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Working Together: What Economics Can Teach Us About How Work Relationships Get Weird

Relationships are critical to our ability to do remarkable work. Even if you’re a hermit like me, the people who collaborate with you, inspire you, and support you are indispensable. That said, relationships are a source of stress, too—especially when it comes to work. 

At work, relationships take on an additional layer of challenge. Sure, there are interpersonal and social dynamics at play. There are (not so) lingering -isms that can make a work relationship sour or fall apart. But, at work, relationships are also evidence of how resources flow. 

We notice when someone in a collaboration contributes more or less than agreed upon. We notice when people are paid differently. And when someone takes up all the time in a meeting or doesn’t ever seem to have time for others, we notice that too.

If we’re talking about the flow of resources, we’re talking about economics. So what does economics have to teach us about work relationships? Quite a bit, it turns out.

A Conversation With No Answers

As much as we know that relationships are key to doing remarkable work, many people have a lot of hang-ups when it comes to pursuing those relationships. Meeting new people or collaborating with colleagues is one (tricky) thing. But hiring support? That’s a whole other ball game.

Among small business owners and independent workers, there are wide concerns about hiring others. Some are worried about the money: what’s fair and what’s not, what’s affordable and what’s not. Others are concerned about becoming a manager—either because they’ve had a less than positive experience as someone’s supervisor or because they’ve been poorly managed themselves in the past. And still others can’t imagine that anyone would want to work for them—not when that person could pursue their own gigs.

Bottom line: caring people don’t want to inadvertently create exploitative relationships. That brings me to a text message I received from friend and new economy provocateur Kate Strathmann:

“Do you want to have a conversation with no answers?”

Do I want to have a conversation with no answers? Yes, yes, a thousand times yes!

What prompted Kate’s text message was an email from someone in her audience at Wanderwell, her bookkeeping and consulting business. The emailer shared that they had developed a strong, service-based business of one. There were opportunities to make a bigger impact and grow—but that would mean hiring help. The emailer wanted to know: is it possible to hire people without exploiting them or giving up control and ownership over the business?

Specifically, they wanted to know whether it was possible to hire someone without profiting from the employee’s labor more than the employee is.

While it’s possible to have a nice business that generously supports one person and fulfills a genuine need for its customers, once you start thinking about making a bigger impact, freeing up your own time and attention, and—yes—making more money, you start thinking about hiring some help.

And once you start thinking about hiring help, you start considering all sorts of relationship quandaries. How much does someone deserve to get paid? How much of a say should they have in the work they do or the direction of the business? How much time will need to be spent on  management and meetings? Is it possible to create a fulfilling and rewarding experience for an employee, even if resources are a bit tight?

For many equity and justice-minded people, the #1 question is: Can I hire someone without exploiting them?

“How do we understand the labor relations we’re creating? And how do we understand the labor relations we are a part of as working owners?”

In short, this business owner was looking at two options. 

The first option was to make money off of other people’s work (the default profit model in employer-employee and contractor-contractee relationships).  And the second option was to form a cooperative or collective so that everyone working could participate on equal footing, thereby giving up the sort of “benevolent dictatorship” role that most small business owners hope to maintain. At first glance, these seem to be the only two options. Try to make the best of a bad situation or give up control of your vision. Are there other options? Could this business owner develop a novel structure for hiring help? How do you know when sustainable people management turns into exploitation?

These were the questions that Kate and I wanted to parse in our conversation with no answers. Plus, we’re both very interested in how all of these concerns can be turned back onto the relationship that a small business owner has with their own business. 

I’ll share more about all of that in a bit. But first, let’s take a few steps back.

The Economics of Work Relationships

First, we should review what economics is in the first place. Economics is the study of how limited resources with many possible uses are distributed to meet needs and wants.

When looking at a business—whether a multinational corporation or a tiny one-person shop—economics helps us understand how resources flow in different relationships between people. It also helps us understand how different resources are valued, extracted, or exploited by different stakeholders. And it also helps us understand how various stakeholders contribute resources to the organization.

Take labor power. 

Labor power is the capacity for work (skills, abilities, talents) of any individual. In capitalism, labor power is commodified and sold to an employer as units of time. Within that time, the employer has control of the labor power of the worker. “The key is that I’m not paid for the ‘fruits of my labor,’ Kate explains, “I’m paid for the time that I’m showing up.”

It’s in the employer’s best interest, then, to fully utilize the labor power they own during the workday. The more productive a worker is, the greater the difference between what the employer has paid for the worker’s time and the value the worker produced during that time. That difference is called surplus value

Surplus value, Karl Marx believed, was the source of exploitation in capitalism. 

