I froze the salaries of my executive team to benefit other workers(theguardian.com)
It's amazing this article even needs to be written. You'd think the executives pulling in these crazy salaries would be competent enough to know that paying their "team members" next to nothing is going to result in high turnover and be a bad business decision in the long run. This article frames his choice to actually pay his employees as some big discovery, but it's not. The fact is, execs already know, but they put their short-term greed over what is best for their employees, the company in the long term, and their communities.
It's more that they are out of touch, IMHO. They have absolutely no concept of how far $7.50/hr goes so they just say their employees need to budget better.
Perhaps if senior executives received minimum wage paychecks for two months (and no bonuses), they might gain some empathy.
You can't gain empathy when something is temporary. Most of the stress of being poor comes of worry about how to handle long term problems / the fact that life has no point except slaving away. That cannot be replicated without genuinely taking everything away from a person.
They need a show like undercover bosses, but instead the CEO must live on 7.50 for an entire year, and work as their own employee they have 0 access to savings, they cannot use credit either, and they are given 1 suitcase of clothes, a cellphone, laptop, and some feature comforts for their tiny apartment like a 32 inch tv.
30 Days Season 1 Episode 1
I'd pay money to watch Angelo Mozilo go through that.
I disagree, if reading books can increase empathy , then I'd expect any activity that forced you to experience the way another person lives would do the same.
>You can't gain empathy when something is temporary. Most of the stress of being poor comes of worry about how to handle long term problems
This was a really insightful comment. I had never thought about it that articulately, but yeah if you are only dealing with stress temporarily, you can't even comprehend what it's like to deal with that FOREVER. It's just an impossible concept to grasp for someone who has that level of a safety net.
I'm nowhere near executive compensation and I would just tap my savings for 2 months.
I think you'd have to limit their usage of previously acquired funds. Once you're rich, you can ride out a 2 month storm like it's nothing.
The goal is not to impose hardship on them, but instead remind them for two months out of the year just how little minimum wage actually is. Most of them could probably blow that $500 paycheck on a single trip to the grocery store.
That's a minor irritation of a similar scale to accidentally leaving their wallet at their summer home and having to wait for replacement bank cards.
Poverty tourism is bollocks.
Never ascribe to malice that which can be explained by incompetence. Lots of things persist because “that’s the way it’s always been done”. Probably what’s going on here, in my opinion.
I think what you are identifying as incompetence is, in fact, well-aged malice.
The greedy behavior that leads to the kind of inequality faced by today's society is now so well established that it has become hard to recognize for what it truly is.
The fact that this article's author seems to find it novel to trickle down the proceeds of the company to the bulk of it's employees is a pretty good indication of that.
> The greedy behavior that leads to the kind of inequality faced by today's society is now so well established that it has become hard to recognize for what it truly is.
So in other words: It no longer requires any malice to pay this way, as it's just a cultural norm in the business world.
By the way, it's also a cultural norm in the US to complain about the lack of generosity among those richer than you, and yet spend almost 100% of your salary helping yourself, when you could just as easily spend it on those less fortunate. Charitable donation is trivially easy, even easier than raising the minimum wage at your company. Yet how many people in these comments are highly-paid millennials who would rather buy the newest iPhone than donate that money to those in need?
If we want to understand the psychology of those at the "top," we need only look no further than ourselves. Unless you're at the bottom, you're also at the top as far as people less fortunate than you are concerned.
> So in other words: It no longer requires any malice to pay this way, as it's just a cultural norm in the business world.
Sure. But I don't think this is a sufficient defense — at the extremes, cultural norms can result in horrific things even though individual actors may not be motivated by malice.
> By the way, it's also a cultural norm in the US to complain about the lack of generosity among those richer than you, and yet spend almost 100% of your salary helping yourself, when you could just as easily spend it on those less fortunate.
There's definitely an incongruity between people's expectations of those above them and what they contribute themselves. We should all give more! But even if I were to donate 100% of my salary, it would barely dent things for those 500 employees.
When we complain about people above us, we're (usually) not chastising individuals but calling for systemic solutions to these issues. The overarching goal isn't for people to donate more of their resources, but to structure things in a more equitable way so that people don't rely on individual generosity in the first place.
> Sure. But I don't think this is a sufficient defense — at the extremes, cultural norms can result in horrific things even though individual actors may not be motivated by malice.
At which point you are better served by targeting the cultural norm and the harm it does, rather than shaming the individuals following it as malicious. Not only is it more accurate, but it's more effective.
> When we complain about people above us, we're (usually) not chastising individuals but calling for systemic solutions to these issues.
I wish this was the case, but 99% of the rhetoric I see is chastising individuals.
> But even if I were to donate 100% of my salary, it would barely dent things for those 500 employees.
There's a lot more people like you than billionares in the world, though.
Agreed, and people like me should donate more! But can we agree that to whatever degree the extreme upper class disproportionately controls the country's wealth, they should also disproportionately shoulder the burden of helping those beneath them?
As far as I'm aware, they already do disproportionately shoulder that burden - not just disproportionately to their proportion of the population, but also relative to their share of the country's income. What level of disproportionality is sufficient for you?
_but the billionaire's have MOST of the money_
............ THAT'S THE PROBLEM
I'm sorry? This seems rather incoherent. Most income in the US does not in fact go to the 1%. (A greatly disproportionate amount does, of course - about 20% - as expected from an exponential distribution)
And if you're talking about wealth... Well, having all the world's billionares give up their money at once wouldn't have much of a positive impact either. (The 1% in the US - not exactly billionaires, $10,000,000 puts you there - had about 35% of US wealth in 2007)
> Unless you're at the bottom, you're also at the top as far as people less fortunate than you are concerned.
Analyzing this situation in terms of a qualitatively homogeneous property differing between people only in magnitude (income or wealth) is a mistake, in my opinion. (And so is taking a psychological approach.)
The most important thing the people at the ‘top’ have here is not any particular amount of money or income, but a radically different relationship to labor and the workplace than the mass of people who work under them. They have special powers (e.g., the power to set wages) and their income comes not only from producing things or providing services using their brains and muscles, but through owning and managing capital. At the very peak of the top, there are owners of capital of whom virtually no management at all is required.
It's because there are people, and of necessity a minority of them, in such a position at all, that the interests of society (as well as its privileges) are divided in such a way as to produce the inequality we have.
When wage laborers _do_ have control or input over things like wages, we _don't_ see the same enormous gaps between the highest and lowest paid employees at those firms. And in the case of that more agreeable outcome, too, the cause is not psychological— it's not that wage laborers are kinder or more generous people than executives, but that their position entails certain interests which are different from those of executives, and given the chance they will guide the firms they work at accordingly.
I don't disagree with you that the system itself has issues.
But the comments here are primarily attacking the "greed" of people richer than them, who would rather spend more money on themselves than on those in need. They're making a psychological argument, and so I am responding in kind by pointing out that these very complainers are hypocritically spending their paychecks the same way: on themselves, not on those in need.
I think you have a fundamental misunderstanding of what pay inequality looks like for top earners. This isn't about using pay to buy luxury items like iPhones vs putting that money to charity. This is about people stuffing bank accounts with more money than they'll be able to use in their lifetimes because the generations of executives that came before them made it acceptable to take a disproportionate cut of the earnings from a business.
Businesses _shouldn't_ exist for the purpose of making the executive team and the shareholders rich at the expense of the employees. American dream or not, businesses serve a purpose in _society_ not just the tiny fraction of society who have the skills to start and run the business.
The goal now is to make executives and shareholders disgustingly rich, and use the government to subsidize the underpaid workforce that generates that wealth. We've created a socialist state for corporations.
> The greedy behavior that leads to the kind of inequality faced by today's society is now so well established that it has become hard to recognize for what it truly is.
I know you think you’re arguing against me, but what you described supports my position.
It doesn't matter if it is hard to recognize, if you are unable to understand something then you are by definition incompetent with respect to the task or idea.
It isn't incompetence, it's complacent acceptance of a toxic norm for personal gain.
Fine, incompetence is the wrong word, but malice isn't the right word.
I think that if you look at the history of the trend, and the politics behind it. The decreases in top marginal tax rate, decreases in corporate tax rates. It starts to really _feel_ malicious. Although you're probably right, I don't think that all of the current c-suite occupants in the nation are acting out of malice.
Well it absolutely needs to be written. Consider the incessant whine here that people ( mainly software engineers) need to be paid in proportion to "value" they deliver. According to them the lower paid employees like office staff or janitors would not deliver much value so they might as well work for nothing.
Never in my life have I seen this. Not once. Where are you from?
Look at just about any resume writing service. They make you come up with ways you have "added value" at your current employer.
So, yeah, it's out there.
I was thinking the math didn't work out, but it does. If you ignore taxes and say a raise of +7.50 an hour for a working week comes to around $14500 extra a year, over 500 employees that's about $7.3m. If that were split into 20 executive bonuses, that'd be $365K each.
And if you're getting a $365k bonus you are likely already so rich that the money is only going for luxury things while for someone making $7.25 it's quite literally the difference between living in a car or not. I wonder if you could apply this to the rest of American society...
> you are likely already so rich that the money is only going for luxury things while for someone making $7.25 it's quite literally the difference between living in a car or not
This is a great insight which unfortunately doesn't get much attention in the inequality debate. I'm now rich enough to be in the top 0.5% of the world. The marginal utility/value of money is so low for me that I've begun valuing my time and optimizing for it.
I, however, do think about it once in a while. I could give away a non-trivial amount of money without getting materially impacted. The same money though will make a massive difference to someone below or around the poverty line. E.g., sponsoring a student, helping a business loan, etc., The capital that's getting accumulated in the richest top 1% people is such a massive waste that could help a huge portion of humanity.
Purely from a utilization (of money), perspective inequality is a suboptimal state, a massive one at that.
Have you heard of Giving What We Can - an international community of people who pledged to give at least 10% of their income to charities they think are most effective at helping others?
I really recommend focusing on cost-effectiveness when you give, however much or however little you give. See GiveWell for amazing research!
Ah yes, non-religious tithing.
That sounds ... dismissive, but I'm not sure what's actually supposed to be wrong about "non-religious tithing".
Should we give up not working at weekends because it's a "non-religious sabbath"?
10% is a nice round figure. It's small enough that many people can afford to give up that fraction of their income without getting into money trouble. It's large enough that many people will be doing a really substantial amount of good to the world if they give that much of their income to well-chosen charities. And, yes, it happens that some religions have used the same figure, which probably helps "give 10% of your income" seem like a reasonable thing to suggest.
Is there anything bad about any of that? If there is, I don't see it.
I don't claim that there's anything optimal about giving 10% of your income. But I don't see any reason to sneer at people for doing it, either.
I understand the sentiment but there are many good organizations that do positive things with people's money, like the ACLU, etc.
> This is a great insight which unfortunately doesn't get much attention in the inequality debate.
Doesn't it? What else motivates things like progressive taxation?
I may eat some downvotes for this but I really need to say it. It's a bit off-topic, too.
Please, do not start believing you will be making a difference through charity.
I observed rich people in the past that out of some half-conscious guilt started thinking they need to give back in some way. But they don't want to be inconvenienced by doing it personally or by evaluating which people deserve a donation or have an important material problem solved, by themselves. They prefer to unload their guilt -- or the need to feel good about themselves -- through a 3rd party. Basically, buying goodwill and good conscience with money.
That's not giving back.
I have known several rich people and they go through a very similar process. It's very saddening to observe.
If you want to make a difference with money -- go out there. Physically! Meet people with less. Talk to them. Ask them what is the hardest thing in their lives at the moment. Ask them what's a regular concern for them. Do that 100 times, or 500 times. Understand their struggle. Many would just squander the money in a week, even if you gave them a bag of it. Try and aim your efforts and money where it will truly count.
It's not an easy thing to do. But it's a worthy cause to pursue, much more worthy that a random charity.
Apologies for off-topic.
I strongly disagree. Financially supporting a charity is an extremely good way for someone with a lot of money to give back. The charitable person may not have expertise to distribute the money effectively, whereas a group who are familiar with the needs and thus where the money should go and how it should be used will use it well.
IMO, what you're saying is akin to saying: Criminals on the streets? Why pay to hire more cops when you can physically go out on the streets and BE the cop?
