Capital-Growth-Sharing Schemes and the Behaviour of the Firm

There are good reasons for believing that present policies designed to reduce the concentration of wealth in Britain have not been especially successful, and that we need to look beyond purely fiscal means of achieving redistribution. On the Continent, similar considerations have led trade unions to propose that wage negotiations should be extended to include a capital element. These proposals, described in detail in a recent OECD report, Negotiated Workers' Savings Plans for Capital Formation [5], would involve unions bargaining not simply about earnings but also for a capital payment to the workers which would be paid not in cash but into a workers' investment fund, where it would be accumulated (until, say, the worker retired).2 In this way, the Continental proposals would appear to fulfil the purpose of increasing the wealth held by those in the bottom 90 per cent. without a fall in the rate of saving. It has also been suggested that the schemes could play an important role in the formulation of a successful long-term incomes policy. For these reasons, the proposals seem to merit further examination; they have, however, received relatively little attention in Britain.3 Moreover, the discussion that has taken place has not been based on any formal analysis of the effect of the schemes on the behaviour of the firm; and indeed, there has been surprisingly little written on the microeconomic implications of profit-sharing of any form. The aim of this paper is to examine the effects of the introduction of such proposals on the behaviour of the firm, and in particular on its price and investment policies. These aspects are of central importance in assessing the distributional and other consequences. It has been argued, for example, that the firm would raise its price, so that there would be no real increase in the remuneration of labour. In this paper an attempt is made to see how far this is likely to be true at a microeconomic level. Similarly, opposition to the Continental proposals has often centred on their adverse effect on capital accumulation; however, it has not been demonstrated that this is a necessary consequence of their introduction. 1 Based on a Special University Lecture given at the London School of Economics, November 1971. 2 References in square brackets are listed on p. 249, below. 3 Among the few references are the OECD report [5], Crossley [2], Forsyth [3], a brief passage in Pen [6], and the recent discussion of incomes policy by Mr. Aubrey Jones [4]. 237

Capital (architecture) · Cash · Earnings · Economics · Investment (military) · Labour economics · Macroeconomics · Microeconomics · Negotiation · Payment · Profit (economics) · Profit sharing · Redistribution (election) · Wage · Finance · Housing, Finance, and Neoliberalism

• Profit-Sharing and Copartnership

  James A Bowie•The Economic Journal•1922

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