Free Enterprise, Fair Employment: A 5000-word summary

Introduction: The Crisis of Employment Societies

Elliott Jaques opens Free Enterprise, Fair Employment with an incisive diagnosis: advanced industrial democracies have become employment societies — economic systems where the overwhelming majority of people (80–90%) earn their living as full-time employees in hierarchical organizations. This transformation, he argues, has created profound systemic problems that neither traditional capitalism nor socialism is equipped to solve.

The central tension lies in trying to achieve four interdependent goals simultaneously:

1. Political freedom, including free enterprise.

2. Abundant employment, suitable for everyone.

3. Fair and equitable wage differentials, especially among employees.

4. A stable and prosperous economy, free of inflation.

The problem, Jaques claims, is that existing economic doctrines fail to manage these interdependencies. Keynesianism inflates while creating jobs; monetarism restrains inflation while suppressing employment. Marxism may offer full employment but only at the cost of coercive central planning and suppressed freedom. None offer a method to resolve one of the most toxic forces in modern economies: pay leapfrogging, the process by which one group’s pay raise triggers others in a self-perpetuating cycle.

Part I: Reframing the Debate — From Instruments to Objectives

Full Employment and Pay Equity as Political Ends

Jaques argues that full employment and equitable pay differentials should not be seen as tools for managing the economy, but as ends in themselves — political and moral obligations in a democratic society. When used as instruments (e.g., allowing unemployment to suppress inflation), they undermine both social trust and national morale.

He introduces a key distinction: market wages vs. fair differentials. The labor market, he says, is not a true market like commodities. Wages are often the result of coercive bargaining — where unions or employer associations exert political and economic power to extract favorable deals. This distorts differentials, fuels resentment, and weakens both competitiveness and social cohesion.

Leapfrogging and the Role of Coercion

When one group negotiates a better deal (e.g., nurses receive a significant pay raise), others (teachers, clerks, mechanics) seek similar or greater increases to "catch up." These adjustments are not based on market scarcity or value-added — but on status comparisons and perceived fairness.

As Jaques observes, this spiral can only be halted by:

• Freezes (which suppress wage growth but eventually explode),

• Productivity bargains (which are often back-door pay increases),

• Or, more effectively, a national settlement on equitable pay differentials based on objective role complexity.

Part II: Free Enterprise, Not Free-for-All

The Social Value of Free Enterprise

Jaques defends free enterprise, not as an ideological preference, but as a pragmatic system for maximizing innovation, accountability, and choice. He distinguishes between:

• Corporate entrepreneurs (who risk capital),

• Self-employed entrepreneurs (e.g., doctors, artists), and

• Employees (who work under hierarchical contracts).

He emphasizes that employment is a social privilege, not a right of employers to exploit. Thus, employment contracts must be governed not only by private interests but by public norms of fairness.

Why Entrepreneurial Earnings Are Not the Same as Wages

Jaques warns against confusing entrepreneurial income with employee wages. Entrepreneurs set their own rates, operate in open markets, and bear the full risk of failure. In contrast, employees trade autonomy for stability, working under structured authority in predefined roles. The latter requires a public framework for setting wages — one that protects fairness and enables trust in the employment system.

This is the ethical core of Jaques’s framework: freedom to employ is contingent upon fair employment practices, including differential equity.

Part III: Toward Equitable Wages — The Differential Concertina

Measuring Work Complexity: Time-Span of Discretion

At the heart of Jaques’s system is a method for objectively evaluating job complexity: the Time-Span of Discretion — the length of time for which a role-holder must exercise independent judgment before their decisions are reviewed or come to fruition.

Examples:

• A cashier: hours to a day.

• A department manager: 3–12 months.

• A CEO: 5–10 years or more.

The longer the time-span, the more complex the role. Jaques argues that felt-fair pay — what people perceive as just compensation — correlates strongly with time-span, not with qualifications, job titles, or even effort. Across cultures and sectors, employees agree on what different time-spans are worth.

Work-Strata: A Natural Hierarchy of Employment

From decades of fieldwork, Jaques identifies seven distinct strata in employment systems, each defined by a time-span range:

Pay bands, Jaques argues, should reflect these objective levels of complexity. It’s not that everyone at Stratum IV should earn the same, but rather that differentials between strata should be publicly visible, politically agreed upon, and felt to be fair.

