And how are we establishing that value? The CEO who ran our company into the ground - was his labor really worth hundreds of thousands of dollars a year when my labor was worth barely a fraction of that? (And that’s on the low end of CEO pay!) How about any of the chucklefucks on this list? The fact that the “market” will pay these people frankly obscene amounts of money is absolutely no guarantee to their quality, so why are we doing it? What is the value of their labor that demands such obscene sums?
CEO pay is decided by the boards of directors, which are, generally, populated by CEOs and other top executives of other companies. I think that’s a big reason why CEO pay, particularly in the US, has grown to the extent it has.
A few years ago, the Walton family decided to understaff Walmart stores(at all positions) to increase profits.
This worked so well that sales(and Walton family profits-most important) fell due to reduction of products out on the sales floor, lack of cashiers to sell what was on the floor and employees to assist customers.
Therefore, the Walton family is incompetent to accurately value the labor of their employees.
CVS pharmacies are going through this right now, and wondering why people are quitting left and right, and customers are taking their business elsewhere.
This is a tough issue. I hate the $100 million CEO salaries as much as any good leftist.
But, as a business owner, I’m not sure how to handle your complaint that we should never make “ten times more” than our employees.
Let’s say (hypothetically) I have 10 employees who are in a position where the market rate is about $50,000 per year. They are good employees. They work hard. I like them as people. Everything is successful, and I can made about $2,000,000 per year in my business. Pretty good, right? So, I decide to pay my loyal employees $100,000 per year because 1) I’m making good money, and 2) they work hard and should have a share in the success (even if they’re not sharing the risk). Nonetheless, they’re making twice the market rate.
Should I feel guilty that I’m making 20 times what they are? Or should I feel good that I’m paying them twice what they would make elsewhere?
If the former, should I pay them $150,000 per year? $200,000 per year? What’s the right number?
I agree. I’m fine with CEOs becoming deca- or centimillionaires when they make their company billions. I don’t understand why they are given these ridiculous contracts where they still earn a massive payday, even if they destroy the company. Especially when companies hire all these contractors who they can terminate at any time and don’t have to pay any benefits.
The only thing I can think of is that, like professional athletes or movie stars, once you attain whatever credentials are required to land a CEO job, you become part of this perverse bubble that views this massive compensation as a sort of entitlement, regardless of performance.
I suppose the real question is how the market allows you to generate an excess $150,000 in revenue on each employee. Why wouldn’t a competitor find it worthwhile to pay tem $70k or $100k for the $200k they generate?
Because wages are sticky, skills and resources are not easily transferable, and most people are risk-averse in ways that leads to them undervaluing a change in job?
The intersection where what the employer is willing to pay meets what the employee is willing to accept.
I didn’t say “never”.
I do think we need to look at CEO compensation a bit harder than we have.
Absolutely, a business owner, who is taking on more risk than the employees, and often working longer/harder hours, deserves equitable compensation for he/her efforts.
However, a business model where the rank and file are earning so little that even the full time employees qualify for food stamps, WIC, heating subsidies in the winter, etc. is NOT equitable, either to the employees or the local area in which they live where they are straining social services. That’s the whole point behind the “living wage” concept - the notion that someone who works full time should earn enough to live on without needing all those additional services.
That’s not a “burger-flipper” wage my friend. It’s very much a living wage (although it may be hard to stretch if a person has a spouse and several children. The biggest problem isn’t for the folks making 50k where a CEO makes 2 million, it’s where the typical company employee is making minimum wage and the CEO is making 100 million.
Honestly… I don’t know. I think this is very much a matter where context matters.
My major objection is to full time work that a person can live on. The exact amount varies by location and is dependent not just on a raw number but other factors like housing costs, which vary enormously from city to rural areas.
There are lots and lots of job openings that pay $20, $25, and $30 per hour. If you’re making (for example) $10 per hour, and want to make more, then you simply need to acquire the skills (and/or education) to qualify for those jobs.
Paying someone $20 per hour when they’re worth $10 per hour doesn’t make economic sense.
The value of one’s labor doesn’t vary based on housing costs.
In case you haven’t been reading the thread, there’s a whole host of reasons why I have a problem with this, not least of which being that this value seems horribly arbitrary, particularly for the top and bottom end of the scale.
Ok, what’s your alternative method to determine the FMV of labor?
