JPRS ID: 10444 EAST EUROPE REPORT ECONOMIC AND INDUSTRIAL AFFAIRS

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• Sequence Number: 20
• Content Type: REPORTS

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JPRS L/ 10444
9 April 1982
- East Euro e R~ ort
p ~
ECONOMIC AND I~J~USTRIAL AFFAIRS
cFOUO 3is2~
Fg~$ FOREIGN BROADCAST INFORMATION SERVICE
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JPRS L/10444
9 April 1982
EAST EU ROPE REPC~ i~T
~ ECONOMIC AND INDUSTRIAL AFFAIRS
(FOUO 3/82)
CONTENTS
INTERNATIONAL AFFAIRS
Development of CEMA Nuclear Power S~rstem Viewed
(Yevgeniy P. Vlasov~ et al.; JADERNA ENERGIE, No 12,
1981) 1
CZECHOSIAVAKIA
Value Added, Keying of Wages Disputed
(Milan Matejka; POLITICKA EKON~4IE, No 12, 1981)......... 11
~
; - a- [ III - E~ - 64 FOUOJ
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INTERNATIONAL AFFAIRS
UDC 621.039.001
DEVELOPMENT OF CEMA NUCLEAR POWER SYSTEM VIEWED
Prague JADERNA ENERGIE in Russian No 12, 1981 pp 439-443
[Article by Yevgeniy P. Vlasov, International Sc ientif ic Research Institute of Con-
trol Problems, Moscow; Mi1os Dragny, Czechoslovak Atomic Energy Commission, Prague;
and Yuriy A. ~urin, Department of Scientific and Technical Cooperation of the CEMA
Secretariat, Moscow: "A Study of Methodological Problems in the'i'~recasting and
Optimal Development of a Nuclear Power System f or CEMA Memb er-Nations"]
[Text] One of the important directiona in solving the fuel-
and-power problem of CEMA member nations is the accelerated devel-
opment of the nuclear power industry. The present stage of the
cooperation among these countries in this area is characterized
by the large-scale and comprehensive implementation of ineasures, �
the considerable influence of scientif ic and technical progress
on production efficiency and the great contribution of t1-,ese
_ countries to the overall issue of realizing the nuclear power-
production portion of the long-term specif ic program of coopera-
tion (DTsPS) to provide for the economically founded requirements
of the CEMA membe~r-nations for the basic types of power, fuel
and raw material?,- the year 2000. 'rhe indicated conditions
for the development of the nuclear power industry are dictated
by the necessity of improving methods of controlling and planning
the development of the entire nuclear power complex (YaEK) of
the socialist countries [1,2].
Figure 1 presents the interindustry structure of the nuclear power-production com-
plex. It includes the fuel-cycle industries (extraction., processing and enrichment
of fuels, the manufacture of fuel ~lements, chemical processing of spent nuclear
fuel and processing and storage of rs~:i,~active wastes), nuc~ear stations and in-
stallations for the generation of electric and thermal power (nuclea- electric-
power stat~ons, nuclear heat-and-power stations and nuclear power-production instal-
lations) dnd all capital-generating sectors of the nuclear pok~r complex (metallurgy,
heavy, chemical and power-engineering industries, the electrical equipment industry,
instrument engineering, power~ industry constru:tion and the construction industries),
Of course, the nuclear power complex of a given country can and must be considered
a subsystem of the integrated nuclear power complex of the CEMA member-natior.s.
It is possible to rationally solve problems which within the framework of a single
country cannot be solved at all or, at least, cannot be solved efficiently. This
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can be accomplished through international cooperation, division of labor, special-
ization of production and con struction through comb ined effort or cooperation with-
in the scope of capital investment in construction.
The industries in the nuclear power complex are embraced by complex interrel.ation-
ships, including reciprocal relationships (for example, the chemical processing of
spent fuel) . The formatior. or this aggregate of industries into a unified nuclear
power complcx is dictated by the degree of specialization, the inf luence they exert
_ on one another as well as by the overall production cycle.
' The characteristic integrit; ~f the nuclear power complex which we have pointed out
determines the necessity for applying a systematic approach to examining the pros-
pects for its development and the introduction of inethods for ~raltisector planning
and control.
The overall organizational structure for planning the long-term development of the
nuclear power complex can be presented in the following manner (f ig. 2). This dia-
gram displays the operational makeup and the interrelationships of these operations
in the forecasting and formation of r~uclear power programs and a comprehensive long-
range plan of development for those industries included in the nuclear power complex.
The close iz~terrelationship between the planning of scientific research and industry
is shown by a b lock for the determination of the needs of industry in the develop-
ment of equipment and technology and effective directions for the utilization of
the new results from scientific research and experimental design work. A positive
feature of this long-term planning program is the combination of the processes for
forecasting and forming programs and plans for the development of the nuclear power
complex into a unif ied cycle of interrelated operations. The results from forecast-
ing programs and the coordinating of these programs with specialized plans should
insure the best continuity.
At the present time, we have good reason to belleve that the CEMA member-nations
will insure the re2lization of a comprehensive and ~pecif ic approach to managing
the development of the nuclear power industry up to the year 1990. Within the scope
of previously mentioned long-term specific program of cooperation, we have con-
cluded the Agreement on Multilateral International Specialization and Cooperation
in the Production and Mutual Supply of AES Equipment for the Period 1981-1990. We
are creating the necessar}? organizational prerequisites and are solving three of
the most important probl~ms in sc ientif ic and technical cooperation within the nu-
clear power industry: the mas*~ry of water-cooled water-modulated reactors with
outputs on the ordcr of 1,000 MW; the development of high-output fast reactors;
and the devel.opment of nuclear heat and power statione and nuclear heat plants.