While classical economics understands the worker as being “free” to sell their labor power to an employer, Marx argued that workers were forced into a work relationship whereby they were paid (often significantly) less than they value they produced.

Here’s an example. Imagine you are an upholsterer—skilled at finishing and refinishing furniture in fabric and padding. You work at an upholstery workshop where you earn $30 per hour. The average sofa takes about 8 hours of your time, so you get paid roughly $240. The upholstery workshop charges $800 for the job. After operating expenses and materials, there is still $300 on the table. That’s the value of the surplus value. If you were working for yourself, you could have charged the upholstery customer the full $800. Then, you’d earn the same $240 for your time. But you’d also pocket the $300 markup.

“Surplus value isn’t bad or evil,” Kate makes clear. It’s critical to the sustainability of any business—including a company of one. After all, an employer does weather risks and provide long-term stability (or they used to) that can’t be matched by working for yourself. But surplus value does create a wide opening for exploitation to walk right on through.

Once a business owner knows all that—whether in those terms or not, it can be hard to see any fair way forward that’s not just grinding it out on their own. “The solution,” Kate explains, “isn’t to create a subsistence-level business, which is what I see happening a lot in the kind of capitalist-critical equitable values space.”

Surplus is a buffer. “We need a surplus to care for our businesses and our people. If our expenses are always equal to our revenue, we’re going to run the business into the ground pretty quickly,” Kate continues. Surplus is actually what allows an employer to weather risks and offer long-term stability. 

Profiting from and managing for surplus value, though, creates an important power dynamic between owner and worker. 

First, consider our upholsterer friend from before. How do you think the upholstery worker feels about working for $30 per hour when their work sells for $800 on the open market? Lots of people are just fine with this, in theory. But in practice, if the work environment and terms of employment leave anything to be desired, that dynamic leads to resentment. The worker senses the power that the employer exercises over them.

Further, if the upholsterer is dependent on their employer because the upholstery workshop has cornered the market in their town through scale, discounting, and marketing dollars, the upholsterer may not be able to sell their work for market value on their own. Plus, they don’t have other options for employment if they want to continue working as an upholsterer.

Employers provide the “means of subsistence.”

The other thing that’s going on here, economically speaking, is that the employer-employee relationship becomes the only viable way to financialize one’s labor power. Consumer capitalism as a political economy requires that we earn money in order to buy what we need to live—the means of subsistence. While setting up shop as an upholsterer and selling directly to clients is feasible, it doesn’t guarantee that the time one spends working will earn money. But working for an employer provides comfort in knowing the bills can be paid.

By providing the means of subsistence rather than compensating for the value being produced, the worker is always in need of an employer—while the employer generally has a ready supply of available labor such that the employer doesn’t need any individual worker. When a worker sells their time to something or someone else, the buyer gains power over them for that amount of time (often more). 

In much smaller businesses and among independent workers, work relationships are often structured around contract work.

The contractor relationship should prevent this “power over” relationship. A contractor, by definition, has the power to set their own rates, decide on when, how, and where they’ll work, and exercise rights over what they create (unless they willingly sign those rights over). However, the contractor relationship is often exploited in the 21st-century economy. 

Businesses designate a worker as a contractor so that they don’t have to pay payroll taxes or offer benefits. An owner might feel more comfortable hiring a “contractor” instead of signing up for the seemingly long-term employee relationship. But often, the business still treats the contractor as an employee. This is how gig economy companies tend to work, as well as the whole labor outsourcing ecosystem. But it’s also how many small business owners deal with assistants and support workers of all stripes. 

In all of these examples, the flow of resources shapes how much control and potential for exploitation there is in a work relationship. An employee’s time and labor power flow to the employer, who then allows money to flow back to the employee. A contractor, by contrast, allows the product of their work to flow to the entity they contracted with, and that entity lets the agreed-upon price for that work flow back to the contractor. 

Alternatives to Traditional Work Relationships

One way to get away from the power dynamic that comes with the employer-employee relationship or the potentially exploitative reliance on surplus value to create more capital is to form work relationships with shared ownership. That could be an equal partnership, or it could be a worker cooperative.

These relationships allow worker-owners to accomplish more than they could on their own. But they also introduce some relationship weirdness. For instance, it’s one thing to say that equal partners split net profit right down the middle. It’s another thing to say who owns what in terms of intellectual property. 

So while partnership and cooperative models are enticing, there are other considerations.

“What are we creating together?”

