Adam Smith, in his book “The Wealth of Nations” spoke about the division of labour and the invisible hand. The book was published in the 18th century during the Age of Enlightenment and obviously did not envisage that a major issue in the 21st century would have been the division of wages and that the invisible hand would be incapable of sharing equitably the fruits of labour.
Misaligned
For most companies, the single largest item of expenditure is the wage bill. It has therefore attracted a lot of attention in the containment of cost and became the poster boy in the era of downsizing. Funny enough, it was during the same period of the late 1980s and early 1990s that the absurd idea of aligning executive and shareholder values gained currency. So on the one hand wages was contained for the masses while on the other it was splurged on the bosses. By the end of the 1990s the ratio of the average-executive to the average production-worker’s pay was approximately 500:1
Taken from the Economist
Capital slavery
The abolition of slavery was more economics than humanitarian. The slaver is no longer obliged to provided food, clothes, shelter, medicine and copulation just enough wages from pay cheque to pay cheque to maintain the dependency. Full employment is not a policy objective as the legion of unemployed restrains wage demand even as the living wage fails to provide the basic necessities granted on the plantation.
Global pillage
Local trade unions took to the cause of workers with somewhat limited successes. In recent times the very trade unions are in a fight for their own survival as the global village attracts educated workers to developed countries for uneducated tasks. Wages in these countries becomes depressed and goods and services becomes cheaper. The developing countries are therefore unable to compete and are in turn forced to cut domestic wages.
Wrong side of the ledger
In accounting, wages is an expense and stock option up until recently did not appear on the books. Then there is the talk of “employees being the most valuable asset of a company”. Employees are the only assets that are written off on occurence, the others are depreciated over its useful life. My own view is that, a percentage of the wage bill should be set up as a liability in the form of a sinking fund as ultimately separation is a must. The current practice of ignoring separation costs overstates profit and in later years appear on a separate line on the income statement as reorganization cost; it is imprudent and should be treated no differently from pension cost or stock option.
Hill-will
The Employment (Termination and Redundancy) Act is not unique to Jamaica, similar legislation exists in Canada, Britain and several developed countries. It does not in and by itself serve as a disincentive to prospective investors doing business in Jamaica.
The 1974 legislation replaced the Masters and Servants law which was passed shortly after slavery was abolished and the changes being advocated from “cave-hill” would be a retrograde step. Inaction by managers in not terminating non-performers for fear of redundancy payout is a poor excuse, it reflects badly on their ability to manage; there is nothing in the legislation that precludes firing an employee with cause without compensation.
Only good for the goose
Carly Fiorina former president and chief executive officer of Hewlett-Packard in negotiating the merger with Compaq Computers in 2002 included a healthy dose of “redundancy payment” for herself and Michael Capellas, just in case. The politicians have not excluded themselves, it was reported in the National Post that more than Cdn$72m will be paid as pension and severance pay to defeated and retiring MPs following the general election held in Canada on January 23, 2006.
Closer home, Aubyn Hill resigned from National Commercial Bank (NCB) after two years on the job in November 2004. According to the notice posted by the Jamaica Stock Exchange (JSE) on February 8, 2005 over six million NCB shares was transferred to Mr. Hill. At $23.50 per share, this amounts to almost $150m. In all good conscience, Mr. Hill could not accept redundancy payment as he is against it in principle, plus he was not made redundant anyway.
It is not often that one find employers like Michael Lee-Chin who voluntarily and out of the goodness of his heart thrusts millions of dollars to part ways with an employee. For the rest of us that don’t work for NCB, the law is still relevant.
