FISHERMEN'S REMUNERATION SYSTEMS AND IMPLICATIONS FOR FISHERIES DEVELOPMENT

Publication Date01 Jun 1979
DOIhttp://doi.org/10.1111/j.1467-9485.1979.tb00540.x
AuthorJ. G. SUTINEN
Scottish Journal
of
Political
Economy,
Vol.
26,
No.
2,
June
1979
FISHERMEN’S REMUNERATION SYSTEMS
AND IMPLICATIONS FOR FISHERIES
DEVELOPMENT
J.
G.
SUTINEN*
University
of
Rhode
Island
Peleg now threw open a chest, and drawing forth the ship’s articles, placed
pen and ink before him, and seated himself at a little table.
I
began to think
it was high time to settle with myself at what terms
I
would be willing to
engage for the voyage.
I
was already aware that in the whaling business
they paid no wages; but all hands, including the captain, received certain
shares of the profits called lays, and that these lays were proportioned to
the degree of importance pertaining to the respective duties of the ship’s
company.
I
was also aware that being
a
green hand at whaling, my own lay
would not be very large: but considering that
I
was used to the sea, could
steer a ship, splice a rope, and all that,
I
made no doubt that from all
I
had heard
I
should be offered at least the 275th lay-that is, the 275th part
of the clear net proceeds of the voyage, whatever that might eventually
amount to. Herman Melville,
Moby-Dick,
Chapter 16.
I
INTRODUCTION
Those familiar with the world’s fisheries know that fishermen, rather than
being paid a wage per unit of time worked, generally have their remuneration
based on
a
share of the revenue received from the boat’s catch.’ The social
desirability of the share system
of
remuneration has been questioned on a
number of occasions. Some have argued that the share system creates hard-
ship for the fisherman and have suggested that “governments may want to
*
I
would like to thank Gardner Brown, Jr., Jim Crutchfield and Richard Hartman for
their helpful comments. Remaining errors are my responsibility.
R.I.
AES
Contrib.
#
1833.
Date of receipt of final manuscript:
18
September
1978.
A
survey conducted by the International Labour Organization (International Labour
Office,
1952)
during the period
1946-47
revealed the share system to be the dominant
fishermen’s remuneration system in the world’s marine iishing industry. The Food and
Agricultural Organization conducted a similar survey (the results of which have never been
published) in the
1960s
of selected countries. The FA0 results were consistent with those of
the
ILO
survey. Other sources, too numerous to list here, suggest the share system of
remuneration is peculiar to a wide variety of fisheries (e.g. from small-scale, labour intensive
producing units to large-scale, capital intensive producing units),
a
wide variety of economic
environments (e.g. it is found in both high-income industrialized and low-income, develop-
ing countries), and has been in
use
for
decades if not centuries.
147
148
J.
G. SUTINEN
intervene in order to support and maintain systems of remuneration providing
the necessary degree of security and stability of earnings for fishermen.
.
.”
(Food and Agricultural Organization,
1961,
p.
3).
And others have argued
that the share system impedes technological progress and investment in the
industry (see, for example, Crutchfield and Zellner,
1963,
p.
98
and Holmsen,
1969).
Briefly, their argument is that the magnitude of expected returns to the
vessel owner from an investment is smaller with a share system than with a
wage system. Therefore, since the incentive to invest is lower, the quantity of
investment in the industry is lower than it would be under
a
wage system.
These arguments against the share system are not as clear as they may seem
at first glance2 They do not hold up under careful and consistent analysis.
This paper has two purposes. One is to formally derive the conditions under
which the share system of remuneration would be preferred by the relevant
parties in the fishing industry. The other is to examine the implications for
fisheries development under these derived conditions. The result is that the
above arguments against the share system disappear. Instead, the share
system of remuneration is viewed as making
a
significant positive contribution
to the development of a fishing industry.
I1
AN ANALYTICAL MODEL
OF
REMUNERATION SYSTEMS
In what follows, the fishing firm is considered to be owned and organized
by an individual (the entrepreneur) who has under his control two variable
factors of production, capital
(K)
and labour
(L).
The quantity of labour
is
denoted by
L
=
mtl,
where
m
=
the number of crewmen on board the vessel
and
t1
=
the amount of time each crewman is employed in this production
process. By “control” is meant the entrepreneur is responsible for negotiating
and enforcing the contracts specifying the terms of employment for the
factors of production, including remuneration and the quantity of each factor
to
be
employed. Assume the entrepreneur has the opportunity to rent capital
at a constant price.,
c,
and each crewman’s next best alternative is to work at
the constant market wage rate,
w,
elsewhere in the economy.
Total revenue
is
equal
to
qp,
where
p
is a positive random variable.
If
p
is
interpreted as output price then
q
is physical output. If
,u
is interpreted as a
natural factor of production (e.g. weather, location and abundance of the fish
stock), then assume production price is normalized to unity. Assume
q
=
f(K,
L)
and
is
strictly concave (i.e.
fKK
fLL-f&
>
0)
and that
fK
>
0,
The most comprehensive analysis of fishermen’s remuneration systems is contained in
a paper by Zoeteweij and the discussion following its presentation (Zoeteweij,
1956,
pp.
18-41).
Space limitations do not permit a complete, critical review
of
Zoeteweij’s paper
here (for such,
see
Sutinen,
1973).
However, he presents a number
of
arguments in favour
of
as well
as
against the share system, and he and the discussants
of
the paper arrive at no
conclusion on the social desirability of this means
of
remunerating fishermen.

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