Tuesday, November 29, 2020

Saving Time?

“Half our life is spent trying to find something to do with the time we have rushed through life trying to save.”
(Will Rogers, in a letter to The New York Times, 1930)

There are some assumptions in business nobody thinks to challenge. One of the commonest is that saving time means saving money. Benjamin Franklin seems to be to blame for the phrase “time is money.” It first appears in his book “Advice to a Young Tradesman” in 1748. Since then, it has become one of those automatic assumptions of the world of business. Perhaps it’s time to see what, if anything, it might mean.

For a start, time cannot be saved. You can’t put it in a bottle to use later. You can’t pile it up, like a miser piling up gold coins, and gloat over your hoard. Time goes on at its own pace. You can spend less of it doing something. You can give up doing something and, in theory, make the time it would have taken available for something else. But you cannot, whatever you do, put that time aside and use it later.

There seem to be only two situations where saving time and saving money equate. If you can make or sell more goods in the same, or less, time, you might be able to increase your profit. The other situation is where employees are paid strictly for the time they work.

Will doing more in less time increase profit? It might, but several other factors are involved. You must first assume you can produce or sell faster with no increase in cost, or less increase than the returns on the extra goods. If you can’t, you’ve gained nothing except more output. If working faster costs you more — perhaps because of the capital cost of new machinery or processes — you’re worse off. Then, can you sell all that extra output at, or near, the price you did before? If demand doesn’t exceed supply before you start, adding to the supply will drive down the price — which is why the motor manufacturers are busily closing plants. More output without additional demand lowers prices and profits. Today’s companies often increase output first, then try to drive up demand to match it, which is truly putting the cart before the horse.

The other situation where time equates to money is when employees are paid by the hour. The more hours they work, the more money they earn, and the more their employer must pay. On this basis, every employer in the land should be rushing to force hourly-paid workers to accept shorter hours. Instead, we have an epidemic of overtime, which usually has a higher pay rate per hour as well. Why is this? Because the fixed costs of medical care and fringe benefits, which are paid per worker and not per hour, have escalated. It now pays employers to hire fewer workers, even if they must pay for longer working hours, rather than hire more people. Modern wage structures virtually guarantee continuing unemployment.

“White collar” workers aren’t paid by the hour, but generally command even more expensive fringe benefits. So the best way for companies to lower the costs of salaried employees has to be to hire as few as possible, then make them work long hours for no extra pay. As long as these people aren’t paid for their extra working hours, “saving” their time is unimportant. All the extra is free to the employer. Of course, since you’ve laid as many people off as possible, to cut your fixed costs, the remaining ones must do more work and work faster. Not to profit themselves, but to save their employer from having to take on more staff.

However you look at it, doing more work in less time produces nil benefit to any employees, salaried or not. If they’re paid by the time they work, using less time equates to being paid less. If they’re paid a more or less fixed salary, doing more in less time makes them work harder for the same pay.

It all looks very different from the employer’s point of view. People who produce the same output in less time are indeed working harder, so the employer needs fewer of them. And as long as there are high fixed costs per employee, there's an automatic incentive for the employer to encourage the process. The employer benefits for every time “saving” made. Even more if, as now, fear of unemployment lets employers also cut benefits and renege on pension benefits. Fewer people, lower fixed costs, longer hours for the same pay. We're turning the clock back to the bad old days of the Industrial Revolution. Only now it's more likely to be well-paid, highly skilled professionals who slave away for 60 plus hours per week than unskilled people on minimum wage or less.

What about the argument that higher productivity leads to higher wages and salaries?

Higher productivity means higher profits only if wage costs remain the same. If the increased productivity is reflected in higher payments to employees, wage costs will increase, wiping out some or all of the profit gains. Since Wall Street demands companies increase profits each quarter, they’re “forced” to make wage increases lag well behind any increase in profits from productivity. Which, of course, assumes they would have paid out all their extra profits in higher wages and salaries otherwise (Ho, ho, ho).

Slow Leaders ignore “saving” time because it can’t be saved. Do they ignore the equation between time and money? No, that’s real enough. But they do question what’s being done with both. People are working harder than ever and someone's getting rich on those extra profits. Sadly, it's two different groups of people. Amassing money at the expense of most other people's quality of life is an equation worth probing deeply.

What if you changed the saying from “time is (the employer’s) money” to “time is (everyone’s) quality of life?” I think that would make quite a difference to people's willingness to accept those longer hours. More time at work means less time for everything else in life.

Our organizational systems are out of balance. Education isn't providing the skills companies need. The cost of fringe benefits is distorting employment patterns. That's why we have people shortages and significant unemployment at the same time. Yet we rush ahead, convinced running faster will somehow cure the problem. One day, we will have to stop. Let's hope it's before we hit a brick wall of business and personal collapse.

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Stingy Scholar said...

Hey there Carmine. I really enjoy your site - I actually have a technical question about your layout coding. If you don't mind me asking, can you email me at wynnwilliamson at gmail dot com? I'm sorry to ask in your comments but I don't see another way to contact you :(

11:06 AM  
Russell Crosswy said...

Wow! I have been thinking some of the things you said for a while. I work as a salaried employee. I thought it was funny how I am on salary, but have to record my hours. If I work less than 40, I get in trouble. If I work more than 40, nobody seems to care as long as the company doesn't have to pay me overtime pay. Needless to say, the 40 hour a week salaried job is starting to wear on me. I'm only 23 and just started in the "real" world. Already I can see why so many people are having problems with anxiety and depression. I'm looking for my way out of this Doom Loop and a way to make money and have time to do what is important to me.

Great job on the site. I'm loving the stuff I am reading. You are doing a terrific job and I apprecate the effort you put into this.

2:57 PM  
Carmine Coyote said...

Thanks, Ironman,

I really appreciate the comments and feedback. Hang in there. You'll find a way to live your life as you want, I'm sure.

6:58 PM  

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