Precisely because workers in a small business have a closer relationship to the value they produce (as opposed to being fully alienated from it), questions about contribution, ownership, and decision-making power abound. These questions become even harder to answer as we inch away from traditional capitalist work relationships.

Kate notes that in a business that produces a commodity—in this case, a product or service that is offered in much the same way regardless of the company making or delivering it—these questions can be easier to answer. I’ve got a very cool example of this in the next section! But in a business built around a founder’s particular perspective and skill set, things become much trickier. 

This is a strange new world “where we’re commodifying our passions, our individual geniuses, our creativity, and creating these new services and products that we’re having to create markets for,” Kate explains. “I think that can feel like a really hard thing to share. Am I going to give up my unique special snowflake view of the world? My intellectual property?” 

Allowing a founder who creates a system or framework to maintain sole ownership of that IP seems pretty straightforward. But, a more equitable, alternative approach to the owner-worker relationship also needs to wrestle with control and autonomy over workers’ time. Kate offers an example from current events. There’s a continuing debate over whether (or how) workers are returning to the office since the onset of the pandemic. “It turns out the thing that makes people happy is having a lot of control over their time and flexibility around their work,” Kate says sarcastically. 

Even still, every week it seems some major employer issues an ultimatum about returning to the office full-time. These companies want to make sure they can maximize every detail of a worker’s day. But Kate points out that there is a lot of ground between enforcing a no-remote work policy and turning over a stake in your company built around your passion.

Kate suggests the question “What are we creating together?” as a jumping-off point for noticing ways to invite greater collaboration with those you hire. In turn, the question can also act as an anchor for thinking through ways to experiment with relationship or compensation structures.

Um, that sounds like a lot of work.

Any time we start talking about collaboration or shared ownership, my palms get sweaty. It sounds like a lot of work—specifically a lot of energy spent on consensus building, emotional management, and conflict resolution. I like the idea of it—but the practice of it? Well, it terrifies me. A traditional work relationship can feel cleaner, simpler, easier.

“Consensus is a super inefficient way to move work forward,” Kate admits. “But I also think there’s probably a lot of hidden labor happening that we’re not accounting for or thinking about when we work through hierarchical structures.” It’s the water cooler chat, the Slack DMs you don’t see between your contractors, and the time it takes to coordinate all the piecemeal work happening in the name of delegation. We don’t often think about that stuff as work but it takes significant time and bandwidth. This kind of work also falls disproportionately to those who have been socially conditioned to do care work (i.e., women and people from historically marginalized communities). 

In a model where there is shared ownership, all of that work has to happen out in the open. It has to be acknowledged as work, as a necessary part of what the collective does to eventually create value. If it doesn’t, well, then a collective can be just as toxic as a cube farm! 

And sure, “maybe it is less efficient, but it depends on what we’re valuing, right?” Part of moving away from exploitative hierarchical work relationships is acknowledging that efficiency and productivity don’t represent the highest good a worker can achieve. 

Case Study: Guerilla Translation

Kate introduced me to an organization—Guerilla Translation—that does name care work and compensates people for it.

So I spent an afternoon pouring through their incredible website. They’ve made all of their governance and compensation model documentation publicly available. And they’ve taken care to explain why they do what they do and how it works in practice.

I’m not going to rehash the whole thing here. If you want all the details, you can find them here with diagrams! But I do want to give you a taste of what this looks like.

Guerilla Translation recognizes three forms of work.

First, there are two categories of value production within their collective: pro bono work and agency work. Pro bono work is work they choose to do because it contributes to the mission of the collective. For example, they might choose to translate an article on alternative monetary policy for publication on their site. Agency work is work they’re commissioned to do. An organization might hire them to translate learning materials into other languages to increase the content’s accessibility.

Then, there is a third category of work—care work—that sees to the health of the collective. This includes business development, internal mentoring, communicating with clients, bookkeeping, etc. They put it this way: Care work is “everything that you’d consider as ‘admin’ work in a traditional agency or co-op, and on top of that, everything else that’s easily forgotten if you’re not doing it yourself. It’s literally invisible work to those who don’t acknowledge it, and work that many feel unjustifiably obligated to take on.”

Guerilla Translation makes all care work visible by documenting what needs to be done to keep the collective healthy. Guerilla Translators agree to share in the care work as part of their membership in the collective. It’s everyone’s responsibility—which means care work is unlikely to be seen as low status or the work of certain members rather than others.

After work is properly categorized, it can be compensated.

