Labour Costs in a Participatory Economy

April 2, 2024

Labour is a productive resource, which, together with manufactured and natural capital, defines the productive capacity of worker councils. A worker council in a participatory economy does not have a wage bill, it does not pay wages. Instead, it is charged a fee for access to categories of labour, which is paid to the Society account (see Accounting System in a Participatory Economy for more information).

The fees that a worker council is charged for access to different categories of labour are decided in the annual planning just as the prices for any other good or service. The IFB announces and updates labour category fees based on excess supply or demand. 

Compensation for Work

Members’ compensation for work performed is a different matter altogether and will, at least theoretically, be based on effort and sacrifice. A key feature of a Participatory Economy that distinguishes it from other economic systems is that, there is no connection between the fees a worker council or workplace is charged for its access to different labour categories and the compensation its members receive for work performed. Except, of course, in the sense that it is the same labour and reported number of worked hours that constitute the basis for both the fees charged to the worker council for use of labour and the compensations paid to its members for work performed. 

Note that since the labour fees that are charged to worker councils for access to labour are not the same as the compensation received by workers, any change in announced labour fees during annual planning will primarily only affect the demand for different labour categories, not the supply, at least not directly.

The Creation and Categorisation of Labour

Labour is not manufactured in the same sense as other goods and services and does not have a readily tracked production cost. In the long-term labour is “produced” through the educational system where education and training are collective goods and collectively funded. In the annual planning procedure, however, there are no labour manufacturers that can increase or decrease production of a certain labour category in the short run in response to an announced price change.

Relevant labour categories in the annual planning product catalogue will be based solely on differences in function and productivity, as described below, and there will be no defined subcategories of labour based on differences in production cost or cost aggregation, as for most other goods and services, since this is not applicable. 

Examples of possible labour categories are construction workers, industrial workers, electricians, accountants, health care workers, and engineers, all of which may be supplemented with specifications of needed training or experience.

The different categories of labour included in the annual planning product catalogue should first and foremost reflect function and productivity just as categories of any other productive resource. This means that labour categorisation criteria should consider characteristics and features affecting the function and productivity of labour, such as primary job orientation, length and kind of education and training, acquired skills and experience. The definitions of labour categories will presumably be much influenced by agencies responsible for designing education and vocational training programmes. In the end, however, labour categories will be defined by the industry federations representing worker councils requesting labour resources. 

The Role of ”Labour Exchange Agencies

How would the supply and demand of labour be tracked and matched in a Participatory Economy, both in the annual planning and during the year? The following is one suggestion:

Every worker who plans to apply for membership, or extend her existing membership, in an active worker council or workplace and, thus, intends to supply her labour in the upcoming annual planning procedure needs to register her proposed supplied labour hours in regionally organised and collectively funded labour exchange agencies. In the aggregate, the supply of labour and its composition in terms of labour categories based on formal education and experience is essentially fixed and given when the annual planning procedure begins and is largely the result of long-term educational and labour planning and decisions by the Ministry of Education, or the equivalent, regarding education programmes, vocational training etc. 

However, while the total supply of labour and its composition are more or less fixed when the annual planning starts, individual workers and students actively looking for new jobs in the coming year may at any time during annual planning and during the year, if qualified, change their supplied labour quantity and category in response to circumstances such as the availability of job opportunities in the near area or changed preferences regarding living area or preferred job tasks. This means that the actual supply of labour will always depend not only on the workers’ qualifications and training but also on their job preferences at any moment in time. 

The worker councils and workplaces, on their part, specify and register their requests, or demand, for different categories of labour during annual planning, in the labour exchange agencies. They may start with the quantities and categories represented by their existing members and then add necessary quantities of new labour categories and/or propose additions or reductions to their existing labour categories represented by their membership.

In the annual planning iterations, the IFB compare the registered aggregated demand for different labour categories in the labour exchange agencies with the registered supply of the same labour categories from workers and updates the relevant quoted labour fees based on excess demand or supply in forthcoming iterations until there is an acceptable balance between supply and demand.

Of course, neither the supply nor demand of labour in the annual planning procedure are final and irrevocable and both worker councils and, especially, workers can and will adjust their registered supply and demand of labour as the year proceeds and circumstances change. So while the majority of workers supplying labour during annual planning will be members of existing worker councils without any desire or intention of changing their proposals, the actual supply (and demand) of labour will inevitably change somewhat during the year as time passes and preferences and circumstances change.

The actual supply of labour will presumably to some degree adapt to available job opportunities. This means that when the IFB compare the registered supply and demand of labour during the annual planning iterations and adjusts the announced labour fees, they should accept a relatively generous margin when deciding the acceptable supply/demand equilibrium. The labour exchange agencies should also, if necessary, be charged with adjusting the aggregate labour supply during the annual planning iterations due to inevitable but, for individuals, unforeseeable circumstances and happenings during the year such as deaths, accidents, illnesses, recoveries, immigration and emigrations, etc. Such adjustments of aggregate supply of labour should reflect relevant historical statistics and forecasts regarding the relation between proposed and actual labour supply. 

As the year starts and during the year the main task and challenge of the labour exchange agencies is to match individual job seekers with worker councils and workplaces seeking new members, as effectively and smoothly as possible, in short, to match the constant flows of supply and demand of different categories of labour. Through the mediation of the labour exchange agencies, workers apply for membership in any worker council of their choice and workplaces accept or reject applicants. 

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