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Sharing Could Pay Off

March 29, 1987

Harry Bernstein's March 4 column, "Lowering Living Standards Is No Solution," correctly points out the unpleasant choices faced by industrialized countries.

On one hand, we have the British model, with real wage increases still triggering demand-restricting, anti-inflation policy and high unemployment.

Alternatively, we have the U.S. example. Here, sustained high unemployment has already beaten down real wage increases. But the economy remains soggy, and the authorities stand by, ready to dish out more pain should inflation show signs of reigniting.

Until recently, there was little to suggest as a remedy for the dilemma Bernstein cited. During the past few years, however, an increasing number of economists have suggested that widespread adoption of profit sharing would improve economic performance.

With appropriate profit-sharing formulas, workers are assured of automatic participation in the good fortunes of their employers. At the same time, the employer receives automatic cost relief during hard times, allowing greater employment stability and fewer layoffs.

If the ultimate goal is to give workers a rising share of economic expansion, the best way to do it--and the way least likely to pose an inflation/unemployment threat--is to build the sharing approach directly into the compensation system.

DANIEL J. B. MITCHELL

Director, UCLA Institute

of Industrial Relations

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