That’s a fascinating take. I interpreted the comment more as charities (in some cases) can be a poor startup vehicle for those getting into serious philanthropy. So why not spend some time getting to know an issue or a specific community affected by an issue, before donating. More like: Criminals on the streets, despite more cops? Why? Maybe this money can make communities safer or deter would-be criminals?
Very wrong analogy, sorry. You are misrepresenting what I said.
You are also very generously assuming that charities actually do what they are supposed to. Here in Eastern Europe where I live this has been proven to be false, many times. Are you convinced it's better where you live?
In the United States larger nonprofits have a great deal of public accountability. They have to file public financial statements and there are numerous watchdog groups which publish ratings on their effectiveness. Check out Charity Navigator for example. You can also give to organizations like GiveWell which are paid specifically to research nonprofits and direct funds effectively.
Have you ever known poor people for whom money and charity donations actually changes their lives? There are quite a lot of those all over this big world.
Serious answer: no. Never. And those who just received money like that squandered them in no time.
Granted this is anecdotal evidence but my overlook on a number of average people flaws -- and I am including myself in this group, I am not pretending like I am on some sort of a moral high ground, mind you -- indicates that most people are not... ready to receive money, if that's even the right word.
It's more or less "OMG money money money!!!!" out of them and they just mess up.
But truthfully, and this is not sarcasm, I'd love to be proven wrong.
I'm not quite where you are wealth-wise but definitely I have had that moment several times recently where I am re-evaluating hiring out work I would have just done myself in the past. I didn't have some big windfall, but pretty much earned and saved my way to wealth. Now it is hard to not do things like fix my own cars as well as bring my own lunch. I do them out of habit now. That's the discipline. Anyways, you don't want idiots working on your cars and you don't want to eat at restaurants all the time.
It makes no sense to me why the CEO and higher ups of the company I work at still work there. They are already set for life many times over. I can only speculate that they share a character flaw that they all see as virtuous. However it isn't--they are impeding someone's chance to "make it" in life, especially the older executives who could have stepped aside a decade ago or more. Even if you just look at the absurd salaries, it doesn't paint a pleasant portrait of greed in America.
There is a great absurdity to life in America. We basically work for the appearance of something that ends up being eaten away to a large degree. Taxes and inflation keep the goalposts moving away but we don't rebel because it's a magic trick and who doesn't like magic?
I don't work because I enjoy it but because it is a means to an end that is a better formula than some other arrangement. I would happily volunteer my time, travel, read, or simply do nothing if I could.
“t makes no sense to me why the CEO and higher ups of the company I work at still work there. ”
My theory is that they simply like their work and get satisfaction from it. They get paid a lot but they also work a lot and I can’t imagine anybody doing this to themselves if they didn’t genuinely like it.
If that were the case, most executives would stay put for decades and take pride in their company. Executives are mercenaries, staying for a few years and moving once someone offers a bigger slice of pie. Lots of people are addicted to exponential growth and wealth and blinded by the damage this behavior wreaks on everyone else.
The work argument is bullshit too. I'm convinced with a few months of hands on training, any passionate and competant person can do the job of a CEO. It is really a job that lacks any qualifications beyond managing a small network of people. CEOs don't work 100x as hard as someone working full time and a second job to make 1% a CEOs pay.
If it's so easy, why aren't you one?
We know the medically "sitting back, and enjoying your retirement" results in a quick death. Doctors now tell people entering retirement to "stay busy". It doesn't matter if you build birdhouses, play chess, or any of the other million things you can do, but don't sit back and relax.
I think most CEOs - used to working extra hours/hard have the least idea what they would do after they retire.
Because work is identity. At least in certain cultures, for better or worse.
My sibling and their significant other are those sorts of people - both made it very high up their respective professions by their early 30's, but when it's time for the Christmas get together, it's a pissing contest about "Oh, I'm only working 70 hour weeks, so I've had some relaxation the last little while." There's little identity outside of work, amassing the cash, then taking vacations with the money, and turning around and doing it all again.
There is such thing as ambition, and a desire for more power/money than you need. The human condition!
There is a much higher rate of sociopathy among corporate executives . It’s still a small rate probably, but it also likely means that some fraction of the people seeking these positions are doing so to derive sadistic pleasure from authority and power. Yes, they also want wealth, but they may persist even after money is no longer important because the position gives them power to soothe narcissistic & sociopathic tendencies.
I think doing something and then learning that you are good at it is pretty intoxicating in general. People who make it to the upper levels of a company are extremely good at playing the games you have to play and there is a lot of external validation in it too. I am just a little tech lead but I also get a kick out of my team of a few performing well. I can't even imagine how exhilarating it is to have an influence on hundreds or thousands of people and to play with millions and billions of dollars.
> It makes no sense to me why the CEO and higher ups of the company I work at still work there.
I expect a large number of middle/upper-middle class people would already be made for life if they just moved to a low cost area/country and simplified their lifestyle.
But we carry on because we want more.
> I wonder if you could apply this to the rest of American society...
At very large-scale companies, it doesn't always work as well as coud be hoped. A company ten times the size of this company may not have ten times as many extremely-highly-paid executives, but it probably has ten times as many people further down the pyramid.
For example, the CEO of United Airlines is compensated $18 million-ish. There are 88,000 employees of United. That's $200 dollars per employee per year. You'd have to find a lot more money than that before you started seeing benefits to average employees on the same scale as here. Even if you assume all the highly-compensated execs can account for 5x-10x that, you're still well short of $14k/yr.
What if you were to add up the income of not just the CEO, but all high level management or, say, those who make more than 500.000 a year? Honest question that I'm not sure how to answer myself, but I suspect the benefit to the lower ranks would be much more than the $200 a year.
That's an excellent question! Let's see if we can address it with some math.
I'll start with this: http://ir.united.com/corporate-governance/company-leadership
This says there are 24 executives at United (I counted). If you assume literally every single one of them is paid as much as the CEO is and redistribute all that money across the whole of United, then that's 24 * $200 = $4800. $200 was rouding a bit ($207 is ungainly to work with), so it's actually closer to $5000.
Now, $5000 a year isn't nothing. It's undoubtedly and unquestionably a life-changing amount of money for a lot of people struggling to get by on manifestly unreasonable and unfair minimum wages.
That said, $5k is also far short of the $14k number above. And we had to make several unreasonable assumptions to get here.
Realistically, the policy proposed here is freezing salaries and re-directing raises among executives. Most compensation would be unaffected. Further, not every executive will be paid as well as the CEO. Assuming generous 10% yearly raises and that other executives are paid around half of what the CEO is, you get a result that looks like $5000 / 2 = 2500 * 0.1 = $250 / yr.
Which isn't far from the initial result. (And still includes some unreasonable assumptions)
Thanks for the calculation! I think limiting it to the 24 execs is still a bit on the conservative end of things (as far as equalizing pay goes), but it's interesting to think on.
I'm actually surprised how merely broadening the calculation a bit already results in a quite significant amount. 5k is quite a bit!
Anyways, thanks again :).
What I'd like to see is what the numbers look like if you:
1) Pegged the CEO <-> lowest-paid worker (or contracted worker, so you can't just contract out the janitors) to no greater than 10 to 1.
2) Balance out the next few layers of management to reflect that cap.
3) And see what pay looks like for the lowest-paid workers.
If you don't like 10-to-1, maybe we do 20-to-1. Find a nice low ratio, though, and if people want to make more, they can run the business such that everyone makes more.
Very minimally different, I rather strongly suspect. You'd probably get larger shareholder dividends, but not that much larger.
There's this idea we're dealing with here that there's massive, virtually untapped, make-everybody-well-paid amounts of money being wasted on management overhead. It's a very reasonable idea. Managers at the top get paid an amount of money that's clearly and obviously incredibly excessive and has absolutely no connection to anything!
Yet, it might be worth considering that this might not actually be true in the important broad sense. What if there isn't a vast pool of money locked up in management salaries that would dramatically improve the lives of workers? What if there isn't the "fix the car money" or "send a kid to college money" another poster was rhapsodizing about for every worker? Might it be worth considering that in most cases, managers aren't actually paid vastly more than their direct reports?
Besides, there are plenty of ways to structure businesses that would get around something as simplistic as a compensation ratio.
There will always be another "But what if we run the numbers differently?" scenario.
I have no reason to believe that it's minimally different, and I'm curious what reason you do, aside from it's comforting.
When 10 people own as much as half of the population of the country, there's something there. Calling it not "a vast pool of money" might be semantics, because there's definitely something there.
When 10 people own as much as half the population, there's definitely a lot wrong with society.
It's perhaps worth considering that most companies might not replicate that structure internally. Given the numbers above, this strikes me as good reason to suspect that the approach you describe - while definitely a good idea to promote equality! - might not have the the numerical outputs you expect.
5k is definitely a lot!
You have to be wildly fantastical to get there, though. Meaning it's not a number that should be taken at all seriously as anything other than a work of numerical fiction. $250 is a number that's likely much closer to reality, though probably still too high unless you can find a much broader swath of people to freeze the salaries of.
Or, if you take a company like Google, give every engineer a 5% haircut, bring the chefs and cleaning staff and groundkeepers and building maintenance back into the company (rather than contracting out), and distribute the money and stock grants among the support staff.
That'd cause a big morale hit & big incentive for engineers to leave. Support staff are great, but at the end of the day they're not what drives growth for the company.
Eh, you take it out of the stock grant refreshes and the noise of stock fluctuations will make it rather difficult to notice in your total compensation.
EDIT: Also, you're taking income off the top of the tax brackets and giving it to someone at the bottom of the bottom, so you get a tax multiplier where you take $1 from me and give $1.50 to someone else. Also, you probably don't need even a 2% or 3% haircut off the engineers' salaries to make every support position a $100k/year job with full benefits and 401k matching, unless your engineer : support ratio is crazy.
EDIT EDIT: Yeah, pushing everyone to $100k/year is probably overselling the idea. You could still free up a life-changing amount of money for people making minimum or near-minimum wage.
Google's published numbers put their engineering headcount at below half their overall headcount.
I'm not sure a 3% haircut on engineers at Google would give them enough funds to make every support position $100k while also doing what you suggested and bringing all the contracted services in-house.
If we assume a 3% haircut on an average engineering compensation of $250k, and 45% of the organization, you have $6k and change per support headcount. And this is without bringing TVCs in-house.
Unless the support staff are all making right about 95k, this seems like it might not quite work out.
I actually don't have enough numbers available myself to support this, so this conversation is doomed to a lot of hand-waving.
However, one point of definitions, I am not using "support staff" to refer to "non-engineers", I am using it to refer to "workers who perform services that are not part of the company's operations, such as building maintenance, cleaning, and cooking". Most of the non-engineering staff at Google are not support staff, they are non-engineering employees doing non-engineering work equally related to the core operations of the business. Sales, partner relations, data center management.
I also don't know how much these individuals are payed, although I hope to god it is "well above minimum wage".
In any case, sure, you're probably right and you can't actually bring everyone up to SWE-minimum-wage (100k$+benefits) with a small haircut off the engineering staff, but a small haircut off engineering, distributed to the 10-20% of employees and contractors being paid the least is a life-changing amount of money. +$15k / employee / year to the bottom 20% of earners is "quit your second job" money, it's "get the car fixed" money, it's "have money to put aside for a rainy day" money, it's "send the kid to college" money, while $7.5k less per year is "retire three months later" money for an engineer.
A lot of the non engineering staff would still be other white collar jobs, no? Sales, admin, HR, etc. $100K is a high number OP reached for, but I’d think a vast majority of Google’s job total comp is in the 6 figures. Or close to it with some junior employees not in certain cities.
What you're saying makes rational sense, but people's egos are not rational. It's the principle of the thing: why tolerate a pay cut when there's a long line of companies in the valley itching for your skills?
At least for Google, IMO I don’t think it would generate long term consequences if engineers with this mindset who also aren’t in love with their work left the company.
Let the sociopaths leave then, they aren't emotionally valuable for a company. Plenty of people in the world outside of engineering take large pay cuts to work on something they believe in vs. taking a job that gives them the most wealth.
Being offended by a pay cut doesn't make you a sociopath, just makes you selfish. And "emotional value" is much less relevant to a company than engineering value.
