Let’s see some fair methods to calculate salaries. Before 1980, companies used three methods to determine the level of salaries:
Performance-based pay. With performance-based pay, companies employees paid a percentage, usually 90% of the added value of their own production. This stimulated companies to teach employees new skills and techniques since increased product quality implied a higher income for both the company and for the employees.
The Roman Empire was the inventor of this salary structure, and traditional companies used it for centuries. The “law of supply and demand” replaced it with the coming of the industrial revolution In 1952, companies reintroduced it in the Netherlands for low and unskilled workers and it led to the prosperity of the late 1960s and the 1970s.
increasing production and salaries by 4.5% per year
Performance-based pay encouraged employees to learn new skills and techniques. Thus, production and salaries increased by 2% per year in the first ten years. By the mid-1960s, employees discovered some skills and techniques worked better in some situations than in others, and they optimized their production, thus increasing production and salaries by 4.5% per year. In the 1970s, employees began to teach each other, and production and salaries increased by 12% per year. In 1979, a construction worker with 20 years’ experience earned 1000 guilders net per week. Which at that time was a huge salary.
a construction worker with 20 years’ experience earned 1000 guilders net per week. Which at that time was a huge salary
Certain industries, especially those involved in work that was dirty, heavy or dangerous, made use of the law of supply and demand. The method implied that a company would continue to increase the salary they offered for a particular job until enough people responded who wanted to do the work.
Some fair methods to calculate salaries will include this method of determining salary had to compete with performance-based pay. Jobs based on the law of supply and demand paid a lower salary than jobs that were based on performance. But their salary was still higher than that of people who received a salary based on training.
administrative employees earned an extremely low salary
Salary based on training. Companies that did not use the general ledger for profit and loss regularly incurred losses, which they try to keep under control through better administration. Over the past 100 years, companies have been developing more and more complicated administrative procedures for that purpose.
Administrative employees produced information that no one outside the company was allowed to use. Thus, that information had no sales price. As a result, training was the most practical basis on which to determine salary. Before 1980, that yielded an extremely low salary.
companies thought they could use the fact that workers were unable to attend training to reduce their salaries once and for all
At the end of the 1970s, it was virtually impossible for low and unskilled employees to attend training in the evenings because their work was very heavy, and part-time jobs did not exist. By 1980, companies thought they could use the fact that workers were unable to attend training to reduce their salaries once and for all. By making salaries dependent on the level of training and the number of hours worked, companies were hoping to reduce workers’ salaries to the level of administrative staff. But the system backfired.
salary of a construction worker with 20 years of experience dropped from 1000 guilders per week to 2600 guilders net per month
In 1980, the salary of a construction worker with 20 years of experience dropped to 2600 guilders net per month. In response, workers started to work slower, and a large segment of workers in the industry was dismissed in 1981. This led to the crisis of the early ’80s.
Hourly wage, however, caused even more problems, especially in cases where the product of a company is paid per month―for example, through newspaper or fitness center subscriptions.
In the years that the salary costs are lower than average, the company should keep any remaining money for the expensive years
For hourly wages, a company calculates the average number of hours that must be worked per year to do all work. The turnover the company needs to be profitable is based on that average number of hours. But in some years, fewer hours are worked, and in other years, more.
In the cheap years, fewer than the average number of hours are worked, so salary costs are less than income, and there is money left. For the expensive years, more than the average number of hours are worked, so salary costs exceed income. In the years that the salary costs are lower than average, the company should keep any remaining money for the expensive years.
If the company instead uses that money to pay out dividends/distribution of profits, too little money remains to pay salaries in the expensive years. So the company runs up losses and cuts back. This results in reduced turnover, and the company cuts itself back into bankruptcy within a few years.
Then they are paid an hourly wage to repair those errors, while the customer doesn’t pay for the restoration of the errors
A similar problem occurs with products that are paid per order. When employees make mistakes, the product is damaged. Then they are paid an hourly wage to repair those errors, while the customer doesn’t pay for the restoration of the errors. As a result, the company regularly incurs losses. In addition, an hourly wage urges employees into rushing, so they make more errors.
to survive companies should pay a fixed salary per day/week/month on the basis of the average production per month
For the best chances of survival, companies should pay a fixed salary per day/week/month on the basis of the average production per month (or in the case of a farm, the average production over the last year), regardless of the number of hours worked. Exceptions are employees who are paid for their presence (including security) or to be present at the right time (including nursing), which can best be paid a fixed salary based on the number of days worked.
Ironically, forty years of cutbacks have caused the salaries of employees who perform duties essential to the survival of our society to fall to a level at which it is hardly possible to live. This is especially true for stock clerks and mail delivery personnel. Before 1980, the stock clerk was a fully-fledged job with a salary high enough to maintain a family of four.
forty years of cutbacks have caused the salaries of employees who perform duties essential to the survival of our society to fall to a level at which it is hardly possible to live
The problem with high unemployment is that companies are opportunists and think that for every job opening they have their choice from hundreds of thousands of unemployed people who are desperately looking for work and are legally required to take anything they find. As a result, these companies can continue to reduce their salaries.
The problem with high unemployment is that companies are opportunists and think that for every job opening they have their choice
Smart savings make companies healthy
- The real cause of unemployment and business losses
- Cause and solution of business losses
- How big can business losses get?
- The accounting method of the Dutch guilds
- Mistakes when cutting back and the cause of high unemployment
- Healthy and unhealthy companies
- Dutch money management
- Entrepreneurs and CEOs’ salaries after cutting back
- The director’s crisis
- Personal income of a million dollars or more
- Fair methods to calculate salaries
- Cover budget deficits
- How slavery causes business losses
- America and the problems of the former colonies
- The budget deficit of the Church
- About the author