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International Socialism, Autumn 1968


Bernard Ross

PIB – Payment by Results Report (No.65)


From International Socialism (1st series), No.34, Autumn 1968, pp.??.
Transcribed & marked up by Einde O’Callaghan for ETOL.


The Notebook

Bernard Ross writes:

1) The Reference. The Prices and Incomes Board itself asked to be given the task of studying Payment by Results (PBR) since it saw this as a loophole in the Incomes Policy. It surveyed the existing literature, took evidence from interested parties, and carried out about 40 case studies.

2) Definitions and Coverage. The Report defines PBR broadly and gives examples of ‘straight piecework’ and other systems. Statistics for 1961 (the most recent available) showed that PBR covered 32 per cent of all wage earners; 42 per cent of all workers in manufacturing; and 50 per cent in engineering. There were important regional variations.

3) Wage Drift. ‘Wage drift’ is a term applied by economists to any increase in a worker’s earnings which results from negotiations and changes on the shop floor, rather than from nationally agreed advances. The Report suggests that in recent years, wage drift has brought the average worker an annual increase of 4 per cent in his earnings. PBR can contribute to drift in several ways: production and thus earnings often rise as a worker becomes experienced on a job, or as small technical changes occur; workers can bargain over rates for new jobs; and while workers will press for an increase in ‘tight’ rates, they rarely accept a reduction in ‘loose’ rates. The Report argues that wage drift resulting from PBR undermines the Government’s Incomes Policy, and that ‘there are therefore good reasons for attempting to bring wage drift under some effective supervision.’

4) Conventional PBR in Practice. The findings of the Board’s case studies suggest that while some PBR systems (particularly where women are involved) are tightly controlled by management, in others there is no such control; and there is no clear evidence that PBR generally leads to increased output or reduced labour costs. The Report argues that workers often resent the insecurity of earnings, and the discrepancies in pay between workers doing similar jobs, which result from PBR; and that they are therefore willing to accept different systems of payment.

5) The Need for Change. The Report urges that managements should examine their payment systems critically. When PBR is used, management must control its operation rigidly. PBR is not normally appropriate unless output is easily measurable, the pace of work is under the control of the worker himself, work can normally proceed without interruption, and changes in job are infrequent.

6) Some Alternative Systems. The Report examines the operation of some plant-wide incentive schemes, and Measured Day Work, and recommends the latter.

7) Control of PBR at the Workplace. Where PBR is used, management should so control its operation that workers can raise their earnings only by increased effort. Systematic and effective work study should be used; rate-fixing must be insulated from shop-floor bargaining pressures; the individual worker should be able to bargain only with his foreman, whose own decisions should be closely controlled by higher management. The system of PBR used should be such that bonus earnings make up only a quarter of the total pay packet; ‘time saved’ systems are preferable to straight piecework. An agreement should be formally negotiated for the whole of a plant or Company, laying down the procedure to be followed when setting rates, together with ‘standard’ earnings for each grade of worker. ‘“Mutuality” has to be removed from the individual job to the enterprise as a whole.’

8) The Role of National Agreements. In most industries, national agreements at present have no direct effect on earnings at plant level. In the future they should stimulate and guide the reform of plant pay systems. Unions and Employers’ Associations should provide ‘experts’ to ‘assist’ plant negotiators. Government departments should also collect information and give advice.

9) PBR and the Incomes Policy. PBR is an important source of increased wages, but at present it escapes the control of the Incomes Policy. The Report sets out ‘guidelines’ for ‘good payment system practices’ – seven features, the most important of which is that earnings should rise by less than l½ per cent per year. The features of a ‘bad’ system include an annual increase in earnings of over 2½ per cent, the absence of effective work study, and .the occurrence of bargaining over most new rates. Such features provide a ‘red light,’ telling firms to take urgent action to change their payment systems. To do this, the Report concludes ominously, firms ‘may well need outside aid.’

10) Comment. This Report gives warning of a co-ordinated attack on all PBR systems over which workers have sufficient control to win significant increases in earnings. The express aim is to ensure that wage restraint hits the earnings of all workers. However, a further consequence of the introduction of any new payment system is likely to be a general weakening of the power of independent workshop organisation.

Workers should ask two basic questions whenever a new pay system is proposed. First: a large wage increase may be offered if the new system is accepted, but what chance is there of continued increases in the future? (The whole point of the change is that there should be no such opportunity.) Second: what effective powers will shop stewards retain? (Will they be reduced to discussing the supply of toilet paper, or the colour of the canteen walls?)

A serious danger is indicated in the pages of this Report: many workers would in fact welcome the end of PBR. Dayworkers resent the higher earnings of pieceworkers; lower-paid sections are jealous of those who are more successful; even stewards get tired of constant bargaining over rates. It is essential to show that the attack on PBR will in the long run hit the wages of all sections of workers, so that a united resistance must be made. One weak section is all that management needs to begin the process which will end in smashing shop-floor power.

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