Again, if you think companies should be stable and oriented towards the long term, great. But if you think long term planning is rubbish and most enterprises function by trial and error, the yearlong timeframe is sort of scary.

And as for stock options, I got loads in California, most for a reliable Fortune 500 firm. They all turned out to be worthless.

“If I join the new division of fast-moving internet firm X, my salary could double in the next five years, or I could be fired if expected sales don’t materialize. If I join boring old blue-chip firm Y, my salary will simply grow with the cost of living, but at least I know I’ll have a job.”

If employees bear none of the risk of their decision to seek employment at a particular firm, incentives get distorted. Also, because they cannot bear the risk (in a model I can’t help seeing as paternalistic) they are likely not to share in the rewards. If California had laws similar to Belgium, you would see many fewer stock options as compensation.

I suppose this is the divide – if you think that managers’ hoarding of profits is a structural feature of capitalism, and that profit-sharing is a freakish exception, then yes, since employees can’t share the rewards, they shouldn’t share the risks. However acting on this view turns it into a self-fulfilling prophecy, by destroying the labor market mechanisms that might incentivize employers to share profits.

” “Firms should bear costs for poor hiring decisions and bad human resource planning.”

Why should firms bear all and employees none?”

I beg your pardon? How is this supposed to work?

I can see it now: “I’m sorry, but your decision to allow us to hire you was inexcusable, given our lack of need for the services we advertised for and our subsequent inability to pay you. We consider it only fair to us, in view of your irresponsibility in accepting our offer of employment, that you cease that employment immediately.”

A sociological perspective can be applied to the situation – the actors are looking at one another in the same class, as much as the counterpart over the class division.

John’s observation of the blurred class division actually indicates the differentiation within each of the classes, which generally conditions the class conflict.

Contending differentiation within a class can bring about outcomes against the interest of the class. A striking historical example was studied by Neil Smelser.

A greater part of factory workers in 19th century London was from rural area where a unit of workplace was family. Status differentiation in the farm had been of husbands over wives, or fathers over children. When the Factory Law was legislated, and child labor was banned, it outraged the father-workers as well as the factory owners. The former-peasant workers were not ready to get demoted by removing their subordinates in the workplace – their own children.

“At the same time, there was widespread apprehension that a limitation of the hours of child labour would occasion the complete dismissal of children. Such a consequence not only would subtract from the family income, but also would break the traditional ties between adult and children. The fear of these consequences, moreover, was not simple propaganda from capitalists; the operative class itself was ‘largely committed to the system of child labour and long hours’” (Smelser, 1959: 269).

Smelser, Neil J.1959.Social Change in the Industrial Revolution: An Application of Theory to the British Cotton Industry, Chicago: The University of Chicago Press.

However, employees already bear considerable risk from employers mistakes. They have no guarantee of finding work with the same pay, or at all. Older employees here are routinely unable to obtain comparable work. Giving employees a significant sum up front does not guarantee that they will not face financial losses due to losing their jobs, regardless of the state of the business cycle.

In Belgium, I’ve worked for one high tech start up in a research position, and will probably soon be starting work in a second – so it’s not like there are no innovating businesses here. It seems to me the Flemish government is claiming SME’s are the primary employers, rather than large risk-averse firms with connections. Creative workers are usually the ones that a firm trying to get ahead through innovation is the least likely to fire. So your claims about European capitalism strike me as unfounded.

“Firms should bear costs for poor hiring decisions and bad human resource planning.”

Why should firms bear all and employees none? (I’d argue that a year’s salary effectively removes all risk of a downturn in business from the employee.)

What this will mean in practice, given the unpredictability of operating a large business and the speed of competition, is that businesses will become extremely risk-averse. They will hire rarely and fire rarely. They will look for industries in which they can entrench themselves – through government preference, or by owning some asset, such as intellectual property.

It’s hard to argue about this without arguing about the entire European model for capitalism – close alliance between industry and government, national champion firms, etc. If that’s your starting point, these regulations won’t seem so terrible. But if you think the strength of capitalism lies in creative destruction, as I do, well…

That’s a rather glib generalization. What if the needs of the business change? What if the behavior of the employee changes, for whatever reason?

While that makes it expensive to fire people, it is a pretty uniform rule so it has no effect on the competitiveness of individual firms. In Belgium, it’s legal to get rid of workers at any time for any reason other than specifically forbidden discrimination.

Any rule designed to protect the rights of workers will have costs for employers. Any reduction of rights for workers will raise worker’s costs and risks. If the rule is uniform and set up in a way that doesn’t discriminate between firms, I don’t see the problem. Firms should bear costs for poor hiring decisions and bad human resource planning. You could make a case that the costs born by employers is too high – that the balance between employer risk and employee risk is off – but then you have to make the complementary argument that workers should therefore bear more costs.

I don’t know where this idea comes from. In France, rather well-known for the difficulty of firing employees, you have a three-month trial period at least, and in many cases, it can be extended to six months (and it is). I’d say the manager who has not asserted the value of his employee after six months is not very perceptive.

John, I am no expert in Marxist reasonning, but the idea that one’s political choices reflect the balance of power one has within the society does not seem alien to Marx. But maybe I misunderstood you.