THE ROLE OF BONUSES IN STIMULATING TECHNOLOGICAL PROGRESS

A. I. Kolmatsui

Scientific and technological progress is the decisive material prerequisite for the socialist transformation of society and the building of communism. Thanks to the accelerated development of science and technology, labor productivity grows, output increases and its quality improves, labor intensity is reduced, and the most advanced forms of organizing production and labor are used, etc. Ultimately, the development of science and technology is the decisive factor in the growth of the efficiency of social production, and on this basis the rise in the living standard of working people is ensured. Therefore the Communist Party of the Soviet Union and the Soviet government regard the accelerated development of scientific and technological progress as one of the principal national-economic tasks.

Guided by V. I. Lenin’s ideas on the role and significance of science and technology under socialism, the Twenty-Fourth Congress of the CPSU, in the Directives for the five-year plan for the development of the national economy for 1971–1975, outlined a comprehensive program of scientific and technological progress, constituting an organic part of the five-year plan. “The basis of this program,” as A. N. Kosygin noted in his report at the third session of the Supreme Soviet of the USSR of the eighth convocation, “is the creation and introduction into production of fundamentally new instruments of labor, new materials, progressive technological processes, and the improvement of product quality”¹. Implementation of the program of scientific and technological progress makes it possible to ensure the intensification of social production and to raise its efficiency, as well as to make fuller use of modern achievements of science and technology in production.

In the system of measures that contribute to increasing the efficiency of social production, the strengthening of the material interest of workers in creating new technology and accelerating the pace of implementation of scientific and technological achievements in production has a most important role. Under socialism, society must choose such a form of assigning the product of production to the direct producer as will interest him to the greatest possible extent in raising labor efficiency. Such a form is the distribution of the main part of the fund—

for consumption in accordance with the quantity and quality of labor expended by each worker in the social economy.

The quantity and quality of workers’ labor, as is known, are determined by a set of different factors, each of which plays a definite role in this aggregate, which is the basis for the distribution of material goods under socialism.

To characterize and evaluate the quality of labor, it is first of all necessary to take into account such factors as skill level, working conditions, and the scale of the work. These factors are stable and common to large groups of workers. They are usually called constant factors.

Meanwhile, in the production process, with one and the same qualification of the worker and complexity of labor, and with equal production and organizational conditions, the results of labor may differ. Consequently, some other factors that determine the quality of labor have remained unaccounted for. Such factors should be considered initiative and creativity in work, promptness, conscientiousness in labor, etc. These factors of labor quality are variable. Some workers may have them, others may not. They may be present today, and tomorrow they may not be.

Variable factors are more mobile and have no direct measure of their own. Their direct accounting in the labor process is impossible. They manifest themselves in the final results of labor and exert a direct influence on them. If the wage rates of time workers, the piece rates of piece workers, and the official salaries of engineering and technical workers and employees reflect the constant factors of labor quality, then for reflecting the variable factors of labor quality, which can be commensurated only by comparing concrete results, a special form of distribution according to labor proves objectively necessary—the bonus.

The bonus is an economic category of socialism expressing the relations of the worker with the production collective and with the whole of society as a whole concerning the distribution of part of the labor-remuneration fund. Its purpose consists in ensuring the maximization of the worker’s efforts in certain periods of time for carrying out assigned tasks by compensating increased labor expenditures that are not reflected in the constant part of wages. The bonus makes it possible to take most fully into account the individual labor contribution of workers of a given category. This has determined the important role of bonus payments in stimulating scientific and technological progress.

For the effective organization of a system of material incentives for workers to raise the rate at which new technology is created and introduced, it is necessary to take into account the specific features of economic relations in the sphere of scientific and technological progress, conditioned by the specificity of the process of assimilating new technology itself. This system must ensure its non-contradictory interaction with the general system of incentives for production as a whole, of which it is an organic part. In other words, the system of material incentives for workers for the creation and introduction of new technology must be based on a combination of the material interests of society, the collective, and the individual in increasing the efficiency of social production.

Taking into account the specific features of economic relations in this area presupposes an analysis of the character of workers’ labor and of its results. The specificity of the labor of workers engaged in the creation and introduction of new technology is the great differentiation of the creative capacities of its bearers and, consequently, of the results of searches. This is conditioned by the relative unrepeatability of labor (workers’ personal abilities, their giftedness, and character often have decisive significance for success in work),

unrestricted by the limits of working time as such, etc. Since the indicated features of workers’ labor cannot be fully reflected in a wage rate or salary, bonuses, reflecting the quality of labor through its results, acquire important significance.

