Re: AltInst: a "work spreading tax"

From: Tom Walker <>
Date: Fri May 29 1998 - 17:18:57 PDT

Lee Daniel Crocker wrote,

>It is not generally taken advantage of because there are
>other costs that overwhelm the effect: the fixed overhead of having
>an employee to begin with, for example, both in normal business
>expenses like facilities and management costs, but also the expense
>of regulatory requirements (which are generally flat per-employee).
>Add to that /regressive/ taxes like US Social Security, and the
>benefit to a business of spreading work out to more empoyees
>evaporates pretty quickly.

Very good point. That's what I thought until about a month and a half ago
(see my earlier paper Then I
was asked to do a workshop in Toronto on labour costs and working time. I
spent several hours putting together a simplified hypothetical case for
overheads to demonstrate the barriers posed by fixed labour costs. My
example turned out to be less costly to the employer than I would have
expected, although still generating some extra cost.

When I got home I tried the same model on some real numbers from a case
study and discovered _costs savings_. I'm not saying there will be savings
in every case. What I am saying is that Walter Oi's theory of quasi-fixed
costs and Ron Ehrenberg's empirical confirmation have outlived their
generality (not their usefulness or historical validity).

Over the past 30 years, the structure of labour costs has changed radically,
but economists and human resource managers have mistaken the historically
specific analysis of quasi-fixed costs for a universal principle of labour
costs. As always, the generals are fighting the last war.


Tom Walker
#408 1035 Pacific St.
Vancouver, B.C.
V6E 4G7
(604) 669-3286
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Received on Fri May 29 17:35:49 1998

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