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The WSJ today gives a surprisingly favorable review to Spark, by Frank Koller, a book extolling the virtues of Cleveland manufacturer Lincoln Electric (NASDAQ:LECO) and its no-layoffs policy:

Mr. Koller contends that layoffs deprive companies of profit-generating talent and leave the remaining employees distrustful of management—and often eager to find jobs elsewhere ahead of the next layoff round. He cites research showing that, on average, for every employee laid off from a company, five additional ones leave voluntarily within a year. He concludes that the cost of recruiting, hiring and training replacements, in most cases, far outweighs the savings that chief executives assume they’re getting when they initiate wholesale firings and plant closings.

The review comes in the wake of an FT op-ed by George Akerlof and Rachel Kranton, which is a good place to start if you’re curious about whether you should buy their book:

Fair compensation should not be confused with outsize bonuses. In identity economics, performance pay demonstrates bad faith. It tells employees they are not trusted to do the right thing…

Acting in your own interest and not in the interest of clients is a failure to carry out the duties of office, to fulfil one’s fiduciary duty. While principles and responsibility sound lofty and idealistic, they can be taught, followed, institutionalised and enshrined in law. We see it every day in fire stations, on factory floors, in surgery rooms and schools. It is time to treat Wall Street like Main Street. Otherwise, it is just more risky business.

I’m not sure there’s enough here to discern a trend, but at the very least we’re seeing some signs of pushback, in the FT and WSJ, against the conventional wisdom of labor economics.

It’s also worth performing a thought experiment: How bad would the crisis and subsequent recession have been if there was no such thing as bankers’ bonuses, and banks instead paid very large salaries to their top employees? My feeling is that we would be much better off right now, and that a professionalized banking system, which looked and felt much more like other professions like doctors and lawyers, would be a much less systemically-dangerous place.

And remember too that doctors and lawyers almost never get laid off.

The problem, of course, is that it’s essentially impossible to get there from here. Still, it’s intriguing to think of what might happen if bankers started behaving a lot more like arc-welder manufacturers.

Source: What Bankers Can Learn from Arc-Welder Manufacturers