Table 12
Effect of Profit Sharing on Hourly Benefits, Wages, and Total Compensation
Hourly
Hourly
Profit Sharing
Hourly Total
Wages
Benefits
Benefits
Compensation
Manufacturing
Profit sharing
$11.01
$3.88
$0.43
$15.32
Nonprofit sharing
$11.04
$4.03
$15.08
Nonmanufacturing
Profit sharing
$10.73
$3.33
$0.47
$14.53
Nonprofit sharing
$10.10
$3.44
$13.53
Source: "Helping Americans to Help Themselves," Profit Sharing/ 401(k) Council of America, April
1998.
Are Worker-Owners More Productive?
ny has had a good year, and Smith asks for an
The entrepreneurs testifying before the
increase to $7,000. He is entitled to it, but the
Senate in 1939 contended that worker capi-
$7,000 may result in increasing the fixed
talism improved not only a worker's charac-
overhead of the company to a point where it
ter but also his productivity. "In our estima-
would be burdensome during subsequent
tion," a Hammerhill Paper Co. executive told
and less prosperous years. When those poor
the Senate Finance Committee, "based upon
years come, no executive likes to reduce
approximately 30 years' experience, a profit
salaries and wages, and usually defers doing
sharing plan or bonus system . . . helped to
so until it becomes necessary to take drastic
key up the organization, has provided an
action. Rather do I prefer to see John Smith
incentive for extra effort, and has been a
continue to receive an annual stipend of
means of stimulating and maintaining high
$5,000 with a profit sharing plan whereby at
standards of quality and the elimination of
the end of a good year he will not only receive
undue waste."5 6 "During the short time our
the additional $2,000 which he desires, but
From 1989 to
plan has been in effect," testified the repre-
perhaps $5,000. . . . Then, if off years ensue,
1995, the percent-
sentative of Pacific Iron & Steel Company,
the fixed overhead of the company has been
age of heads of
"we have noticed a reduction in waste. Men
maintained at a point where it is bearable
under adverse conditions."5 9
are very much interested in keeping costs
households
down, hence are more careful when using
Those predictions, too, can now be test-
below age 35 who
machines. . . . [P]rofit-sharers work for the
ed. Various studies have assessed attitudi-
best interest of the company."5 7
owned stock
nal changes among employees offered stock
options or defined contribution plans.60 In
Several industrialists argued back then
increased
that profit sharing, by making labor costs
1987, D. Wallace Bell and Charles G.
64 percent.
more flexible, might help reduce layoffs and
Hanson surveyed a random sample of 4,060
bankruptcies.5 8 At the same time, it could
British profit sharing workers. Seventy-
three percent said the plan improved their
yield higher total compensation. H. S.
attitude toward their work, 68 percent that
Murray, president of Kalak Water Company,
it improved their attitude toward their
provided a hypothetical case: "John Smith
employer. In a 1989 Ph.D. dissertation,
receives a pay of $5,000 per year. The compa-
19