Monday, November 22, 2010

What's "growth" got to do with it?

The following estimate is from a letter to the editor of The Times of London from Sir William Armstrong, spokesman for the employers during the 1871 engineers' strike in Newcastle, England for the nine-hour day.

It is easy to value the commercial gain to the men of a given reduction of time, but it is more difficult to define the loss to the employer. As a mere arithmetical question, a reduction from 59 to 54 hours a week represents a money gain to the workman of about 8 per cent. on the price of his labour. To the employer the direct loss is, of course, the same; but the indirect loss must be matter of estimate, varying in each particular instance. In my own case, I should certainly regard it as equal to the direct loss on wages, and I believe that engineers in general would concur in the substantial accuracy of this estimate. Upon this view the reduction of time claimed by our men would be attended with a gain to them of 8 per cent. on the amount of their wages, and of a loss to us equal to 17 per cent. on the same amount.
My question to Peter Dorman is: can you identify the major error in the calculation? There are three errors, one trivial, one 'theoretically naive' and one whopper of a mistake. What's the big one?

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