I know lots of people focus on less profit-driven motives for their career, but I bet even more do not, especially at places like Google.
That's a terrible mentality. Exponential growth is not sustainable. The worst thing about technology companies these days is that putting out a polished product and covering overhead + emergency funding is seen as a failure. Products must be modified to extract money from the consumer at every turn, and the market cap must rise and rise. If engineers would leave a company because its no longer growth driven, then our universites have failed to teach empathy in their engineering curriculum.
That focus on increasing shareholder value above all else is definitely a regrettable inevitability of publicly-traded companies.
I know my engineering curriculum hasn't focused on empathy, or ethics much at all. Unfortunately you can't educate the selfishness out of humanity.
Last time someone tried to teach me empathy, all I learned is that they had a poor understanding of how emotions connect to actions. They assumed that if I had a real, true, genuine emotional experience of empathy then I would be compelled to take some specific action. Generally the action assumed is either something directly to alleviate the perceived pain or the one prescribed by the person evoking the empathy.
I find these notions curious, and rather at odds with how I expect thinking humans to interact with the world around them.
Perhaps there's something else you think our universities might be failing to teach?
Still not much. I didn't bother to look it up (it probably isn't public), but doubt more than 10 people at United make more than $500,000/year, so the amount isn't significant. Now if you said $200,000/year I would expect a significant amount of people make that. However now you are getting into the middle class where lifestyles have expanded to spend most of that money, and they would feel the pinch.
The latest SEC filing does not include executive compensation, having disclosed it at the latest shareholder meeting.
The 2015 SEC filing includes 8 named individuals in its executive compensation program. In 2015, they received between $500,000 and $1.25M in base salary, and between $1 million and $10.7M in long-term incentives. In addition, they received between 110% and 150% of their base salary in annual incentives (bonuses). Two of them received additional monthly cash payments of $100,000 and $40,000 for temporary duties in addition to their normal post.
Granted, that's only the top 8 individuals at the company, but if the lowest-compensated individual among those 8 is taking home >$2M I'm fairly certain that there are a lot more than 10 making more than $500k.
It's also still the case that that pile of money is not much divided among 88,000 people, but you could still raise the income of the lowest-compensated 10k employees by several thousand dollars, or fund employee daycare, or something other than give it to a small group of people.
At that point people don't value money for what it can buy them, they value it for what it looks like in their accounts. That's the problem.
I'm not rich per se, but I make enough that I can give away 10% of my pre-tax income to nonprofits without it materially impacting my quality of life, so that's what I do. If my society won't distribute wealth in a sane way, then I'll do it for them. If anyone else has similar feelings, consider taking a percentage off the top of your own salary and allocating it to charities that will help the less fortunate.
Yeah indeed. I wonder why more rich Americans don’t feel shame and embarrassment at such purchases.
There are studies that show being wealthy somehow decreases empathy.any people just stop noticing. https://www.scientificamerican.com/article/how-wealth-reduce...
The studies do not show that.
>In order to figure out whether selfishness leads to wealth (rather than vice versa), Piff and his colleagues ran a study where they manipulated people’s class feelings. The researchers asked participants to spend a few minutes comparing themselves either to people better off or worse off than themselves financially. Afterwards, participants were shown a jar of candy and told that they could take home as much as they wanted. They were also told that the leftover candy would be given to children in a nearby laboratory. Those participants who had spent time thinking about how much better off they were compared to others ended up taking significantly more candy for themselves--leaving less behind for the children.
Trying to take a single minor difference in behavior in a controlled setting and apply it to an entire demographic is bad psychology. Imagine someone doing this with a demographic distinction other than SES.
Do you also wonder why the entire Western world doesn't give extra penny to global poverty relief? http://www.globalrichlist.com/
Perhaps we're all just flawed, self-centered people trying to keep up with what our environment defines as the good life.
I agree that a lot of luxury is irresponsible, but at the same time I tend to view it differently depending on the situation:
An executive making a luxury purchase is different if their company is successful versus laying off lots of employees.
Buying a yacht can be part of an understandable (although expensive) hobby/lifestyle as opposed to something simply wasteful like buying solid gold toilet seats.
Building beautiful architecture, commissioning art, or adventuring/exploring (e.g. being the first person to climb X or to cross Y) can contribute to the vibrancy of society even if it isn't super practical.
They do. Then they go shopping to make themselves feel better.
Most Americans have smartphones worth about as much as a monthly salary in Europeans countries. Should people feel embarrassment about that?
I think most Americans have phones that are used, and not Apple, and not flagship. Europe is pretty divers so I don't know if you mean Greece ~€1000 or Norway ~€4000 but it still seems like a stretch
When I lived in the US I thought more Europeans lived in gorgeous architecture and had excellent public transport. Living in Europe, I find a lot of people think Americans are wealthier than reality (though if they're thinking of tech salaries, they're probably right - that EU/US disparity is enormous).
There are twelve countries in the European Union with an average net income of less than 1000 euro. The two poorest ones (Romania & Bulgaria) are at 515 euro and 406 euro. So it's not that of a stretch that Americans have phones worth more than a European monthly wage.
It is a stretch to say most Americans do, though.
Also, your original post needs a qualifier on the scope of "European countries".
Many Europeans in wealthier countries also have phones worth over 1000€. Buying iPhones is not exclusive to Americans.
Most? 50%? I don't think this is correct.
I understand that a popular philosophy is that they're rich because they deserve it; they're simply better people. There's no shame to be had; it's simply the natural order of things, it's morally right.
While I agree with the absurdity of rich people being "better" than the less wealthy, what makes someone "deserve" to be rich? I would argue that no one deserves to be poor, but whether or not it is morally correct to buy nice things doesn't sound to me like a debate worth having.
At what point does someone need to be ashamed of the money they make? Is anything over the $50k figure that is quoted as the maximum happiness per dollar figure considered shameful?
I don't think it's a matter of shame, but it's a matter of realizing that while it may have been hard work, it was also a fair amount of luck that got you to where you got to be, and that a lot of people put in the same amount of work, but due to the fates they don't end up in the same place.
What makes someone deserve to be rich, under this philosophy? I understand that's not part of it. Maybe some of them deserve to be rich for being clever, some deserve to be rich for working hard, there are many reasons. The point is that they clearly do deserve it because they are rich.
If it even goes into luxury buying, rather than to an investment account that will only enrich them and whoever is managing the account.
That's the thing, once you reach a certain level of net worth it's actually relatively hard to become poor again. You have to actively make really poor financial decisions over a long period of time.
Buy a boat for $100,000 and it'll cost you money to maintain and run.
Buy a boat for $100 million and it'll earn you money if you lease it out or take passengers during the 11 months of the year that you're not using it.
Maybe. It is hard to making money leasing your boat. You need to pay the crew and such. If the market of people wanting to lease a boat is down one year you still have to pay those people.
Note that a boat is a bad example on your part. There are lots of other things you can do that are more likely to earn money.
For that matter if you can afford a $100 million boat, the crew cost is a line item that you can ignore and thus your boat sits in port 11 months just so you can have your boat. If you really like that boat it isn't a big deal that you are losing that much money.
Interesting bit I learned a while back- boat operating costs run about 10% of capital expense, regardless of size of boat.
You seem confused. It is much, much better for the world if the money is invested than if it is spent on frivolous personal consumption.
It doesn't really make much difference.
If you invest it directly you support whatever you invest in. (you might or might not get it back depending on if the investment is successful) The best case you supported a new things that everybody buys, thus creating a company that employees a lot of workers.
If you buy luxury goods you directly support all the employees of the companies that make those goods, keeping them in a job.
Even if the investment choice was a life saving drug, the luxury purchase means those employees have money and they are likely to donate to research of life saving drugs.
Consider what happens to the actual resources in the different cases:
1. You spent the money on consumption. By definition, consumption means that whatever you buy ends up being less valuable after you are done with it (otherwise we would consider it investment - note that unsuccessful investment is also a form of consumption under this definition). Consider an extreme example, where you commission a massive yacht to be built for you, then use the yacht recklessly and sink it. All of the time of many people, all of the materials that went into building it have been wasted. In aggregate, we are all poorer as a result. The fact that the yacht company now has more money just means that they now have a relatively larger claim on a smaller overall economic pie than they did before.
2. You invest. Instead of spending money on yourself, you instead use the resources you have a claim to that the money represents (e.g. the people and the resources that could have resulted in a yacht for yourself) to create real value for others. This makes the overall economic pie larger (and also changes the distribution of claims on this pie that people have).
3. You donate money to other people, burn the money - neither consume nor invest. The overall economic pie is unchanged, but the distribution of claims on this pie by various people has changed.
Of course, there are caveats and nuances, but in general option 2 makes society richer in aggregate, option 1 makes it poorer, and option 3 merely changes who gets to decide what to do with the resources that we have while neither growing nor shrinking this resource base.
The money went to people who couldn’t afford even their own rent, you rich moron.
Read the parent. He was comparing investing the money vs luxury buying.
Please stop this. Instead of insults, why not ask a clarifying question and contribute to an intellectual conversation? Your instant conclusion is not always right.
Someone is making this luxury thing.
Isn't money used to buy luxury things supposed to stimulate the economy that would then stimulate the job markets and then trickle down to people ? /s
edit: forgot the /s
Money for luxury things doesn't do nearly as much as money for necessities, because luxury things are optional. The person with the money can easily decide to postpone the purchase and save the money instead. Or spend the money abroad, which doesn't do much for the local economy.
People who are short on necessities will immediately buy them when they get the money for them, because they are necessities. Money for the poor is an extremely reliable way to stimulate the economy, much more so than money for the rich.
Maybe saving money is as important as "stimulating" the economy? Maybe the type of economy is important too, i.e. luxury items that push the envelope wrt novel manufacturing methods or R&D
Maybe, or maybe not. I think the first concern is that everybody should be able to eat, have a roof over their heads, and have the freedom to focus on other things. I think it's definitely healthy for a society if the poor are able to save some money so their life doesn't immediately collapse on a rainy day. Once that's sorted, I'm all for investigating all the maybes.
Depends. Maybe not all "poor" are the same. Some choose not to stay in school, what do you do then? Guarantee food and shelter anyway? Why work my way up through the humiliation of McJob when I can stay home and prove my worth in Xbox?
Are we still talking about stimulating the economy? Then yes, making sure they have money to spend will ensure they spend it, increase demand, and grow the economy.
But yes, reject humiliating jobs. I'm not sure why you'd actively want people to be miserable.
But if you want a bigger picture: create better opportunities, and make sure they are accessible to everybody. The whole reason people withdraw from society into either drugs or gaming or whatever, is that, from their perspective, society has nothing to offer them but humiliation and misery. Heaping more humiliation and misery on them is not going to fix anything.
And if rich kids drop out of school and spend their time partying, they're also guaranteed food and shelter, and quite a bit of wealth on top of that.
This feels like the glass-makers fallacy
If the money if free, distributing it will stimulate the economy. But since that money comes from somewhere, any growth due to that distribution competes with the lack of growth due to wherever you took it from,
e.g If you took it via taxes, people have less money to spend because of the higher taxes.
If you took it from the rich because they don't spend it on things, they also don't invest it, meaning banks have less capital.
> reject humiliating jobs
serving fast food is humiliating to people with people who think of themselves as better
> create better opportunities, and make sure they are accessible to everybody.
like free school? and those people who choose not to attend?
You seems to think the only problem is lack of opportunity, it isn't. For example, if a community has a drug problem, a better economy isn't going to fix that.
> The whole reason people withdraw from society
people don't withdrawn from society fully, they just stop contributing to it. They need society for food, shelter etc. You are suggesting they get these things unconditionally, ensuring their withdrawal is indefinitely viable.
And drug addicts aren't simply poor, that's an entirely different issue.
> And if rich kids drop out of school..
So what? The state, and by extension the taxpayer, don't fund that, so it's none of our business how that works out. The state shouldn't micromanage all of society to ensure equal outcomes for all, and if it did it would need far more power than it has now.
A "rich" kid isn't guaranteed anything beyond what their rich parents decide, and I'm not going to tell someone how to spend their money.
