On workplace incentives: The ethics of getting extra for what we are already supposed to be doing

[Dedicated to E. N.]

I work at a bank. I’m not a teller but my job description includes running a cash till. There are incentives for balancing—making sure we don’t give away or take in too much money through miscount. After threats from management to do away with these incentives, they finally have. Budgetary reasons aside, the idea is that it is one’s job to balance, and it makes no sense to “reward a person for doing what he is supposed to be doing already.”

This post explores this argument in the interest of workers’ intellectual self-defense.

Hyperbolic indignation

The bankers’ argument should seem odd on its face, for we constantly violate it in practice. In every other avenue of life there is space for praising (i.e., rewarding) people for doing what they should already be doing. “Giving recognition” to those who simply meet the dictates of their roles is widely considered a virtue. What a monstrous spouse, for instance, who never thanked or praised the other for doing their “duty” as husband or wife. The same goes for parents of children, teachers of pupils, close friends, etc. On consideration, I suspect the vast majority of what we praise and reward falls solidly within the region of what one is “supposed to do” already.

The ‘extreme’ cases show the point most clearly. Consider heroes: Most would agree that the lifeguard who dives in to save the drowning child, or the returning soldier who has braved bullets in defense of country, are due some special recognition—paycheck aside. At least, nobody finds it odd or illegitimate to give it. (Indeed, “hero” is a normative term; to apply it to such persons is already to confer special recognition.) Nonetheless, every hero, when interviewed, humbly defends that he only did “what anyone would have done in my position” or no more than “what I had to do.” And he is entirely correct: Despite our high praise, we can agree that, given his circumstances, he had to try and save that child (etc.). He was “supposed to do” it. Indeed, if he had twiddled his thumbs while the child flailed about, or the bullets flew, he would not only be a non-hero like the rest of us, but a sonuvabitch deserving everything from harsh criticism to legal persecution.

Finally, it occurs to me that on a daily basis I recognize my dog for performing such acts as coming to me when I call her; perhaps I even give her a biscuit. She is then a “good dog.” But coming when I call isn’t really “good”; it’s just un-bad. That is, a dog who comes when called is just behaving as a companion animal should; it doesn’t exceed the mandates of what she is “supposed to do.” And yet, each of us understands the praise attending this behavior. It is just what a proper “owner” (yuck) does.

It would appear, then, that the scope of “rewardable” behavior overlaps with the scope what one is “supposed to do.” Some of the latter are also the former. They are not entirely separate dimensions, as the bankers’ argument would have it. At least, nobody really thinks they are. To quote Charles Peirce, “let us not pretend to doubt in philosophy [i.e., when constructing arguments] what we do not doubt in our hearts.”

“Supposed to” versus “have to” or “is expected to”

The question remains: Why do we reward “supposed to” behavior? We do it, but can we justify it?

First, while virtually everyone supports rewarding heroic behaviors, it is actually easier to justify rewards like balancing incentives. This, because unlike a lifeguard’s rescuing the drowning child, a teller doesn’t have to balance. Being out of balance (within reason) is not a fireable offense; almost every teller is out from time to time. (If she weren’t, nobody would ever think to reward her for it.) So every time a teller balances, while she may be doing what she is “supposed to do,” she is nonetheless doing more than she must do.

From another angle: Yes, one is “supposed to” meet one’s job description. But any job description is the articulation of an ideal. As “ideal” would suggest, nobody lives up to it, nor does anyone think they will. This being the case, “supposed to” is a rather hollow basis for an incentive scheme. What one is “supposed to do” is always more than what we expect them to; one ought to balance all the time, but he is not expected to.

In short, we are well within our rights to reward those who exceed expectations, who do more than they have to do. Whether this falls within what they are “supposed to do” is beside the point.

“Bonus” is just a figure of speech

An incentive is presented as a “bonus,” something added to a predetermined wage-base. But let us not make too much of mere words. We can just as accurately describe it as a penalty for not balancing. Instead of a chance to pad my check, maybe I’m just fighting not to lose the last part of it. We have as much reason to look at it that way as the way our employer presents.

At best, then, a balancing incentive is ambiguous; depending on how you look at it, it could be a bonus, or it could be a penalty. Is there anything which might favor one interpretation over the other? I can think of two lines of argument:

i.