The results of labor also have their own specificity. In connection with the great influence exerted on economic relations in the sphere of scientific and technological progress by the time factor, in a number of cases it is impossible to determine reliably the final outcome of scientific and technical activity and the ways of its realization in social production. Often the results of scientific and technical activity can be introduced into production and yield an economic effect only in the future; therefore, in organizing material incentives for scientific and technological progress, it is necessary to resolve the question of the interaction between the interests of the present and the future development of the socialist economy. In addition, the results of labor are used not only at the given enterprise, and they do not always produce an economic effect in the immediate future. All this accounts for the complexity of bonuses in stimulating technical progress.

Under the new conditions of planning and economic incentives, the amounts of incentive funds of enterprises and organizations have been made dependent on the self-financing results of their activity. With the growth of enterprises’ self-financing initiative, with the increase in funds directed to capital investments directly from enterprises, modernization and technical renewal of fixed assets, the transition to new technology, the use of new materials, and the output of new products increasingly depend directly on enterprises. The solution of these questions leads to changes in the current self-financing indicators that determine the size of incentive funds. If, as the principles of the economic reform are put into practice, the mass of profit, the level of profitability, and the sale of output grow at an enterprise, then carrying out these measures becomes advantageous for it. Therefore it is necessary that the activity of enterprises in the sphere of scientific and technological progress should ultimately be reflected in the growth of incentive funds that ensure the material interest of the entire enterprise collective. However, it is important not only to have a sufficient fund for material incentives, but also to use it correctly. Meanwhile, an analysis of the use of enterprises’ material incentive funds shows that funds are hardly spent on bonuses to workers for the introduction and assimilation of new types of equipment. This applies especially to such a type of incentive as the payment of one-time bonuses for the performance of particularly important tasks for improving the technical level of production, all the more since the resources of the material incentive fund are far from being used in full. For example, in 1969 the resources of the economic incentive funds of industrial enterprises operating under the new planning conditions amounted to 11,237 million rubles. Of these, only 7,216 million rubles were used.^2 One of the reasons for this situation is the absence of effective forms of rewarding workers for carrying out particularly important production tasks, among which tasks involving new technology must be included first of all. It seems that under the item “One-time incentives for distinguished workers, engineering and technical personnel, and employees for the performance of particularly important tasks,” bonuses should be awarded for those measures that yield an economic effect in the nearest two to three years. These measures should be included in the enterprise’s plan for new technology, and their financing should be carried out both from economic incentive funds and from credit.

^2 See: The National Economy of the USSR in 1969. Moscow, “Statistika,” 1970, p. 766.

However, it would be wrong to limit the sphere of material incentives for technical progress only to the interest of the collective.

In modern conditions, when accelerating the pace of technical progress is of decisive importance for the further development of social production, an important role is played by ensuring an advantage in material interest for those workers who are directly engaged in the tasks of implementing scientific and technical progress. These workers, as a rule, perform creative labor that is qualitatively more complex. Such labor contributes to the greatest degree to increasing the efficiency of social production. Consequently, increased remuneration for this labor is economically fully justified.

It must also be taken into account that, in this case, bonuses may constitute an economic form of realizing the independent interests of groups of workers engaged in carrying out a single scientific and technical task, the economic result of which can be realized only by society as a whole and often only in the future. In addition, the implementation of measures in the field of scientific and technical progress may entail a temporary decline in current production indicators.

The circumstances we have noted may lead to contradictions between the interests of an individual worker or group, the collective, and society. Therefore bonuses must be paid from centralized incentive funds, which act as economic levers for carrying out a unified policy in the field of scientific and technical progress. Such a fund is the special sectoral bonus fund for the creation and introduction of new technology.

The propositions we have considered predetermine the directions in the development of the system of material incentives for workers employed in the sphere of scientific and technical progress. On the one hand, it is necessary to improve the organization of wages and special bonuses for scientific and technical achievements and, on the other hand, to improve the formation and use of economic incentive funds of industrial enterprises and scientific and technical organizations. Thus, bonuses for scientific and technical achievements must come both from a centralized source and from cost-accounting funds for material encouragement.

