Corporate profits, employee wages, and government assistance: is it really this simple??

Factual Questions
21

Furthermore - Wal-Mart’s profit margin is around 3%. Out of $470 billion in revenue last year, they made $16 billion in profit.

If Wal-Mart decided to transform itself totally, from a big, evil, multinational corporation, to a charitable organization that existed solely to better the welfare of it’s workers - it could pay each worker $7,000 more annually.

That’s certainly an appreciable amount of money, and it would undoubtedly make a difference to people’s lives, but even this totally impossible scenario (essentially turning Wal-Mart into a non-profit, worker-owned cooperative) would not elevate Wal-Mart workers to a middle-class lifestyle, or turn a Wal-Mart job into something that could support a family of 4.

22

Sorry, I’ve never known a company to pay under the table for those reasons. Even the day laborers you pick up in the Home Depot parking lot get paid more than minimum wage. Anyway, maybe it happens somewhere but I don’t think it’s that common.

23

Have you ever heard of fruit?

24

Part 3/3

So, in short, to answer’s the OP’s question: no, it is not that simple, and your understanding is fundamentally flawed. The problem is not that excessive corporate profits and/or management salaries are driving workers’ wages below the threshold of a living wage. The problem is that unskilled labor in the modern, global economy is not valuable enough to support what we call a “living wage” in the US.

The question that should be asked is, how much of a detriment to the economy would it be if workers were paid substantially more than their work is worth?

25

It varies by area and pay structure, but the average wages for season farm labor has held steady around $10.50 for years. The shitty part about season farm labor is not so much that it’s shockingly poorly paid, but that it’s backbreaking labor. We are actually facing a massive shortage of farm labor right now, as Mexico’s economy is improving and there is less incentive to come work in the US.

26

Lemme see. Wages go up regardless due to inflationary pressures. The company also incurs contingent liabilities for future retirees and separation benefits. This last point alone has caused many companies to go into the red, even while paying employees modest wages.

In nearly all income statements you see, salaries and wages make up only a small percentage of revenues, and often less than half of total costs. It’s a fixed cost that rises only gradually. Management would focus more on variable costs that go up and down, along with sales. There’s no reason why someone’s salary shouldn’t go up if the productivity also goes up.

Last, you will see that net profits are often just a small percentage of sales and even smaller than salaries or wages. So capitalists have ascendancy over socialists in the question of “where do the profits go?” The answer is it goes to expenses with salaries being a major component.

As regard Government assistance, I’m not qualified to write on that.

27

How so? How is the US unique in this regard?

28

Sorry for the typos. I was using my cellphone and I went a bit long:

There’s a misconception that profits are excess earnings. They are revenues in excess of costs, but that doesn’t make it a surplus. My parents small horse breeding facility is an LLC with two stockholders: Mom and Dad. Profits pay for the mortgage and to expand the farm and what-not. For a more public company, returns on investment are the payment you get for essentially giving out a very risky loan. They also are a major form of payment for many people in the company. The two founders of Google for instance each get an honorary salary of $1.00 a year, the rest of their income is from dividends.

If you sized two circles so one was costs and the other revenues and you laid one on top of the other, you’d see that only a tiny sliver is leftover for retained earnings.

Minimum wage seems to work more or less like any other price control. There is some movement on the margins as employers try to avoid layoffs whenever they can, but long-term for all practical purposes wage control merely results in unemployment. Of its illegal to work for $6.00 an hour, then that means you don’t work until you can find some way to be worth more than that. In the meantime, you are forced to take on extra debt because you can’t even find an entry-level job to pay for SOMETHING while you gain enough experience and prove yourself a reliable enough worker to get promoted.

It’s not about socialism vs. Capitalism in my view. The cold war is over. Its about implementing theoretically sound policies and continually monitoring them for cost effectiveness and feasibility. The school lunch program apparently does wonders with grades, something it was never intended to do. Minimum wages create structural unemployment. Something it also wasn’t supposed to do. So if it works go for it, but make sure you have a good, well-vetted proposal to back it up.

29

The bottom line net profits is still surplus; whether you plow it back as investment, or withdraw it for new investments, or for personal use. It is discretionary funds generated by your business.

30

All of the money of a business is discretionary. Why are the wages paid to factory workers not a surplus, but the wages to their managers and the companies owners surplus?

31

So why does a persons’ inability or lack of interest in learning engineering or business or some other high paying skill give them the right to make a slave of someone has the ability and interest? Look, I get that it sucks that someone isn’t that smart, or even worse, is a lazy piece of shit. But I didn’t just wake up one day earning a six figure managers salary. I spent a lot of money and time getting educated and working long hours at jobs I didn’t necessarily enjoy. So why should the fruits of that hard work go to support someone else just because they can’t or won’t do what I do?