In this case, we're comparing giving money to the rich to giving it to the poor. It's coming from the same place in both cases. In this case, it's quite likely that the financial problems of the poor people in the company has been hurting their productivity (the article doesn't really go into that, but it starts with that the company was stagnating). For the rich, their growth is just a number; they don't really need that extra money for anything, because they already have plenty of it.
Of course in general, it's best to use the money wherever it will give you the best growth. I think that in general, that will be where the most growth is needed; where the most shortages are.
> serving fast food is humiliating to people with people who think of themselves as better
Well, you were the one calling it humiliating. I've got nothing against serving fast food, but in general, I think jobs shouldn't be humiliating, and I feel strongly that people should have the freedom to reject humiliating jobs. A job is a major part of your life. It shouldn't be sucking your soul out, it should stimulate and/or empower you.
> You seems to think the only problem is lack of opportunity, it isn't.
It's not the only problem, but a lack of opportunity is absolutely a problem. And a very real one, for a lot of people.
> For example, if a community has a drug problem, a better economy isn't going to fix that.
No, but that drug problem comes from somewhere, and humiliating or punishing people isn't going to fix it. If anything, that seems likely to make it worse.
Yes and no. Give someone earning $7.50/hour more money and it gets spent and put back into the economy like you said. Give someone earning a base salary of say 500k more money and it gets put into a bank to earn them even more money, taking it out of the equation.
Some ideas for the US investor.
Invest the money with a payday lender to loan it out to your under-paid employees so you can grab even more of their paycheck!
Buy a block of housing that houses your under-paid employees and raise rents so you can get even more of their paycheck!
Invest in sub-prime auto loans so that your underpaid employees can get to work. Make money on them while the commute! Of course make sure that you diversify if you need to lay them off!
Invest is short term unsecured credit card debt of your under-paid employees. To goose the returns put them on a high deductible health plan and leverage what you lend to them with their own health account savings (free money). If you are generous give them a 401K match (which is required by law if you have the same) and leverage up using that money too!
Many of your underpaid employees will be on food stamps and located in areas without those fancy suburban grocery stores. Invest a quicky-mart and rake in the food stamp money at high margins! Don’t forget the liquor and lotto tickets as income boosters! If you underpaid employees can’t numb at least you can sell them a bit of hope!
Lastly have you thought about the medical field? A lot of your under paid employees are on Medicaid and I’m hearing good things about insulin!
The return of the company store ...
I don't support trickle down economics, but it's not the case that money in banks is just sitting around in a vault. The banks actually do stuff with the money. For example it's loaned out to real world businesses.
No it's not - banks are statistical multiplexers.
They don't take money and lend it out. They create money, lend that, and then remove that money as the capital (loan amount) is repaid - or when the loan goes into default.
> The banks actually do stuff with the money. For example it's loaned out to real world businesses.
Traditional loan business is not the core business of banks any more, at least not where the big profits come from.
Hypothetically here you would invest the 500k which is putting money into the economy.
Your right that socially its better for society for a lower paid person to have the $ how ever certainly in the UK some of that increase would get clawed back by reduction in benefits.
How does buying $500k worth of stock ("investing the money") stimulate the economy? Haven't I just purchased a paper asset from the seller? I guess you could argue that the seller who liquidated their position is now free to spend that cash on something productive.
That’s the argument for buybacks and dividends. If companies don’t have any NPV positive projects to take then the cash must go out to shareholders who do.
Aside from the fact that companies need investors there is also the question of investing in IPO's etc.
As far as investments, I'm no economist, but I'm skeptical that the money spent purchasing securities has an equal impact as someone buying goods and services locally. It seems like a disproportionate amount would go right back to other members of the investor class, who are going to use it on other securities, or else high-margin luxury items, and very little of that is actually going to escape that bubble.
I think you could argue that replacing benefits with direct income is still a "win" for society. If they're able, it's more efficient for people to meet their own needs than to be provided for through a bureaucratic process with lots of administrative overhead.
Nobody puts that money in a bank. They invest it in a mutual fund or similar, so it ends up funding businesses and their employees.
Investing in a mutual fund only directly funds other shareholders
This shouldn't be downvoted, because Trickle-down economics, or rather politics, is a big part of today's world, and it needs to be discussed. It tries to justify socioeconomic stratification and deregulation, which is nuts in this late-stage capitalist society. It shouldn't be supported, in my opinion at least, but it should be critiqued and discussed. It's too important to be downvoted out of the thread.
‘Trickle down’ theory is obviously just a bullshit excuse for people enriching themselves but companies can’t exist without investors.
At this point every time I read the "trickle down" argument I just think the person is trolling.
This is a nice gesture from this CEO/company. I wish more companies tried this.
That said, we shouldn't depend on the largesse/good nature/etc of a few rich individuals - if there is sensible minimum wage, sensible labor laws (and enforcement of these laws), sensible housing laws etc, we probably wouldn't be in this situation in the first place.
Putting so many laws into place about how much you have to pay workers / etc. makes it harder for small companies to even start. To me, seeing a company pay its workers more voluntarily is the best option, and also one I wish more companies would go with.
Have you noticed the behavior of markets, especially big companies? The only things they seem to be doing voluntarily are those that help increase their profits. CEOs are getting paid tens of millions of dollars while laying off thousands of people and closing factories. Companies do every dirty little trick to avoid paying for healthcare/pension. And so on.
We have already tried the "markets will fix things, markets will regulate themselves" blah blah strategy - it doesn't seem to work. When was the last time a big company voluntarily cleaned up its own oil spill or other environmental disasters?
There has to be minimum wage laws (and environmental laws etc etc) and they have to be sensible. It boggles my mind that you'd argue against this. If you want to encourage small businesses to start, there are other ways to help them - interest free loans, tax free zones etc
A company cleaning up their own spill isn't news worthy and so you never hear about it.
When I started here the first thing they sent me to a mandatory class: 2 hours to say (in different ways) "All the drains outside go directly to the river, so if you see a chemical going towards a drain you are to find the cover near to the drain (a sticker) and block that drain, then call maintenance to figure out what it is".
The above happens several times a year, and you never hear of it because we clean up our own mess. (almost all the mess is the brake line on a delivery truck breaking)
That was not a great example, because EPA enforcement actually is fairly effective and large companies do police themselves to some extent either out of fear of enforcement or as a result of a settlement caused by past enforcement.
It's useful to remember, though, what the world looked like before climate regulation. Rivers in industrialized cities were once choked with toxic effluent from tanneries and heavy industry. Even in Silicon Valley semiconductor manufacturers dumped heavy metals down the drain, contaminating groundwater and causing many billions of dollars of damage to be cleaned up by the taxpayer.
We don't know how much the EPA affected anything. In the past people didn't realize how bad pollution was so they didn't see why to care: people have been dumping trash in rivers for thousands of years to no noticeable ill effect (such trash was mostly organic matter that the fish could eat and in small quantities until the very end of that). Companies are directed by people, and they started caring: they did two things in parallel: start the EPA and clean up their act. We can only guess how things would be different if the EPA had been ruled unconstitutional (I can't even think how you could construct a parallel universe where the people running a company didn't care but the EPA existed and had teeth).
I do know the EPA fines are a cost of doing business to some. A few of them have decided that the public relations problems were getting too bad and cleaned up their act.
Well... bump the fiduciary duty to shareholders couple of stairs down the priority ladder and they may change.
You mean the mythical one Milton Friedman made up?
> There has to be minimum wage laws
Minimum wage laws, like employer healthcare mandates, are a feudal solution (specifically, viewing employers as feudal lords responsible for the minimal upkeep of their employer-subjects) to a capitalist problem. They are better than nothing, but worse than making minimal upkeep a public function, taxing appropriately to support it, and doing less to impose additional costs or barriers to mutually beneficial employment.
Not at all. Many laws only apply to companies with certain amounts of employees.
It is entirely possible to put in laws that are reasonable for larger companies to follow, but not hurt small business growth.
This is correct. My roommate worked for a landscaping company that had 5 employees. They did not have to pay overtime.
There are often overtime exceptions for seasonal work. If x% of your revenue is earned in y months you don't need to pay overtime. Landscaping likely qualifies as seasonal.
Benefits that cost small businesses more than large ones are a huge problem maybe the biggest problem, because it takes an already risky venture and essentially punishes people who want to pursue it.
For example health insurance costs 10x or more either via either the public exchange or for a small business to offer relative to corporations in the same market. That's a huge disincentive for employees to work for you.
If we were really interested in making it easier for small businesses we'd improve social safety nets, not weaken them further with re-regulation. We need to reduce the risk/pressure for employee rather than concerning ourselves with how cheaply we can exploit an underclass.
Yes, I'm quite sure people who have spent their whole life obsessing over every single cent, and whose core motivation is "getting more money to keep score" are going to just decide to start paying their workers more one day. Keep wishing! I'm sure we'll see wages just start to rise everywhere because of the power of your wishing.
I guess the important point he's making is regarding sensible minimum wages. If a company, whether startup or not, can't pay a reasonable minimum wage then it shouldn't be trying to hire.
Wishing for market players to act against their own self-interest, that is one strategy. In case it doesn't work, and you don't like minimum wage or complicated rules, another strategy might be to advocate for an universal basic income. I would even argue that this is less utopian than the first strategy.
But those 20 folks did receive their bonuses (if any). What they missed out on was the inflation adjustment (3-4% I guess). Now the math doesn't check out. If 4% of the wages for those 20 is $7.3M, then the total annual wages for the same people is $182M.
I wish he had shared the numbers.
Not every employee was at dead minimum wage.
$7.3M is the max if every other employee were making minimum wage. The amount it would take just to bring only the bottommost employees to the base wage is significantly smaller.
If you ignore taxes and say a raise of +7.50 an hour for a working week comes to around $14500 extra a year
For budgeting, you take the hourly x 2080, so $15,600 before taxes. I've filled out one too many government SF-424 forms back in the day.
I was told, when I was a contractor, to use 1920 x bill rate, so I had a realistic idea of the yearly with 4 weeks off.
I wish redistribution to the very bottom was a bigger part of the political debate. Our politics is currently focused on redistribution from the very top to the middle class. (Stuff like free college or universal healthcare would primarily benefit the top half, because those folks are the ones who are in a position to be accepted to and attend college, and aren’t already covered by Medicaid.) The math of that is tough, because 70% of all income is earned by households in the 50-99% income range (between $40,000 and $480,000 household income).
But the bottom 50% earns just 11% of all income, a little over $1 trillion. You could really improve their standard of living with even modest redistribution of the $9 trillion earned by the top 50% to the bottom 50%. But unfortunately middle class taxation is a complete non-starter in the US, even though that is how almost all European countries pay for their welfare states.
Because all politically profitable strategies at increases taxes for the rich are always about giving a benefit to the most politically powerful group: the middle class.
A society where the top 90% pitches in to help the 10% in distress is very different to the one where the middle 50% takes from the top 25%, and leaves some scraps to the bottom 25%. - Milton Friedman
Maybe, just maybe, the feds and the states (in the US) should pass laws like this: Employers are liable to the government for four times the cost of providing SNAP (f/k/a food stamps), public housing, and other welfare benefits to their employees.
1/3 of any fines collected in this way would be payable to citizens who report the problems.
It's totally unfair for the taxpayers to subsidize businesses by feeding and housing their underpaid employees.
The point of the draconian 4x charge is to make it less expensive for companies to do the right thing and quit with the starvation wages already.
But legislatures work for their donors, not their citizens, so it won't happen.
Hiring someone to work part time who has a spouse with a good full time job: totally fine.
Hiring someone to work part time who is a single mother: company gets saddled with massive fines.
Doesn't seem like the best plan.
You can probably work in some kind of FTE exemption.
It would need careful writing, otherwise it might introduce more precarity by encouraging employers not to offer full time contracts.
Indeed it might. No matter how careful the writing.
That’s interesting. I’ve always seen the promotion of free college and universal healthcare as one of promoting equal opportunity to all.
While the lowest income groups have historically had low college participation, I saw it as a reflection of a class of people not even daring to dream an impossible dream, as it would cost too much. Making it free would of course change the idea around it.
Part of the problem with the free college issue is that the extra time spent in full-time education is not free. It's another 3 or more years of not earning a proper full time wage. It's also (in my country) a time when you are explicitly not eligible for those benefits available to the unemployed.
