That is exactly one of the problems with unions. Company A doesn’t get the best employees because some unions make it nearly impossible to fire incompetent /lazy workers and actually makes life worse for the hard workers. Company B will throw your ass out on the street in a heart beat but if you perform well you can actually receive a raise in pay over some of your co-workers who aren’t as motivated.
The year 3 profits are way over the top in the example. But no company succeeds at that level unless everyone is kicking ass. Even oil companies. Is it really wrong to recognize unexpected performance? The high tech companies I’ve worked for have had discretionary awards programs for people going above and beyond the call. However, the right way of doing this is to have a bonus program based on profits or other criteria, defined in advance. All the bonuses I’ve ever received were like this.
The money was out of whack, but so were the profits of the company. And think of it in practical terms. How hard are the workers going to work next year if their company made a bundle, their execs made a bundle, the shareholders made a bundle, but they got frozen out because they shouldn’t exceed market wages. Any worker with marketable skills will be out of there, and everyone else is not going to lift a finger beyond the basic needs of the job to make the company as successful in year 4 as year 3. Why should workers who don’t get more than the average no matter what put in more than average effort?
Isn’t that like saying the way to win at gambling is to always pick the winning horse? There is always a skill set that is more in demand at any given time, but it is never always the same skills. I remember in the 1960’s aeronautical engineers were top drawer, but by the 70’s, they were pumping gas. Same with IT jobs after the Bubble burst.
Are there skills that are not subject to the vagaries of the market? It seems to me that as one skill becomes more desireable and higher paid, more people will acquire that skill and fill the demand, holding down wages again.
Incorrect. IT workers automated the pumping gas job out of existence. 
And when a segment crashes, no one studies it any more. IT execs lay off people and send jobs to India, and then moan and groan about the shortage of people studying it. Many of them want other companies to train employees in specific skills so they can hire people who can start work without any training.
I think part of the dislike is a misunderstanding on wages…each side thinks the other side is raking it in.
UAW workers don’t make $70 an hour - but that number gets bandied about.
And someone who just put in four years of college and gets out with an accounting degree makes around $20 an hour…but is salaried and works a 55 hour week every time they need to close books.
Sure there are exec’s pulling in millions - and people with experience pulling in good salaries in “skilled” jobs. But there are also well paid plumbers and electricians.
from Dangerosa
yup - Joe the Plumber in Ohio makes over $250,000 a year — I heard him tell that to the next President of the USA.
Not necessarily. What if the responsibility of your worker was to place a penny on a table? (Not saying this is what UAW does)
Would your long v. short term analysis be right? In other words, like the first poster said, you find workers with the same skill set to do the job for 17 bucks an hour, and the other company pays $30 an hour due to existing labor contracts (not because of market forces) then who will come out on top?
McDonalds does well with $8/hr wages. What if I opened a fast food chain across the street and paid my kitchen help $150,000/yr with stock options, health bennies, and a company Lexus? How do you think I would compete?
Do you feel Fair Trade products are immoral?
Why is it immoral to treat your employees like people? The bonus checks where based on how long each employee worked with the company. The more labor an employee put into generating wealth for the company the more they got. It’s a token of appreciation for hardwork.
What’s immoral is how many companies forget that and treat people like machines.
You could afford to hire professional highly skilled chefs with that so pretty good in the right neighborhoods. You could deliver a premium product you could charge a nice premium for.
Quality pay gets you quality employees.
I guess that’s the crux of the confusion. The workers are not “frozen” out of those profits. There is already a mechanism in place for the workers to share in the profits! They can buy stock, just like anyone else. They don’t need the company’s permission to become shareholders (I emphasized your quote).
The execs made a bundle because their contracts had their bonuses+incentives spelled out and/or they have stocks as part of their compensation. (E.g. Apple Steve Job’s $1.00 salary but most compensation is stock+bonus.)
The shareholders made a bundle because sharing the profits is what the very definition of what stock ownership is.
The workers didn’t make a bundle (or “frozen out” as you say) because they decided not to take the risk and buy stock.
It’s about deliberate decisions and tradeoffs. I guess people can’t wrap their head around this.
