“Breakdown of the Fear Incentive”: American Kaleckism, continued

Paul H. Douglas, “Personnel Problems and the Business Cycle,” Administration: The Journal of Business Analysis and Control (July, 1922):

“Another source of labor inefficiency that was increased by the situation of the labor market was that of absenteeism. The percentage of absenteeism rose steadily, caused by the increase in wages, the longer hours worked, and the lessened fear of unemployment. It was no uncommon experience for a firm to find that from 10 to 15 per cent of its force were absent daily. Indeed, a conservative statement for the country as a whole, was perhaps somewhere between 6 and 10 percent. Employers tried to meet this situation by offering bonuses for good attendance and by instituting home visits. Both of these were necessary items of expense which were probably justified in view of the desperate situation.

The basic factor behind all these developments was the removal of the fear of unemployment from the minds of the workmen. It was this which primarily accounted for the increase in turnover and absenteeism, with their attendant costs and problems. The absence of this fear, moreover, served to make the worker less efficient on the job itself. He knew that the employer would be loath to part with him even though his output did increase. ‘Man,’ says Emerson, ‘is as lazy as he dares to be,’ and one could then dare to be lazy in view of the great shortage of labor.

Naturally, this decrease was probably greater in the hand trades than in those largely dominated by the automatic machine, since in the latter the speed of the machine largely forces the worker to keep pace willy-nilly.

The breakdown of the fear incentive which in the previous periods of depression or only moderate revival, had been the chief reliance of the employers, necessitated the substitution and utilization of other incentives, if industry was to continue on any basis of efficiency. Both publicists and employers, therefore, began to advocate the policy of securing the co-operation of the workers and many adopted the policy of cajoling or inducing the workers to increase output now that the old policy of coercion was inapplicable.

Throughout the depression phase of the business cycle the old incentive of fear is coming back with increasing force…In a word, the labor market becomes once more a buyer’s market and it is not necessary for the employers to cajole their labor into granting an increased output. The whole pressure of economic forces tends to force the workmen to produce more, to be steadier at work, and to be more docile. The average business, therefore, will tend either to abolish its employment and personnel department, or radically to curtail the number of members in it….Employers in general decide to make war upon the unions, and the shop committees that have been created find themselves shorn of effective power either to determine a wage increase or adequately to determine the working conditions in the plant.”

(reference via Jeff E. Biddle, “The Genealogy of the Labor Hoarding Concept” [2013])

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