However, features of the process for the integrated development of a nuclear power
complex--a considerable rate of growth, a broad spectrum of scientific research
and feasible structural transf ormations, the time lag and the capital-intensive
nature ~f thF pr~blem--dictate that technical and ~conomic studies of the prospects
�or a CEMA member-nation nuclear power complex be conducted for the yea?-s beyond
1990 and that corresponding long-term cycles for managing its development and pro-
gress be organ ized.
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Control over the development and proR.*.~88 of the nuclear power complex and the real-
ization of the corresponding indust~ial-economic and scientif ic-technical activities
are contained in the field of activity of a number of agencies and organizations,
primary among which are:
a) at the national level:
- the highest organs (government and ~oint agencies for planning, f inance, technical
development, foreign trade, etc.)
- special ministries (ministries of power, metallurgy, machine construction, instru-
ment engineering, construction and the construction industry, etc.)
- the organization of a scientif ic-research and experimental-design base;
b) at the CEMA level:
- supreme organs (Supreme Soviet, Executive Committee),
-committees for cooperation in the area uf planned activity and for scientific and
technical cooperation, as well as their working agencies (namely, the Working Group
for the Fuel and Power Balance and the Council for Scientific and Technical Coopera-
tion in the Area of Fuel and Power Problems--the TEP Council),
- special Permanent Committees (namely, those f or the utilization of nuclear power
for peaceful purposes, for electric pawer, for machine building and f or construction)
and their working agencies,
- international economic organizations (namely, international economic organiza-
tions of Interatomenergo and Interatominstrument),
- international organizations of the scientif ic research base (namely, MNIIPU--
the International Scientif ic Research InsCitute for Control Problems).
Within the organizational p1an, integrated programmatic-specif ic planning and man-
agement of the CEMA member-nation nuclear power complex according to diagram 2 should
be constructed on one interrelated plan of harmonious work coord~nated by the above-
mentioned agencies and organizations at the national and internationa~ levels.
Let us now dwell upon the status of the work being done in the area of forecasting
the long-range development of the nuclear power industry in soci~list countries.
We refer here to the work being carried out within the scope of activity of the
Committee of the Scientific and Technical Council which, on behalf of the 24th meeting
of the CEMA Session, organizes the development of a scientif ic and technical f orecast
for the solution to fuel and power problems in the period to the year 2000 and for
the long term. This work, being carrted out f rom 1980 to 1984, is based upon data
from interested CEMA member-nations regarding the planned development of national
fuel and power complexes.
The first meeting of the Provisional Collective of Scientists and Specialists (VKUS),
created by the TEP Council to develop a�orecast for the development af the nuclear
power industry, took placa from 27 to 30 January 1981 in the city of Ostrava in
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the Czechoslovak Socialist Republic. The meeting examined materials prepared
jointly by the Czechoslovak and Soviet sides with *he participation of a department
of the Secretariat's Scientific and Technical Council and MNIIPU. ~ao major docu-
ments were submitted for approval:
1. a program of development and
2. organizational and methodological statutes regarding the development of a forE�-
cast for the growth of the nuclear power industry in CEMA member-nations in the
period to the year 2000 and for the long term.
The sixth session of the TEP Council which took place in Berlin, East Germany from
16 through 19 June 1981 approved both documents and noted that the Soviet Union had
assumed the duties of the coordinating nation.
This program of development and the organizational-methodological statutes determine
the makeup and the interdependence of work being done at the national and CEMA lev-
els. Work at the CEMA level is oriented toward correlating and sysCematically com-
bining national forec3sts and f orming the besC strategy for the intensive develop-
ment of the nuclear power complex of CEMA member-nations together with t~e drawing-
up of recommendations for the individual countries. Forecast studies at the national
level are oriented toward the formation of an optimum long-term strategy f or the
country which is based on its specific situation and which insures the participation
of national organizations in international cooperation for the realization o� inte-
grating measures in the area of nuclear power generation and related areas of the
nuclear power complex. Studies carried out at the national level are the chief
and initial basis for forecasting. ~ao major stages have been proposed: the develop-
ment of a forecast plan and, naturally, the forecast itself. During the f irst stage,

~ alternative strategies for the development of the power industry itself are examined
and evaluated. During the second stage, these strategies are ref ined and adjusted.
In addition, suggestions are developed regarding integrating measures and the con-
" tribution of each country toward their realization.
At first, the countries develop a structure for the development of the national
nuclear power industry and carry out an initial evaluation of the long-term require-
ments for external deliveries of the basic types of equipment and scarce resources
and the feasibility of making their own deliveries to the other counCries. On the
basis of these data presented in CEMA, the Provisional Collective of Scientists and
Specialists work out alternatives for an interindustry structure and scenarios for
the development of the nuclear power complex so as to satisfy the countries' re-
quirements for the development of the national nuclear power industries to the max-
imum degree possible. As a result, the basic directions for the development of
the nuclear power complex are determined. They expand and deepen the sphere of
scientific-technical and industrial~economic cooperation among the countries and
contribute to the achievement of their national goals.
At the next stage, the structure for the development of the country's nuclear power
industry is refined, with consideration being given to the basic directions for
the development of the CEMA member-nations' nuclear power complex on the whole.
Specif ic alternatives are being developed for the realization of long-term goals
for the growth of the national nuclear power base.
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At the same time, on the international level, alternatives are worked out for ~he
realization of integrating meaeures for CEMA member-nations as well as mutually ad-
vantageous alternatives for scientific-tech.*~ical and inaustrial-economic cooperation.