In connection with the implementation of the economic reform, some economists propose abolishing the special system of bonuses for the creation and introduction of new technology and using for these purposes only the material encouragement fund, increasing its size accordingly.^3 This point of view has been subjected to just criticism in a number of works by Soviet economists.^4 For in this case the sphere of operation of workers’ material interest will be limited to the interests of only the given enterprise, whereas the basic significance of the system of material incentives for technical progress consists in ensuring the unity of technical policy at all stages of technical progress on the basis of a unified material interest of workers at research, design-engineering, manufacturing enterprises, and consumer organizations.

And indeed, the organization of wages, the indicators and amounts—

^3 See, for example: I. Oblomskaya, “Questions of Stimulating Technical Progress,” Planovoe khozyaistvo, 1969, No. 10.

^4 See, for example: L. M. Gatovskii, Economic Problems of Scientific and Technical Progress. Moscow, 1971.

...the measures of bonuses for results obtained in the economic activity of enterprises do not yet fully take into account the contribution of workers to the development of technological progress. Moreover, the results of introducing new technology are not immediately reflected in the indicators of the cost-accounting activity of enterprises. The stimulating significance of bonuses for new technology lies in the fact that they are paid not in dependence on the overall results of the economic activity of collectives, but above all in dependence on the national-economic efficiency of the new technology.

Thus, the problem is not to deprive enterprises and organizations of bonuses from a centralized fund, but to combine a unified state technological policy with the material, cost-accounting interest of industrial enterprises in their rapid and effective development.

According to the Regulation on bonuses for enterprises and organizations for the creation and introduction of new technology, approved by a resolution of the State Committee of the USSR Council of Ministers on Labor and Wages and the Presidium of the All-Union Central Council of Trade Unions of December 26, 1964, with account taken of amendments and additions introduced in subsequent years,^5 at enterprises a bonus fund is formed for the creation and introduction of new technology. It is formed from special deductions provided for by ministries in the cost plans of the output of industrial enterprises. The amount of these deductions for enterprises of particular branches is differentiated from 0.2 to 1% of the wage fund of industrial-production personnel. The funds thus obtained are distributed between ministries and enterprises.

From 25 to 50% of the indicated funds remains at the disposal of enterprises, and from 50 to 75% is transferred to ministries for the formation of a centralized fund. The amounts of funds left at the disposal of enterprises are determined by the ministries depending on the volume of work on new technology, as well as on its complexity and significance. These funds are used for bonuses to workers who have ensured the fulfillment of assignments provided for in the annual plans of enterprises for the introduction of new technology. Funds from the centralized fund are spent on rewarding workers for the performance of the most important work provided for in national-economic plans and in the annual plans of ministries. Rewards are made depending on the economic efficiency obtained as a result of the performance of the work at the given enterprise and in other branches of the national economy.

The existing system of bonuses for the creation and introduction of new technology, in its purpose and in the character of the measures whose performance gives the right to receive additional material remuneration, basically meets the requirements of the present stage of development of the socialist economy. It should correspond to a greater degree to the new methods of planning and economic stimulation, and also promote the implementation of unified scientific and technical measures that are significant for an entire branch and for the whole national economy.

However, analysis of existing practice shows that the system of bonuses for the creation and introduction of new technology needs improvement.

Thus, for example, the procedure for forming special bonus funds for new technology cannot be considered optimal.

^5 Bulletin of the State Committee of the USSR Council of Ministers on Labor and Wages, 1970, No. 2.

For enterprises that devote greater attention to technological progress, the bonus fund for work on new technology does not fully satisfy their need for it. The point is that, as scientific and technological progress is carried out, initial investments in research and development, as a rule, increase. Work on mastering new types of products and technological processes becomes ever more labor-intensive, requiring the expenditure of highly skilled labor. Such labor also needs higher remuneration, which makes it necessary to increase the funds allocated for these purposes. Under conditions in which the size of the fund for material incentives to workers for the creation and introduction of new technology cannot exceed 1% of the wage fund of industrial-production personnel, the amount of these resources may prove insufficient to fully meet enterprises’ needs in stimulating technological progress.

With the transition of enterprises to the new system of planning and economic incentives, and with a tendency toward a reduction in the number of employees, the wage fund decreases, which leads to a reduction in the amount of bonuses for the creation and introduction of new technology. The established dependence of the amount of bonuses for new technology on the wage fund cannot be considered economically justified, since the implementation of scientific and technological progress should contribute to reducing the expenditures of living and social labor.

