Ok, I think I finally unraveled this subtopic confusion. I added to the confusion by misinterpreting your earlier question.
In your posts #34 and #37, when you were asking about “morals” and “entitled” you were using those words in the context of “legal” rights. However, this context is not obvious and required piecing together separate posts.
I think most everyone else used “morals” beyond the legal sense. For example, in post #27 that you responded to, emacknight was using “morally” in the non-legal sense. I was also using the word this way.
Frylock, you do seem to use particular words in unconventional ways which makes it harder for readers to form a coherent context.
Well as I said, it’s a GD talent to write a million words of disagreement on obvious facts that we already all agree on.
If so, I seriously wasn’t able to follow what you were saying previously about “free.” It’s a puzzle. What do you mean by “free” that’s not a synonym of being independently wealthy? Or is “free” another one of those words that you use slightly differently than the rest of us?
The OP has done an able job at trying to help people understand the reason why workers should not share in the profits, but I would distinguish this example.
There is rarely a shortage of rental housing. If your landlord tells you to get out, generally you are entitled to a period of notice. At that time you are free to look in the newspaper or on the internet, find an apartment in your price range and then begin the process of moving. It’s bad, it’s inconvenient, but it is doable.
Now, the dishwasher that gets laid off generally gets a handshake and a boot in the ass on his way out the door. He was living hand to mouth anyways and now faces the daunting future of no paychecks for…who knows? Maybe he finds a job tomorrow? Maybe it takes a year? The paychecks are now zero, but the electric bill and the rent is still the full amount.
So, in this sense, a job is a far greater risk that renting a particular apartment. That’s not to say that profit sharing is equitable, but I can see a difference in the two topics.
If the workers and the employer agreed to a profit sharing scheme, what would go wrong?
How is the job a risk again? The dishwasher is in danger of losing his job, but that’s not the kind of risk emacknight* is talking about. He means the kind of risk that comes with investment. He means the possibility that one might not get back what one has put into something. Losing a job isn’t failing to get back what one has put in. If it were, then keeping a job would be getting back what one has put in. But in what sense has the dishwasher “put in” something with a worth of the same type and amount as the good “having employment”?
You’re free with respect to action X if you have the power to do X and the power to refrain from X, in accordance with your own desire whether or not to do X.
But without wealth sufficient to support oneself without employment,* one does not have the power to refrain from being employed.
This invites the question what it means to “have the power” to do something. Briefly, you have the power to do something only if doing it would not cost you something you value in a fundamentally visceral way. By that I mean things like the ability to eat from day to day, the ability for yourself and your family to be protected from theft and violence, etc.
That X would cost you doesn’t mean you don’t have the power to do X. But that X would cost you one of these fundamentally viscerally valued things does mean you don’t have the power to do X. I don’t mean this as an analysis of the meaning of the phrase “having the power to do X” but rather as an explication of what I mean when I use the phrase in the argument above.
So, yeah, I’m arguing for the view that you are not free unless you have wealth sufficient to support yourself without employment.
*Note that certain setups like “welfare programs” may amount to ensuring people do in fact have wealth sufficient to support themselves without employment.
Nothing, but I would think that such a deal would be terribly unfair for the employer unless the workers agreed to pay out of pocket if the company had a bad year and share in the losses as well. And I don’t just mean pay cuts. I mean, take the losses on the income statement and divide them among the employees. Each employee then writes the company a check.
I think that we are in agreement here. I just wanted to point out that the risk of losing your rental unit is different than the risk of losing your job. In that sense, I think that the OP’s analogy fails.
Oh, actually that’s what I had in mind. I guess “profit sharing” actually just connotes… profit sharing… my mistake!
OTOH if nothing would go wrong, I’m not sure what some prior notion of “fairness” needs to have to do with anything. If they all see fit to enter into the agreement, what more can be said than that?
That’s one of my themes in this thread I guess–I’m not sure what there’s supposed to be beyond agreements and their consequences that is supposed to help us decide what’s “fair” and what’s not.
It’s more than just the loss-sharing agreement at play, profits may not be realized for months if not years. Workers, so much of the time, want cash in hand, not promises of a big pay out in a year. Since we’ve established that all workers seem to live pay cheque to pay cheque, who could afford to go work for a month without a guarantee of payment. Remember those bills keep coming.