When you reach school leaving age, you have a choice, start full time paid work now (with the social safety net if you can't find work), or spend at least 3 more years of full time education without that safety net, doing part time work when you can, possibly taking loans, all in the hope that you'll get a much better paid job at the end of it (which, nowadays, is not a given).
It also isn't just a case of poor kids with good potential not having the money to pay for higher education, but also of poor kids with good potential not having the grades to get into higher education.
Home factors (sleep, nutrition, reading at home, stress, extracurricular activities, peer pressure from the wrong crowd) make a significant difference to education outcomes in children.
Universal healthcare, on the other hand, is truly about equal opportunity for all. Illness is neither an indulgence for which people have to pay, nor an offence for which they should be penalised, but a misfortune, the cost of which should be shared by the community. No society can legitimately call itself civilized if a sick person is denied medical aid because of lack of means.
> Making it free would of course change the idea around it.
For every good private college I know of (and almost every good public school) prices are free or enormously close to so for people in the bottom quarter of incomes. Making it free for everyone might change the psychology, but not the reality for lower-income people today.
> That’s interesting. I’ve always seen the promotion of free college and universal healthcare as one of promoting equal opportunity to all.
The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread. -
Free college has always been a poor-to-the-middle class program.
The poor are eligible for Pell Grants, which covers 60% of the tuition of the average public college, and historically covered even more. Nonetheless, college completion rates for the bottom quantile are 1/4 that of the top quintile. There are many other barriers to college attendance for the poor. There is a large opportunity cost—if you are attending college, you can’t work to support your family. To the contrary, your family still has to support you. The social fabric in poor neighborhoods often are frayed, with gangs and drugs and crime distracting kids from school. As a result, children from poor areas often aren’t motivated to apply to college, wouldn’t be accepted even if they applied nor would they be prepared for college coursework if they were admitted. The end result is that most people benefitting from free college would be middle class people who don’t have those other barriers.
If you look at countries that have free college, most have college completion rates similar to or lower than the US: https://www.in.gov/che/files/DMatthews.pdf. The vast majority of the EU population lives in the U.K., Germany, Italy, France, and Spain. All of those countries have lower college completion rates among people 25-34 than the US, even with tuition being cheap or free in those other countries. While tuition is not a barrier to college attendance in say Germany, college is still primarily something for the middle and upper middle class.
Programs that theoretically offer “equal opportunity to all,” but where the middle class gain the lion’s share of benefits, is not an efficient way to better the lives of the poor.
(The same thing with Medicare for All versus the ACA. In Europe, the middle class pay for their own health care, and also subsidize the poor. In Germany, public health insurance premiums are 15% of income, with folks making above $70,000 being exempt from the public system. The ACA is similar—premiums are capped at 0-10% of income for folks making less than $50,000. That’s even more generous than the German system for folks making low incomes. The folks who feel the pinch are middle class people, for whom a 10% premium is a lot when they’re used to having a much lower tax burden than what they would have in Germany. Consequently, replacing ACA with Medicare for All would primarily benefit middle class people, especially if funded through a progressive tax.)
The plight of the poor (who are worse off in the US than the poor in the big EU countries), is unfortunately being used as a fig leaf. The American middle class (who are better off than the middle class in the big EU countries) wants the safety and security of a European style welfare system, but doesn’t want to pay a 40% tax as they would in Europe, a 20% VAT, etc. Even though you could dramatically improve the lives of the bottom 50% through targeted programs, progress on that front gets held hostage to a broader push to have the rich pay for middle class welfare.
It's also crazy to me that the whole framing is around providing money for investment when any stimulus to the end consumer is going to inevitably end up at the top (it's not like money flows many other directions in the long run in our current system).
Why does a company with only 500 regular employees even have 20 executives in the upper bracket?
Are they just overpaid sales people?
If the upper 5% at my company earned enough to double the wages of the other 95%, I'd be pretty damn mad about those leeches.
Especially if the company is already struggling.
According to glassdoor: 1 to 5k employees, 2-5 billion in yearly revenue
It's 500 entry level jobs, not all remaining 500 jobs. I presume there are many people between the bottom 500 employees and top 20 executives
What they have on the website:
In addition their board has 8 members.
* Chief Executive Officer * Chief Medical Officer * Senior Vice President, Human Resources * Chief Customer Officer * Chief Legal & Strategic Solutions Officer * Chief Financial Officer * President and Chief Operating Officer * Chief Compliance Officer * Chief Technology Officer * Chief Growth Officer
What the hell is even "Chief Growth Officer"? Asking for real.
Growth is either achieved organically or you are just forcing your way to a lucrative exit without bringing any value. Artificial and forced growth is toxic for the economy at large.
The rest of the roles mostly make sense although I believe some of them can be merged so further savings can be accomplished.
"Growth" is one of the most misnamed and misunderstood roles because, as you correctly noted, everyone in the company should be responsible for growth.
I explain to everyone about my role that it's not the responsibility of the Growth team to deliver Growth, it's our responsibility to put Growth more under the companies control. We act like a team of scientists to empirically try and understand what drives our growth and then build out systems, tools and processes to measure & improve those factors.
YC has a good guide on what kinds of roles a Growth team is responsible for and what good Growth people do: https://blog.ycombinator.com/growth-guide2017/
What you say softens it a little but IMO growth still should be organically achieved first and foremost and not chased after to please investors.
Bringing real value for customers should weigh much more than the approval of a bunch of golfers.
"Growth" in the terms you describe should be more like "marketing": what other market niches can we fill, are our prices reasonable, can we expand to country X, etc.
You have the definition that shalmanese mentioned, which is one potential org structure that might be what the Chief Growth Officer is in charge of.
I've also seen it used as a a C-level title for head of sales (along with Chief Revenue Officer). In the cases where I've seen the role be a head of sales, it usually indicated that the sales org took a very active role in dictating the rest of the companies priorities.
It's sort of like data science teams - some data science teams are truly data science teams in the traditional sense of the word, doing advanced statistical and machine learning work. While other data science teams are just doing basic reporting but under a more politically valuable moniker.
Yes, but investors don't care about profit or sustainability anymore, always just this perpetual, artificial growth.
A million years ago when I was young the IPO market used to be the end of the bullshit, you actually had to make money and have a long term plan. That is no longer true, the fictional growth narrative is demanded over actual money now.
As a counter example to your good old times consider the financing of the Suez Canal.
That's a lot of chiefs. What are they achiefing by having that many?
I wonder how many of these are legally mandated...
* Chief Executive Officer - someone shareholders can sue * Chief Medical Officer - someone patients can sue * HR - someone employees can sue * Chief Legal Officer & Chief Compliance Officer - someone anyone can sue * Chief Financial Officer - someone the IRS can sue * Chief Technology Officer - someone that can be sued in case of a hack
None. You could even require board decions for each expense but it will gridlock the company.
500 at the very bottom, many more in between
CEO CFO Head of Marketing Head of Sales Chief Security Officer Head of IT Head of Clinical Services. Head of HR
.. off the top of my head. Shouldn't be too difficult to add in the remaining posts
HR should be about 5 people in a 500 people company.
There's not much space there for a hierachy with much of a pay gap, unless you're going to pay a direct superior >500% more.
Same with most other roles at such a company.
I worked for a company that had about a thousand people in the UK and it had 2 people in HR (it was part of a much larger multinational).
Mind you - they didn't get involved in hiring at all - only processing people during acquisitions and handling layoffs and disciplinary matters.
> If the upper 5% at my company earned enough to double the wages of the other 95%, I'd be pretty damn mad about those leeches.
I'm pretty sure every large company in America matches that criteria.
> My HR staff suggested that we re-think our recruiting and training – which made sense – but I thought that we could do more. I thought we needed to reconsider how we supported and paid our team.
Sounds like a situation right out of Yes, Minister. HR staff not being forthcoming with the obvious answer of increasing pay to lower attrition rates from 30-40% due to the attitude of the board/CEO and anticipation of their negative response.
I've always wondered if companies even need a HR? Especially when they are huge separate departments.
At some point every company needs someone to handle those duties. Payroll & benefits, recruiting, onboarding & offboarding, these sort of things don't just sort themselves out on the side and quickly become full time positions that require dedicated individuals.
Most of HR is just meeting federal regulatory compliance requirements.
This is insane -- paying a $7.25/hr minimum wage to people you call "teammates" and expecting them to stick around is preposterous. In anything but a terrible economic downturn, minimum wage says to employees that you just want a body doing a job right at this moment, but aren't willing to invest any further in them.
Why would anyone stick around, or care to do more than the most basic job requirements? These jobs are totally disposable to employees, just as the employees are disposable to the company. If you don't want your employees to leave, don't treat them as disposable, and don't belittle them by pretending you're a team.
This guy thinks he stumbled on some grand new lesson, and it's hilariously terrible.
He took action and doubled the pay to 15/hr, then it further increased to 16.50/hr. I didn't think he was stumbling on a new lesson, your reading was a bit more cynical than mine. Simply put, he hadn't realized the plight of those on 7.25/hr until he heard what his employees were going through.
How else can we improve things if we don't allow people to change their views? Mocking a CEO for changing his view is the opposite of what we need.
I’m so torn! I agree completely with you and I want to give the charitable interpretation and I want this to set a good example for other CEOs. That’s how I was feeling reading the article, but all of a sudden after I finished I started thinking this is nuts. 500 people is not that many to be that far out of touch with employees. It’s one thing at Walmart or McDonalds, but at a healthcare company with only 500 to have 20 execs making millions and employees at minimum wage in the first place, and for the execs to not know what their pay ratio is -- meaning not knowing how many employees could be hired for the amount of money they’re each paid -- seems like more than an oversight, and is definitely one more example of the hundreds of stories we’ve heard about how crazy modern business has become. So, anyway, I agree with you and I agree with the parent comment too, it is insane.
Is because the top tax brackets were reduced so much under Reagan, it made sense to pay out all the profits to a few at the top rather than the hundreds or thousands below. Now is easier with computers but the execs got greedy.
> he hadn't realized the plight of those on 7.25/hr until he heard what his employees were going through.
That's the crux of the problem right there.
If you need somebody to start living with their kid in a car to get this grand epiphany then you are hilariously mis-prepared to be any kind of a leader.
To be a leader, you need a much better [emotional] education than this.
Or higher taxation and less inequality so that the people whose parents are on minimum wage end up being the people making the decisions, not the people whose parents are from rich suburbia who never had these issues in life.
That might help as well. But so far our civilisation doesn't work in terms of meritocracy. I am hopeful you are right though.
Totally agree with you. By the way, your user name checks out.
No one is prepared to be a leader. You have to learn on the spot. Admitting he made one and acting to solve it made him better than most of the leaders.
No, the current "leader / management" culture in MBA America is toxic. MBA speaking. They are toxic to their peers and double to their disposable employees. The "enlightened caring manager" is also ridiculed as a "libtard" and never promoted. Young managers are selected for their superior manipulation skills and lack of empathy.
Nobody is born into it. But there is a ton of education that can prepare you. And always aiming for minimum expense and maximum revenue is NOT that education.
You need to sympathise with people and honestly, I very rarely see that in any executive. So the selection process right now is definitely broken.
Nothing can teach you to be a leader other than leading.
Generally having compassion and not being extremely self-centered is a very good start though.
I'm not sure about the self centered part. It's not the people at work helping everyone who are promoted. Is the ones dishonestly taking credit for all that work who get the praise and promotions.
The self centered ones kiss up, slack off, ask others for "help" etc and don't get fired.
How much is a banana, like $10?
The problem isn't the $7.25 specifically, it's what he was expecting them to do for that rate.
Why would anyone deal with a minimum wage job being, I'm assuming, a call center operator when a) you can get paid the same to do far less stressful work or b) get paid more to do the same level of work?
Secondly, notice how he never gives updated turnover numbers - an omission of note, that probably means they didn't really improve much. This guy most likely hasn't solved any problem other than what bullet point he's going to put on his resume when he parachutes to another company.
I agree with you about allowing CEOs room for growth and increased understanding. This case though really points out the glaring problem we have today, it shouldn't take a more than a basic high school diploma to understand that $7.25 is an unlivable wage. I'm sure the CEO has had to go out for dinner with his family and is able to do quick mental math to realize that most of his employees would have to work for days to be afford a meal like that.