One of the reasons giving rise to the discrepancy between the size of bonuses and the fund allocated for these purposes is also that the size of bonuses does not correspond to the effectiveness of the measures being carried out. According to the current regulation on bonuses for new technology, the amount of the incentive is the higher, the lower the economic effectiveness of the given measure. For example, for measures yielding savings of up to 10 thousand rubles per year, the scale provides for a bonus of from 6 to 25% of the annual economic effect, while for measures that yield 50–100 thousand rubles of savings per year—from 3 to 12%. This does not foster the collective’s interest in the most economical solution of technical problems. When determining the amount of the bonus at the maximum rate, an enterprise may receive more funds for a less economical solution of the indicated problems.

In 1969, as a scientific experiment, all research institutes, design-engineering and technological organizations, as well as industrial enterprises of the Ministry of the Electrical-Engineering Industry of the USSR, were the first in the country to switch to a new procedure for planning and economically stimulating the development of new technology.

The amount of funds allocated to incentive funds for the development and introduction of new technology depends entirely on the annual economic effect of the measures being carried out. The specific amount of allocations to the material-incentive fund for the creation and introduction of new technology for industrial enterprises and to the economic-incentive fund for scientific and design-technological organizations is determined by the scale contained in the Regulation on bonuses for employees of enterprises and organizations for the creation and introduction of new technology.

A substantial shortcoming of the new system of economic stimulation of technological progress, in our view, is the unjustifiably large reduction in allocations as the economic effect of the measures carried out increases. For enterprises, those measures are of great importance which can substantially raise the economic efficiency of production.

Meanwhile, the results of the first year of the experiment showed that if in

on average, for measures with an effectiveness of up to 7 thousand rubles per year, deductions amounted to more than 22%, whereas for measures with an annual effect of 50 to 60 thousand rubles they were approximately 12%.^6

Practice shows that as the economic effectiveness of scientific and technical measures grows, the complexity of their development and introduction increases significantly; the participation of a large collective of workers and a longer time for their implementation are required. At the same time, a sharp reduction in the funds allocated for incentives diminishes the possibility of materially rewarding the participants in such developments.

In this connection, the proposal of economists to discuss and test the possibilities of paying bonuses for new technology at a single percentage of the amount of the effect obtained deserves attention. In our opinion, this would substantially improve the stimulation of the economic effectiveness of new technology and increase the interest of enterprises in developing and introducing the most effective and large-scale measures.

The question of the sources for forming the bonus fund also requires resolution. At present, the bonus fund for new technology is formed from deductions charged to the cost of production of industrial enterprises. This practice has already been criticized. Indeed, bonuses for new technology are not related to the costs of producing the main output of the given enterprise. Moreover, charging bonuses for new technology to the cost of production reduces profit, which diminishes the possibilities for material incentives for the overall results of activity. Here the interests of the group of workers receiving bonuses for new technology may clash with the interests of the entire collective.

The most correct of the proposed methods for resolving this question, in our opinion, is the formation of the bonus fund for the creation and introduction of new technology out of total profit. In this case, the costs of producing and introducing new technology will correspond to their economic nature, on the one hand, and will not lead to a reduction in the fund for material incentives for the overall results of economic activity, on the other. N. Garetovsky is right, in our view, when he notes: “In practice, by including in the cost of production expenditures for developing new types of products, what is ultimately ensured is the redistribution, for the purposes of scientific and technical progress, of part of the surplus product created during the given specific period.”^7

In order to ensure an organic connection of the system of incentives for technical progress with the new conditions of the economic reform, it is necessary substantially to change the role, the methods of forming, and the use of the bonus fund for the creation and introduction of new technology. The careful preparation of a system of measures to strengthen bonuses for technical progress and their testing in practice will undoubtedly produce a positive economic effect.

^6 K. I. Kogan. Experience in applying a new system of economic incentives for the assimilation and introduction of new technology. “Experience of economic work at enterprises,” NIIinformtyazhmash, Moscow, 1970, p. 38.

^7 N. Garetovsky. Financial problems of scientific and technical progress. “Planned Economy,” 1971, No. 3, p. 39.

1. A. N. Kosygin, On the State Five-Year Plan for the Development of the National Economy of the USSR for 1971–1975 and the State Plan for the Development of the National Economy of the USSR for 1972. Moscow, 1971, p. 7. ↩