Some workers can’t buy stock because they can’t afford it. That’s true. But many workers don’t buy stock because it’s “scary, risky, don’t understand it, and I may lose all my money.” They place a premium on their fear of loss but place no premium on other shareholders’ ability to overcome that fear and get the benefits of profit distribution. Explain that paradox to me.
I think you are a bit off here, “some workers” should read most if we are talking about the vast majority of low wage jobs.
and I guess the best way to illustrate would be to flip it around, Microsoft employees were often paid in stock in the early days, are you saying that a secretary that made a quardribillion dollars on her stocks deserves it but one who simply got paid a quardribillion doesnt?
you seem to be arguing very hard for the status quo to remain the same in spite of the obvious and truly massive imbalance in wage scales across a company like a large auto maker. at one end you have guys who after all is said and done cost the company around $30 per hour and at the other you have guys costing the company close to $5,000 per hour. please explain to me what kind of ungodly skills you have to posses to justify that kind of difference in pay rate…and dont say contracts, that just says some bozo was convinced to pay that wage, it doesnt justify anything.
Even if they are shareholders (and I never said they weren’t) the percentage ownership they’d is tiny compared to the influence they had on the company’s profitability. A couple of other things. Assuming they were making market wages, they might not be able to afford a lot of stock before the good year. Second, any reasonable financial planner will tell you that it is a terrible idea to have a lot of stock in your company, because economic conditions which might cost you your job might also kill the value of the stock. I know someone who got laid off from IBM who was badly screwed by not following this rule. Half my 401K was in AT&T stock when I left during the trivestiture - I lucked out and did very well, but I’ve never made that mistake again. I have stock from an ESPP plan in my current company, but I tend to dump it when the holding period is over, which is lucky considering the price now. So your advice to these workers is awful.
Jobs is a special case, being rich from the first go-round. Giving all employees a share of the profits, not just the CEO, fosters loyalty.
You were wrong about dividends, and you are wrong about this also. Dividends do not in general fluctuate with profits, but are constant from year to year, with minor changes. Stock is ownership in a company, and only indirectly has anything to do with profits. Many companies, especially tech ones, plow their profits back into the company. In the short term share prices may go down if the profits are not as good as expected, and may go up if the loss isn’t as bad as expected. In the example, for all we know the big killing was a one time event, and stock prices might tumble as investors expect much lower profits next year. There are many profitable companies right now whose stock price has been slaughtered due to general market conditions.
Why don’t you talk to your financial adviser about this. Your view of employee investment in stock is wrong and dangerous. Remember Enron? If you don’t know about diversification, you shouldn’t be offering any advice at all.
My point being that some skills are better than no skills. If all you can do is manual labor, that’s going to limit your options and income. If you can type, use computers, fix stuff, hold a professional license or otherwise do things that other people can’t, you’re in a better position to compete for higher wages.
A doctor can dig ditches, if that’s what he has to do. It doesn’t work the other way around.
I’ll try to address the various points that other posters made in response to my original comment.
Somebody was interested in what exact standard I thought a living wage was. One should be able to maintain a studio/efficiency housing, food without assistance, transportation allowance (since most of us do not live in big cities with mass transit), minimum medical and auto insurances. Assuming the low end of everything, about 20k a year or roughly $9-$10 per hour, given a full work week. It does not allow for dependents, nor should it. It does not allow for rainy day costs, or sick grandmothers. What it DOES ensure, is that someone working a full time job is making AT LEAST enough to meet a minimum standard of living independently.
I would argue that any company should have to pay this wage as the minimum. Jobs that cannot be justified to this cost should be cut, rather than keeping people in positions with little to no room for advancement, while monopolizing all of their time and not paying them enough to put food on their plate. While this model would slow business, and be damaging to an already poor unemployment situation, it would ensure some level of corporate responsibility in terms of growth. If you can’t afford that new guy, then you either don’t need the position, or the pay comes out of the bottom line, not the minimum workers pockets.
Come for a ride in Dearborn Michigan and I will show you schools that have one function, to train and retrain workers in Ford and the Unions. They are like 2 year colleges but specifically train employees to be better auto workers. You guys have the idea some one comes off the street and becomes a useful worker.Your vision is so 1940s.
