Brad McCormick wrote,
>>Ah! My proposal: That, just as we outlawed the buying and
>>selling of persons a century and a half ago, we now need to
>>take the next step in the humanization of "mankind", and
>>OUTLAW THE RENTING OF PERSONS, i.e., outlaw wage labor.
Here's a few paragraphs from J.M. Clark's _Studies in the Economics of
Overhead Costs_, written in 1923 (pp. 15-16). Note especially Clark's
observation in paragraph three: "The reason why the expenses of production,
some of them, normally vary in proportion to output is simply because the
terms of the wage contract are drawn in that way."
12. LABOR AS AN OVERHEAD COST
Once the holding of unused productive capacity is conceived as "idle
overhead," it was inevitable that the idea should be extended to human
powers as well as to the powers of physical plant and machinery. G. P.
Watkins, in discussing the load factor (ratio of average output to maximum
output) includes a discussion of the load factor of labor, indicating that
the waste involved is as real as in the case of capital. Wherever a laborer
has invested time and money in specialized training the result is, in a
certain sense, fixed capital which is useful in one occupation and in no
other, and which must earn whatever return it can, because the investment
cannot be withdrawn and moved into some other line of business. In such a
case it seems fairly clear that labor involves an overhead cost.
In a more general sense, however, there is a minimum of maintenance of the
laborer's health and working capacity which must be borne by someone,
whether the laborer works or not that is, if it is not borne, if the
maintenance is not forthcoming the community suffers a loss through the
deterioration of its working power which is at least equivalent to the cost
of maintaining the laborer. Thus the burden is there in any case: it cannot
be avoided. From this point of view it appears that a large part of the cost
originally counted as wages represents an overhead cost which the laborer is
responsible for covering as best be can, just as the employer is responsible
for covering the overhead cost on account of capital. However, if the
laborer fails to cover it the community does not escape the burden, and it
is ultimately borne by industry in the shape of reduced productive power and
damaged morale. And thus it comes back to the employer in any case. There
are other features of the human cost of labor correspondingto some of the
particular phases of overhead costs in connection with large fixed capital,
but they may be reserved for more detailed treatment later.
If this last step is taken, overhead costs are seen to be a universal fact.
The reason why the expenses of production, some of them, normally vary in
proportion to output is simply because the terms of the wage contract are
drawn in that way. The employer leaves the wage-earner to care for his own
overhead and the terms of the contract are not scientifically adjusted as,
for instance, the contract for electric current is sometimes adjusted, to
the overhead costs of the ultimate producer. It may be that we shall find
that our general system of wage payment is thoroughly unscientific and that
a more scientific system may operate to improve the steadiness of employment
in much the same way in which scientific rate systems have been used to
increase the regularity of use of electric power plants.
Regards,
Tom Walker
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