Agreed. It's funny seeing replies here. Making people feel bad about themselves doesn't get very far in influencing their viewpoints. A lot of smart people disagree with higher minimum wage. You won't reach them by saying stuff like "it just takes a basic high school diploma..." "you're out of touch..." But you will get padded-on-the-back by others holding your beliefs.
>Simply put, he hadn't realized the plight of those on 7.25/hr until he heard what his employees were going through.
The fact that he needed to hear what his employees "were going through" to justify paying them more than literal poverty wages is a problem. That shouldn't require a learning experience, it should be a day 1 realization.
I was watching a sitcom called Superstore a little while ago, features the employees in a Wal-Mart like store, and the protagonist got a promotion to the head of the store. There was a whole plot line about how her wage was now in the 6 figures, and I was incredulous until I did a bit of research - Wal-Mart store managers can absolutely make that much money while their employees live in poverty.
How you could make that much and expect loyalty and sacrifice from your staff who make a fraction of that, I won't ever know.
Supposes employer A chooses to pay their employees more than other employers. Employer B chooses to pay their employees less. Both employers are selling products or services that the purchaser finds the same, i.e. they have no preference for who they buy it from.
Employer B takes the money they save by paying employees less, and invests in newer, better facilities or R&D or whatever. Now employer B is selling a better product than employer A. Who will customers choose to purchase from? Who will lose business, and end up having to fire employees?
To be a successful business, compensation decisions can't be based on people's feelings. You have to consider when a new store or hotel or restaurant will come around and put them out of business, and stay ahead of the curve. You pay what you need to to get the job done. There are some good examples like Costco, but there are only so many people with sufficient disposable income who can afford to shop at Costco and similar stores, and they're not competing with Walmart/CVS/Dollar Store or other bottom tier vendors.
> Employer B takes the money they save by paying employees less, and invests in newer, better facilities or R&D or whatever.
In practice, Employer B takes the money and pays Employer B (ie the senior staff) with it.
Considering there is new development happening all the time, clearly there must be some funds leftover.
> To be a successful business, compensation decisions can't be based on people's feelings
Great, good point, so let's base it on what's equitable and humane instead. People aren't mad because their feelings are hurt, they're mad because they can't make ends meet or prepare for the future.
> so let's base it on what's equitable and humane instead
Those are feelings.
True, but Employer-B now has employees who DGAF about anything in the business, and often have an adversarial, even 'eff them! attitude to the business.
Employer-B's customer service and general care of its facilities & inventory will suck, and they will have much higher turnover costs, even if they have better products.
So, what is the relative advantage?
Moreover, the article was specifically about the tradeoff in executive pay vs low-end pay, and how a small sacrifice at the top made huge differences both for the low-level employees and for profits overall
There’s a reason Walmart and Dollar General are crushing others, and it’s because either their customers can’t afford good customer service or they don’t care for it and choose to shop there anyway. The proof is literally the fact that mom and pop stores and others like Sears went out of business, customers preferred saving $5 over good customer service.
As I prefaced above, this is true for business where customers aren’t differentiating between vendors except on price.
Most DG are out in more ruralish areas where there's simply less choice, and/or the cost of exercising that choice is more pronounced. Drive an extra 15-20 min to save 30c on milk? Probably not worth it to many folks (cost of gas is more, might make you late for work, etc).
Had a lot of discussions with the former manager of our local DG, and... while not 'eye-opening', it was interesting to hear the pressure she was under. $x/week budget to schedule all the staff, targets to be hit (dollar targets, merchandising display targets, etc). It's "retail", but the numbers she had to play with were pretty low given the volume, imo. FWICT, she wasn't on more than perhaps the equivalent of around $13/hr, although I do think there were small performance bonuses thrown in. But, I think she was 'salaried', so lots of 50-60 hour weeks for probably not much more than ~$35k?
This is a somewhat ruralish area, and this was also... 4 years ago? She's moved on since then, and we lost touch so I don't know if things have changed much with the newer managers or not.
FWIW, she did keep that store ticking over. She was a bit bristly at times with other staff, but ... there was a pretty noticeable decline in staff behaviour, sheving, cleanliness and overall experience at the store within a couple weeks of her leaving, and it's never quite recovered. I'm guessing had they paid her an extra $100/week she'd have stayed and continued going above and beyond, but... .hey... profits...
Yes but what he’s saying is that if you take that money from high executive pay then you can offer both. You have three variables rather then just two, most businesses ignore the executive pay. That’s where the example breaks down. Now if you want to keep executive pay high then yes a lot of people select price over service and you are correct. But those aren’t the only two variables then it’s a lot more variable. Pardon the pun.
The grocery business is, and has been for a very long time, a low margin business. You’re not going to get phenomenal service at any grocery store.
That said, anecdotally, I do the grocery shopping and prefer WalMart. The produce is better, there’s a larger selection, and I can get the odd household item while out for groceries without paying an extortionate price. I’m saving at least 10% on my grocery bill without even trying. Hell, Walmart even does free curbside pickup where the other grocery chain wants to charge me.
Enormous selection, and economies of scale (massive purchasing & warehousing ops reducing costs, lower cost/sqft of store area, etc.) are also reasons that Walmart, Dollar General, etc. can out-compete local stores.
It is not only lower labor costs. And they are clearly willing to spend on the appearance of customer service, paying 'extra' people to be greeters, etc.
Viewing it as if the people who produce your products and services are a mere cost instead of an asset is stupid.
And, just because a lot of "successful" finance types implement this view, dies not mean that they are also not stupid.
Oversimplifying is not a solution to most problems.
Don't know about Dollar General, but isn't Walmart successful because they're big enough to dictate terms to their suppliers and simply squash their smaller competition with convenience?
They started small at some point, and there are many factors contributing to their ability to offer the lowest price.
I have had no better customer service at Mom and Pops than at Walmart, maybe it is just my area.
People are willing to put up with shitty service to save a couple of bucks. Not everyone, but almost everyone. People prove it time again. See the success of no frills airlines like Ryanair and Spirit.
Amazon is a pretty good example of people willing to pay more for being able to return anything for almost any reason. There’s more comfort behind the click so more people buy noticeably more.
I still prefer Southwest over Spirit and any other airline but i’m just one anecdote.
For some reason in these scenarios the workers, who literally construct the product, are always framed as the adversary, and a sunk cost that needs to be avoided if at all possible. Workers are keeping the business from being as successful as it could be by being a monetary drain on the business instead of, in fact, being the business.
Labor costs are the biggest, if not one of the biggest costs for any employer, and it happens to be one the employer can sort of control.
Again, I’m not making anyone a hero or adversary, I’m just pointing out that some businesses can’t survive unless they compete on price, and that means lowering their own costs. It’s quite a blessing to be able to work in a high margin business.
Sounds like a great argument to increase the federal minimum wage so everyone is forced to pay their employees more.
In economic theory, this is what’s known as an efficiency wage. If you pay more, there’s more competition for your openings and you attract a better class of employee.
As other comments have pointed out, simply raising the minimum wage doesn’t accomplish the same thing. Instead, all those people who were marginal at $7-8/hour simply don’t get hired, and employers use automation or forego the opportunities that additional labor offers.
If your business is only viable when paying people below what they need to live, then your business shouldn't exist. The fact that you can do that now is simply people in power exploiting the weak.
Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. Generally in economics, making a business only viable through subsidies is a bad thing. It is much more efficient to give that labour to better businesses.
To provide a slight counter example: 1. Employee A produces 20 widgets an hour 2. Employee B produces 100 widgets an hour
There is a wage where employee A costs more than the value they create. By mandating a wage that is higher than their productivity they are simply not hired, they do not get a chance to gain experience/knowledge, they loose the chance to be as productive as Employee B.
The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder.
In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold.
> The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder. > In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold.
That's only assuming that the ladder is just that, and not a single rung. Time spent in most minimum wage jobs are hard to sell as giving you a leg up when moving into the higher professional strata.
The first sentence is the "how do we want society to work" and it is the right one.
Businesses are a thing we've invented to shuffle resources around; there's currently enough resources for everyone in the world to be fat and happy (the world produces 3,500 calories per capita per day), it's just so very unequally distributed that 1 in 10 working Americans faces food insecurity, and 1 in 8 Americans overall lives in poverty.
Anyone working a full-time job should be able to live comfortably, and if you can't work full-time, society should take care of you anyway.
> Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost.
How do you define "cost"?
The 'cost' of labour is the income required for such labor to maintain itself.
I.e. living costs + healthcare costs + groceries & other expenses + a little saving.
This is the base cost of a person, and thus the base cost of labour.
You're just pushing the bubble around under the wallpaper: who defines "living costs" etc? A person can technically stay alive in extremely spartan conditions.
For your second paragraph, that is a bit more complicated than simple economic theory might say.
For one thing, someone has to cook the fries, sweep the back room, and help customers. Unless you invent insanely cheap and powerful automation or raise the wage to a point that it's uneconomic to open a new store (and please take the employers who say "if you raise the minimum wage, I'm going to take my marbles and go home" with a grain of salt), it's hard to actually get rid of minimum wage jobs.
For another, remember that you will be injecting money into a sector of the economy that tends to spend it immediately. Minimum wage workers are likely to buy more fries and day care, causing more demand for other low-wage jobs.
But that’s exactly what happens. A marginally profitable store becomes an unprofitable store and shuts down. Fewer stores serving the same customers more efficiently are able to afford paying the remaining employees the new prevailing wage.
There’s a lot of slack in how many customers per hour a team can serve in a fast food restaurant. Look at In N Out burger at lunch time versus the average Wendy’s.
You can pay an experienced team 2x to serve 5x as many meals. But you’ll need 1/5th as many restaurants.
One interesting result of that is it becomes more viable to look for strategies that eliminate the employees altogether, eg the food-ordering terminals that are going up everywhere, as the relative cost diminishes with wage increase.
In such situations, it becomes an irreversible effect, as the cost to transition was mainly up front.
Which is generally fine. Because that is going to happen one day anyway. You want people to be paid well because then the transition becomes gradual. The most unproductive businesses and positions disappear first. People getting paid just over living expenses is the worst case scenario, because then everyone gets replaced over night as automation becomes cheap enough.
Those terminals were going to happen anyway.
One interesting question: is the tipping point for switching to automation in the range of the minimum wage? Does increasing wages move you across that tipping point, or is it cheaper to get rid of employees no matter what the minimum wage is?
The existence of minimum wage at all enforces the property — you can otherwise just keep lowering pay until its not worth replacement (eg india can get away with paying very low wages, so the threat of automatic replacement isn’t nearly as high).
So the real question is: at what point does minimum wage draw automation as a response?
And that of course depends on the economics of automation at any given point in time — if a human isn’t drawing enough value (compared to the cheaper alternative), then the only rational thing is to replace the job entirely.
But minimum wage is also independent of automation (or any other alternative) costs, which is why its a bit of a hamfisted solution — it ignores the possibility that human labor simply isn’t worth that much. So you get this awkward line where everyone above the line is better off, and everyone below the line is homeless — the line being how much value you can produce.
Using India again as an example, that line doesn’t really exist — you have a fluid scale of wealth, where the bottom-most aren’t jobless (we can always produce enough work, if the price is right; you don’t want a daily maid?), but they barely make anything, and they live a lifestyle that we as a first-world country would deem unacceptable, but they find acceptable (especially compared to the alternative — no job/money at all).
Notably the poor indian probably lives better than the poor american, because the economy of the poor is significantly more developed. Partly because there are so many poor people in india, and partly because their income is allowed to be so much more fluid.
So there’s also the additional question of whether minimum wage “starves out” the poor economy, compounding how bad life can be at the bottommost rungs of our society
They also have a caste society where racism is okay. But in America, everyone is supposed to be considered equal.
India is also a place where if you were to have 10 children and 6 of them survived, that’s good odds. In America, if you have 10 children and 1 dies, that’s a tragedy.
Source: I lived there for a few months.
...how is any of that relevant to anything under discussion, beyond the keyword “india”?
India, and every other third world country, has their (many) problems, but nonetheless, the economy of those living on a dime is far superior to whatever exists in the US.
