Wage Slaves or Labor Entrepreneurs?

Who owns our work?

ADP Time Card Reader. Photo: BrokenSphere. Source: Wikimedia

There’s a memorable scene from the bike-racing movie, “Breaking Away.” When a member of a teenage gang shows up for his first day of work at a car wash, his pushy new boss tells him: “Don’t forget to punch the clock, Shorty.” Offended by his supervisor’s attitude, the young man wraps his hand in a rag and physically punches the time-clock, breaking the glass. His buddies cheer, and he storms off.

As long as there’s been work, there have been wages. Wages have been part of society from ancient times to the present. There are lots of references to wages in the Bible, with admonishments for supervisors to be fair. Wages can be calculated by the task or by the time we put in. Day wages were typical in the ancient world, and once clocks were widespread, hourly wages became the norm.

Paying people by the hour has the virtue of being simple. If you don’t show up, you don’t get paid. But it creates a fundamental conflict. It’s in the employer’s interest to get as much work out of a laborer as possible. But maximum effort isn’t always in the worker’s best interest. As a result, wages always come with oversight – foremen and gang-bosses, paid slightly more – to keep the workers on-task and productive.

Photo: Russell Lee. Source: National Archives

Wage-labor distances workers from the product of their work. When farmers cultivate a field, their crop is a direct result of what they do. It doesn’t matter the hours they put in, what matters is that the job gets done. With wage-labor, though, businesses manage labor as just one of many inputs into their production process. And the business needs to be sure they get honest work for honest pay.

And specialization brings benefits, most notably an increase in productivity. Ever since Adam Smith wrote about his pin factory in The Wealth of Nations, we’ve understood that when we each do what we do best and trades our output for someone else’s, we’re all better off.

Public Domain. Source: Online Liberty Fund

Wages create a conflict – perhaps the most basic conflict in economics – between workers who own their labor and managers use that labor. If firms want workers to act like owners, they need to find ways for workers to enjoy some of the fruits of their work.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2018-07-17T06:12:41+00:00July 17th, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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