At the concluding stage of furecast development, the specific structure is submitted
for approval and a plan of the decisions is prepared f or examination by the corres-
ponding CEMA agencies with regard to integrating measures which insure the long-term
growth of the CEMA member-nation nuclear power complex.
Let us dwell in more detail upon the development of a forecast plan for the growth
of the national nuclear power industry. The development of a forecast begins with
the determination of the scope of the national nuclear power industry for the years
1990-2000-2010 and the selection of types,.unit outputs and the stages of utiliza-
tion of nuclear reactors. Then studies are developed for determining the basic
tasks of scientific research, alternatives for the development of an induatrial
and construction base and the demand for scarce materials and the basic types of
equipment. Simultaneously, as a result of the determination of the structure of
AES's, ATETs's and AST's planned for construction in the period to 2010 and the
evaluation of the prospects for the utilization of nuclear power installations in
metallurgy, chemistry, agriculture, transportation and in other sectors of the
economy, we are conducting:
' - an analysis of ecological factors and the identification of the corresponding
limitations on and requirements f or the construction of nuclear power installations;
- the development of alternative methods for maintaining, storing and transporting
spen~~ fuel and for processing and burying radioactive wastes;
- the development of alternative methods for decommissioning nuclear power installa-
tions.
Naturally, these problems in the development of the nuclear power industry give
rise to their own scientific-technical and industrial-economic questio~s. A study
of the alternative methods for de~7elop ing production and scientif ic research in
individual sectors of the nuclear power complex concludes with a system for evaluat-
ing alternative methods for the development of the pow~r industry. If it becomes
necessary, the previously selected structure and alternative methods for the utili-
zation of nuclear reactors can be adjusted according to the results of this evalua-
tion in order to improve the effectiveness of the solutions obtained. After satis-
factory results are obtained, a selection is made of the major directions f or the
scientific and industrial work being done to insure the development of the national
nuclear power industry. The country then draws up proposals for international coop-
eratio~~ in the given area.
It must be noted that the initial selection of the structure and alternative methods
oE utilization of nuclear reactors is a moat critical stage in the development of
a national forecast. This selection essentially determines future scientific and
industrial activity both within the scope of the national nuclear power program
as well as international programs for the integrated development of the nuclear
power complex. Thus, we must develop this stage with particular care, enlisting
the aid of leading scientists from various sectors of the nuclear power industry.
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In order to carry out systematic research and optimize strategies for the long-term
development of the CEMA member-nations' nuclear power complex, MNIIPU together with
the interested national organizations is formulating a system of m~thematical eco-
nomic models. This system includes models f or the development of f uel-cycle sectors,
a model for the development of the power-production base, a model f or the develop-
ment of the machine-construction base and the related nuclear-power production in-
dustr3.es as well as a model of the interrelations among sectors of the nuclear power
industry. This system of models reflects the multistage process of production (for
example, the extraction, enrichment, processing, etc. of ores) and considers the
basic production parameters which determine its technological feasibility and its
technical and economic eff icienCy. Moreover, the models directly ref lect the re-
sults of the development of new equipment and techniques and their introduction into
industry.
The realization of tasks regarding research and the optimization of long-term strat-
egies for the development of a nuclear power complex utilizing the indicated models
- - is accomplished on the basis of the SOPOT [expansion not provided] man-ma~chine sys-
tem developed at the International Scientific Research Institute for Control Prob-
lems. This system is problem-oriented toward the solution of tasks involving simu-
lation and the optimization of intersector industrial complexes [3]. The SOPOT
system consists of: a data bank; a generator of model programs; a numerical-method
library; a model-research and problem-solving block; and an interactive-procedure
block. '
The features of the SOPOT system provide:
the capacity for system correlation and problem decomposition in multilevel.
organizational systems;
_ - facility in adjusting mathematical economic models and problem conditions;
- the solvtion to complex data problems, including the answers ~co nonoperational
queries.
At the present time, MNIIPU is organizing the exchange of SOPOT system sof tware
with interested national organizations. The planned exchange wi11 enable the coun-
tries to reduce considerably the time and resources spent on creating a system for
simulating the growth of national fuel-and-power con:plexes, as well as to prepare
a basis for combining national systems of power-industry models in order to conduct
joint investigations of alternative strategies f or integrated development of fuel-
and-power complexes.
In conclusion, we must emphasize:
1. the importance of data formulated at the national level and, thus, the complex-
ity of the makeup of national working groups. It is desirable that all interested
agencies and organizations in the scientif ic-technical and economic spheres of each
country participate within the scope of these working groups. The participation of
administrative and economic agencies (the State Planning Committee, the ministries,
etc.) is necessary in view of the fact that these agencies are the ones which will
subsequently utilize the results of the forecast and can irom the very outset intro-
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Figure 1. Diagram of Interindustry Structure
of the Nuclear Power Complex
Key:
B. Radioactive discharges and waste
1. Revenue-generating sectors of the nuclear power complex: metallurgy, heavy,
power, chemical and electrical machine construction, instrument engineering,
- the construction industry, etc.
2. Equipment for extracting and preparing ore
3. Reactor units
4. Thermonuclear equipment
5. Chemical equipment
6. Electrical equipment
7. Instrumentation and computers
8. Hoisting and transporting equipment
9. Construction and prefabricated materials
10. Natural reserves of uranium �
11. Natural reserves of thorium
12. Extraction and preparation of uranium ore
13. Extraction and preparation of thorium ore
14. Uranium enrichment
15. Enriched uran ium
16. Depleted uran ium ~
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Figure 1. Key (con'd.)