It’s not that I’m heartless or unsympathetic. And I do believe that we as a society are justified in funding social safety nets or simply paying for common infrastructure. And I also recognize that not everyone gets the same chances starting out in life. But there reaches a point where your misfortune and bad choices does not give you the right to take money out of my pocket any more than it gives me the right to take money out of some multi-millionaires pocket just because I might want to live on Park Avenue.

32

I won’t pretend that OP’s question has simple answers (though others here do :cool: ).

More annoying than over-simplified answers are cherry-picked numbers.

Did someone else mention Wal-Mart? Do you think cherry-picking one stat that best serves your case proves anything? To the contrary it seems more like an admission that your case is weak? In a thread discussing large birds, would you focus on hummingbird stats?

Why not pick McKesson Coroporation instead of Wal-Mart? Repeating your arithmetic
51700000 / 36400 = $1420 per employee. Add in the next half-dozen highest paid McKesson employees after John Hammergren and get $3000 per employee, were these salaries distributed out.

No, that doesn’t prove anything. Especially since McKesson, like Wal-Mart, is an outlier. I just get annoyed when Dopers post deliberately misleading statistics.

33

At a certain point, there will be a growing list of people who can do no useful work for anyone - computers are better.

If we don’t “take money out of your pocket”, what can be done? Do you want those people to just die?

Keep in mind that it’s a progressive process - at the end of the process, software will be able to perform every job, including yours.

Another factor is that with increasing automation, the other side of the coin is the actual economic cost of “socialism” keeps going down and down. This is because if automation is doing most of the actual work, the real cost of feeding the poor keeps diminishing.

34

Anyone old enough to remember Margaret Thatcher and the miners’ unions fighting it out?

My father was no raving socialist, he left for greener pastures when the socialists got out of hand after the war. However, he told me about how the mines got that way and the sense of entitlement.

Before the war, going back to the industrial revolution when the coal mines opened - forget that idyllic “How Green Was My Valley” crap. Miners were paid a pittance for an often-fatal job in god-awful working conditions. You worked at the bosses’ say-so. There were plenty of people trying to make a few shillings, and the foremen could pick and choose.

The miners would show up for work each morning, and the bosses would decide who would get to work that day. If you’d pissed off the foreman, or your wife had annoyed his wife last Sunday, or he’d heard some rumor - well, maybe a few days without pay would show you who’s boss. Once you were suitably submissive, you’d get a chance to work again. Meanwhile, the foremen got decent wages and the bosses commuted back and forth to nice houses in London so their wives could shop.

Any wonder that when the Labour Party won the elections after WWII, the first thing they did was nationalize all the mines away from the rich bastards and give the unionized workers regular employment and a living wage. When Thatcher wanted to end the guaranteed work, the leaders of the union were those who could still remember how it used to be. They fought the end of the guaranteed work rules with a vengeance.

So those are the two extremes. On the one side, everyone’s job is like the day labourers huddled on the street corner wondering if they get paid and get to eat today. (Which is where we seem to be going. Any contract labourers on this site?) On the other extreme, the government guarantees that you get paid, even if the work loses money.

A job is something that you should be able to count on, to ensure stability in your life, to be able to afford the good things. Labour should not be something like an order of groceries - “today we’ll order 50, tomorrow we’ll only need 20.” Somewhere between the two extremes must be a happy medium.

As for executive pay - they pay themselves that much because they can. The pay is set by the boards of directors, which oddly enough are the same top 1% as the executives. There is no restraint. It’s like the professional sports pay scals, but without the pesky burden of actually having to deliver wins. If your “team” goes bankrupt, you get a nice golden parachute - or a special bonus to stay on to ensure continuity.

35

Say it takes 20grand to live in america, and currently citizen x is getting 10 grand from working at walmart and 10 grand in benefits from the government. Further suppose that the value of x’s work to walmart is 15 grand per year. If the government forces walmart to pay everyone at least 20 grand than walmart can either fire x or raise prices. Since the only reason people shop at walmart is low prices, raising prices would be suicidal for walmart. Thus the only thing for walmart to do is fire x. Now instead of the government paying 10 grand in benefits to x they pay 20 grand. The government is out the extra 10 grand, walmart is out the value of x’s labor, and x is out of a job. Everyone loses.

I would object to some of your terms, no one is allowed to keep profits. Profits are earned. No government is forced to support its citizens that is a choice.

36

I will try to make this as factual and non-tendentious as possible.

Once upon the time, there were no corporations. There were businesses, but mostly small. And farms. Workers made enough for food, clothing, and shelter. And probably little else. No car, TV, or computer. Then corporations formed. They had total control over their workers and the workers had little power over the corporations. Then workers had the idea of organizing. Needless to say the corporations fought back. By getting laws passed and hiring goons. In the 1930s, Roosevelt tried to stabilize things and the Wagner labor act was passed.

