Socialized Business Just Doesn’t Work

There has been a lot of press coverage recently about the company that raised its entire company’s wages to $70,000.

It seems like a good idea, until you start thinking about it.

http://www.nytimes.com/2015/08/02/business/a-company-copes-with-backlash-against-the-raise-that-roared.html

Short term, the company may be able to demonstrate improved productivity from its workforce, but what is the incentive for an employee going forward to put in the extra hours and go the extra mile to rise above the crowd?

There isn’t any. If everybody is making the same, there isn’t any crowd to rise above. If anything, the motivation is to move downward to the less stressful, routine jobs.

Dan Price, the leader on the company, has transformed his workplace into equivalent of the East Germany’s VEB Sachsenring Automobilwerke Zwickau, which produced (notice the past tense) the Trabant motor vehicle, widely used in Eastern Bloc nations, but ridiculed in the rest of the free world.

https://en.wikipedia.org/wiki/Trabant

With no incentive and no motivation to make a better car, the Trabant changed or improved very little in its 30 year history, upon German unification, the car line was shut down with in the year.

Humans are predictable, and making more money is a powerful motivator.

If you level the compensation scale, you will attract unmotivated people to your workplace and repel the people that can really make your business thrive. The incentive of higher pay gives a person more desire to go back to school or study harder in a field that creates more opportunity.

If I make $70,000 to answer telephones, and an engineer gets paid $70,000 for the more stressful and difficult job of developing complex cipher algorithms, what would make me want to work to develop my skills for his job? On the other hand, If I’m the stressed-out engineer, I may want to ask my boss for a demotion to the telephone-answering job.