1. LESSON 24:
FIRM’S DUTIES TO THE EMPLOYEE
Today, we will discuss the employer’s duties towards the From the employee’s point of view, wages are the principal
employee. (perhaps the only) means for satisfying the basic economic
needs of the worker and the worker’s family. From the
Points to be covered in this lesson:
employer’s point of view, wages are a cost of production that
• Employee compensation must be kept down lest the product be priced out of the mar-
• Working conditions ket. Every employer, therefore, faces the dilemma of setting fair
Can you think of some of the duties of employers or the firm wages: How can a fair balance be struck between the employer’s
towards the employee? In the last lecture we discussed some of interests in minimizing costs and the workers’ interest in
the duties of employees towards the firm and the ways in which providing a decent living for themselves and their families?
they fail to live up to the duties, to pursue the goals of There is, unfortunately, no simple formula for determining a
the firm. “fair wage”. The fairness of wages depends in part on the public
supports that society pro-vides the worker (social security,
I will try to list down some of the duties of the employers
Medicare, unemployment compensation, public education,
now:
welfare, etc.), on the freedom of labor markets, on the con-
1. Compensation or Wages tribution of the worker, on the needs of the worker, and on the
2. Job satisfaction competitive po-sition of the firm.
3. Working environment Although there is no way of determining fair salaries with
mathematical exactitude, we can at least identify a number of
4. Job profile
factors that should be taken into account in determining wages
5. Health and Safety and salaries:
6. Growth prospects 1. The going wage in the industry and the area Although
7. Job Rotation labor markets in an in-dustry or an area may be manipulated
The basic moral obligation that the employer has toward or distorted (by job shortages, for exam-ple), they generally
employees, accord-ing to the rational view of the firm, is to provide at least rough indicators of fair wages if they are
provide them with the compensation they have freely and competitive and if we assume competitive markets are just.
knowingly agreed to receive in exchange for their ser-vices. In addition, the cost of living in the area must be taken into
account if employees are to be provided with an income
There are two main issues related to this obligation:
adequate to their families needs.
• The fairness of wages and
2. The firm’s capabilities In general, the higher the firm’s
• The fairness of employee working conditions. profits, the more it can and should pay its workers, while the
Both wages and working conditions are aspects of the compen- smaller its profits, the less it can afford. Taking advantage of
sation employees receive from their services, and both are related cheap labor in captive markets when a company is perfectly
to the question of whether or not the em-ployee contracted to capable of paying higher wages is exploitation.
take a job freely and knowingly. If an employee was “forced” to 3. The nature of the job Jobs that involve greater health risks,
accept a job with inadequate wages or inad- equate working condi- that offer less security, that require more training or
tions, then the work contract would be unfair. experience, that impose heavier physical or emotional burdens,
Wages or that take greater effort should carry higher levels of
compensation.
4. Minimum wage laws The minimum wages required by law
set a floor for wages.
In most circumstances, wages that fall beneath this floor are
unfair.
5. Relation to other salaries If the salary structure within an
organization is to be fair, workers who do roughly similar
work should receive roughly similar salaries.
6. The fairness of wage negotiations Salaries and wages that
result from “unfree” negotiations in which one side uses
fraud, power, ignorance, deceit, or passion to get its way will
rarely be fair. When the management of a company, for
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2. exam-ple, uses the threat of relocation to force wage In 1970 Congress passed the Occupational Safety and Health Act
concessions out of a wholly de-pendent community, or when and cre-ated the Occupational Safety and Health Adminis-
a union “blackmails” a failing company with a strike that is tration (OSHA) “to assure as far as possible every working man
certain to send the firm into bankruptcy, the resulting wages and woman in the nation safe and healthful working condi-
have little likelihood of being fair. tions.” Unfortunately, from the beginning OSHA found itself
embroiled in controversy. But in spite of the severe criticism it
Working Conditions: Health and Safety has received, an inadequate number of field inspectors (800),
and often-inefficient forms of regulation, the existence of
OSHA has led many firms to institute their own safety
programs. One poll revealed that 36 percent of the firms
surveyed had implemented safety programs as a result of
OSHA, while 72 percent said that the existence of OSHA had
influenced them in their safety efforts.
Although more attention is now being paid to worker safety,
occupational accident rates have not all been declining. Between
1960 and 1993, the num-ber of workers killed on the job
declined dramatically from 21 deaths per 100,000 workers to 8
deaths per 100,000. However, the number of disabling injuries
rose from 2.0 million in 1960 to 3.2 million in 1993.
Risk is, of course, an unavoidable part of many occupations. A
racecar driver, a circus performer, a rodeo cowboy, all accepts
certain hazards as part of their jobs. So long as they
Each year more than 5000 workers are killed and over 3,000,000 1. Are fully compensated for assuming these risks and
are se-riously injured as a result of job accidents. Ten percent of
2. Freely and knowingly choose to accept the risk in exchange
the job force suf-fers a job-related injury or illness each year, for a
for the added compensation, and then we may assume that
loss of over 31 million workdays annually. Delayed occupa- tional
their employer has acted ethically.
diseases resulting from exposure to chem-ical and physical
hazards till off additional numbers. Annual costs of work related The basic problem, however, is that in many hazardous
deaths and injuries were estimated to be $119 billion in 1995. occupations, these conditions do not obtain.