The Concertina Model: Flexibility + Fairness

Jaques introduces the metaphor of a concertina to describe the pay structure:

• It can expand (to reward top-level roles more),

• Or contract (to reduce inequality or adjust for economic hardship),

• While maintaining consistent internal differentials.

This means society can raise or lower overall pay levels, or compress or widen differentials — without generating resentment or leapfrogging. The key is transparency, consensus, and adherence to the structural logic of work complexity.

Part IV: Abundant Employment as a Public Good

The Right to Abundant Work

Jaques asserts that abundant employment — meaningful work for all who seek it, matched to capability — should be a constitutional right. He defines abundant employment as a situation where:

• Suitable jobs are available for all,

• People are not trapped below their capability,

• Careers are mobile and developmental,

• Unemployment is temporary, transitional, or voluntary.

Policy Mechanisms for Abundant Employment

To implement this vision, Jaques proposes:

1. Entrepreneurial stimulation through access to capital and deregulation.

2. Government as employer of last resort, creating short-term roles during downturns.

3. Geographic and sectoral mobility, using housing support or incentives.

4. Pay continuation for laid-off employees while they search for new roles.

He stresses that abundant employment does not mean everyone must work full-time or in traditional jobs. It means that society provides the opportunity to engage in productive work at one’s level of capacity.

Part V: From Coercion to Consensus

Why Incomes Policies Fail

Traditional incomes policies (e.g., pay caps, wage boards, inflation-linked raises) tend to fail because they:

• Rely on coercion or fiat,

• Ignore felt-fair differentials,

• Distort incentives or performance,

• Are reactive, not proactive.

Jaques’s model replaces coercion with consensual calibration of pay structures, based on measurable role complexity.

Public Management of Pay Differentials

He calls for an annual national process, wherein:

• The total wage bill is estimated (what the nation can afford),

• Differential bands are reviewed (based on the seven strata),

• Adjustments are made (e.g., concertina expansion or compression),

• Results are made public (to reinforce fairness and trust).

This system, Jaques argues, would depoliticize wage negotiations, reduce conflict, and enhance morale.

Part VI: Organizational Implications

Open Management and Participation

Jaques ties his economic model to organizational design. He advocates for open systems of management where:

• Employees understand the decision logic,

• Role expectations are clear and measurable,

• Promotions are based on capability, not politics,

• Participation is structured through consultation and forums, not through adversarial bargaining.

Equality of Opportunity, Not Outcome

In contrast to egalitarianism, Jaques supports equality of opportunity within a structured employment system that recognizes differences in capacity and contribution. His approach:

• Respects individual potential,

• Avoids punitive leveling,

• Encourages growth and mastery,

• Rewards real responsibility.

Part VII: Critique, Relevance, and Implications

Strengths of Jaques’s Proposal

• Objectivity: The use of time-span provides a replicable method for job evaluation.

• Fairness: Aligning pay with role complexity enhances trust.

• Political viability: Differential concertina allows for adjustments without conflict.

• Freedom-preserving: Supports entrepreneurship while regulating employment.

• Morally compelling: Links economic design to dignity, contribution, and justice.

Challenges and Limitations

• Implementation: Requires cultural and institutional readiness.

• Measurement validity: Time-span as a proxy for complexity may be debated.

• Resistance from elites: High earners may resist pay compression.

• Public understanding: Complexity may hinder broad adoption without education.

• Globalization: National-level concertinas may face pressure from global labor markets.

Conclusion: Reclaiming Democratic Capitalism

Elliott Jaques’s Free Enterprise, Fair Employment is more than a critique of economic policy. It is a blueprint for restoring integrity to work, justice to compensation, and rationality to public policy. It proposes that:

• Wages must reflect structured differences in work complexity.

• Employment must be a national right, not a market accident.

• Free enterprise must operate within a moral and institutional framework.

• Inflation and unrest are not inevitable — they arise from systemic incoherence.

Jaques offers an ambitious yet grounded vision: a society where individuals are matched to roles by capability, compensated with dignity, and employed in ways that foster both economic vitality and social fairness.