17. Natural uranium
18. Production of fuel elements
19. Burial of radioactive wastes
20. Processing of spent fuel elements
21. Fresh fuel elemer~ts
22. Spent fuel elements
23. Radioactive wastes
24. AES's, ATETs's and AST's with thermal reactors
25. AES`s, ATETs's and nuclear power installations with fast reactors
26. Nuclear pewer installations with high-temperature reactors
27. Electric power
28. High-potential heat
29. Low-potential heat
30. Thermal wastes
31. Non-power materials
duce the necessary corrections i.n tt?e studies being conducted and or3ent these stu-
dies in accordance with their own requirements. The immediate users will be the
organizations in the scientific-technical sphere which will introduce the desired
scientif.ic approach and methodological apparatus into forecast studies;
2. the important ~ole of ineetings of the Provisional Collective of Scientiszs and
Specialists which will observe and evaluate the progress of the work, insure the
exchange of information and experience as well as consolidate individual points
of view and discuss all data presented by the member-nations and the caordinator;
3. the extraordinarily vital and complex role of the coordinator. In contrast to
the Provisional Collective of Scientists and Specialists, which can operate only
periodically during the course of its meetings and will be limited to the discussion
of the materials presented, the coordinator wi11 continuously carry out the follow-
ing activities on an international scale:
- prepare proposals for refining methodological instructions and working programs,
- develop a conceptual plan for an integrated nuclear power complex (at the f irst
stage of development),
- evaluate materials presented by the countries regarding national nuclear power
complexes and develop plans of the corresponding recommendations,
- evaluate thP countries' considerations regarding an integrated nuclear power com-
plex, summarize them and, finally,
- complete editing of the forecast plan and the final farecast for the intFgrated
nuclear power complex.
Naturally, in order to successfully implement such broad and multilateral activity,
the coordinator must make exten~ive use of its own scientific-technical potential
and accumulated expertise in the area of organization of forecast work.
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~ ; ~ ~ X ~,.i ` ~ i 5070161T0'AS . .:"%lIO.:OI ~ I
I
j rporiroa aaaear~ i (13 ~ ~T-' ~ i ~ ~
9 Nir1I10-TlJC11R~!^.K:I'0 ~ . ~ : ~
O! ~~.�a ~ oan.~t~ ~ , ro"~'~>;`s~- ' ~ I ~(16 ~(17) i
co~taictz ~oarcx .t3�. ue- I ~
~Nepre~;rveerzt~ ~ r:s~a iu_pN~? i ~ ,
n.~aaacco a.er.!:...-.,. ~~c:c:ee~a, . i I ~
C~ySQlO'. M~J4- . ~
~ ~ Y. '.7L:'~��p':� ~ I ?d]RiJ^.'7d.~b1,7N:1S^9lN~ ~
r. : z c::-:~c~a.:.~: ea:aa~;':n :,pni wme ~
e-r~::r_.: :~,u --t:ioa �n~yr;o-:ccrf:ecKC.. ; Z~.:uoiiwc
~ i I ~ � 1!R:^_.4N:C~Y. ,ac:c;~ ~ ::sxoe !
~ I ~ CDC7dD" nJKV ~ i OC~~67!."
i rporKO~ ~-.x:::,c : , . (19) I (20)
~],Q~ weyexu .aoK~aoterae:ixo=. i i ~
~ Ca~~ R3A ! , . ~ � . '
' ~ ~
Xoppex-apa2::a tporp.v.en '
~ AHS.m sei~:e~ea~i ps:- , ~ 21
( i l ~ I ,~r,u aax ~a ( )
Orpa~ar+ewu Hs ~^.ep?eu
I
L ' ~22~
12 �upa0o~cs ZMc~~�e ;s _~~e2 :o;r~xposaiiNC aatr~cDovx~f Pa~naCO~Ka rta~crter~;f~xuz tiaMn~ ;n~nmu
~ ~ `"^eFreKr:~:~c.e ;a+ea::_ __..yrtpc-~nru~ pvebk! .'+":tC etr�~u:ex a aoer.v- A~X
~
(23) (24)
Figure 2. Overall Structure of a System for the Long-Range
Developmental Planning of a Nuclear Power Complex
Key:
1. Joint program of scientific and technical progress
2. Goals of the country's social and economic development
3. Basic directions for the country's economic and social development
4. Limitations on resources
5. Program adjustment
6. Formulation, balancing and optimization of alternative long-range plans
for the development of industrial production within the nuclear power
complex
7. Forecast of economic require~ents for the output of the nuclear power
complex
8. Forecast for the development of the raw materials base ~
9. Forecast for the development of scientific and technical progress in the
creation of new nuclear power equipment and technology
10. Forecast for the development and situation of the nuclear power complex's
production base
11. Analysis of foreign trends in the development of the nuclear power complex
12. Formulation of forecasts and goals in the long-range development of the
. nuclear power complex
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Figure 2. Key (con'd.)
13. Integrated forecast for the development of the nuclear power industry
and its raw-material, scientif ic-technical and industrial base
14. Determination of goals according to the basic directions for the develop-
ment of the nuclear power complex (the creation of AES's, development of
the fuel and raw-material base, nuclear equipment construction, etc.)
15. Formation of long-term scientific-technical and industrial programs for
the development of the nuclear power complex
16. Industry requirements for the development of equipment and technology
17. Proposals for the utilization of new equipment and technology
18. Formulation of an integrated long-range plan for development of industries
within the nuclear power complex
- 19. Formulation, balancing and optimization of alternative plans for sc ien-
tific-technical activity in industries within the nuclear power complex
20. Formulation of f ive-year plans for industry
21. Program adjustment
22. Limitations on resources
23. Formulation of long-term programs for the development of the nuclear power
complex
24. Formulation of long-range plans for the development of industries within
the nuclear power complex
BIBLIOGRAPHY
_ 1. Dragny, M., and Svetlik, Ya., "The Nuclear Power Complex and the Main Directions
of Scientific and Technical Progress," ATOMNAYA ENERGIYA, Vol 49, 1980.