Workplace hazards include not only the more obvious catego- 1. Wages will fail to provide a level of compensation
ries of me-chanical injury, electrocution, and burns, but also proportional to the risks of a job when labor markets in an
extreme heat and cold, noisy machinery, rock dust, textile fiber industry are not competitive, or when markets do not reg-
dust, chemical fumes, mercury, lead, beryl-lium, arsenic, corrosives, ister risks because the risks are not yet known. In some rural
poisons, skin irritants, and radiation. A government description mining areas, for ex-ample, a single mining company may
of occupational injuries is dismaying. have a monopoly on jobs. The health risks involved in
mining a certain mineral (such as uranium) may not be
Three and a half million American workers exposed to asbestos
known until many years afterwards. In such cases, wages will
face a dual threat: Not only are they subject to the lung-scarring
not fully compensate for risks.
pneumoconiosis of their trade, asbestosis, but they are
endangered by lung cancer associated with in-halation of asbestos 2. Workers might accept risks unknowingly because they do not
fibers. Recent studies of insulation workers in two states showed have adequate ac-cess to information concerning those risks.
1 in 5 deaths were from lung cancer, seven times the expected rate; Collecting information on the risks of handling certain
half of those with twenty years or more in the trade had x-ray chemicals, for example, takes up a great deal of time, effort,
evidence of asbesto-sis; 1 in 10 deaths were caused by and money. Workers acting individually may find it too costly,
mesothelioma, a rare malignancy of the lung or therefore, to collect the information needed to assess the risks
pleura which strikes only 1 in 10,000 in the general working of the jobs they accept.
population. Of 6000 men who have been uranium miners, an 3. Workers might accept known risks out of desperation
estimated 600 to 1100 will die dur-ing the next twenty years as a because they lack the mobility to enter other less risky
result of radiation exposure, principally from lung cancer. Fifty industries or because they lack information on the
percent of the machines in industry generate noise levels alternatives available to them. Low-income coal miners, for
potentially harmful to hearing. Hundreds of thousands of example, may know the hazards inherent in coal mining, but
workers each year suffer skin dis-eases from contact with materials since they lack the resources needed to travel elsewhere, they
used in their work. The dermatoses are the most common of all may be forced to either take a job in a coal mine or starve.
occupational illnesses. Even the old, well- known industrial When any of the three conditions obtain, then the contract
poisons, such as mercury, arsenic, and lead, still cause trouble. In between employer and employee is no longer fair; the employer
India also, the places where too much of health hazards workers has a duty, in such cases, to take steps to ensure that the worker
face are the coalmines, fire crackers manufacturing unit and lime is not being unfairly manipulated into accepting a risk unknow-
manufacturing units. ingly, unwillingly, or without due compensation. In particular:
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3. 1. Employers should offer wages that reflect the risk-premium the number of pieces we completed, and the number of errors
prevalent in other similar but competitive labor markets. we made, on our individual production sheets. These produc-
2. To insure their workers against unknown hazards the tion sheets were the basis for our periodic merit raises. Aside
from counting and checking, the supervisor also tried to curtail
employer should provide them with suitable health
talking and eating at desks.
insurance programs.
The debilitating effects that job specialization can have on
3. Employers should (singly or together with other firms)
workers were first noted over two hundred years ago by Adam
collect information on the health hazards that accompany a
Smith when he wrote:
given job and make all such information avail- able to
workers. In the progress of the division of labor, the employment of the
far greater part of those who live by labor, that is, of the great
Working Conditions: Job Satisfaction body of the people, comes to be con-firmed to a few very simple
operations, frequently to one or two. But the under- standings
of the greater part of men are necessarily formed by their
ordinary employments. The man whose whole life is spent in
performing a few simple op-erations has no occasion to exert his
understanding. . . . He naturally loses, there-fore, the habit
of such exertion and generally becomes as stupid and ignorant
as it is possible for a human creature to become. . . . It corrupts
even the activity of his body, and renders him incapable of
exerting his strength with vigor and per-severance, in any other
employment than that to which he has been bred.
More recent research on the mental health of assembly-line
workers has tended to corroberate Smith’s early suspicions. In a
study of auto workers, for exam-ple, A. W. Kornhauser found
that about 40 percent suffered some sort of men-tal health
‘The rational parts of the organization put a high value on problem and that only 18 percent could be considered to have
efficiency: All jobs, all tasks, are to be designed so as to achieve “good mental health. “A later study found that many American
the organization’s goals as efficiently as possible. When efficiency workers suffered from ulcers, lack of self-esteem, anxiety, and
is achieved through specialization, the rational aspects of other psychological and psycho-somatic diseases. In a survey of
organizations tend to incorporate highly specialized jobs. fifteen years of research on job satisfaction, Stanislav Kasl
found that, among other factors, low job satisfaction was
Jobs can be specialized along two dimensions:
related to “lack of control over work; inability to use skills and
• Jobs can be specialized horizontally by restricting the range abilities; highly frac-tionated, repetitive tasks involving few
of different tasks contained in the job and increasing the diverse operations; no participation in decision-making,” and
repetition of this narrow range of tasks. that poor mental health was related to similar factors.