When Johny bought the house or started a restaurant, that $100,000 was locked up. If the market is down (like scenario 2) he has to wait, keeping that money tied up until it rebounds. He doesn’t see the $50k profit until he finally gets to sell. Even month to month he’s only looking at a couple hundred of float.
Meanwhile, Timmy the tenant/dishwasher has just barely enough to get buy. If the roof leaks there is no way he can come up with the cash to fix it–that’s on Johny. If the restaurant has a slow month (or a leaky roof) it’s the owners coming up with the cash, not the dishwashers.
And after of this we still have scenario 2, where the hell is Tommy the tenant/dishwasher going to come up with his half of the $9000?
My point here is that few people want the risk (loss of equity) that comes with profit sharing, nor do they want the time factor that it involves. Labour/renters have it pretty good, because they avoid all the risk that goes into capital investments. They show up, do their job, and get paid. Meanwhile, someone else worries about getting them a pay cheque.
If you want I can present a situation in which losing your apartment is way worse than losing a job.
As I said in my other OP, apartments and unskilled labour depend on the market. Some times supply is abundant and rent is down, some times jobs our bountiful and salaries are up. There have been times when shortages meant there was nothing to rent, and some times the market is so hot dishwashers make over $20/hour. This was actually the case in a town called Fort McMurry in northern Alberta, where the tar sands are (Canada’s main source of oil). Engineers were moving out there and living in tents, while dishwashers couldn’t be hired fast enough.
And there are times like now, when houses aren’t selling, and since it seemed everyone decided to buy two, they are desperate to have someone in them, taking a loss on the rent just so it’s not empty. And as a result restaurants are reducing hours or closing down.
This seems to constitute a shift from the “fairness” question to the “workability” question.
The workability one is just an engineering issue–and I know there are actual real live agreements people enter into in which an advance payment is made, and then subtracted from profit (or loss) dividends later on. Something like this could surely be drawn up for the dishwasher as well if the dishwasher and owner wanted to enter into such an agreement.
But what you’re saying is that the dishwasher won’t want to enter into that kind of agreement because the dishwasher won’t want to share the risk of loss. As an empirical claim, this may be correct.* But what I was responding to was an argument that this kind of profit-loss-sharing scheme would be somehow unfair. I don’t think it’d be unfair, if everyone freely agreed to it. I think agreements constitute fairness. I don’t think there’s a prior notion of fairness that applies independently of agreements.
Again: The fairness question and the workability question are separate.
*But it may only be correct because of the fact that not everyone is independently wealthy. If everyone were independently wealthy, then perhaps even the dishwasher wouldn’t mind sharing the risk of loss. Would that be a bad thing?
If everyone is independently wealthy who’s going to wash dishes?
I have the sinking suspicion that when people hear “profit sharing” they picture billions and assume they’re getting 50%. Let’s say for sake of argument Johny puts in $100k to start a restaurant, Timmy washes dishes 40 hours per week. At the end of the year the restaurant made $150k. What would be fair and equitable division? 50/50?
And I think this is where I run into a problem personally. I see the time value of money. I think, hey, if Timmy was willing to work-for-profit (ie go without salary for the year) he’s entitled to a lot. He put up capital (time/labour) and in effect added equity to the equation. At the very least he deserves market rate for his work, plus interest earned for that period of time, plus compensation for the risk.
See, it’s that last part that entices me in all this. If all Tommy was going to get was his basic $20k, why risk it? If Johny was going to have to share 50%, why would he bother buying the house? It’s the upside that entices people to risk, the buy lottery tickets or provide venture capital. The more “fairness” eats into the upside potential, the less there is to entice risk taking behavior.
Ha! I told my wife as I typed the previous post, “I’m about to entrap someone into saying ‘we can’t let everyone be independently wealthy, because then who would wash our dishes for us?’”
I guess you didn’t say “us” explicitly, but still…
Iunno. What’d they agree to? As I’ve said, right now I’m pretty fixated on the notion that freely-entered-into agreements constitute fairness.
Yeah, well, I told my wife I was going to, uh, damn, I give up.
