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\title{14.64 Paper: Working \\
       \large {\it Jim Grayson} (and others from {\it The Making})}
\author{Chris Laas}
\date{May 1, 2000}

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\markright{Chris Laas \hfil 14.64 \hfil 5/1/2000}


\begin{document}
\maketitle

Jim Grayson is a spot welder at the Ford assembly plant on the South
Side of Chicago.  He stands at an assembly line post, from 3:30 PM to
midnight every weeknight, and welds pieces of metal together by
pressing buttons on a bulky and heavy welding machine: one button for
high voltage, and one button for low voltage.  Staying always within a
two or three-foot area, he works on about four hundred cars a day.

The company is always trying to improve efficiency; manufacturing
process engineers make detailed measurements of the time it takes to
perform any task, and especially of any time wasted by, for example,
walking away from an assembly line post to get more stock.  If any
inefficiencies in the line are detected, they are corrected
immediately: in this example, stock is brought directly to the post in
a truck.  In the General Motors plant in Lordsdown, Ohio, twenty-two
welding robots called ``unimates'' pushed production from sixty cars
an hour to one hundred cars an hour, while replacing about two hundred
workers.  The firms substitute capital, in the form of information and
machinery, for labor, as long as it is more productive for the price;
the process is slower than simply hiring more workers, but the result
is more production efficiency, and ultimately more profit for the
firm.

Jim Grayson doesn't enjoy his job.  The work is uncomfortable: he
stands up all day, pushes around heavy machinery in a repetitive way,
and can only go to the bathroom during the two short breaks in his
shift.  ``Plant pollution,'' such as carbon monoxide, disturbs him,
and the plant is full of immediate hazards such as sparks and smoke
and heavy machinery with moving parts.  The head foreman at Grayson's
plant knows that cuts and other injuries are everyday occurrences;
Grayson feels that the night shift medic department is inadequate.
Most importantly, Grayson has little variety in his work, cannot talk
to the other workers while at his post, and, altogether, is bored.

So, why does Grayson stay in this job?  There's a lot of evidence that
he is getting a compensating differential in his wage, relative to
what he would be getting elsewhere.  Phil Stallings, in the same job
as Jim, gets \$4.32 an hour, and thinks ``that's real good money
now;'' the plant manager, Tom Brand, notes that Ford pays ``top
dollar'' and that the workers get twelve paid vacation days a year.
Brand also expounds with pride upon his concern for the safety of his
workers: he describes measures including a doctor, four nurses,
prescription safety glasses, non-slip shoes, hearing protection, and
powerful cooling fans.  There's no doubt that, without these measures,
the compensating wage differential would have to be significantly
higher in order to hire sufficient labor.

The best evidence that Grayson receives a compensating wage
differential in this job is that he declares that he would be willing
to accept a reduced wage if he could get a job in ``industry'', by
which he means a desk job in which he could talk with other workers
and do nonrepetitive work.  To this end, he is enrolled in a part-time
Business Administration degree program at Roosevelt University; he
wants a job with ``status,'' which would clearly give him some utility.

Grayson's decision to invest in education could be explained under
either the human capital or the signaling model, since the jobs he
wants require some general and specialized training but probably not a
college education.  There is some evidence that it fits more with the
signaling model, however: Grayson applied to a junior accountant
position for which he was qualified, but he feels he was turned down
because he was Black.  The fact that he continues to invest
significant money, time, and energy into college implies that he
believes that better credentials (signals) will improve his odds in
the job market, despite the fact that he feels that he already has
enough human capital to enter the market for ``desk jobs with
status.''

It is also notable that, while Grayson is investing heavily in
education with the expectation of greater future utility, Phil
Stallings (who is very similar to Grayson in most other ways) is not
investing in formal eduction at all; his ambition is to become a
utility worker for the plant.  To some small degree, Stallings is
investing in specialized training, and he is signaling his productivity
via hard work, to encourage the company to promote him.  It's quite
clear that Grayson is investing more heavily in his future than
Stallings, however; in economic terms, this is no doubt due to
Grayson having a lower discount rate than Stallings.  Grayson is more
future-oriented, and Stallings is more present-oriented.

Young workers are more mobile, and Gary Bryner, the union president at
the General Motors plant in Lordstown, comments that they are more
likely to be taking classes part-time; this is certainly consistent
with our model of education, since older workers have a shorter payoff
period, limited, in this case, by Ford's thirty-and-out policy.  In
general, the old have more stable lifestyles and are less likely to
rock the boat, since they look forward to their thirty-and-out
retirement packages coming up; the old also have a more difficult time
finding a new job.  Thus, they are less likely to leave the company,
and in this way, the firm retains the workers with more experience
(specialized on-the-job training) and puts them in higher positions,
such as utility worker or foreman.  Nevertheless, old workers without
specialized training are less productive than young workers, and so
the company statistically discriminates against them; the firm hires
more young people with low wages and high productivity.