2. Dragny, M., "The Integrated Nuclear Power Complex of the CEMA Member-Nations,"
.iADERNA ENERGIE, No 26, 1980.
3. Vlasov, Ye. P., Tyurin, Yu. A., "The Study of Methodological Questions and the
SOPOT Man-Machine System for ~he Forecasting and Optimal Planning of the Devel-
opment of the CEMA Member-Nation Fuel and Power Complex (Based on the Example
of the Nuclear Power Complex)," International Scientific Coordinating Conference
on the Problem of Improving the Control System f or the Development of the CEMA
Member-Nation Fuel and Power Complex, Moscow, 1-3 December 1980.
COPYRIGHT: SNTL, n.p. 1981
9512
cso: 5100/3012
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C Z ECHO SLOVAKIA
VALUE ADDED, KEYING OF WAGES DISPUTED
Prague POLITICKA EKONOMIE in Czech No 12, 1981 pp 1269-1278
[Article by Milan Matejka]
[Text] A still wide open subject in the socialist economy is the system
of [economic] indicators. On p3ges of various publications, we argue
about~ways to measure certain economic phenomena (the past few years it was
characteristic to discuss measuring of production efficiency), and changes
occur even in the economic practice, with considerable differences between
the individual socialist countries.
The question of relations between the 3nd3.cators is actually wide open.
The economic units (VHJ and enterprises), for example, are being mandated
_ values for inclividual indicators without any def initions of their relations.
The indicators are not the systezn, they are only a set of ineasurements.
That together with the differences in indicators has some serious practical
implications. The Khozraschet [cost accounting] units are manipulating the
production process to f it into the range delimited by the set of indicators;
the decision making process in this context 3s very sub~ective (the number
of variables to be decided upon can often be extensive) not because it is
- left upon the VHJ or the enterprises but because it is not backed by
scientific data. If the indicator relations are not properly formulated
then, in most cases, we are unable to determine which of the possible
answers is the best (only in a few cases is a given variable best according
to a.ll indicators). Only a scientifically defined relation of the indica-
tors, conversion to a higher quality of a set of indicators--in a system
of indicators--will create conditions for ob~ective optimalization.
But ttle management of prod~iction within these limits is not quite so coinci-
dental, dependent on the intuition of decision makEr as to which indicator
to choose in a given situat3on. Defacto priorities among indicators do
develop in the subconsciousness of the managers and gradually become fixated,
based primarily on the stake which the collectives and individuals have in
thE specific indicators. It is only natural, and historically confirmed,
that th e greates~ motivation is provided by indicators which determine the
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wages and salaries. '~he interest in such indicators is often so strong that
- it leads to a lag in the uses of other indicators (for example, a plan for
a product mix) and even pushes into the background the khozraschet principles.
Such preferred indicators in the past were the gross production and later
performance (an indicator of similar characteristics like the enterprise
gross production, but including all activities--even indirect labor) or
the indicators of labor productivity derived from it. Currently we are
conceived with the value added as the basis of the wage structure.
The total performance in our economic practice is being succeeded by value
added in its broader context; in some relative indicators comparing output
(production) with input (used product3on resources), ae for example, labor
productivity indicators, capital asset effectiveness, or indicators of
production cost efficiency.
The actual function of gross production or performance as a criterion indica-
tor was undisputably bad. The main reason--the possibility of its maximiza-
tion by uneconomical processes, primarily uneconomical vertical cooperation--
tias already been theoretically clarified in the fifties and it is only
surprising how long this indicator (in its variations) survived in this
function. Of course, we must also be able to see its objective function
in the system of value indicators and not to dismiss it out of hand.
The value added must then be approached similarly. An ind~.cator of this
type is indisputably a significant signpost. It is one of the traditional
western statis tical indicators (value added in manufacturing). But its
worth should not be overrated. In this article I wish to point out primarily:
a) the general irreplaceabil3ty of gross production (performance) by value
added; �
b) the questionable value of regulating wages according to any value indicator
including value added.
Total Performance and Reduced Production Indicators Relative to Inputs
If we evaluate the demands of the manufacturing process on production re-
sources, wheth er from the point of view of cost or its dependence on the
- resources, we must always compare these resources (inputs) with the total
performance (outputs). The replacement of the total performance by a
deflated output is not appropriate within this context; derived re;.ative
cliaracteristics are sub~ect to a very questionable interpretation and
utility.
IC we strip the material costs or even ~ust part of them from the value of
tlie newly created product, it means the reduction [deflation] of the output
by the valtte of a portion (possible of all)used up production assets. The
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�~alue of relative indicators always reacts to the consumption of that portion
of production assets by which the value of the created product is also
_ reduced, further also to consumption or dependence of the production factors
expressed in the second item of the relat3ve indicator. Thus for example,
the proportion of wage costs to the value of net production, , reflects
� how labor-intensive the product (Q) is, (when capital consinnpt3on goes down
and the numerator (v) drops and thus the value of the relative indicators
will also decline. At the same time the product becomes less capital
intensive (~ahen the materials costs (c) fall, the denominator increases
and the value of the relative indicator falls again).
The situation is further complicated by the varied reaction of these relative
indicators to the changes in individual cost items. Because with the changes
in material costs (as such) or at least in a partial change, the value
of the deflated production indicators also changes, while with the change
in the wage costs (as such) there is no changel then, accord3ng to the derived
relative indicators, the unit change in wage coats (for example, a change
by Kcs 1.00) is not equivalent to the unit change in material costs.. This,
of course, results in a highly questionable use and synthesis of these
relative indicators.
