Victoria 3 - Dev Diary #11 - Employment and Qualifications

[lachek]

So buildings won't engage in any layoffs, just a reduction in wage rate? So how do Pops become unemployed?

Unemployment occurs in instances where some employees leaves and proportionality cannot be easily restored (i.e. a couple of smaller businesses in the sector closed down because a bunch of Engineers went elsewhere, rendering the Machinists, Laborers, and Capitalists temporarily inconvenienced for a few weeks until they can find other employment), when there's inbound migration but insufficient jobs (and/or insufficient Qualifications among the immigrants), and when automation Production Methods are activated that makes a chunk of workforce redundant.

 

[lachek]

From a UI/Immersion perspective, this is a place where I think V2 did it better than V3 looks like it is doing. Having the POPs represented by pictures of people makes them feel more like people, while V3's icons lose that. There's nothing in these icons that indicates that they represent people, and I think that is important to have.

The Pop icons in V2 were great for this, agreed. The reasons we didn't use this approach in V3 are threefold:
1) Static icons that look like people could not possibly even begin to represent the diversity of people all around the world. I find V2's icons to be immersive when I play Britain, but pretty immersion-shattering when I play Bhutan.
2) On the other hand we don't want different icons for different cultures, either, since the point of an "icon" is to be instantly recognizable even between different game sessions.
3) We have the technological luxury of actually being able to display each Pop as a rendered portrait of a unique person, which reduces the need to use Profession icons to give you a sense of Pop personhood by approximately 97%.

 

[lachek]

Can there be unemployment if a resource runs into such a shortage that it stops being available altogether? (As opposed to just being more expensive.)

This will make the building extremely unprofitable which will cause it to dump its wages. This will cause the lowest-paid employees to return to being Peasants on Subsistence Farms or just migrate away. It can also cause unemployment if a bunch of Laborers leave, nobody else comes in to replace them on account of the low wages offered, and Pops of other Professions are fired to restore proportionality.

 

[lachek]

the question was whether a pop can add new qualifications simultaneously, not whether it already carries around multiple qualifications in its pool. From the screenshots posted it's not clear whether the pop can add +4 to machinists and +2 to aristocrats this same month, or whether it fills its pool of qualified machinists first and then starts to fill aristocrats.

Qualifications for all Professions are updated for each Pop once per month. There's no queue where they have to fill up Qualifications for one Profession before moving onto another.

 

[lachek]

1. How big will this cash reserve be?
2. Will its size be static or dynamic?
3. If dynamic will it change with:
3.1. Change in price of product produced by the building
3.2. Change in size of building
3.3. Change of profitability rate of building
3.4. Change of average wages in a country
4. Will this reserve disappear in command economy?

The size is static by building type but depends on the building level, so a level 3 Textile Mill has 3x the size Cash Reserve of a level 1 Textile Mill. It does not disappear under command economies, no.

 

[lachek]

In RL most socialist economies subsidize full or almost full employment even if a given factory is unprofitable.
Will this be simulated in game? Can you spend your national treasury on this?

(to be honest, I don't believe that VIC3 as it is now can convincingly simulate a socialist economy, because it will require a whole new economic system to be programmed in, with such key distinctions as totally fiat money, non-convertible money, total ban on conversion of bank deposits into cash for enterprises).

We'll talk more about this later but in short this is simulated via the way subsidy mechanics works in a Command Economy.
You're correct that some of the fundamental distinctions between capitalist and communist systems of organizing the economy cannot be captured with our market mechanics, since it's completely driven by supply and demand affecting goods prices in ways that doesn't make a clear distinction between "sales price" and "value" .

 

[lachek]

If a potentially qualified pop promotes to a profession requiring a higher literacy or wealth, does this lower the literacy rate of the pop they originated from?

Yes! The literacy rate shown is actually a computation, the value stored in the Pop is how many of its members are literate. These literate members are transferred in greater quantities if the Pop is hired into a job that requires greater Literacy, so it will in effect drain the source Pop's literacy rate.

 

[lachek]

So if I understand this correctly, let's have a look at this example:

There are two job opportunities in a state, both competing for the same workers. Let's say, they each want 100 and there are 100 in total in the state. One is slightly more profitable than the other. Over time, if nothing else changes, we will see an equilibrium in which the more profitable workplace ("1") is filled to 100% (taking in all available workers) and the other ("2") has 0?

