during that time. Executives are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills. Indeed, executives often get full pay, bonuses and a six-figure golden handshake even when their companies fail and go bankrupt, receive taxpayer bailouts or pay millions in fines for fraud.

The challenge is NOW. There are currently several well-established job evaluation systems in current use. With a little common debate a National Standard could easily be established. Application nation- and industry-wide at all levels would ensure that "A fair day's pay for a fair day's work" could become a reality.

But pay has meaning only in terms of prices.

A factory's, or a business's total costs consist of three elements: bought-in raw materials and components, the direct labour added in the factory, and third, the costs of capital write-off, overheads and finance. From these costs a Unit Production Cost can be calculated for each product or service. Add the net profit to get the Selling Price.

How is the net profit disposed of? Companies may well choose to re-invest a part of the net profit in up-dating or up-grading their premises and equipment. And the balance remaining?

Currently the answer is 'the shareholders' – not just as a fair reward for their investment, but increasingly through the use of, yes, buybacks and other devices which serve largely to reward the already over-paid executives.

It is here that the 1% make their millions.

As human invention and creativity develop ways of making better goods with less work and less cost, so prices should also fall and life get progressively easier for everyone. So much for theory. But in reality the benefits of productivity gains have gone almost entirely to the ‘top’, leaving the average standard of living unaffected. The cost of living doesn't go down. And life doesn't get any easier.

Pay has value only in terms of its purchasing power, what you can buy with it, and without some direct link between production cost and selling price, remuneration evaluation of itself will not achieve its potential of social justice. A fair wage must be accompanied by a fair price.

This in turn requires that a major part of productivity-increases, producing more goods with the same or less labour, must be translated into lower prices. Lower prices increase sales, thus reducing the company's own unit production costs through more productive use of equipment.

In the economy overall, gradually falling prices equals rising purchasing power yielding in turn a climate of increasing prosperity and stability, as well as enhancing the nation's international competitiveness.

In 1913 Henry Ford introduced the continuously moving assembly line. This move dramatically reduced production costs, which Ford astutely passed on in a corresponding price reduction. This not only increased sales, but left the competition way behind. The effect of simplification and scale was to move the price of a Model T down to $550 in 1914, when 248,30 were sold. By 1917, the price had been reduced even further, to $360, with the result that sales soared to 785,432. In 1920, Ford sold 1.25 million Model T's.

Lower costs, lower prices, increased sales, resulting in further productivity gains... a virtuous circle. And a profitable one, both for producer and consumer.

Productivity UP
Production cost DOWN
Price DOWN

Deflation – a Rich Reward

Inflation is a permanent feature of every world currency today, and though economists and politicians seem quite comfortable with its existence, even promote it (yes really), inflation is a manifestation of gross monetary mismanagement, for it is a denial of one of the basic purposes of money: that it should serve as a store of value. Nobody would put money under the mattress and expect it to be worth anything in twenty years. Sensible people put their savings into property which pushes up prices, and explains why 'a home of your own' is now simply a dream for young folks living with their parents well into their thirties.

The longterm result of productivity maximization, combined with the stability of a labour-based monetary system, is negative inflation. As productivity increases, the labour-content decreases, and it becomes possible for goods and services to be produced and offered at lower prices, thus progressively lowering the cost of living. Your money buys more each year, not less.

This in turn means that as we get older we can look forward to increased purchasing power for our savings. A wild dream? No. This is as it should be, the normal course of events. We should be increasing productivity, producing more and better at less cost. And with a stable monetary unit, increased productivity involving less labour should be reflected in lower prices.

Ultimately the idea of living in a society where the cost of living goes down slowly, year by year instead of up, where your savings are not only safe but increase in value as productivity reduces prices, where your domestically produced goods get progressively better and cheaper, where a fair day's pay for a fair day's work in decent conditions is an accepted norm rather than an on-going battle... it may seem utopian.

But it's all possible.

And right now, as we're forced to re-evaluate and re-think the very basis of wages, prices and money... right now's the time to do it.

Development Banking can spread growth across the nation, creating jobs and providing the wherewithal for existing companies to increase their competitiveness and productivity.

Productivity in Government Government takes half the nation's income. It needs to maximize its own productivity.