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Well if everyone followed your path, they would find themselves making minimum wage. You could chose to work at the minimum wage farm, or the productive farm w

by paddy_m 18y ago

Well if everyone followed your path, they would find themselves making minimum wage. You could chose to work at the minimum wage farm, or the productive farm where you would be making more than minimum wage. You would also find that the minimum wage farm would be likely to go out of business.

ars 18y ago
No, the implication was that the whole point of doing this was to get as much output as possible while paying minimum wage. That was the whole premise - the whole thing about tuning the piece rate - it was to make sure each person earned minimum wage, and no more, but also not less, because otherwise they are paying extra (to make up the difference), without getting more fruit.
- gojomo 18y ago
  I think you misread the article. The farmowner was happy to pay more than the minimum wage for more-than-minimum productivity.
  - ars 18y ago
    I'm getting down mods, and you're getting ups. But I read it _again_ and I don't see anywhere at all where it says that! Exactly the opposite: "their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous" Where are you seeing that he is paying more? All I see is him paying the same, but getting more output via competition. And again: "(If the managers made a mistake in their estimate, and the pickers didn't earn minimum wage, Farmer Smith would make up the shortfall"
    - dkokelley 18y ago
      Exactly the opposite: "their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous" That was before the economists tried the new payment methods. The entire paragraph, for reference: The owner had been paying a piece rate - a rate per kilogram of fruit - but also needed to ensure that whether pickers spent the day on a bountiful field or a sparse one, their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous: The more the work force picked, the lower the piece rate. But his workers were outwitting him by keeping an eye on each other, making sure nobody picked too quickly, and thus collectively slowing down and cranking up the piece rate. To summarize, the farmer was paying a modified market rate for the productivity: using minimum wage as the mean to determine the rate to be paid out. The problem was that the workers were the only supply and they were collaborating to lower the output (even in good fields) so that they would work less for the same pay. A good analogy for this would be OPEC deciding to lower oil production. The oil supply is there, but by exporting less they do less work and increase the market value by limiting supply. After the new methods of payment were introduced, the more productive workers could earn more by being more productive.
      - DougBTX 18y ago
        After the new methods of payment were introduced, the more productive workers could earn more by being more productive. The change was to do the calculation of how much to pay per kg before the day's work, rather than after. The most productive were always paid the most, and the least productive were still paid as close to minimum wage as possible. With the rate set at the start of the day, the people working in a particular field had no control over that day's pay per kg. As noted in footnote 5, the workers also had little control over the price for future days, because it was harder for them to correlate their productivity with the pay rate: First, ... it is difficult for workers to disentangle changes in the piece rate due to changing conditions and those due to management learning about workers' true ability ... Second, the effect of a worker's current performance on the unit wage she faces in the future is weak as the unit wage is field-day specific and workers are reallocated to different fields in different days So, instead of using the day's average, the farmer sets the