You say thins:
Then you say this:
The first suggests that there is no market, salary is completely utilitarian based on earning for the company—everybody is paid on commission. The second is much closer to the truth, in that salaries are determined by a market. The companies will attempt to pay the minimum necessary to get a qualified employee. If the minimum necessary is higher than the employee’s earning contribution to the company, then maybe the company goes out of business, or moves to someplace where labor is cheaper.
The problem with the market based approach, as others have said, is that things can become very distorted, particularly at the bottom end. If there are enough people seeking the burger flipper job that it pays $7.50/hour, but then the burger flipper is making so little money that their income has to be supplemented by social safety nets. So the $7.50/hour employee gets housing vouchers, food from a charitable food bank, and free school lunches for their kids. The company might appear to be paying the appropriate salary as determined by the market, but the company is in fact exploiting others in order to pay the employee too little. If the social safety net did not exist, the $7.50/hour employee might vanish from the workforce because they’re living on the street and starving.
So at the low end it may be necessary to have living wage regulations in order to keep the market from being distorted by social safety net which can be used by companies to effectively boost their workers’ pay.
It’s my understanding that much of the growth in CEO pay over the last 30 years has been due to a slow increase by boards over time. If the board wants to attract a CEO earning $8 million, then they have to offer $10, and so on.
I think it is much different for the owner. If you can get $2 million of profit from 10 employees each earning $50k, then that is probably fine. Assuming $50k isn’t an artificially distorted low salary. A CEO may be drawing a $2 million salary, whether there is any profit or not. The owner is just the sole stock holder. For a public corporation, the stock holders make or loose money with extremely little say over the business operations.
This is just the argument of “stop being poor.” K9Befriender has some thoughts about education I disagree with, but his basic point that it is hard, is completely correct. Without support and opportunities somebody making $10/hour may simply be unable to get the training necessary for a better job. I am entirely in favor of society making sure that such support and opportunities do exist. Free daycare, free college tuition, moving incentives, etc. are all things I think should exist. Also, of course, well designed studies of what concrete programs actually work to improve people’s earning potential.
No, they’re exactly the same thing. The value is whatever someone is willing to pay for it.
Someone making $10 an hour in my area will struggle to find housing, even a 1 room studio, on that wage. Or even half a two-bedroom apartment. And we’re not even the most expensive housing market by a long shot. There will be no money left over for acquiring additional skills or education. They will have no means to crawl out of that corner.
Yes, you can go down to the public library and self-educate… but that will have no official standing. No employer will recognize that when you try to apply for a job. In order for the education to “count” you have to go through an accredited school of some sort, which costs money. Which, after they pay for rent and utilities and transportation and a little bit of food they won’t have. This is where student loans come in… but that means acquiring a heavy debt load which may or may not be paid off down the line.
On top of that - society still needs people to do those $10 an hour jobs. Someone has to stock the shelves at the grocery store, scrub toilets, flip burgers, make your morning Starbucks, and so on. Those people deserve a living that isn’t a constant treadmill of scraping and stress to make ends meet on a wage that always means there’s more month than money.
Even the characterization as “$10/hour jobs” chafes me the wrong way. Let’s just take “Amazon Warehouse Employee” as an example. Amazon is embarrassingly profitable. It has made its owner the richest man in the world. If there was nobody willing to take those jobs for less than $15 per hour, do you think they’d just suddenly disappear? That Jeff Bezos would say, “Damn, can’t get workers at the rate I’m offering, guess it’s time to shutter business”? Same thing for the Waltons - WalMart is obscenely profitable; would that all stop if they had to pay every employee a decent wage? I don’t think so - they’d take the hit in profits, and keep rolling, becoming only slightly less obscenely, immorally rich.
In reality, what we’re dealing with is something of a market failure due to lack of coordination. If every worker demanded $15 from those companies, they would get $15 from that company. But they can’t, because there always is someone else willing to take the job for less. You end up in a race to the bottom. It’s kinda fucked up. This is why unions matter, and why union-busting has been such a big goal for capitalists.
Except here in reality we dont have a race to the bottom.
Well, it is somewhat halted by minimum wage. At least in the USA. But let’s just say there’s a reason my company gets its email tech support from India, rather than sourcing it locally - they’re just straight-up cheaper. Companies outsource because other places can do it cheaper.