--------------------- forwarded message ----------------- From: Tom Walker I'd like to raise three point with regard to Dr. David Chapman's proposal for a work-spreading tax and then elaborate on a proposal of my own. First, I agree with Dr. Chapman that the progressive income tax contains a potential incentive to employers to spread the work. However, I would argue that that potential could readily be realized by employers regardless of who nominally pays the tax. In other words, there is no _actual_ need for a change to public tax policy other than to bring something to the attention of employers that they seem not to have noticed, namely price signals. Second, my assertion that employers have systematically and chronically ignored price signals in the labour market is a bold one, so it is some comfort that I am not alone. Jeffrey Pfeffer of the Stanford Graduate School of Business makes the same claim in an article in the May/June 1998 Harvard Review of Business, "Six Dangerous Myths About Pay." In Pfeffer's view employers typically confuse labour costs with labour rates, overestimate the effect of labour costs on total costs and misjudge the relationship between pay and work performance. Managers are more likely to look at what everybody else is doing and then do the same rather than implement pay systems that actually work. Third, I was disappointed to read Gavin Cameron's knee-jerk hoisting of the 'lump of labour' canard. Dr. Chapman's work-spreading tax doesn't rely on any 'lump of labour fallacy' and Cameron's "economist's perspective" on the 'lump of labour', is not at all helpful. "Having a name for the idea that cutting working hours would raise employment" is quite a different thing than explaining what is wrong with a particular proposal to change the structure of tax incentives for hours of work. There's also "a name" for endless and exclusive tinkering on the labour market supply-side: 'blame the victim'. Shall we dispense with the thinly veiled name calling? My own proposal is for realizing the work-spreading potential of the progressive income tax without any public policy change -- other than perhaps a public effort to inform employers of the profitable opportunities. I will give only a short description here as I have posted a more detailed version of the proposal at: http://www.vcn.bc.ca/timework/arbitrag.htm A PROPOSAL FOR ARBITRAGING FREE TIME When a commodity sells for unequal prices in different markets, an opportunity arises to profit from arbitrage -- buying and selling the commodity simultaneously in the different markets. The commodity in question is free time. This proposal would arbitrage the market for free time by rewarding years of service with more free time rather than with higher annual income. The typical collective agreement as well as the personnel policies of many non-unionized employers contains a schedule of wage rates that provides for service increments within a job classification and pay grades between classifications. The unquestioned assumption is that as an employee moves up the wage rate schedule, the annual paid hours remain constant and his or her annual income increases in proportion to the increasing wage rate. An equally logical (but unheard of!) alternative would be to keep annual incomes steady while reducing hours of work in direct proportion to the wage increments. That is to say, more free time -- rather than higher income -- would be the reward for skill and years of service. This is not to say that all people, or even most, would prefer having more free time to having more income. It is only to point out that nowhere in the standard collective agreement is it acknowledged that they even might. Nor does the standard collective agreement offer any comparison of the relative benefits of such a trade off between free time and income. For an employee facing a marginal tax rate of, say, 33 per cent for example, one extra day off would be worth one and a half days' income. Progressive income taxation means the higher the income, the greater the relative value of free time. For an employer, selling free time to experienced, high wage employees and buying it from new recruits would be a good way to save on labour costs. Over the longer term, the benefit to the employer would be a well balanced workforce with progressively experienced younger employees moving up to take over for the glut of aging baby boomers who will soon be dying, retiring and/or burning out (if they haven't already). Regards, Tom Walker ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ #408 1035 Pacific St. Vancouver, B.C. V6E 4G7 [EMAIL PROTECTED] (604) 669-3286 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
