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National Times

Gillard's Law of economics operates at a crass roots level

Ross Gittins
August 11, 2010

Opinion

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Gillard throws cash at teachers

Julia Gillard's cash incentives for teachers who spend more time involved in community issues are probably insulting and miss the point, says Ross Gittins.

Frederick Taylor, the American inventor of ''scientific management'' a century ago, believed workers were dumb and lazy. So the tasks they were required to perform had to be broken down into the simplest of steps and they needed to be closely supervised. The only way to motivate them was by paying piece rates - what today we'd call ''performance pay''.

I'm sure Julia Gillard would never admit to regarding ''hardworking Australians'' as dumb and lazy. But she believes school teachers need to be spurred to greater effort by ''a bonus payment under a new performance framework''.

This is in addition to her plan for rewards of up to $100,000 to the 1000 schools that each year show the most improvement in attendance, literacy and numeracy or, in the case of high schools, year 12 results and the number of students going on to further education, training or work.

Kerrie Leishman

Illustration: Kerrie Leishman

Top performers, about 10 per cent of teachers, would receive annual bonus payments of between $5400 and $8100, determined by the achievement of their students, their contribution to the school community and their participation in extracurricular activities.

I doubt the wisdom of this idea. I can understand why company boards feel they need to pay executives extra money to get off their backsides but teachers are meant to be professionals and it's a strange way to treat professionals.

Gillard professes to hold teachers in great respect (do I feel an election coming on?) but I suspect many of them would be amazed to hear it.

It's said the one thing economists agree on is: incentives matter. Trouble is, most economists assume the only incentives that matter are monetary. It wouldn't occur to them that offering teachers money for ''contributing to the school community'' contains a contradiction.

Teachers contribute to the school community and take part in extra-curricular activities because they want to. I've seen teachers putting extraordinary amounts of their time and effort into preparing kids for a school play, coaching debating teams and so forth. They do it because they regard the activity as worthwhile and of benefit to their kids, but also because they enjoy doing it.

It would be nice to think these intrinsic motivations - doing things for their own sake - could be pepped up by adding money (an extrinsic motivation, where you do things because of external benefits they bring). That's what economists assume can be done. Gillard, clearly, has started thinking like an economist.

But as I discuss in my new book, The Happy Economist (Allen & Unwin), psychologists have discovered it doesn't work that way. Economists have something called Gresham's Law: bad money drives out good. It turns out monetary motives drive out non-monetary motives.

Once you start paying people to do good works the selfish, materialist mentality takes hold and they stop doing those things unless they're paid. People who did good works because it made them feel good about themselves no longer feel that way. Those who contribute to the school community without winning a bonus may be discouraged in their well-doing.

So, should this scheme be implemented, don't expect a surge in School Spirit (as it was called at my school) and don't be surprised if it leads to a decline in teachers' second-mile contributions.

If I'm right, we will have discovered Gillard's Law.

This crass attempt to motivate teachers is symptomatic of the election campaign. More than ever it's been obsessed by money: budget deficits, public debt, wasteful spending. The only major non-monetary issue has been our intense objection to foreigners entering our territory without permission.

Both sides conduct their campaigns on the assumption we're quite selfish and mesmerised by money. For individuals, both sides have rolled out monetary bribes: cash for clunkers, higher family benefits for the parents of teenagers, incentives for age pensioners to do paid work, a more generous paid parental leave scheme. For marginal electorates, a new road or building.

Although it's been hidden by the negativity of this campaign and its obsession with budgeting, the underlying assumption of both sides is that the job of governments is to continually raise our material standard of living because this is what will make us happy.

They seem oblivious to the evidence, recounted in my book, that decades of rising living standards have done nothing to increase people's happiness or ''subjective well-being''.

It's time politicians reached a more enlightened view of what they could do to increase national happiness. They could start by rethinking their attitude to work.

The economists' model assumes we work only for the money it brings us. The rationale for WorkChoices was: give employers more freedom to hire and fire, to call people in to work at times when it best suits the business without penalty payments, and the greater efficiency with which labour is deployed will raise our material standard of living to the benefit of all.

In truth, most people gain a lot of satisfaction from their work. That satisfaction can be diminished if people become less secure in their jobs and in the hours and days of the week they'll be required to work. An understanding of this seems implicit in Labor's opposition to WorkChoices and in Tony Abbott's promise not to reintroduce it.

But why not make that understanding explicit? If work is a primary source of our happiness - as the evidence says it is - why not encourage employers to see the provision of secure, satisfying work as an end in itself, a primary reason for the existence of the business?

Why not help employers see that happy workers contribute more to the success of the business (or the school) - as the evidence increasingly says they do?

Ross Gittins is the economics editor.

 

71 comments

  • Miss Gillard's economic theory: If you have a vote, I have a cheque for you.

    Commenter
    SteveH.
    Date and time
    August 11, 2010, 7:04AM
  • Nice summary Ross
    I agree I think for the teachers - this is a load of BS. How about spending the money in schools that need it.