Minimum wage, as all regulation does, strangles such poor economies (there must be an official term for this; anyone know it?) by virtue of creating a hard line where things simply cease to exist, be it half-functional cars, drugs, housing, wage, etc. Anyone above the line is better off (all options are now guaranteed to be at least decent), and anyone below simply has no options.
Whether we really want this depends on the context and subjects (drugs, banks are high-return targets for regulation; cars and wage perhaps less so), but that regulation deletes a market, by-design, should always be a part of the consideration, though it rarely seems to be.
Because if I had responded to everything you had said, I would have had to have written an essay.
About 100 years ago, minimum wage used to be a socialist concept. Now, all parties in America support the minimum wage. The only debate is whether it should go up or stay the same. Your view on minimum wage and absolute deregulation is so radical that only the anarchist party is likely to share your views. I swear, some people just want to see the world burn.
The economics term you are searching for is probably a “deadweight loss”. In theory, when a $1/pack tax is introduced on cigarettes, there is a decrease in the volume of cigarettes packs sold. That volume reduction numeric value is the deadweight loss. In practice, cigarettes are an “inelastic” good and nicotine addicts keep buying packs to support their nicotine addiction even when the price goes up by a dollar. Thus, the deadweight loss on cigarettes is much lower than with usual goods.
Regulation does not delete a market. Just because we have printed nutrition facts and safety checks on almost all of our foods does not mean people have stopped selling food and people have stopped buying food. Just because drivers must stop at stop signs doesn’t mean people have stopped driving. Just because banks are required to only safeguard 10% or more of their account holder’s balance doesn’t mean banks are unprofitable and have ceased to exist. These all just mean the equilibrium has shifted in some amount in some direction and the market has established a new equilibrium.
Until you realize that no level on minimum wage is adequate in SF, while $10/hr is livable in rural Arkansas.
It's not a silver bullet even with COL factored in. Higher staff costs? Replace them with automation. You can see the largest employers of minimum wage employees (eg. Mcdonalds) hedging against a rising minimum wage with kiosks to replace cashiers. At $15/hr for labor, those capital investments start looking like a mighty fine ROI.
The cost of technology falls much faster than wages rise.
Wages currently are responsible for about 4% of the cost of the burger. https://www.purdue.edu/newsroom/releases/2015/Q3/study-raisi...
So you're saying that by increasing the cost of the burger by ~5% some of their employees could double their salaries? That's great!
Cashiers helping one customer at a time are a bottleneck in a fast food restaurant. It's not that those jobs are eliminated, food still needs to be cooked and served. Kiosks allow up to 2, 3, 4 times the number of customers to order food at the same time (this also includes food delivery services who can order remotely). Kiosks are just the last part of efficiency that fast food restaurants have been developing over the last 50 years.
Increasingly surprised how we need all these various ipads/terminals in businesses. Seems by now technology should be able to push something to the customer's phone when they walk into the store and have them complete their order on their phone without having to install apps.
But employer B also can now remove employees due to the investments they made in automation - if they can remove the workers entirely they'll have even more money to invest in making a better product to edge out employer A. At the end of the day the worker always loses.
That’s a bit oversimplified. Automation doesn’t fix everything, it may not be a useful option regardless of how much money you just saved.
It’s more likely the best employees will move towards the company that pays more, along with their experience and know how, probably producing a better product. On one side you’ll have the best people and on the other side you’ll have ones that may be good but also very upset about the disparity.
I would still question if saving on personnel brings the most benefit in most cases. It’s short term benefit, enough for an executive to get the bonus. It may also be long term if everyone is doing it so an employee has no option.
> At the end of the day the worker always loses.
Rise up comrades, and shake off the bourgeoisie! /s
In Norma Rae, the main heroine is promoted to a supervisor (with a higher salary) in order to alienate her from others and suppress her pro-union stance. I suspect a similar dynamics can also happen in Walmart.
>promoted to a supervisor... in order to alienate her from others and suppress her pro-union stance
That sounds like a great way to encourage pro-union stances...
Also core to the main plot of "Sorry to Bother You".
Maybe there shouldn't be "bottom tier" vendors at all if their existence means pushing and exploiting an inequitable standard of living.
Labor market is a market, too.
Who will lose business unable to hire enough employees?
Unemployment rate in US is very low at the moment, well under 4%. Last time it was this way in 1970.
There are several metrics for unemployment. One of them is around 4%.
... And the last time that one was this low was 1970. There’s no arguing the US has been absolutely crushing it in terms of jobs creation for several years now.
But that's only one of the possible scenarios.
A different one is that employees leave Employer B for Employer A (or others). So Employer B makes more money per employee, but he has less of them now.
Employees under employer B would quit and work for employer A instead.
Employer A can’t hire infinite number of employees.
> There was a whole plot line about how her wage was now in the 6 figures, and I was incredulous until I did a bit of research - Wal-Mart store managers can absolutely make that much money while their employees live in poverty.
The problem is fundamentally this: A typical Wal-Mart store has around 300 employees. If you take the manager's entire $100,000 and distribute it to the employees, they each get less than $500/year, a raise of less than $0.25/hour.
Meanwhile you're never going to get a good manager for the price of a stock clerk, because it's skilled vs. unskilled labor. But you still need a manager.
And nice as it would be to pay all 300 employees $100K/year, that would immediately bankrupt the store. Moreover, it would be more than the amount it would cost to automate most of those jobs.
This is not a problem with glib or moralistic solutions. And the solutions that do exist are probably more along the lines of making housing cost less so lower income people can afford it, rather than chastising the employers who actually employ unskilled workers.
> And nice as it would be to pay all 300 employees $100K/year, that would immediately bankrupt the store
I don't think everyone necessarily expects $100k/employee. But many (most?) of them work for 30-35 hours per week - not out of choice, but because their schedule is controlled by the management. And they've generally been paid at or under $10/h. In the last few years there's been moves to increase that, but even moving from full time (which not everyone gets) at $10/hr to, say, $14/hr... That's $28k? Loaded cost with taxes and stuff might be ... $35k? $40k? Maybe? That's still a far cry from "we can't afford to pay everyone $100k". Sure, you can't, but that doesn't explicitly justify paying most people $9/h part time when they want full time (and the store has a need for full time staff, they just don't want to have to provide X benefits that come with full time).
> In the last few years there's been moves to increase that, but even moving from full time (which not everyone gets) at $10/hr to, say, $14/hr... That's $28k? Loaded cost with taxes and stuff might be ... $35k? $40k? Maybe? That's still a far cry from "we can't afford to pay everyone $100k".
Sure, but that's the point. Should the manager not get $100K just because there is no way the employees could? What if that's what it takes to get a good manager?
And even at the numbers you're suggesting, multiplied by hundreds of employees, turns into millions of dollars a year. That's more than the store's entire profit. And it's also still above the threshold where it becomes profitable to automate many of those jobs.
> Sure, you can't, but that doesn't explicitly justify paying most people $9/h part time when they want full time (and the store has a need for full time staff, they just don't want to have to provide X benefits that come with full time).
But whose fault is that? Employers generally shouldn't provide any "benefits" -- they originally came about as a tax dodge at a time when non-monetary benefits weren't considered taxable income to the employee, and that's still the primary reason they exist. Company cars disappeared when they became taxable income, employer-provided health insurance didn't because it's still a tax deduction. But in every case the employees would be better off with the equivalent in cash and the only reason they don't have it is dumb laws.
It's even worse for low income employees because the rules keep trying to "help them" by giving employers huge incentives to cut their hours.
Redistributing Walmart's store managers wealth is a really poor example when you don't even look at executive salaries or dividends.
> The problem is fundamentally this: A typical Wal-Mart store has around 300 employees. If you take the manager's entire $100,000 and distribute it to the employees, they each get less than $500/year, a raise of less than $0.25/hour.
Walmart has 2,867,125,000 shares outstanding * $1.96 per quarter * 4 = $22,478,260,000 per year spent on dividends alone. If you take all that money and give it to the 2.1 million employees listed that comes to $10,703 a year in additional wages alone. I haven't even looked at executive salaries or the costs from lawsuits Walmart gets from it's shady tactics. Or that many employees are part time and the per hour wage increase would be much higher than it indicates.
> And nice as it would be to pay all 300 employees $100K/year, that would immediately bankrupt the store. Moreover, it would be more than the amount it would cost to automate most of those jobs.
No one is asking Walmart to pay a bagger 100k a year. Most people are asking a decent wage for where they live. For most places that is $15 an hour... $30k a year. In California that is more. If Walmart can't pay that then maybe they deserve to fail and Costco, which does pay well and comply with the law, can take their place.
Compared to Microsoft or Apple, which can easily afford to pay the contract labor they use in place of union janitors, technicians, drivers, etc. Despite their margins they still use it and those people live in poverty because of it.
Walmart overall is a poor example as they push lower costs at every level including using dubious or illegal tactics. Certain property tax strategies, pressuring employees to work on unrecorded hours, pushing manufacturers to low cost sweat shops overseas.
These costs don't show up in people's wages, the products they buy, or a company's 10-k. They show up in the quality of life in our towns, the unemployment rate, and the budgets of our governments. Microsoft, Apple, Wall Street banks, even McDonalds is a better example. (McDonalds operating margin is 42% compared to Walmart's 3.34%. Source: MSN Money.)
> Walmart has 2,867,125,000 shares outstanding * $1.96 per quarter * 4 = $22,478,260,000 per year spent on dividends alone.
Where did you get those dividend values? According to this , annual dividend was $2,08 per share for fiscal year 2019.
You are right. Misread MSN Money. Google Finance by default shows quarterly, but G Finance is terrible now. MSN Money by default shows annual.
> Walmart has 2,867,125,000 shares outstanding * $1.96 per quarter * 4 = $22,478,260,000 per year spent on dividends alone.
Their quarterly dividend is ~$0.53/share:
Moreover, let's suppose you take that entire amount and give it to the employees. Then the company has zero ROI and the stock value drops to the level that it's profitable for corporate raiders to buy the company to liquidate its real estate holdings etc., and everyone loses their jobs.
Shareholders get paid because they invested money. You can't avoid paying them market rates unless you can operate without capital. Somebody has to pay for the land the store sits on and the trucks that deliver the goods. They have to get a return if you want to get an investment.
> I haven't even looked at executive salaries or the costs from lawsuits Walmart gets from it's shady tactics.
The numbers for top level executives will be even less valuable than for store managers, because they get paid hundreds of times more money but have ten thousand times more employees under them.
> If Walmart can't pay that then maybe they deserve to fail and Costco, which does pay well and comply with the law, can take their place.
Costco can't replace Walmart because Walmart customers can't afford membership fees and bulk purchases, or they would already buy at Costco. The thing that replaces Walmart is dollar stores. That is not an improvement for anybody.
> Compared to Microsoft or Apple, which can easily afford to pay the contract labor they use in place of union janitors, technicians, drivers, etc. Despite their margins they still use it and those people live in poverty because of it.
Those people live in poverty because the cost of necessities is high compared to the value of unskilled labor. If janitors at other companies make $8/hour, Microsoft isn't going to pay more just because they have more money.
To improve the lives of those people, what you need is either more demand for labor or more supply (i.e. lower prices) for necessities.
> Microsoft, Apple, Wall Street banks, even McDonalds is a better example.
None of these companies are good examples because they're all titans. The large majority of people work for small and medium businesses with low margins. Setting policy based on Apple and McDonalds is exactly how you get policies that only work for Apple and McDonalds. You destroy the small businesses that actually employ people and drive the demand for labor while you increase corporate profits and consumer prices from the lack of competition.
Forget about punishing Walmart and McDonalds. Figure out how to make it easier for the family owned corner store to better compete with them. Figure out how to reduce housing and education costs.
And yet there are stores like Costco which do pay their employees quite comfortable wages and manage not to immediately bankrupt themselves. How is this so?
Different business models. Walmart sells a 10 oz box, Costco sells a 100 oz box using the same number of employees which allows them to pay each employee more. They employ fewer people per quantity of goods sold.
Walmart could sell 100 oz boxes, but then they wouldn't have the same customers. People who don't have the cabinet space or the money to buy everything in bulk couldn't shop there anymore. Then some other discount store selling in smaller quantities would spring up to serve those customers and they'd be the ones who couldn't pay higher wages.
