Why Our Work Incentive Structure Needs Change

“That is the beliefs that individuals, groups, and societies hold which determine choices are a consequence of learning through time - not just the span of an individual’s life or of a generation of a society but the learning embodied in individuals, groups and societies that is cumulative through time and passed on inter-generationally by the culture of a society.” – Douglass North

Determining Economic Priorities

Most Americans would probably say that going to work and earning an income takes priority over spending time with their friends, family or children. The argument usually is that without a paycheck I cannot afford a living worth enjoying. That leaves Americans working in order to afford healthcare, pay the bills or provide a certain standard of living for themselves or family. My question to you all is why hasn’t the reason we worked changed? Since the Great Depression, the United States has developed laws and regulations to govern the workplace and devised certain social safety nets e.g. unemployment benefits that were suppose to make working a more enjoyable experience. Unemployment currently stands at over10% nationally, are we any better off?

When 7 Hours Became 8 and 8 Hours Became 9

Americans work considerably longer hours than most industrialized nations yet we’ve developed powerful tools that help us get our jobs done faster. This disconnect (longer hours vs. tools to help us work) is due to not capitalizing on the productivity gains we’ve realized.

The main reason for this is that we’re still measuring output as if we were a manufacturing-based society. Our economy is predominately supported by the production of services that are elastic, meaning they are sensitive to changes in demand. There are no inventories for services; you cannot produce a lot now and save it for later. The need for services depends solely on there being a demand.

This means that there will be some days, weeks or months when we may work well over 10 hours a day. Other time periods we may need only 2-4 hours to complete our work due to changes in demand. Why are we then still using the 40 hour work-week as a standard work-week?

We've been increasing the numbers of hours we dedicate to work but haven’t gained much in return. Why? Because the way we work has remained stagnant. Currently there is no flexibility built into our operating environment that allows us to capture these differences in demand. If you only need 4 hours to complete your work for one employer then why not have the ability to spend time with you family, take training, get an education or volunteer?

It is these additional “outside” activities that are going to positively impact our future generations. As Douglas North mentioned in his Nobel Prize lecture, it is the cumulative knowledge of a society that is passed on through generations. In order to increase this knowledge we need to work smarter and use our time more wisely. This includes changing how we reward staff – it shouldn’t be about how many hours you worked but rather the quality of the service you provided. We are no longer dependent on making widgets in our society – we sell our knowledge. The only way we’ll be able to actually grow our cumulative knowledge is if we’re given time expand our experiences.

Growing Our Economy

The first step toward growing as a society is the advent of social-networking tools. These tools have helped us collaborate more, share more information, and build relationships in ways previously deemed as unimaginable. This has yet to fully cross over into our culture but it has the potential to change the way we work and the way we interact with our customers and clients.

The Great Recession has caused many workers to question their role in the economy and the priorities they’ve set. We must now consider new ways to move forward, to grow and remain competitive – providing more flexible workplaces that incentivize quality of service versus quantity of hours should be the starting-point.