We are illustrating the net product cost on an example of indicators.2
Let us assume the possibility of manufacturing a certain product with a value
of 100 monetary units using three different technologies under conditions
described in the table. Our task is to estimete the overall costs of prod~,ction.
production.
Manufacture Using Material Wage ToCal Total Value Net
Technology Costs Costs Costs of Manufactured Product
Product Value
(c) (v) (c-Fv (c+v~Mn) (v~n)
1 40 40 80 100 60
2 50 32 82 100 50
3 50 25 75 100 50
1. When for wage costs of the product, for example, fall and all else
(price, material costs) remafn the same, the profit increase is
equivalent to the drop in wage costs and the net production value
does no t change .
2. We have selected net production for its simplicity. We could come to
the same conclusions if we used value added instead.
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If we use for the evaluation of the total costs the proportion of wage costs
to net production (wage costs are in the numerator, material costs reduce the
value of the manufactured product in the denominator), then the technological
process 2 appears to be more advantageous than process 1, because:
v2 = �2 - 32 = 0.64, while
(c2+v2+m2) - c2 ~'2 + m2 50
�1 = ~1 = 40 = 0.67
(cl+vl+ml) - cl vl + ml 60
But in reality, the costs for the same product are higher with the use
of process number 2.
The evaluation of overall costs will not be ob~ective even 3f we assume that
(in an obvious contradiction to real.ity) the ratio of wage costs to net
production is only an indicator of relative use of labor and the relative
use of production assets is expressed as a ratio of material costs to net
production. Total production costs will then be defined by the ratio of
total costs to net production.
This is obvious fr~m the evaluation of alternatives 1 and 3 from our example.
Using the ratio we find the technologica.l process 1 more profitable
because '
. c+ v 80 = 1.33 c+ v 75 1.5
~ _
v+m 60 v+m SO
even though the total costs for the same product are lower w3th process 3.
The synthesis of material and wage cost levels of net product3on is also
questionable from the for~l log3cal standpoint. Both indicators are
qualitatively different types of structural measures. While the ratio of
wage costs to net production is the indicator of the structure of net
production (a proportion of the total), the ratio of material costs to net
production as an indicator characterizes (in another way) the structure of
the entire product. (This is a different type of structural indicator than
the proportion of the total.~ Thus we cannot justify the adding up of
material and wage cc~st net production indicators even by a formal logic.
Also questionable is, of course, the ability to separate and utilize not
only the cost indicators but also indicators of linka.ge of net production
(value added, etc.) to resource allocation. These indicators react not
only to the linkage of a given item of product3on resources during the
manufacture of th e product, but also to the wear of that portion of
production ~sset which we use to deflate the value of the created product.
We would be t~ard pressed to f3nd logical arguments for an appropriate combi-
nation of production requirements to wear and [resource?] allocation.
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And, if the ability to separate these indicators is questionable, that much
more doubtful is the formulat3on of their internal relations. If we further
consider that the deflation of production [indicators?] can differ, it is
obvious, that the relat.ive requir anent indicators of net [deflated?] pro-
duction on the use and allocation of production resources cannot be used
as the basic elements of the system of relative i.ndicators of relations
between inputs and outputs.
Value Added and Wages
The basic problems of the wage amount relation to value added derives from
the elements of the value added is composed.
It is undeniable that the increase in transferred value (depreciation and
_ possible supplempntal materials and energy'~ ~ncluded in the value added
(item ca) does not by itself, create conditions for wage increases. Even
if this portion of the cost of production ma.terial correlates closer with
th e quantity and quality of the actual dir ect labor than the remaining
portion of material costs (Cb), including primarily the value of the used
basic material, we cannot expect a consistent relation. Thus, for example,
L-he increase in depreciation can, in most cases only be related to the
growth in direct labor involved, yet the rate of increase of either factor
will be generally different, we might have to admit the possibility of an
opposite development of both indicators--increase 3n depreciation with a
decrease in actual direct labor. We will show, that the problems arise
primarily in the substitution of direct labor for capital.
We can come to analogous conclusions concerning prof its. In production
pricing we must assume that the profitability depends on the amount of
production assets tied up in th e corresponding production run; a change
in the labor structure--substitution of direct labor for past labor input,,
or an increase in the value of the past labor content without changing
- the amount of direct labor--creates a formal cond3tion for the increase in
the level of wages (it increases the value of profit per unit of direct
labor) and that means even if economic conditions for this increase have
not been created, that profits per unit of total labor are falling.
Concerning the th ird element of total performance, the wage costs, the
relation between the wages and value added appears at first glance to be
the most questionable. It almost appears to be a case of tautology--we are
keying wages to wages. Actually, it is not quite so because we do not
consider the alue added to be a sum of individual items, i.e.
V=ca + v+ m, but as a differentiation subtracting the value of cost of
material from the total performance, i.e., V= Q- cb.
* Limits of the reduced indicators are often different
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'L'tius value added is determined by the factors Q and cb; the relation of wages
to value added then determines the size of the factor "v" of value added
and, indirectly, the value of profits; wage increases within the framework
of a given value added will lead to a fall in profit and vise versa (factor c
is not affectdd by the wage levels.
For further clarification, le~ us use numerical examples. Monetary 3ndicators
are expressed in thousands of Kcs.