There were three kinds of shops: open shops, closed shops, and union shops. In the first, union membership was voluntary and the unions were weak. In closed shops, you had to belong to the union in order to be employed. This can be, and often was, abused. In Philadelphia in 1960, the constructions unions acted (illegally, as you will see) as a closed shop and prevented blacks from memberships. Even the builders wanted to hire some token blacks to buy peace, but the union resisted. Eventually, some settlement was reached and a few black tokens got construction jobs. The union shop arrangement allowed a worker to be hired and then join the union and the union could not refuse them.

The Wagner act legalized all three arrangements and the unions, I believe, had the power to enforce whichever type of shop they wanted. The midterm election of 1946 elected a strongly Republican House and the Senate was in the hands of the Republicans + Dixiecrats. They passed the Taft-Hartley labor act which did two important things (and many other things). It outlawed the closed shop and they allowed individual states to outlaw the union shop.

Southern states did the latter and used it as a lure to move a lot of manufacturing to the south and has resulted, over the years, in the near destruction of the unions and the current situation in which there are not enough jobs that pay a living wage.

Quebec allows closed shop and when a Walmart unionized, they promptly closed it. Of course they denied that the union was the reason. Take that for what it is worth. One thing I don’t understand is why no Walmart is unionized even in states that allow union shops.

Over the years the corporations have grown bigger and more powerful, while workers have grown weaker.

If I were dictator, I would consider abolishing corporate taxes (which get paid by the consumer anyway), but taxing all income, earned and unearned, at steeply graduated rates. But capital gains would be taxed only net of inflation (as happens, I believe, in Britain). But then I think supply-side economics is nonsense.

As for economics, I am a Josephian (the biblical Joseph). Have budget surpluses during the fat years (e.g., the late Clinton years) and deficits during the lean.

37

That is absolutely not true and the fact that you would decouple “groceries” and “labor” as if they are two separate and unrelated entities demonstrates a fundamental lack of understanding of economics.

A “job” is labor that you provide for someone else, for which in exchange, they will give you compensation. Just as you morally shouldn’t be forced to provide your labor without being compensated, someone else shouldn’t be forced to provide compensation for you if your services are no longer required.

Groceries do not just materialize out of thin air. They are the end result of various people’s labor - farmers, truckers, grocers, and everyone in between. If tomorrow we suddenly only need 20 units of groceries instead of 50, why would we continue to need the same number of farmers, truckers, grocers and so on?

People abstract large corporations as these huge monolithic entities with unlimited resources. But they are not, as evident by the fact that sometimes they go out of business when they aren’t run properly. And a lot of them would go out of business if the government legislated that they had to continue paying workers into perpetuity, even if they were no longer producing meaningful work.

Ultimately, if you pay enough people to not do work, the value of what you are paying them with becomes meaningless. Shuffling dollars back and forth doesn’t create groceries if there is no work associated with it.

38

I posit to you that on a sliding scale of major parameters of a modern society such as Unions, Minimum Wage, Healthcare, Political Landscape (left/right paradigm), Taxes (progressive/regressive), income inequality, Corporate/Individual Law and few others, US has the most reactionary stance of all the Western democracies (US, Canada, Nordic countries, West Europe Continental and UK).

It doesn’t have to be that way.

39

I did not cherry-pick anything. Wal-Mart is the company that is most frequently accused of not paying employees a living wage, along with McDonald’s, whose numbers turn out similarly. I have no idea what the hell McKesson is or does, and I’ve certainly never seen anyone accuse them of not paying their employees a living wage and expecting the government to pick up the tab, which is the accusation frequently leveled against Wal-Mart and McDonald’s, and the topic of the OP.

40

This is a tough one to find a solution to. The seemingly obvious situation would be to raise the minimum wage.

On the one hand, a lot of fast-food type jobs are filled by high-school kids. They aren’t working to put a roof over their heads or food on their tables, as those things are provided to them by their parents.

Those kind of jobs are often a teenager’s very first introduction to the working world, so it can be a valuable experience for them. If you raise the minimum wage, there would be less of an incentive for those restaurants to hire teenagers, and so more teenagers might not be getting that work experience which can be one factor to lead to higher paying jobs later on.

On the other hand, it isn’t right for a business to expect full-time employees to work without paying them enough to live on. A person should not be expected to spend every waking hour on work, and only sleep four hours per night, just to make enough money to survive. It certainly isn’t right that the rest of us have to pick up the tab to support someone because employers don’t want to pay a livable wage.

I think a minimum wage increase is the best way to go about solving the issue, but I don’t think it will be without near-term consequences; I just think the long-term benefits will outweigh them, especially if we index it to inflation.