Wait, did your wife look over at you and raise one eyebrow? She’s probably wondering why you’d right that if you knew the result…
Except you then said we can’t be free if we aren’t independently wealthy. Others have alluded to the fact that a dishwasher isn’t exactly free when there are no other jobs available and his bills are past due. And let’s not forget he’s living pay cheque to pay cheque, for some reason everyone in this country is living hand to mouth.
Fairness doesn’t even have to come into play. It may simply be illegal. If you have a dishwasher making minimum wage, and then ask him to contribute a portion of his pay to offset company losses, you are violating federal law, contract be damned.
emacknight, taking you at your word that you’re trying to understand the other view of “risk,” what you’re missing is that the labor view of value isn’t really based on risk. It’s based on value. In a restaurant, many pieces come together to create value, both capital and labor. In the real estate hypothetical posited here, it’s nigh on impossible to posit that the renter contributes value in the same way. Whether and on what terms labor should share in the profits of a restaurant is a complex issue. The renter, not so much.
That’s what I love about this. The renter and worker are the same thing, but we’re not used to seeing it that way.
The renter is every bit as crucial to Johny’s success as labour is to a business’ success. Both the renter and dishwasher (for lack of a better word) are generating revenue. The renter pays monthly, at a cost of the room provided. The dishwasher keeps the restaurant functioning (generating revenue) at the cost of his hourly wage.
Right now thousands of homes are rented out while the owners wait for the market to recover. Seven of my friends right now are renting out a place they own because they bought before the crash and need to wait until they can recover their investment.
Without Timmy, Johny would have to cover the monthly payments on his own until he can sell, or take the loss in scenario 2. Remove the rental income and the business venture isn’t nearly as alluring/profitable.
The tenant is every bit as crucial to the real estate venture as any other employee. Not to mention the fact that you really want a good tenant–pays on time, uses a shower curtain, doesn’t let his dog piss on the carpet. Losing a tenant is a huge risk; there is a cost to searching, the lost revenue while it sits empty, the unknown of a new tenant.
I was really surprised no one came in to show how much value the tenant adds (along with risks taken) over the course of the year. After all, he’s the one adding equity buy paying the mortgage. Which is why it isn’t uncommon for people to enter into a sharing agreement that looks like owner/tenant, but allows for distribution of realized gains.
My wife’s uncle really wanted to do that in 2006. He was big into real estate investments, continuously buying rental property in Florida. He proposed a system where he’d buy the property, and we’d pay the mortgage. When it came time to sell, he’d get repaid in full and we’d split the gains. Keep in mind this was at a time when real estate was on fire, so naturally what happens if the value falls never got mentioned.
The quote emacknight posted here was correct - he just didn’t understand it. Say Johnny used his own money to fix up his apartment, and did it so well that the sale price of the place went up by $10,000. Now, since what he did was not covered by any contract, he legally doesn’t deserve a penny of the increase, but what about morally? In the other thread I said that the dishwasher probably didn’t deserve a share of the success, but the chef (who has vanished from this thread) did.
There it is, surprised it took so long. Supposing that Timmy does something that helps Johny, morally Tommy deserves a little kick back. And yes, I understood it perfectly because it makes perfect logical sense.
My initial problem with it is that it’s all upside. The scenario you present involves that dirty word risk. Timmy took risk, and made an investment in the property. That risk/investment may or may not pay off.
So then, if we grant that morally Timmy should deserve some of the profit, we need to look at Scenario 2 and say that morally Timmy should cover some of the loss.
What you are describing is a lot like Frylock’s thread. Timmy invests a year of his time and $5000 cash renovating the kitchen, and that increases the property value by $10,000. We can take this one of two ways:
*The first is to make Timmy a skilled tradesman. He doesn’t get to claim any of the profits from the first year (because it wasn’t agreed on), but he does get to increase is personal value. He can say to Johny, “my skills made you an extra $10,000. If you let me live free in your next condo I can do even better.” Timmy can also add that to his portfolio and shop around, he has proven himself skilled improving in a $100,000 condo, imagine what he could do in a $200,000 condo. Last year Timmy was a virtual unknown without any experience, now he’s an accomplished decorator type person.
*The other way is to consider that Timmy improved the property he was living in. He was paying $1000 a month to live in a $100,000 condo. His improvements made it a $110,000, but his rent stayed the same. The investment he made paid off in the form of better rent to property ratio.
