THE OI VEY WAVE
by Tom Walker
It has long been agreed by economists that (all other things being equal) a
reduction in the hours of work per worker will lead to an increase in the
hourly cost of labour. This is because of the importance that per-worker
fixed costs play in determining modern labour costs. Economist Walter Oi
presented the seminal theoretical discussion of this phenomenon in a 1962
paper, "Labor as a Quasi-fixed Factor".
That's the thesis, anyway. Now for the antithesis: the fixed component of
labour costs rises _and falls_ cyclically over long periods. If we call the
rising phase of the cycle an "Oi", in deference to Walter Oi, isn't it only
fitting that we call the falling phase of the cycle a "vey"?
Although the above may sound like obscure academic theorizing, it has some
pretty amazing implications for the real world. The Oi vey wave could well
explain the "long wave" cycle of alternating periods of prosperity and
retrenchment first identified by Dutch economists around the turn of the
century and widely associated with the name of the Russian economist,
Kondratieff.
The Oi phase would correspond with the fat years and the vey with the lean.
If the world economy has just suffered through a quarter century of vey, it
may well be posed on the brink of an Oi upswing. Happy days are (almost)
here again!
But wait. There's a synthesis. It's possible that the alternation of Oi and
vey phases may reflect the strategies that management uses to adapt to the
labour cost structure of the prevailing phase.
Towards the end of the Oi phase, for example, management begins to
experiment with "un-Oiing" strategies to cut labour costs. Because such
strategies can only be implemented incrementally, over time they become
habits. Eventually these un-Oiing habits come to be seen as first principles
of management.
Corporate executives are hailed, not for their bold vision, but simply for
possessing the venerated un-Oiing habits. These un-Oiing executives are the
types who would spend a dollar to save a dime. But no matter -- they can
point to past precedent to justify their ways like old generals pointing to
the last war to justify their preparations for the next one.
Without putting too fine a point on the data crunching, it is possible to
name exactly when the (un-Oiing) vey phase of the wave crested (troughed?).
That would be when it became obligatory for stock prices to rise in response
to an announcement of layoffs. Most stock market players are like vultures
-- they swoop after the meat is dead.
HOW TO PROFIT FROM THE COMING OI PHASE
The driving principle of the Oi phase is providence. The formula for success
in the coming period is simple:
generous = profit
stingy = loss
For the more technically-minded, the way for companies to take advantage of
the new labour cost structure of the vey phase is to substantially reduce
the hours of work for highly-paid "core workers" and to aggressively expand
employment.
Employers with the wisdom to offer free time as a benefit to their highly
skilled, experienced work force and to recruit, train and promote young
workers will reap the dividends of a new Jubilee. Corporate downsizers will
inherit the wind. You can bank on it.
Regards,
Tom Walker
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Vancouver, B.C.
[EMAIL PROTECTED]
(604) 669-3286
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The TimeWork Web: http://www.vcn.bc.ca/timework/