I am guessing they don’t expect loyalty but rather desperation and the need to pay bills. Use the person until they move on and get a new one. I make about 9$ an hour above minimum wage and I can not even fathom how a person on minimum wage survives.
That may be the pragmatic assumption, but I've worked my fair share of low paying jobs, and there's a ton of talk of being part of the team.
There's a difference between what leadership will say publicly & what they really mean. Reading between the lines of retail manager's inspiring speeches will reveal that their personal careers are directly affected by the store's bottom line, and they're certainly not going to explicitly acknowledge their employees' desperation as a motivational tool.
>How you could make that much and expect loyalty and sacrifice from your staff who make a fraction of that, I won't ever know.
All those Walmart store managers make 6 figures as you say, some as much as $250k, but the one thing they can always fall back on is they all started out as a low paid Walmart employee as well.
It doesn’t change the inequality dynamics but it’s better than something like this story of the healthcare execs making $300k+ bonuses compared to their minimum wage coworkers, where the execs never started out making min wage with the company...or consider the horror story’s of those certain tech companies who don’t even treat low wage employees as regular workers and encourage regular high wage workers not to socialize with the low wage workers.
I didn't know that Walmart store managers were that well paid. And to be certain, they pay a lot more than 7.25/hr to their lowest paid employees!
I would focus on dividends and executive salaries over store manager's pay. Executives want store managers to be loyal to control theft.
Walmart has 2,867,125,000 shares outstanding * $1.96 per quarter * 4 = $22,478,260,000 per year spent on dividends alone. If you take all that money and give it to the 2.1 million employees listed that comes to $10,703 a year in additional wages alone. I haven't even looked at executive salaries or the costs from lawsuits Walmart gets from it's shady tactics. Or that many employees are part time and the per hour wage increase would be much higher than it indicates.
Why do you think anyone expects “loyalty and sacrifice” for minimum wage at Walmart!
They will always ask you to work harder, put on more responsibilities, maybe stay a little late after you clock out to tidy up, always.
You’re fine up until that labor violation at the end there. The state will quickly fine them for that, and any manager worth $100k knows better than to ask it.
Well, most managers at any pay scale definitely act like they don't know better.
Walmarts min pay is a lot higher than min wage in most states.
How much would you expect a person to make who manages and is responsible for the entire operations of a store with revenues in the tens of millions of dollars?
And who perhaps spent 5-10 years learning and developing those skills by rising up the ranks in that company.
Economics is amoral. It doesn't know good from evil. The biggest mistake on the right is thinking that capitalism is Good. The biggest mistake on the left is thinking that capitalism is Evil. It just is. It's like thermodynamics. If you get burned by a hot stove, it doesn't mean physics is evil. And it doesn't mean getting burned is just your imagination, either.
Without intelligence guiding them, such systems can easily destroy themselves with feedback loops. Power differentials etc, in an amoral environment, lead to low-level employees getting screwed and owners/upper management getting rich. This feedback loop can eventually destroy a company, or a society.
So what I find hard to understand isn't that employees go along with this system that screws them (they need to eat, y'know?), but rather that they think it's good, that it's what's best for everyone, that maximized profits will be equitably distributed. We have an angry, populist working class that has completely accepted the systematic inequalities of neoliberal-flavored capitalism, and the socialist welfare-state hacks that come with it mostly to keep the whole thing from self-destructing this year at least. They're mad they're getting screwed, but think their bosses are completely right to screw them.
It's really hard to grok that.
> Economics is amoral
Such a thing does not exist. It is the study of exchange between individuals, any model that brings down morality to 0 will not be useful, practical or a applicable.
There is a reason why the most iconic political economists were all philosophers!
When you buy something from Amazon, is it an exchange between individuals? When you get a paycheck from a corporate employer, is it an exchange between individuals? No, that makes no sense. It's an exchange between an individual and an abstract legal/financial entity that engages in economic activity, but is in no rational way a human being. And what about B2B exchange? Clearly, it's economics, but when Wal-Mart buys a wholesale lot of shampoo from Proctor & Gamble, it is absurd to think of that as "between individuals".
> When you buy something from Amazon, is it an exchange between individuals?
Yes. You exchange your labor, divided into an unseen number of customers for another one's labor, divided into an unseen number of customers.
Remove individual interactions and see everything disappear. Its the building block of society.
Ok, even if you take humans as the motivating agent... how does it become a moral act? How is an exchange of money for goods/services an inherent good, or an inherent evil for that matter?
Is it done under coercion? Is the exchange forbidden, or punished? Is the exchange harming an innocent third party? Is the exchange guaranteed by a third party? etc.
I worked at a pharma sales company for a bit that was losing money. This was shortly after a startup I cofounded back in the 90's was sold, and was my first (and only) "senior exec" position after that transaction (afterward I went back to engineering). I remember attending a nearly four hour meeting where the senior executive team and CEO spent the entire time strategizing ways to increase the executive bonuses. I noted that perhaps we should address that after we solved the "losing money" problem, and you would have thought I had suggested kidnapping the CEO's mother. The lesson I took from that is that senior management can be _amazingly_ out of touch, and one hundred percent convinced of their own merit and entitlement, regardless of what's going on with the business.
The lesson isn't terrible, employee's should be paid more, but yeah to act like this is a grand discovery seems a bit absurd.
Somewhere there was a quote; Paying minimum wage is like saying: "I would like to pay you less, but it is illegal to do so."
> "Why would anyone ... care to do more than the most basic job requirements?"
They are called promotions or achievements for your next role. That's a terrible attitude to have above, and as someone who started out working minimum wage, people who had that attitude generally didn't do as well.
I'm afraid many people are just terrible at empathy, and imagining how it is to live a life very different from their own. As they say, the greatest privilege of them all is the ignorance of how privileged you are.
"minimum wage says to employees that you just want a body doing a job right at this moment, but aren't willing to invest any further in them"
Minimum wage says to employees that if slavery weren't illegal and it wouldn't be a PR nightmare to do so besides, they would totally pay you nothing and expect servitude.
"I figured out if I treat my slaves better than the plantation down the road, I would get more results!" -CEOs
Slavery is the problem, not the treatment. Making 200x more than the people who actually know how to do the job that makes your company run is ridiculous and the core issue.
I think it's great that this company did this, but this article is a puff piece. There's no real data here. He just states that the `business tripled`. What does that actually mean? Did it triple in revenue? How did increasing the entry-level pay result in that? And how did your non-entry level employees handle the lowest wrung earning far closer to their own pay? How many executives decided that the freeze wasn't in their own best interest and left? You can't just sacrifice and redistribute and expect it to be all roses. The details matter, especially if you're trying to convince resistant minds that it's a good thing.
It's a newspaper article, the aim is to raise awareness. People should read this and wonder if/how it applies to their company.
It's easy to forget how the lowest-paid in a company are often key people in having operations run smoothly. If they have trouble paying their bills, often on sick-leave, etc, it can have an impact on everyone else (causing delays, quality issues or security issues). Ideally, you invest in fixing both the technical and the underlying social issues.
With something this important, I'd expect something more substantial than the equivalent of "I stayed on this diet for a year and it worked! I shrunk by 1/3rd!"
Puff piece or not I don't get what you want from him? Scans of their IRS taxes? It's an article to show what they did, not a step by step manual, will every single detail. Now if he lied, he'd be called on it
How about something a little bit more than "it worked" and "business tripled". An analysis of contributing factors, maybe. There's so much bullshit in the media with people claiming things that are half-truths, or outright lies. It'd be nice for something like this to have some actual justification to support it. Warts and all.
If you take this at face value, those top 20 execs must have been extremely highly paid if freezing their wages allowed this to happen. (As math done by others shows - giving 25 people a 15K raise is ~350k. That means those top people were expecting raises of that much. Implies a crazy base)
I suspect there is more to the story. Either the raises paid for themselves via lower attrition, or perhaps came with added productivity. If you look up the company on Glassdoor, there is a lot of negativity towards management.
I don't understand something from this article:
"Our margins had declined and our revenue growth had stalled. ... I was becoming increasingly worried about our team and our turnover numbers. We are a people business and in some divisions we were losing 30 to 40% of our teammates within a year.
My HR staff suggested that we re-think our recruiting and training – which made sense – but I thought that we could do more. I thought we needed to reconsider how we supported and paid our team. For our entry level jobs – where turnover was the highest – we paid the federal minimum wage of $7.25 an hour (or less than $16,000 per year).
I took my concerns to my team. After many tough conversations, it became clear that we could not simply raise wages and hit our budget."
This just doesn't make any sense whatsoever. Recruiting and especially training has a very real cost for non-trivial jobs. Why would they pay minimum wage when they seem to be acknowledging that not paying minimum wage would increase their profits? This is something companies learned in the early 20th century. Henry Ford was the first employer to institute a higher minimum wage for his employees (doubling the average pay of the time). He didn't do it because he was a nice guy, he did it because he found that increasing the minimum wage reduced turnover which meant less spent on training and a general increase in productivity and profits. The same reason he would also go on to standardize what we now consider the normal 8 hour work day / 40 hour work week.
This seems very much like a story of a very poorly managed company. A minimum wage is appropriate when it's appropriate. When you're losing 30-40% of your employees, likely in meaningful part due to wage, and it's costing substantial amounts to replace and retrain for their roles - it's not appropriate. It seriously seems like at times that MBAs should be relabeled to masters of business annihilation because that's invariably where these incredibly myopic views on labor:costs:revenue seem to come from.
edit: confirmed. Here  is their board. And indeed it's just an MBA pack.
I used to work for some of those guys (very indirectly) when they used to work at Medco as senior execs making millions. They are smart guys that don't need $$$ at this point. In their defense, operations/call center leaders are very metrics and cost-driven at most companies. 50% annual attrition rate is business as usual. Driving down call volume, average handle time, and increasing first-call-resolution are name of the games. Call centers are viewed only as cost center at most companies. This trend has been changing in the past few years, so I'm glad they are also in the right side of the fence.
What a find! There are a lot of jobs that are complete bullshit, especially in finance and tech. That hot new app or device isn't a necessity, its decoration. Things got done before slack existed, so why are some brilliant people wasting their time and life working tirelessly to optimize slack? People might get promoted and pat themselves on the back for reworking some aspect of the snapchat back end, for instance, but are you gonna put that accomplishment on your tombstone? Will your project ever come up in university CS lectures, or even see the light of day to be cited by other researchers? The iPhone Xs doesn't do anything fundamentally different than the first iPhone, and people buy new ones every year to do the same emailing, texting and calling, and web surfing they've always done since their first smartphone. There are people who are striving daily to make missiles more lethal, advertising more addictive, consumption more rampant, the environment more polluted, and shareholder profit more exponential.
A lack of fulfillment in the majority of straight out of undergrad private sector career paths is what got me interested in grad school, to spend my time and effort working on a topic that's explicitly not bullshit.
> last year we broadened profit sharing to all levels of the company
So... do executives think this means something to people? This incentive seems comically out-of-touch. I guess because CEOs live and breathe stock valuation-based bonuses they naturally assume that everyone gets motivated the same way. But it seems like a stretch that strains credulity to think that someone making $15/hr and getting a microscopic slice of revenue would develop a sense of motivation from the fact that their personal call-center interactions might maybe increase their share of revenue by a few pennies a week through slightly happier customers.
I really hate articles like this. The company provides home health visits, requiring a nurse. Nurses don't work for $7.50 hour. Reading closely, it was for entry-level positions, probably in a certain department. Skilled positions would require market rates.
Translation: in an economic down turn they killed the bonus, raised the pay for customer service reps, and are now claiming a moral victory as if the growth was caused by paying people more.
This seems like the equivalent of a man walking up to a homeless person, kneeling and handing the man $5 while his wife takes a picture of the action... Oh! You have an ounce of humanity left in your slowly freezing heart, you want a cookie jackass? Had the top 5% cut their salaries in half and disbursed it equally to the bottom 5% then I might have been impressed but anything short of that and you aren't going to get me to bat an eye.
And this is exactly how wage rises should work: business-driven decision without any government intervention. Good job.
That's called being an startup, any other news?
me thinks the shitty 7.25 an hour is to blame.