Labor Incentives

Labor Incentives, Socialist Economy Definition

No question is put to the socialist more often than this one: "How would you get people to work under socialism?" The questioner is certain of the impracticability of socialism when he gets this reply: "Much as you do under capitalism." The answer is sincerely given; the modifications pro­posed by modern socialists would directly affect only a small portion of the gainfully employed population, and the effect on this group would be less than is often supposed. The basic reason for this has already been stated: The socialists do not desire complete economic equality, but instead advocate the degree of inequality necessary to spur individuals to exert their best efforts. This is coupled with the promise that the inequality aris­ing from unearned incomes under capitalism will be abolished.

The socialist prefaces his program by pointing out that an over­whelming portion of the mental and physical effort put into capitalist production is not induced by the profit motive. Only the "enterprisers" are so motivated; the wage-worker group extends from the assembly line through the managers and research workers who hold the keys to cur­rent and future industrial development. The growing dominance of the large corporate business unit creates a strong tendency for the entrepre­neurial function to be centered in a small group of salaried managers.

Socialists contend that the basic stimulus with which capitalism moti­vates employees is fear—fear of declining living standards and, in some cases, of reduced ability to subsist. The socialist would substitute a com­bination of wage differentials, piecework rates, and bonuses as induce­ments to productive effort within an environment of reduced economic insecurity.
The socialist places greater reliance on noneconomic incentives than exists under capitalism. In part, this source of motivation would stem from the education of citizens to appreciate social values. However, the socialist also foresees some use for the system of rewards used under capitalism. For example, socialists claim that high executives in private industry are motivated partly by desire for power, by the excitement of "playing the game" of management, or by the desire to acquire honor or prestige. The executive's salary is important in itself, but it also represents a scorecard that measures success. Far-sighted executives, like hard-hitting shortstops and fearless steeplejacks, would still be highly rewarded under socialism because they would still be in limited supply. The point is that noneco­nomic incentives can conceivably play a large role in bringing forth the creative talents and specialized skills essential for the operation of a so­cialist economy.

Critics of socialism often imply that a transition from capitalism to socialism would destroy or reduce the existing body of technical knowl­edge used in the management of industrial firms. Socialists find no reason to believe this is true. The technical expertise required to operate the bank­ing system or steel industry, for instance, would not change appreciably under socialism, and socialists would have every reason to preserve and pro­tect banking experts and steel technicians during a transition to socialism.