- Period Value of Number of Capital asset Material ele- Other Value
production employees orig3nal pur- ment of value mater~al added
chase price added costs
- Q T P ca cb V
Base 200 50 200 30 50 150
Current 220 35 300 45 68 152
We can explain the value of the indicators in that during the current per3od
there was a qua.litative improvement in capital assets as compared to the
base per iod. Instead of inechanized, qualified-labor intensive production
we have switched to automated production with a reduced number of workers.
The need for employee qualifications and work intensity has not changed
~operating automated machines does not require higher level of qualification
than mechanized production, often the opposite is true).
Has we, under the conditions stated above, tied the wages to the value added,
then w e would have in the current period (compared to the base period),
--a slight increase in t~ tal wages;
--a rapid increase in the average wages.
However, neither is economically acceptable. On the face of it, the
situatio n is satisfactory,
--a reduction in total wages, and
--a stagnation in the average wage (quality and intensity of direct labor
has not changed).
Wage as a Necessary Product
The question then remains: Wh3ch indicato?- should determine the wages if we
re~ect not only performance but also value added?
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It is my opinion that we cannot ~ustify keying the basic wages to any general
- value indicator (above we have indicated reasons why we could not use
profitability and in this relation, we can easily ~ustify the unsuitability
of net production). The fact is that we cannot view the basic wages as an
element of distribution of a manufactured product; it must be understood
primarily as a cost element, as a necessary product with its size corres-
ponding to the amount and quality of d3rect labor in the given production
ruii; the wages (together with other social costs) are to ensure the replace-
ment of labor which has been used up by the production process.
_ This understanding of the (basic) wage is roughly correspondent to the
contemporary economic practice. This is most ob~ious in the case of
piece-work l~abor where the wages bear th e closest relation to the quality
and quantity of che specific accomplished work. In case of the administra-
tive and supervisory personnel we are trying, within our possibilit3es, to
reflect the accomplished work by classifying them in wage categories corres-
ponding to the work requirements based on required qualifications, physical
difficulties, work conditions (difficult environment), etc., again, in
such a way that we ensure the replacea~ent of labor. The labor replacement
must also be ensured under unfavorable developments in any of the general
value indicators; the concept of necessary product, introduced by the Marxist
political economy, does have its full ~ustification.
It follows then: The principal approach to the ob~ective remuneration should
be through higher quality work norms for piece-work labor and better quality
job class3f ication system for other employees and, naturally, the criteria
for their assignments into a specific wage grade.
This route is no doubt considerably more difficult than tying the wages to a
given value ind icator. Ensuring comparability of inter-enterprise norms and
inter-professio nal wage-rate comparability are theoretically and practically
' an extraordinarily difficult taek. But, accord3ng to my opinion, there is
no other way to judge objectively the work effort and the corresponding hasic
wage rates.
Other Wage Functions
'The reader is certain to object: "The view of wages as a necessary product
is very lopsided. In determin3.ng the level of wages, especially under
socialism, we cannot subtract from the value of commodity production; it is
primarily necessary to ensure that there is a correlation between consumer
goods and the public purchasing power. The wage must be a factor dependent
on distrib ution of commodity production.
Keying the wages to value indicators, furthermore, has a motivating funct3on--
it causes the workers to develop a stake in the value of commodity production
and stimulates growth of production through the increase in labor productivity.
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A position on the objection: Ensuring a balance between the consumer goods
and the public purchasing power is without a doubt a serious problem.
How ever, we cannot achieve such balance by tying the wages to gross produc-
tion, because it absolutely cannot be justified due to the nature of gross
production. The past experience,when total demand constantly exceeded
supply, has also convinced us of this; after years, when the wages "slipped"
excessively, centralized measures to slow the wage increases had to be
implemented, regardless of the gross production developments.
At the macrolevel we can ~ustity maintaining a relation between the wages and
net production (approximately also value added). However, the problem lies
in the fact that keying wages to net production is not appropriate for
ensuring this relation at the m3crolevels. The macro-micro relations are
complicated and agreed to. The reasons why we cannot generally t3es the
wages to net production have been noted anc~ illustrated above.
Furth ermore: Relation between the level of output and wages can also be
derived from wages conceptualized as a necessary product. From wage
costs we derive material costs and from total costs (indirectly) also the
cost of production. Even th3s process, of course,�has i.ts danger points,
but it is not wholly unrealistic. It 3s actually being pract3ced 3.n
capitalist countries where, in spite of the negative points of the system,
the problem of demand exceeding supply does not arise. The tradiCional
wage regulations by the way of general value indicators then is not the
only way* and it certainly would be worthwhile to investigate other methods,
more so, because that traditional method did not prove very successful in
practice and we can easily point out its weaknesses.
The problem of individual incentives in the production is also more complicated
- than it would seem at first ~glance.
First of all, it is debatable whether maximization of the production indicators
even should be the employees primary interest--i.ndependently of how they are
defined (the gross production, valued added, net production, etc.) and whether
it would not be better to aim the main incentive elements at the effect
(prof it) and efficiency (i.e., return on investment).
Second, individual stake 3n the economic results does not have to be ensured
by keying the basic wage rate to the corresponding economic result indicator.
For that we can use supplemental (bonus type) wage components--just as it is
in the current CS [Czechoslovak] practice when approximately 20 percent of
the total remuneration is dependent on the return on investment.
* The wage developments in Hungary are today weighed on the basis of natural
production indicators (the weights 3n the heterogenous production are wages
and depreciation of the base per3od), which tie the wages much better in
with the expanded direct labor, than coupling of wages to level of output
indicators. (More of the effects of changes in the production structure
are eliminated.)
