Abstract
It has long been argued that pay formulas containing an element of profit-sharing have noninflationary employment promotion properties (Vanek 1965), except in self-managed enterprises (e.g., Vanek 1970). Recently Weitzman (1983, 1984, 1985a,b,c) has promoted economy-wide profit-sharing, combined with workers’ strict exclusion from employment decisions, as a scheme guaranteed to achieve a blissful state of noninflationary excess demand for labor, absorbing all or part of possible deflationary shocks. Weitzman’s proposal is reminiscent of the set-up in Catch-22, where a wheeler-dealer retrades and speculates with army supplies originally meant for the soldiers, who are supposed to benefit instead from their share in the profit of his operations; everybody has a share, nobody has a say, and the main beneficiary of the scheme is its proposer.
Published in Industrial Relations, Vol. 26, No. 1 (Winter) 1987, pp. 18–29. Reproduced with the permission of John Wiley and Sons Inc. A previous version was published as EUI Working Paper No. 245, European University Institute, Florence 1986.
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Notes
- 1.
Alternatively, we could incorporate unemployment into an income probability distribution as the probability of zero income and treat the choice by workers as one between expected value and dispersion of earnings under the two regimes; this would be tidier but would oversimplify the alternatives, given the discontinuity in employment/unemployment status.
- 2.
However, conflicts rendered more tractable by the introduction of codetermination inevitably reappear over time (Furubotn 1985).
- 3.
Ironically, the theory of labor-managed enterprises where profit-sharing is accompanied by employment-restrictive policies has been developed and promoted by the same person who first pointed out the employment-promotion properties of profit-sharing in isolation (Vanek 1970, who developed the approach initiated by Ward 1958).
- 4.
This is implicit in Vanek’s model (which he presents in diagrams) though not in his argument. The physical marginal product of labor may not be positive at full employment, however, after a protracted worldwide recession such as that recently experienced.
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Nuti, D.M. (2023). Profit-sharing and Employment: Claims and Overclaims. In: Estrin, S., Uvalic, M. (eds) Collected Works of Domenico Mario Nuti, Volume II . Studies in Economic Transition. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-23167-4_16
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