rate based on an historical average, or a direct measurement of how hard a particular field is to work. In either case, it disconnects how hard someone works, and how much the they get paid that day. This makes collusion between workers harder, as they can no-longer game the system by forcing those directly working with them to work less. They would need co-operation between everyone working on the farm - a level of control that only the farm owner has. Looking at Table 1, you'll see that productivity rises from 4.92 kg/hr to 8.06 kg/hr. The difference between the hardest workers and the weakest workers can be approximated using the standard deviation, which went from 3.13 to 4.10. Putting that into a little table: weakest workers hardest workers kg/hr before 1.79 8.05 kg/hr after 4.93 12.16 Now, we know that the farmer will set the pay rate so that the weakest workers receive minimum wage. For simplicity, we can call the minimum wage £5 an hour. In the "before" case, he must pay £5 for 1.79 kg, so the pay rate = 5/1.79 = £2.79/kg. And "after", he must pay only 5/4.93 = £1.01/kg. This gives the following table: weakest workers hardest workers before £5.00/hr £22.45/hr after £5.00/hr £12.28/hr Now you can clearly see ars's worry. The hardest workers are picking 50% more, but are being paid almost 50% less, while the weakest workers pick 175% more, but are paid the same amount. No wonder the farmer was pleased, but it is hard to see how the workers will be happy with the "work harder and then you will get paid more" line.
    - netcan 18y ago
      I went over it again and had a look at the linked paper. The farmer originally had the minimum wage problem. The piece rate needed to keep everyone over minimum wage regardless of skill level or field quality. So (Piece rate) = (Minimum Wage) / (the lowest performer's fruit quantity). You can scale incentive on additional output, but it has to go up from there. In this environment, he could probably work out a pay scale that works & it is to his advantage if worker earn more then minimum wage (because he probably pays less for marginal output). Problem was that another productivity factor is the field. So, if he sets the above rate based on the worst field he is over paying workers on the best field. This is where 'generous' comes in. It means they were getting paid for being on a good field not working faster. His solution was scaling based on group productivity. In a perfectly individualistic market, this is a good system . But the workers colluded to work less for the same pay (as opposed to getting paid more). The economist 'fixed' that by removing the group incentive (they call it an externality) to pick less.
      - paddy_m 18y ago
        I think the most accurate description of Farmer Smith's intention would be to maximize the amount of productivity he received per dollar paid. production/cost = x Solve for x, maximizing x. His objective was to maximize x, not minimize cost.
DougBTX 18y ago
... or the productive farm where you would be making more than minimum wage. There is nothing to say that you will get paid more working in the "productive" farm, especially when "high productivity" is defined as "you doing more work for less money with the same tools". The farmer has all the data, he sets your pay, and he wants you to work for minimum wage. The trick used to boost the amount of work done was to reduce the influence that the workers had on their pay, not to increase their pay. Doing some quick calculations using the numbers in the paper linked to from the article, (and assuming that the farmer was successful in setting his pay structure so that those working the least were paid a minimum wage of £5/hr), those working the hardest worked harder (from 8.05 kg/hr to 12.16 kg/hr) but got paid less (from £22.45/hr to £12.28/hr). Assuming you don't care whether the farm goes out of business or not (you're only working there for one summer) which one would you like to work in again?