Now what happened is that 1 increased its wages to compete against 2 and because 1 is more profitable, it could do so longer than 2, winning the race. However, 1 still diminished its profitability because of the high wages. My question is: Will the now empty 2 keep pushing up wages for 1, until it is demolished?

Or do I have an error in my example and, e.g. the split between 1 and 2 is more continuous, like 80%/20%, depending on the profitability-advantage, because it is reduced when having higher employment rate?

And in any case, we effectively see a distribution of wealth to the limiting factor of production (in this case: labor)? If there were more wokers than jobs, we'd see the profiuts go to the jop opportunity owners? If so, are the owners' wages paid before the job opportunity balance is made or will they effectively work for free to fill their jobs (given that "being in black" is the hard cut-off)?

There's a limit to how many Pops can be hired by a building each week. In week 1, workplace 1 will gain hiring precedence and will recruit the "best" workers until it's reached its limit. If there are more qualifying workers after that, workplace 2 will recruit them, up to their limit. If the building manages to hire it won't increase wages. Now, in week 2, workplace 1 has now increased their throughput and their net profit as a result has decreased somewhat, and it won't try to increase wages since it's been successful in recruiting new workers. This makes it comparatively less desirable than workplace 2, which might have increased its wages and as such might get precedence over 1 this time around.

Over time, the most productive / profitable building will be able to hire more workers than the less productive building, but they'll both get opportunities to increase their throughput and for as long as they have profit to spare and job opportunities to fill they will continue to compete on wages to steal workers from each other.

As for owner wages, they're distinct from dividends - these are the excess profits paid out to shareholders (=owners) after Cash Reserve deposits have been made. So owners take their "fixed" share of the wages alongside everyone else in the building, but then get paid a weekly bonus depending on how well the building is doing.

 

[lachek]

Probably out of scope of this dev diary, but how does this interact with pops out of State? If there's a labour shortage will it start pulling in qualified personnel from different states? If there's a labour surplus, will it start pushing the unemployed to other states?

At the moment there is no explicit "there are job opportunities over there, time to move" mechanic, since that would require us to assess the wage paid for each of those job opportunities compared to the current wage the Pop is being offered to not get weird effects. Essentially to model it perfectly would be to assess each opportunity for each Pop across a whole market which would be much too CPU heavy and arguably quite unrealistic given that there are huge economic and social barriers to packing up and moving even to an adjacent state in the same country.

However, the Standard of Living (which we'll learn more about in a couple of weeks) of Pops in a state does affect its migration attraction. Indirectly this means that if a state has a good amount of labor competition and therefore relatively high wages, and reasonable access to consumer goods and government amenities that affect that measure, it will be a better state to move to. In addition, unemployed Pops are more likely than employed Pops to take the risk of moving to another state in search of greener pastures. This does create the effect you're describing, it just takes a longer route to get there.

 

[lachek]

How is this "fair" wage calculated? It seems like it has to be enough to potentially pull qualified workers from high-profit industries. But you don't want two subsidised industries to get into a bidding war for labour.

All countries keep track of a constantly updating "Normal Wage Rate" that's based on the average wage rate across all non-government, non-subsistence buildings in their incorporated territory. This wage rate is used to determine the fair wage rate for employees of subsidized buildings, as well as set the baseline for what government employees should be paid. So the higher the average private-sector wage across your country (at least the incorporated parts) the higher the cost of paying government employees and subsidizing buildings will be.

 

[lachek]

I am unsure whether I understood this idea that increased production decreases (marginal) profits. Is this solely due to the fact that increased supply in a market with constant demand decreases the product price? If so, the production change we talk about here would have to be significant compared to the market size.

And on the other hand, increased production should increase the total profit of the business, as each produced unit still has a specific profit. The marginal profit is then not really an issue. If I can double my throughput and the marginal profit goes down by 10%, that seems like a damn good deal: I will make more money. Why would this mean I have to lower wages?

On top, even if the added unit has negative variable profit, it could still cover some fixed costs, increasing overall profitability. Or are there no fixed costs?

