payments and the bonuses.
A much more important and very definite advantage of the system
is that despite the producers' loss of market power over wages,
it gives them the same kind of excess demandfor labor that their
dominant position in the labor market gave A them under the ordinary
v/age system.
To show that that is so, express the price or average cost of
labor, AC^ , as
AC^ = w + qAR
and the marginal cost of labor, MC-^, as
KC^ = w + a MVP ,
(1)
(2)
where MVP is the marginal value product of labor, w the annual
sum of monthly wage payments, AR the firm’s average-revenue
per worker, and q the workers' share of revenue distributed among
them in the form of bonuses.
Subtracting (2) from (1) shows that the the MC of labor is
below its AC in the proportion in which the MVP of a worker
short of his average gross product:
AG 1 - MC 1 = q(AR - MVP)
falls