    Here we go again Jools is hosing our tax payers dollars again.
    Waste, Waste

    Commenter
    Mr C
    Location
    Penrith
    Date and time
    August 11, 2010, 7:32AM
  • Julia, no economist and having little knowledge of reasons for work productivity and what makes people tick, also seemingly has no knowledge of W E Demming (responsible for Japan's economic miracle after WWII) and his 10th Principle of Management: "Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force." Note to Julia: Demming believed in Leadership, which may be an unfamiliar concept???

    Commenter
    FAIR GO
    Location
    Queensland
    Date and time
    August 11, 2010, 7:57AM
  • This is pure focus-group stuff, driven by years of piffle emanating from right-wing talk radio blowhards. It should be dropped cold. Alas this kind of specious claptrap seems to be driving just about every decision of indecision.

    Commenter
    Redsaunas
    Date and time
    August 11, 2010, 8:00AM
  • The evidence is strong that workers that are treated fairly and made to feel secure are "happier" and hence more productive. So something like Work Choices was a fundamentally ill-conceived.
    But in the case of teachers, professionals as they are, many of them simply feel they are not being paid fairly. One only has to look at other professions such as marketing and IT - often less stressful and responsible jobs than teaching - or at fellow teachers in say, the UK, and see the base pay difference to understand where the teachers are coming from.
    That line for teachers - especially for those thinking of entering the profession (as opposed to those already in it) - between incentive and a labour of love is being pushed too far...

    Commenter
    Bill
    Location
    Petersham
    Date and time
    August 11, 2010, 8:02AM
  • Insightful as ever, Ross.
    I'd say even the non-monetary issue you mention, "our intense objection to foreigners entering our territory without permission" (gee, what a brilliantly achieved euphemism!) has a distant monetary background (waste, apparent competition for jobs, alleged abuse of welfare).
    I entirely agree: Australians are obsessed by money. And note the preposition is "by", not "with".
    Good teachers - and I have met a few, I used to be one myself - take the greatest reward from seeing their students become better persons, achieve their potential and grow into future citizens who can be relied upon. That's why they enjoy their work and most don't see the need for the 'bonus performance payment'. Some might even be affronted by it.
    My only disagreement with Ross is on the notion that "work is a primary source of our happiness". Happiness is too big a word for this, Ross. You probably mean something else: wellbeing, being self-content or self-satisfied, perhaps, but not happiness. As such, happiness does not exist anywhere or for anyone: we delude ourselves in its pursuit, but we never reach it.

    Commenter
    Jordiet
    Location
    Ngunnawal Land
    Date and time
    August 11, 2010, 8:07AM
  • I neglected to mention Demming's 3rd "Deadly Disease" of management: "Evaluation by performance, merit rating, or annual review of performance." Julia, please note!!

    Commenter
    FAIR GO
    Location
    Queensland
    Date and time
    August 11, 2010, 8:07AM
  • Ross there is some truth in what you say, but you need to recognise the sweated conditions and the increasing bureaucratic demands that teachers work under that work strongly to undermine intrinsic incentives. For example at my school a 20 page document was distributed as the new standard for application for a camp or excursion on the weekend. A public servant would probably require at least a week to fill in this document, and demand training in "risk management". Teachers are expected to fill it in, somehow, on top of their tasks. Added to this is the general malaise in the teaching force.. Bad money has already forced out good money- teachers are paid and honoured for taking on bureaucratic roles but nothing else. The situation is pretty dire. Being rewarded for "good works" might be a refreshing change.

    Commenter
    Captain Rick
    Date and time
    August 11, 2010, 8:16AM
  • As a retired teacher, I agree. Performance payments for teachers show regressive thinking (or a desperate bid for votes, or both).

    Commenter
    David Morrison
    Location
    Springwood NSW
    Date and time
    August 11, 2010, 8:18AM
  • The problem of over-promising and over-spending has been with us for many years, in previous incarnations known variously as 'The Overload Thesis' or 'The Fiscal Crisis of the State'. The danger is that if growth falters, industries and enterpreneurs move off-shore or for whatever reason the tax intake falls, governments get into debt. We have seen the sorry mess made by Messrs Blair and Brown by lax over-spending.

    Adam Smith pointed out a long time ago (1751) that people living in societies are motivated in myriad ways - in fact, he conceived of a hierarchy of needs long before Maslow. These include acting decently, being well-mannered, having 'Sympathy' and trying to live a virtuous life. Job satisfaction is also one of these. That said, economists are also right that people respond to incentives and disincentives.

    I'd like to see more balance between dollars and moral sentiments, but some realism when it comes to borrowing to spend on things we don't need. I see no sign of this amongst the historical materialists of the ALP.

    Commenter
    John Montgomery
    Location
    Brisbane
    Date and time
    August 11, 2010, 8:40AM

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