by paddy_m 18y ago

ars 18y ago

No, the implication was that the whole point of doing this was to get as much output as possible while paying minimum wage. That was the whole premise - the whole thing about tuning the piece rate - it was to make sure each person earned minimum wage, and no more, but also not less, because otherwise they are paying extra (to make up the difference), without getting more fruit.

gojomo 18y ago
I think you misread the article. The farmowner was happy to pay more than the minimum wage for more-than-minimum productivity.
- ars 18y ago
  I'm getting down mods, and you're getting ups. But I read it _again_ and I don't see anywhere at all where it says that! Exactly the opposite: "their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous" Where are you seeing that he is paying more? All I see is him paying the same, but getting more output via competition. And again: "(If the managers made a mistake in their estimate, and the pickers didn't earn minimum wage, Farmer Smith would make up the shortfall"
  - dkokelley 18y ago
    Exactly the opposite: "their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous" That was before the economists tried the new payment methods. The entire paragraph, for reference: The owner had been paying a piece rate - a rate per kilogram of fruit - but also needed to ensure that whether pickers spent the day on a bountiful field or a sparse one, their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous: The more the work force picked, the lower the piece rate. But his workers were outwitting him by keeping an eye on each other, making sure nobody picked too quickly, and thus collectively slowing down and cranking up the piece rate. To summarize, the farmer was paying a modified market rate for the productivity: using minimum wage as the mean to determine the rate to be paid out. The problem was that the workers were the only supply and they were collaborating to lower the output (even in good fields) so that they would work less for the same pay. A good analogy for this would be OPEC deciding to lower oil production. The oil supply is there, but by exporting less they do less work and increase the market value by limiting supply. After the new methods of payment were introduced, the more productive workers could earn more by being more productive.
    - DougBTX 18y ago
      After the new methods of payment were introduced, the more productive workers could earn more by being more productive. The change was to do the calculation of how much to pay per kg before the day's work, rather than after. The most productive were always paid the most, and the least productive were still paid as close to minimum wage as possible. With the rate set at the start of the day, the people working in a particular field had no control over that day's pay per kg. As noted in footnote 5, the workers also had little control over the price for future days, because it was harder for them to correlate their productivity with the pay rate: First, ... it is difficult for workers to disentangle changes in the piece rate due to changing conditions and those due to management learning about workers' true ability ... Second, the effect of a worker's current performance on the unit wage she faces in the future is weak as the unit wage is field-day specific and workers are reallocated to different fields in different days So, instead of using the day's average, the farmer sets the rate based on an historical average, or a direct measurement of how hard a particular field is to work. In either case, it disconnects how hard someone works, and how much the they get paid that day. This makes collusion between workers harder, as they can no-longer game the system by forcing those directly working with them to work less. They would need co-operation between everyone working on the farm - a level of control that only the farm owner has. Looking at Table 1, you'll see that productivity rises from 4.92 kg/hr to 8.06 kg/hr. The difference between the hardest workers and the weakest workers can be approximated using the standard deviation, which went from 3.13 to 4.10. Putting that into a little table: weakest workers hardest workers kg/hr before 1.79 8.05 kg/hr after 4.93 12.16 Now, we know that the farmer will set the pay rate so that the weakest workers receive minimum wage. For simplicity, we can call the minimum wage £5 an hour. In the "before" case, he must pay £5 for 1.79 kg, so the pay rate = 5/1.79 = £2.79/kg. And "after", he must pay only 5/4.93 = £1.01/kg. This gives the following table: weakest workers hardest workers before £5.00/hr £22.45/hr after £5.00/hr £12.28/hr Now you can clearly see ars's worry. The hardest workers are picking 50% more, but are being paid almost 50% less, while the weakest workers pick 175% more, but are paid the same amount. No wonder the farmer was pleased, but it is hard to see how the workers will be happy with the "work harder and then you will get paid more" line.
  - netcan 18y ago
    I went over it again and had a look at the linked paper. The farmer originally had the minimum wage problem. The piece rate needed to keep everyone over minimum wage regardless of skill level or field quality. So (Piece rate) = (Minimum Wage) / (the lowest performer's fruit quantity). You can scale incentive on additional output, but it has to go up from there. In this environment, he could probably work out a pay scale that works & it is to his advantage if worker earn more then minimum wage (because he probably pays less for marginal output). Problem was that another productivity factor is the field. So, if he sets the above rate based on the worst field he is over paying workers on the best field. This is where 'generous' comes in. It means they were getting paid for being on a good field not working faster. His solution was scaling based on group productivity. In a perfectly individualistic market, this is a good system . But the workers colluded to work less for the same pay (as opposed to getting paid more). The economist 'fixed' that by removing the group incentive (they call it an externality) to pick less.
    - paddy_m 18y ago
      I think the most accurate description of Farmer Smith's intention would be to maximize the amount of productivity he received per dollar paid. production/cost = x Solve for x, maximizing x. His objective was to maximize x, not minimize cost.

DougBTX 18y ago

... or the productive farm where you would be making more than minimum wage. There is nothing to say that you will get paid more working in the "productive" farm, especially when "high productivity" is defined as "you doing more work for less money with the same tools". The farmer has all the data, he sets your pay, and he wants you to work for minimum wage. The trick used to boost the amount of work done was to reduce the influence that the workers had on their pay, not to increase their pay. Doing some quick calculations using the numbers in the paper linked to from the article, (and assuming that the farmer was successful in setting his pay structure so that those working the least were paid a minimum wage of £5/hr), those working the hardest worked harder (from 8.05 kg/hr to 12.16 kg/hr) but got paid less (from £22.45/hr to £12.28/hr). Assuming you don't care whether the farm goes out of business or not (you're only working there for one summer) which one would you like to work in again?