The legal convention of contra proferentem (“against the one bringing forth”) says that, when a dispute hangs on ambiguities in the wording of a contract, it goes against the party who drafted the document. This is designed to prevent the deliberate use of language which can be “bent” one way to entice a second party and then “bent” the other way to win a dispute. Law aside, the principle behind this is a good one, with broad application. The party perpetrating an ambiguity—and any dispute stemming from it—should be the very last to benefit from it. The party upon whom the ambiguity was “passively” foisted gets the benefit of any doubt.

In short, when faced with the “bonus vs. penalty” ambiguity, our prejudice should go against the party who set the whole scheme up. In this case, it is clearly the employer.

ii.

More important, whenever other kinds of employer “contributions” to wages have been studied, they have been shown to be factored as part of wages themselves.

The clearest example is payroll taxes. A percentage of each worker’s paycheck (15.3%) is owed in payroll tax. In theory, the worker pays half of this, and the employer pays the other half. But this is a “difference that makes no difference.” The employer is responsible for sending 15.3% of each wage to the government—period; it makes no difference that half this amount appears in writing on the paycheck stub.

The question is only whether the payroll tax is ultimately carved out of employer profits, or worker wages. The answer is not controversial; virtually all tax economists, across the political spectrum, agree: The payroll match is anticipated in the decision to hire any new worker, and the wage adjusted downward accordingly. An employer will not hire an additional worker unless the costs associated with taking her on—wages-proper, inputs, additional wear and tear on machinery, etc.—is less than the value of what she will produce. The payroll match has become a “cost of production” like any other, and is accounted as such. And why wouldn’t it be? Let us make not a fetish of bookkeeping; in real effect, the entire tax is deducted from wages.[1] There is no reason to think that balancing incentives work any differently.

Conclusion

The bankers’ argument presumes that the only legitimate reason to give “extra” is when people are “owed” it. This “economic thinking” is encouraged by capitalism. In real life, we reward people for all kinds of reasons—we want to influence behavior; make a statement; keep people around; avoid the consequences of not rewarding; or just to be nice. (Even the bankers’ argument is too narrow. It overlooks the loss-preventive function of balancing incentives: One hesitates to pilfer a twenty from the till if that move will cost her a few hundred come the end of the quarter.)

The idea that we can’t reward work one is “supposed to do” is so contrary to how we behave that it must be ideological—that is, a reflection of the stories capitalism has to tell to live with itself. Namely, the whole system is said to rest on the free and fair exchange of “value-equivalents.” All “factors” of production “deserve” (are bought/sold at) a price in proportion to what they contribute to production. Labor is just another factor; so anything it earns above its price—like a bonus—represents an injustice toward the employer.

A bit of (oversimplified) Marxist theory tells us this story is false. When “free and equal” exchange is generalized, each capitalist just breaks even. Buying at cost and selling at cost gets him nowhere. Nor can this be circumvented by selling at a markup; marking up iron spoons by 10% just “washes” with the 10% markup which the previous capitalist placed on the iron ore sold to make the spoons. The key to profit is to find a “factor” which, like magic, produces value in excess of its own value. Labor alone fits this bill; the quantity of goods it takes to sustain itself (in a given period) is less than what it can produce during that time.[2]

Not only, then, is everything which capitalists call a “bonus” not one; but under the current system, the very idea of a bonus is impossible. Capitalists cannot add anything to the “value” of labor because they don’t pay its “value” in the first place—if they wish to remain capitalists for long.[3] No incentive package will raise a worker’s takings to her real worth. There is no such thing as an “illegitimate” reward, right up to the point that the entire operation is transferred in share to the workers.

Notes

[1] Example taken from Paul Krugman, Fuzzy Math: The Essential Guide to the Bush Tax Plan, pp. 42-43.

[2] The Marxist theory of exploitation and the labor theory of value is given in more detail here (Sect. 1 mostly): http://www.marxists.org/archive/mandel/lg67/intromet/index.htm

[3] By “value” in this sentence I mean value in explicit neoclassical capitalist terms—the value of what labor produces for the capitalist; in truth, the value of labor is whatever the value of the goods it takes to keep the worker alive, which, again, is less than this quantity.

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