• Jobs can also be specialized vertically by restricting the range of Not all workers are equally affected by job specialization. Older
con-trol and decision making over the activity that the job workers and workers in large urban areas seem to show more
involves. Whereas, the job of the spot-welder is highly tolerance for routine mo-notonous jobs, apparently because
specialized vertically, the job of the plant man-ager is much less older workers scale down their expectations over the years, while
vertically specialized. urban workers reject the Puritan work ethic and prefer not to
Job specialization is most obvious at the operating levels of become involved in their work. Nonetheless, only 24 percent of
organiza-tions. Assembly-line work usually consists of closely all blue-collar workers would choose the same type of work if
supervised, repetitive, and simple tasks. Low-level clerical jobs they could start all over again, an indication that a substantial
also tend to be fragmented, repeti-tive, dull, and closely portion of workers do not find their jobs intrinsically satisfying.
monitored as this example shows. The injuries that highly specialized work has on the well-being
I worked for a while at the Fair Plan Insurance Company, where of work-ers poses an important problem of justice for
hundreds of women sat typing up and breaking down employees. The most narrowly specialized forms of work are
sextuplicate insurance forms. My job was in endorsements: First, those that require the least skills (since one of the functions of
third, and fourth copies staple together/place the pink sheet in specialization is to dispense of the need for training). And un-
back of the yellow/If the endorsement shows a new skilled labor, of course, commands the lowest levels of
mortgagee/stamp the fifth copy” certificate needed. . .” Other compensation. As a consequence, the psychological costs of dull,
sections, like coding, checks, filing, and endorsement typing, did meaningless, and repetitive work tend to be borne by the group
similar subdivided parts of the paperwork. The women in the of workers that is paid least: unskilled laborers.
other sections sat at steel desks like mine, each working separately Not only may the injuries of specialization be inequitable, they
on a tack of forms or cards. Every section had a supervisor who are often also related to a lack of freedom. Unskilled workers
counted and checked the work. She recorded often have no real free-dom of choice: They must either accept
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4. work that is meaningless and debili-tating or else not work at provide them with the compensation they have freely and
all. The freedom that is essential to a fair work contract is, knowingly agreed to receive in exchange for their ser-vices.
therefore, often absent. There are two main issues related to this obligation: fairness
Excessive job specialization is undesirable for other reasons of wages, and fairness of employee working conditions.
than that it places unjust burdens on workers. There is also Activity
considerable evidence that it does not contribute to efficiency. Discuss the factors that should be considered to determine
Research findings have demonstrated that there is a linkage wages and salaries of employees.
between worker productivity and programs that improve the
quality of work life for workers by giving workers greater
involvement in and control over a variety of work tasks.
How should these problems of job dissatisfaction and mental
injury be dealt with? A few years ago, Hackman, Oldham, Jansen,
and Purdy argued that there are three determinants of job
satisfaction:
Experienced Meaningfulness. The individual must perceive his
work as worth- while or important by some system of values he
accepts.
Experienced Responsibility. He must believe that he personally is
accountable for the outcome of his efforts.
Knowledge of Results. He must be able to determine, on some
regular basis, whether or not the outcomes of his work are
satisfactory.
To influence these three determinants, the authors claim, jobs
must be ex-panded along five dimensions:
1. Skill Variety the degree to which a job requires the worker to
perform activities that challenge his skills and abilities.
2. Task Identity the degree to which the job requires a
completion of a whole and identifiable piece of work—
doing a job from beginning to end with a visible outcome.
3. Task Significance the degree to which the job has a substantial
and perceivable impact on lives of other people, whether in
the immediate organization or the world at large.
4. Autonomy the degree to which the job gives the worker
freedom, independence, and discretion in scheduling work
and determining how he will carry it out.
5. Feedback the degree to which a worker, in carrying out the
work activities re-quired by the job, gets information about
the effectiveness of his efforts.
In short, the solution to job dissatisfaction is perceivable
enlargement of the narrowly specialized jobs that give rise to
dissatisfaction: broadening the job “horizontally” by giving the
employee a wider variety of tasks, and deepening the job
“vertically” by allowing the employee more perceivable control
over these tasks. Jobs can be horizontally enlarged, for example,
by replacing sin-gle workers performing single repetitive tasks
with teams of three or four who are jointly responsible for the
complete assembly of a certain number of ma-chines. Delegat-
ing to the team the responsibility of determining their own
work assignments, work breaks, and inspection procedures can
vertically enlarge such team jobs.
Overview
• The basic moral obligation that the employer has toward
employees, accord-ing to the rational view of the firm, is to
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