Share Economy (Martin Weitzman)
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The concept of the Share Economy (also known as the Weitzman Plan ) regards profit-sharing as an instrument to avoid unemployment in the event of economic fluctuations . It was described in 1984 by the Harvard economist Martin Weitzman and has subsequently been the subject of many economic research. In response to the publication of Weitzman's book, a symposium was held at Yale University in June 1985 , attended by William Nordhaus , Robert J. Shiller and James Tobin , among others . The concept of profit sharing was looked at from various theoretical perspectives. T. criticized. In a subsequent paper, Weitzman responded to some of the criticisms and defended his approach.
background
Employee profit-sharing
The idea of allowing employees to participate in the success of their work has been discussed since the 19th century. In Germany, Johann Heinrich von Thünen (1783–1850) is a pioneer with his profit-sharing model introduced in 1848. The US economist Michael Jensen researched this topic in 1976 . However, this discussion related to the operational and socio-political effects of such models of pay differentiation . Weitzman's innovation was to address the economic effects of profit sharing for the first time.
Business cycle theory
Both the question of the origin of business cycles and how they can be smoothed out most effectively is controversial in business theory, depending on the economic school. The Weitzman Plan was created under the influence of stagflation . The two oil crises of the early and late 1970s acted as supply shocks , bringing with them both high inflation rates and economic stagnation . This situation contradicted the notion that there is an automatic relationship between inflation and the unemployment rate, which is reflected in the Phillips curve . According to the neoclassical theory , wages would have to fall due to unemployment, which would lead to a reduction in inflation and an increase in the demand for labor. The economy would find a new equilibrium on a new level. However, no decline in real wages was observed in the 1970s, and unemployment rose accordingly . Several theories emerged to justify this, including the efficiency wage theory , the theory of collective bargaining (the collective negotiation of collective agreements by trade unions and employers acts like a business cartel ) or the addiction theory . Martin Weitzman's concept of the share economy represents another theory in this concept and offers a proposed solution.
The concept
In his book, Martin Weitzman examines the question of the economic aspects of fixed or company success-related remuneration. His thesis is that an economy in which not only fixed hourly wages but also profit-related remuneration are paid is better able to prevent unemployment in the event of an economic downturn, since labor costs dynamically adapt to the economic situation of the employer. This avoids the difficulty that with fixed personnel costs and falling sales, personnel have to be cut in order to compensate for the decline in sales. This also improves the allocation of labor, since employees leave the company in their own interest when their remuneration falls as a result of falling profits for their employer, if they can get a job in a company with higher profits and therefore better pay. If the yields were constant, the wage bill would not increase if additional workers were employed; the per capita wage and thus the marginal cost of production would even fall.
In this model based on equilibrium theoretical assumptions , Weitzman specifically calls for the wages to be split into a fixed wage component (base wage) and a profit-related part. The sum between the two should correspond to the market-clearing equilibrium wage, the basic wage alone is lower. The profit-related part should be a fixed proportion of the company's profit. The wages will therefore not change at the time of the changeover. From the employer's point of view, however, the calculation of hiring additional employees changes. Since the basic wage is lower than the total wage, the introduction of the participation model increases the demand for labor, resulting in a demand for overwork (which cannot be met with full employment).
The decisive factor is the effectiveness of the instrument in the event of external shocks. Profits fall, so this demand for labor is reduced. Ultimately, this is the result of falling overall wages. The effect of the external shock thus takes place at the level of prices, not the amount of work demanded. This effect occurs automatically without any intervention by the social partners.
The profit sharing between owners and employees to supplement the usual fiscal should macroeconomic and policy measures to be.
The model assumes, however, that labor is a relatively homogeneous and flexible (non- limitational ) factor of production and that there is no solidified unemployment.
Reception and debate
The model has been widely and controversially discussed in economics. So put William Nordhaus adopting rigid wage parameters in question. The willingness of the unions to adjust wages in the event of external shocks is promoted by the fact that otherwise there is a risk of unemployment. He also addresses the question of why an employee should accept a wage model that in the event of a crisis entails an automatic wage cut. The continuation of this thought leads to the idea that workers would demand compensation in the form of a wage increase for this consent. Weitzman assumes that external shocks are unpredictable. If at least a statistical frequency of external shocks could be estimated, an insurance premium against these cuts could be determined. This tends to reduce employment. A key issue is the conflict between those who have a job (insider) and those who are looking for a job (outsider) (see also insider-outsider theory ). Weitzmann assumes in his model that the hiring decisions are made by the company without the involvement of the employees. This assumption is called into question with reference to the legal situation and the role of the trade unions. The Weitzman Plan does not consider the impact on investment or structural adjustments in the economy from the shock. In particular, the very different proportions of wage costs in total costs, depending on the industry, lead to significant structural adjustments in a share economy: while the mineral oil industry, for example, with a wage cost of 4.5% in total costs, has hardly any savings in total costs during the crisis this is significantly higher for the repair of consumer goods with a wage cost share of 50.3%. Accordingly, the Weitzman model alone would bring about a structural change in the crisis.
Sharing economy
Weitzman's concept should not be confused with the concept of the sharing economy , which deals with the sharing of goods and resources.
literature
- Martin L. Weitzman: The share economy: conquering stagflation, 1984, ISBN 0674805828 (English).
- Martin L. Weitzman: The participation model: full employment through flexible wages, 1987, ISBN 3593338475 .
- Russell Cooper: Sharing Some Thoughts on Weitzman's The Share Economy, Cambridge, Mass. : National Bureau of Economic Research, NBER working paper series; no. w1734, 1985 (English).
- Markus Eder: Employment stabilization through the participation system - An examination of the Weitzman plan, Diss. 1992, ISBN 3-88259-946-4 .
Individual evidence
- ^ William Nordhaus and Andrew John: The Share Economy: A Symposium . In: Journal of Competitive Economics . tape 10 , no. 4 , 1986, pp. 414-415 , doi : 10.1016 / 0147-5967 (86) 90081-8 ( PDF ).
- ^ Martin L. Weitzman: The Share Economy Symposium: A Reply . In: Journal of Competitive Economics . tape 10 , 1986, pp. 469-473 ( PDF ).
- ↑ Eder: Employment Stabilization, pp. 4–6.
- ↑ Eder: Employment Stabilization, pp. 2–4.
- ↑ Eder: Employment Stabilization, pp. 4–5.
- ^ William D. Nordhaus (ed.): The share economy: A Symposium; in: Journal of Comparative Economics, 1986, Vol. 10, pp. 415-475
- ↑ Sushil Wadhwani as: Profit-Sharing and Meade's Discriminating ..., Oxford Economic Papers, 1987, pp 421-442
- ^ Domenico Mario Nuti: The Share Economy ...; EUI Working Papers mo. 86/245, 1986
- ^ Eder: Employment stabilization, pp. 56–69.