There's evidence that Blacks are discriminated against at Ford: for
example, Grayson feels that the foremen, mostly Southern Whites,
unfairly single out Blacks.  Bryner points out that older workers call
each other ``nigger'' and ``honkie''.  The plant manager admits that
although the plant workers are forty-five percent Black, only
twenty-five percent of salaried workers are Black.  There doesn't seem
to be any evidence for statistical discrimination here, though,
because there's no sign that Blacks are less productive that Whites in
any part of the plant.  However, taste-based discrimination on the
part of employees provides a good explanation for these effects:
Whites in the company management have no problem with Blacks working
in jobs of lower status, but these Whites have lower personal
utilities if Blacks share the same rank as them.  The predominantly
white foremen provide strong support for this hypothesis.  However,
this model does not explain the relatively high level of integration
on the lowest level, the assembly line; this could be explained by
social reasons (the young unskilled workers don't mind integration as
much as the older leadership or the more Southern foremen) or could be
explained by compensating differentials if it were found that White
workers in a completely segregated plant earned less than workers in
this Ford plant.

Another interesting point is that, until recently, women did not work
on the assembly line at all; the work was too physically demanding.
In a way, this was an extreme case of a kind of statistical
discrimination, in that women, in general, had very low productivity
on the assembly line, and thus were never hired for that kind of work.
Of course, probably very few women ever applied for the job; and,
regardless of gender, an employer can easily estimate the size of the
muscles on a prospective employee.  Thus, the label ``statistical
discrimination'' is somewhat questionable for this effect, since it
has less to do with statistically educated guesses and more to do with
an appraisal of actual applicants.

One thread that runs through all the essays is the issue of how the
firm prevents shirking.  Grayson points out that absenteeism is
rampant: workers are experts at producing fake doctor's notes and the
like to have extra leisure time on Mondays.  When workers like Grayson
do not take pleasure in their work, the company must find ways to keep
assembly line workers producing.  One way is the use of efficiency
wages; this, along with compensating differentials, helps to explain
why the wages at the plant were relatively high.  The monitoring
strategy of the plant, hiring thirteen foremen to supervise the
workers, is expensive, but not so costly as lost productivity due to
shirking workers; the close monitoring allows the firm to decrease the
no-shirk premium.

The primary punishment for shirking is to be sent to the ``Green
House'', where one would be either reprimanded or fired; the promise
of promotion (status) and pay increases (the utility man makes \$4.49
$\frac{1}{2}$ per hour, compared to Grayson's \$4.32 per hour), along
with the touted thirty-and-out retirement plan, provide incentives to
avoid this fate.  Interestingly, however, the company does not usually
fire workers permanently, but instead docks them a few days' pay and
hires them again.  This is the best strategy for the firm, because it
would no doubt have a strong negative effect on a worker's chances of
promotion, so would still remain a disincentive for shirking; but
would alleviate some of the hiring and training costs of the firm,
since it could re-hire workers who already knew the trade.  This
theory is supported by the high turnover rate at the plant --- at one
point, the firm hired 125 people per week, which is a 2.7\% per week
turnover rate.  However, Brand, the plant manager, notes that during a
recession, the turnover rate (and shirking) becomes much less of a
problem, due to the low employment rate; this, again, lends credence
to the theory.

Jim Grayson complains that he is treated like a robot; in economic
terms, however, he is almost as predictable as one.  The
manufacturing-plant situation in which he finds himself is very well
studied, and the models of productivity, discrimination, wage
determination, and education explain the qualitative aspects quite
well.  It is likely, however, that a quantitative analysis would
reveal some portions of the effects, especially discrimination and
education, which are not as easily explained by the simple models;
these would be attributed to social effects which were not
incorporated into the models.  It is also clear that, in some aspects,
the factory in which Grayson works is not in efficient equilibrium;
for example, some of the working conditions which Grayson (and the
union) would prefer might, in fact, be possible for the factory to
create without significantly decreasing productivity, but the plant
manager seems oblivious to such concerns.  A more detailed model,
taking into account the effects of incomplete information and
unbalanced bargaining, might be able to address more of these issues,
and create a more complete picture of the microeconomy of this firm.

\end{document}