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The existing combined wage relation to two value indicators is, 3.n its way,
a double bonus where the value added carries a greater weight which is a
defacto priority given to this indicator and might result in a selection
of not the most effective solution. (That also applies in the case where we
will be deciding in the interest of maximum wages, considering the size of
its base and supplemental elements, that is, when we will take into
consideration both indicators to which the total wage is tied.) From the
preceding discussion it follows that the principle of the combined designa-
tion of the total wage could be establi,shed on a very rational basis, as
long as the basic element is understood to be a"necessary product"; the
supplemental element than is the item of distribution of the economic
results and dependent on its size (of the profit).
Third: The concept of wages as a necessary product generates an interest
in the efficient growth of p:oduction. It is quite obvious in the
_ case of the piece-work employee (the more they produce, the higher their
, wages) and indirectly (through higher qualification [requirements])this
goal can also be achieved for other employees.
Wages arid Labor Productivity
The innate cause of the problems arising in keying the wages to general value
indicators can b e seen in measuring of labor productivity. Th3s interaction
has historically developed from the relation of the wage levels to labor
productivity in the interests g3ving priority to the requirement that the
productivity grow faster than the average wages.
If we express labor productivity as a relation
Q
v = ,
T
where Q is production indicator
T is manpower ind3.cator,
average wage as a ratio m= M
T
where M is the amount of total wages ~ ~
and if we require that I I that is V1 - 41 40 , M1 Mo - ml ,
v~ m' v T ' T T ' T m
0 1 0 1 0 0
M
than the relation Q1 ~ M1 applies.
0 0
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'111e requirements of growth in productivity faster than growth in average
wages then may be reduced to the requirement of production having t~ grow
faster than total wages .
In determining the authorized total wages in the past (adjusted wage fund)
we have based both relations (which, of course, with the use of given
adjusting coefficients expressing the authorized percentage of growth in
total wages for each 1 percent of increase in productivity or production
resulted in differing values of the ad~usted fund); gradually we switched
to another, simpler procedure--keying the total wages to production
� indicators.
Both procedures assume that the measuring of labor productivity by the ratio
of~ is correct, that is w e used the ratio of some monetary value indicator
of production (whether gross, net or only partially reduced by the material
costs) to the number of employees (or days or hours worked, etc.). Such is
the statistical practice (and economic practice) but it is this practice
which has been criticized a number of times. Particularly well known is the
basic criticism of a Soviet academ3cian Strumilin.
Production as a Marxist concept is the relation of the amount of production
to the amount of labor involved, i.e., past and direct labor inputs and only
on this basis can we econom3cally justify the relation of wages and pro-
ductivity in the correspond3ng economic unit.
Unfortunately, we must note that the quantification problem of productivity
as defined by the Marxist political economy have resisted satisfactory
solution on the part of the statistic3.ans, although a number of such experts
in the socialist countries have attempted it. The problem lies in quantifying
- the amount of production in cases of heterogenous products (monetary value
indicators, even if at deflated prices are not, s'trictly speaking, volume
indicators) and thus (primarily) in quantificat3on of total labor input.
As for direct lak~or, we cannot ob~ectively measure its intensity and quality
_ (according to Marx, in a more intensive work we are expending more work per
time unit while skilled work is real~y a multiplied simple work) and we are
in fact only measuring the production time. As far as past labor input
(dead labor) is concerned, 3t is not quite clear what use (whether
dependency on or the consumption of production means--because neither is an
analogy to expended direct labor). Additionally, we have the problem of
synthesis of the two elements as a result of various measuring units of
direct and past labor inputs.
Symbolically speaking, instead of the relation
Q Q
v= La+Lb = T.k.i+Lb
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where v is labor productivity
Q - production
La- direct labor input
Lb- past labor input
T- time worked (average number of workers in the period or number of
days or hours worked)
k- quality of labor input (labor sk.ill)
i - labor intens ity
we find in practice only the ratio ~
? Q
v = ~
T
We can justify the measuring practice by the complications in measuY3ng the
labor productivity; hcwever, we should be aware of the simpl3fications made
and infer any consequences.
One of these consequences is the inappropr3ateness of wage relations to
the simplified productivity characteristics at the micro-levels. A complete
disregard of past labor input in the denominator will result in a subst3tut;on
of direct labor for past labor input, in an increase in the indicator value
without a corresponding actual productivity increase (Marxist concept of ~
productivity). We cannot sub~ract from past labor input because even this
labor input into the production of the evaluated production unit was in the
past, and in another production unit, the direct labor.
We take past labor input into consideration in the productivity indicators
which use the net production in the numerator; here we reduce the value of
the created product by the cost of material. But even this solution is
not in concert with the basic conceptual defin3tion of productivity. Even
if we made th e past labor input identical to the secondary inputs, we cannot
interchange the ratio of the two factors w3th the ratio of the same two
factors reduced by the same amount. If we express the productivity of total
labor in general terms by the ratio and the indication constructed
as the ratio of net production to dir~ct f~bor input, 4- Lb then we cannot
call it a productivity indicator. The cancelling effectL~f the two ratios as
well as their development are different. The first may be increasing and the
_ second may be increasing and falling at the sameQtime. Q_ b
L
Period Q La Lb La + Lb La
base 200 50 100 1.33 2.00
current 200 48 103 1.32 2.02
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If we cannot unconditionally accept the dependence of the average wages on
any of the currently employed labor productivity indicators, we cannot
accept the dependence of the volume of wages to production indicators either.
Much less can we then accept a dependence on other general absolute
indicators (i.e., profit, production costs, etc.) because their characteristics
do not define labor productivity (they do not appear in the numerators and
by reducing the denominator we will not arrive to the appropriate linkage
either).
COPYRIGHT: Academia, Prague, 1981
1
CSO: 2400/196 E~
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