Why should a businessman invest in such factories?

Imagine you are the manager a factory that produces some product. It might be a tangible commodity -- something you can actually touch or hold in your hands -- or it might be something intangible like processing insurance claims. We will assume the market be a large enough to justify the techniques of mass production, including the division of labor and the use of specialized equipment and machinery. In other words the factory must employ considerable amounts of labor and capital.

As a manager your goal is to produce as much product, at the least cost, and of the highest
 quality as possible.  Only then can you maximize profit and get the best possible rate of return on your investment.

Let me now state as concisely as I can the case for factories in the countryside run on four-hour shifts: Many such factories -- particularly those with a variable pace of production -- can be made to run faster and more efficiently than similar factories in urban areas employing a full-time workforce.    For two reasons:

In the first place because part-time workers can work faster and more efficiently than full-time workers -- just as in track-and-field the short-distance runners always run faster than the long-distance runners.

And secondly, because our part-time workers will, if anything, have slightly fewer hours in the week than they might voluntarily prefer. This means they will be eager to earn every penny they can. Provided their wages are tied to their output by some equitable formula (a crucial qualification), the workers can be motivated to exert themselves to the maximum degree possible.

Thus even though unit labor costs would remain the same the factory’s annual output would be greater than that of an identical plant elsewhere employing identical machinery and capital equipment.   Hourly wages and the rate of return on investment would rise proportionately together.

Some years back when I presented this concept of incentive-based work-sprints in a letter to the management of the Fantus Corporation, a firm specializing in industrial relocation, the executive vice-president flew down to see me the very next day.  This was a "doable" thing he assured me, not pie-in-the-sky.

For a more complete and theoretical discussion see here.

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Luke Lea said...
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