Bonus season is upon us, yet all indications point to the fact that the majority of public sector workers won’t receive a penny. On the surface, that’s bad news, but evidence from across the world suggests this might not necessarily be a bad thing.
BY BHEKI NGUBENI
The article investigates factors that determine the awarding of bonuses, that is, broad supply and demand variables, capital rationing (survival) or intrinsic productivity of an employee. We find that bonus awards are cyclically elastic, dependent and sometimes counterproductive. The article proffers alternative solutions to cash payments, which can be an equally rewarding form of recompense.
Apportioning of bonuses in the developed world
In the 1940s, the defunct Soviet Union ran a model whereby workers competed with each other for special recognition and bonuses. Perhaps the principle of “shock workers” could be introduced in Zimbabwe. In order to encourage efficient production and cheaper output, bonuses should be reserved for high achievers.
Considerations of this kind are supported by current Portuguese models that run an output-oriented bonus scheme whereby, value is not measured in revenues, but through a quantifiable condition such as “exam results”. For example, in schools, bonuses are awarded to those that exceed a predefined grade criteria.
Japan’s “shushin koyo” labour market model systematically indoctrinates employees, teaching them that work benefits, specifically bonuses, are primarily dependent on the company’s performance. Bonus payments are correlated to reported profits. If we are going to emulate their productivity success, shouldn’t we take behavioural cues on how workers perceive rewards?
Evidence from China suggests that bonuses, widely used by State-owned enterprises, do not improve productivity in State enterprises and may even reduce it. There is little correlation between increased employee commitments as a by-product of bonus payments.
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In contrast, American theory postulates a completely different take on bonus reduction. Janet Yellen’s “morale” theories focus on adverse behavioural consequences of benefit reduction arguing that cuts impacts morale, which in turn adversely affects both individual and collective performance.
One would imagine the moral hazardous attitudes that saw American bankers award themselves hefty bonuses in the face of the 2008 recession is the same price Zimbabweans will pay if wages are disproportionate with real output. Following the above observations, it is important to explore to conventional cash payments.
Alternative compensation: Bond coin payments
Business has warmed up to bond coins as a means of exchange, transaction rates have increased as users view with less suspicion. Bond coins are now considered legitimate currency. Why not use the internal tender to pay bonuses?
A bond-funded wage expenditure occasioned by a measured degree of use can be employed to negate harmful effects such as cross border spill overs, that is, export purchases from South Africa. The currency’s closed economy function will encourage the purchase of local goods and services or enclose the aggregate flow of income in the process plugging capital outflows.
A positive takeaway from the creation of the coins is the fact that, country falls in the category of investor-led credit expansion with choking interest rates. Bond coins, in theory, should lower the dual risk of capital inflows and upward pressure on exchange rates. Of course, such a policy needs to be carefully considered taking into account the failed money creation experiments of 2008.
Alternative compensation: Bonus farms
In 1928, a broke Germany government adopted a paternalist approach to benefit awards. Bonuses paid in kind included free education programmes, free housing (stands) set against income tax. As such, Zimbabwe’s public sector bodies must conjure innovative ways to keep workers loyal in a low wage economy, while they re-organise and developed re-employment schemes.
In theory, government can identify idle farmable space, evaluate and translate the asset into a share price and offer workers a piece of land on a lease basis. Such an option is commercially viable, individuals can collectively own an infinitely productive asset that bears financial reward within a short space of time. Tanzania, as part of the Arusha declaration, successfully implemented land ownership solutions as an effective self-reliance mechanism.
Land is one resource the nation has in abundance. It is something one can walk on, touch or hold in their hand. As a start, government could assist with the financial inputs, basic agriculture implements and technical advice for farmers. With efficient management, “bonus farms” can decrease government expenditure, generate revenue through taxable land assets and income tax gains.
It is evident that the frame and outlook of the current labour market is characterised by a budget crisis. Rationally, that should shape the tone on any debates going forward. Morally, is it fair for Zimbabwean civil servants to demand bonuses, while some of their colleagues were recently made redundant? I am of the opinion that any argument must address the macro threat of redundancy and long term unemployment not reduced earnings.
lBheki Ngubeni (MSC, BA) can be reached at [email protected]