Just spend some time in an auto factory. They are huge,loud and can be dangerous. The machinery is complicated and it can cost you fingers if you make a mistake. Many people have been hurt and killed in plants. There are not very many line worker jobs. Most repetitious work has been automated. Robots provide more consistent welds and don’t miss any ever. They turn a screw to the same foot pounds every time. They spray paint smoothly night and day.
Again, you read too much into what I was saying. I’m not saying that investing in company’s stock is the “right” thing to do. I’m not advising workers to buy stock. I’m merely pointing out that buying stock is the mechanism to “share in company profits”. Are there risks?! Yes! And shareholders are exposed that risk as well.
Oh, I think I get it… you want the workers to have a share of the profits RISK FREE. And how is that fair to the shareholders? Who guarantees that they get profits with no risk?
Don’t want to hijack this thread with a sidebar but this concept of “loyalty” is vastly overrated. Virtually every company that “loyal” folks work for has been started by “disloyal” people. Tom Watson was “disloyal” to NCR and left to start IBM. Larry Ellison was “disloyal” to IBM and left to start Oracle. Henry Ford was “disloyal” to Thomas Edison’s company and started his auto company.
Another reason that “loyalty” is meaningless: most people that beat their chest about “loyalty” don’t have anywhere else to go for more money. It’s an empty platitude.
I proclaim that, “I’m loyal to the planet Earth.” Therefore, I should be paid a salary of 1 million a year because of my loyalty! How can being “loyal to the planet Earth” have any meaning unless I can hop on a spaceship and live somewhere else in the galaxy?
John the janitor’s “loyalty” to company XYZ has no weight unless John can go to another company for more pay. Talking from a position of loyalty is a sign of weakness, not strength.
I don’t have any financial advice to give but I do advise that nobody brings up the “loyalty” card with their boss unless they have truly have a verifiable Plan B. Otherwise, you will be laughed at behind your back.
Pretty good start. I would agree that is a decent definition of a living wage.
Next question - what jobs should PAY a living wage?
Wal Mart Greeter?
McDonald’s Fry Specialist?
Ditch Digger?
Here is where it gets interesting. I would propose that positions like greeter, bagger, etc are superfluous positions, non essential to business. Sine they are the traditional realm of retirees and minors, I would not have a problem with the wage being lower here. The trade off would be that these positions are available ONLY to minors, retirees, or the disabled on assistance. They are a sort of charity job, and due to the lack of any real skill required need not be available to regular workers.
Working a line in a fast food joint isn’t unskilled work. It takes time to learn to be efficient, and there are plenty of potentially dangerous situations to get into.
Physical jobs should always pay the living wage. They are often the resort of the truly unskilled, the refugee immigrant, and the out of work tradesman. The roughness of the labor is deserving of the living wage.
Maybe. I don’t have any concrete numbers but I do find it fascinating that I see DirecTV satellite dishes and other toys in slums of Chicago and Atlanta. I guess it’s more of a priority to buy gadgets on the credit-card vs using debt to buy stock … and then complain that they don’t participate in the profit gains.
(Please don’t nitpick my comment above. It’s just a random anecdote with no statistical rigor at all. I do realize that some workers can’t afford stock. I grew up poor. I know what it’s like to be poor.)
Those 2 scenarios are equivalent to me. The secretary got paid out of whack. But that was Bill Gates’ decision and she got lucky. Maybe he had to offer stock options to make up the shortfall in other areas (such as lack of health benefits). I don’t know enough MS history comment on this. A lot of workers with stock options don’t get lucky (dot com bust of 2001).
This is going to sound bizarre but the massive imbalance in wage scales at the auto maker is not caused by business owners. It is caused by you. You certainly don’t think you’re the cause, but you are. The preferences/desires embedded in the brains of even the lowest wage workers get multiplied out to the salary inequalities you see. I also notice that people are confused about teachers’ salary being low. Why do NFL football player make more than teachers?! If you truly understand the answer to that, then you will know why you have wage disparities at the car company. The source of the wage imbalance is the same–it is you.
And I’d counter that what you propose accomplishes nothing. If labor costs go up, as they would under your plan, then the cost of the goods or services produced by that labor will also go up…and the best the worker can hope for is to retain the buying power he currently has.