So in conclusion: why does increased production reduces the profit and thus the wages for all workers? Seems also like something the Betriebsrat would take offense in .

Or is it more abstract, representing a balance of wages workers are going to accept in the long term and not so much a company's production planning rational? In this case, I may be able to understand it, as you need both upwards and downwards pressure on wages from somewhere to create dynamics.

I think the part you're overlooking is that a doubled Throughput resulting from a doubling of total employees will also require double the wages? As an example, let's say I employ 5000 employees and make 2000 in profit, due to my wages costing me 1000, input goods cost being 4000, and sale of output goods yielding 7000. Under these conditions, if I doubled my employment and thereby my Throughput and we assumed zero or negligible change in goods prices due to supply and demand (no loss of marginal profit) then my now 10,000 employees will generate 4000 in profit due to wage expenses of 2000, input goods expenses of 8000, and sale of output goods yielding 14,000. Yes, this is a higher absolute profit but since the number of shareholders (owner) have also doubled, wages + dividends paid out per employee will remain the same.

This means that any decrease in marginal profit, whether 1% or 50%, as a result of proportionally increasing employment will always result in less net profits generated per employee. This would be different if a building had fixed costs no matter its size (they do not) and is to some degree counteracted by a small Economy of Scale bonus that some buildings have, where Throughput gains a small boost in larger buildings independent of workforce size, but the core principle remains.

 

[lachek]

I am afraid you are implying ownership is not present in the game and it is only a title without any effect. If "owners" double every time the employees double, this means "owners" are only employees. Ownership should come from selling shares of companies to investors. [..]This is a way to achieve accumulation of capital, and one of the main reasons for capitalism to thrive.

Rather than "owners" we speak of Shareholders in Victoria 3. Any Pops in a building can also be Shareholders in that building, the amount per Pop typically determined by its Ownership Production Method. Dividends are split between Pops in relation to the number of Shares they hold and the building's Cash Reserve is also considered to be owned - albeit in an illiquid manner - by the Shareholders in proportion to their shares. This lets us represent many different forms of ownership types, investments, etc.

What is does not let us do is represent unlimited, snowballing accumulation of capital in individuals, as you point out, particularly across several industrial sectors. In its current form, shares in a building can only be owned by Pops in the building's workforce, including Capitalists, Aristocrats, etcetera. This implies that e.g. Capitalists actually do some meaningful work in running the day-to-day operations of a business and therefore cannot simply let their workforce balloon without also creating more opportunities for Capitalists to manage the growing operation in the process. This is not completely representative of reality and is a bit of an idealized take on how market economies operate in practice, but there are several gameplay benefits to using this model and its representation as the default behavior. Snowballing accumulation of capital can still be modelled by reducing the number of available Capitalists job opportunities in a building under certain conditions, and it's not out of the question that something like that will make it in. But I can't say I'm feeling the lack of this in-game right now, Capitalists tend to get plenty powerful in industrializing nations even without the ability to snowball their capital.

 

[lachek]

As PoPs are differentiated by Profession, Culture, Religion, Workplace (Building/State) one has to be careful when adding more of any of these categories as the number of PoPs that one has to iterate across can get out of hand.

This is a very good consideration, but it's not as sensitive as one might think at first blush! There are a lot of cultures in the game, so adding a few more isn't going to make much of an impact. Religion might be the most sensitive one, particularly world-spanning religions, but you'd have to double the number of religions to theoretically double the number of Pops, which is still fine. Another Profession won't matter if the new type replaces an existing Profession in a building (for example, let's say a new Artists Profession replace Academics in a certain building) since no more Pops are created than before. Similarly, if new Professions are made for Clergymen of different religions, unless you have Priests and Imams in the same building no additional Pops would be created. To really start to flirt with poor performance you'd have to make a mod that doubles the number of different Professions in each building type, or create so many new and necessary building types that the average number of buildings per state doubles, and even then you'd likely only run into trouble by endgame.

Any of the above scenarios pale in comparison to the situation where most of the world abandons discrimination policies and Pops start moving around a lot, which can happen in a vanilla game and is the worst-case scenario we need to benchmark for. Please don't quote me out of context on that.