Both pro bono and agency work are compensated. To do this, Guerilla Translation uses a system called contributive accounting, which informs how all forms of work are documented. In terms of financial compensation, pro bono work is documented in Love Credits, and agency work is documented in Livelihood Credits. At the end of each month, a portion of the revenue generated that month is divested to members—75% going to Livelihood Credits and 25% going to Love Credits. 

Both Love Credits and Livelihood Credits are also documented as Historical Credits—those aren’t financial. Instead, they represent a share of decision-making power equal to the overall investment a member has made in the collective. Care work activities earn Historical Credits so that care work accrues to members as further investment and decision-making power.

Isn’t that complicated?

On the surface, this seems like a much more complicated system than the financial accounting we’re used to. But that perception is more a function of its novelty than an objective difference. Bookkeeping in traditional businesses is also complicated! But if it’s the only system you’ve ever known, it seems natural. It seems straightforward—when it’s just as contrived as any other system.

The perception of traditional accounting systems as natural and straightforward allows us to ignore the way resources are distributed. We don’t have to think beyond whether we’re paying someone a fair rate to consider whether the basis for how we’re paying them in the first place is aligned with our values.

By taking the care to intentionally design a system of contribution and distribution, a collective like Guerilla Translation can make the flow of resources demonstrable and transparent. 

My INTP, world-builder, system-creator brain absolutely loves this. My harried, capitalism-colonized entrepreneur brain can’t imagine actually implementing it. But that’s how the status quo remains status quo, right? It takes additional care and work to update the default settings on our businesses.

As Kate pointed out earlier, a contributive accounting system like this makes more sense for services like translation or even design or, say, podcast production than it does for a business that is based on intellectual property—which is the subject of an upcoming episode in this series. A group of translators can see how what they’re building is the business and governance thereof, rather than a particular creative work that can be leveraged for profit. An individual artist, writer, creator, consultant, or educator would have a harder time with it.

So I don’t share this case study as a recommendation. Instead, it’s an example of working with others and doing business outside the problematic systems we’ve inherited. 

Self-exploitation

There is one final aspect of the economics of hiring help that I want to address before we wrap up. And that is, to put it dramatically, entrepreneurial martyrdom.

When you care about treating others fairly, modeling new ways of working together, and participating in alternative ways to distribute resources, it’s entirely possible to take on responsibilities that are not yours to take on.

“The folks that I work with,” Kate shares, ”are more often exploiting themselves than their employees.” She explains that they’re not intentionally paying their employees less so that they can pocket the surplus value. They’re paying themselves less and either claiming the surplus value they create as profit (when it should be labor) or using that surplus value to reinvest in the business (including paying others).

This is what I see all too often, as well. 

Too few business owners know what the true financial needs of their businesses are.

How much does it cost to run your business the way you want it to be run? How much does it cost to run it in alignment with your values? Most often, business owners consider how much money they want or need to make from the business and then build a budget around that. 

But how much more fruitful and less fraught could our work relationships be if our financial models were based on the true cost of business? What if we planned for resources to flow more equitability? What if accommodating a vacation or paying for health insurance wasn’t seen as a financial inconvenience but as an integral part of operating expenses?

I realize that these can seem like questions for businesses that are already making more money or have been around for a long time. But the thing is: when we ask these questions early and often, we actually build better, stronger operations that accommodate—and even attract—clients who want to pay considerably more or a much higher volume of clients.

Whose responsibility is it?

Personally and politically, I believe that businesses have a real responsibility to the people that help them produce value. I believe that responsibility extends to dignity, agency, and compensation. But I also believe that too much in our economic system hinges on what businesses provide to workers. 

While creating a budget that allows a business to meet the needs of the people who make it work is a necessary step, it’s also important to consider what the responsibility of a business is in the first place. Is it a company’s job to be the primary provider of social interaction, health care, wellness, and education to the people they hire? Should we be beholden to employers—macro or micro—for all of our most basic human needs? No. I don’t believe so. I believe there are far better ways to build care and needs-meeting into our communities.

While it’s certainly true that unexamined economic relationships can create toxic work environments, it’s also true that trying to be everything to everyone through the guise of business creates toxic work environments, too. 

It’s a tricky balance: intentionally crafting ways of doing business that are fair and sustainable for all involved while simultaneously recognizing the limitations of the systems we live and work in. 

But we have an incredible power to, as Kate put it, understand the “tiny economy” of our businesses and explore what’s possible. 

What’s more, it can be really fun.

“It is. I love it,” Kate agrees.

By Tara McMullin

Writer, Podcaster, Producer. Founder of What Works.

Jan 25, 2023

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