The Administrative Command Economy: Management, Labor

1
The Administrative Command Economy Management,
Labor Pricing

• Igor Lukashin
• ECN 365/ IBS 394 lecture

2
General Housekeeping

• Sketches of suggested answers at
• www.public.asu.edu/lukashii/ecn365/mid1ans.doc
  Word 7 format
• Grade distribution discussion (theoretical)
• Class presentation discussion
• News from the Eastern Front How risky is the
  Russian market? Infer

1
3
Inputs and Enterprise Manager

• managers responsible for a set of targets
• reward based only on meeting these targets
• US management reward basis ?
• Group 1 - leader appointed respondent

2
4
Intermediate Materials

• Allocated through material balances system to
  ministries
• Enterprises Soft budget constraint doesnt
  matter if it earns or loses money
• Uncertainties of supply how is it possible?
  Group 2 leader select
• Inherent shortages over-order of inputs to be
  assured of being able to meet production plan

3
5
Labor Planning

• labor demand is planned
• labor supply - determined by HH
• not directly planed
• under pressure to supply labor
• labor - leisure tradeoff Group 3 leader select
• soviet-specific constraints

6
Labor Planning continued

• Planners labor balances of LS LD
• LD input -output coefficients estimation labor
  productivity increases
• LS estimation based on age, gender, region labor
  participation rates gt need incentives for
  sectoral reallocation, gradual planning

7
Wages in the Soviet Economy

• labor allocation administrative, force, material
  moral incentives, comprehensive training
• US who determines LS. What info is it based on.
  Is the choice rational? Group 4 LS
• Organized recruitment, internal passports, closed
  cities gt sectoral/regional shifts

8
Wages in the Soviet Economy- contd

• Wages Equal pay for Equal work
• US - is it the same? Why? Group 5 LS

9
Wage Determination

• Industrial branch base pay determined (lowest)
• Schedule higher pay occupations as of base
• Base rate alteration LS industry shift
• Industrialization attracted into heavy industry

10
Wage Determination, continued

• differentials encourage education premiums for
  skilled workers, 1930s - differences larger than
  in the US
• Reduction in differentials after WWII
• increase in base rates
• few unskilled workers left
• Differentiation by region
• Uniform system of coefficients siberia, central
  asia, far north 1.5 to 1.7
• Premiums for hazardous work (mining/chemical)

11
Wage Determination continued

• Bonus payments
• overfulfillment of plan
• special work conditions
• 1930s piece-rate system
• 1960-70s experiments w/bonuses for
  profitability, quality improvements, growth of
  labor productivity
• Group 6 LS Problems with this kind of incentives
  under soviets?

12
Administrative controls over labor

• Education labor force
• Organized recruitment
• Legal controls
• Penal Labor
• Nomenclatura positions

13
Prices

• Administratively set
• Gosplan, Trade ministry, ministry of finance,
  goskomtsen
• Five types industrial wholesale, retail,
  agricultural, collective farm, underground economy