# Profits are a tax on labor **URL:** \ **Category:** Great Debates\ **Created:** [July 12, 2013, 3:07am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283 "2013-07-12T03:07:25Z")\ **Posts on this page:** 20\ **Page:** 14
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [July 24, 2013, 12:55pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/261 "2013-07-24T12:55:47Z")
> [@Hellestal](#): > > I was taking a more theoretical turn. The ideal with a risk-free rate is that there is no other chance of loss involved. It’s a floor. You will gain a risk-free rate of return, even a negative return, _but no lower_. This is to say that if you’re knowingly buying with rates at -1%, you’re not supposed to get surprised with a -2% return. There is no risk of that happening, as far as the theory goes. If you want to be \*theoretical \*about it, the risk free rate of return is the rate an investor would demand from a portfolio consisting of all assets in the world. In other words, the return an investor receives for systemic risk that can’t be diversified away. Return above that rate is paid for non-systemic risk an investor takes on by choosing a particular investment. The return on short term government debt is simply a useful proxy. I’ve read almost all of this thread and I can’t for the life of me understand why anyone thinks the risk free rate of return has anything to do with morality. ---
**Author:** ![bldysabba](https://avatars.discourse-cdn.com/v4/letter/b/ecccb3/32.png) [@bldysabba](https://boards.straightdope.com/u/bldysabba)\ **Post date:** [July 24, 2013, 1:13pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/262 "2013-07-24T13:13:52Z")
> [@Hellestal](#): > > Yes, we’re certain to lose money over time if real yields stay negative (although keep in mind that real rates might eventually recover). Sure, ok, I get what you were going for. A tangent - you seem to imply in the statement quoted here that real interest rates on short term US T bills are sometimes/often positive? Can you cite that? I know interest rates are pretty low, but I was under the impression that it’s rare for short term T Bills to give a positive real return. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [July 24, 2013, 1:24pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/263 "2013-07-24T13:24:27Z")
> [@Fuzzy\_Dunlop](#): > > If you want to be \*theoretical \*about it, the risk free rate of return is the rate an investor would demand from a portfolio consisting of all assets in the world. In other words, the return an investor receives for systemic risk that can’t be diversified away. Return above that rate is paid for non-systemic risk an investor takes on by choosing a particular investment. If we want to be _comprehensive_, we must admit that [both definitions are commonly used](http://www.investopedia.com/terms/r/risk-freerate.asp). > [@Fuzzy\_Dunlop](#): > > I’ve read almost all of this thread and I can’t for the life of me understand why anyone thinks the risk free rate of return has anything to do with morality. You and me both. > [@bldysabba](#): > > Sure, ok, I get what you were going for. A tangent - you seem to imply in the statement quoted here that real interest rates on short term US T bills are sometimes/often positive? Can you cite that? I know interest rates are pretty low, but I was under the impression that it’s rare for short term T Bills to give a positive real return. Sorry, I didn’t mean to imply anything about normal values. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [July 24, 2013, 1:41pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/264 "2013-07-24T13:41:13Z")
I saw something earlier in the thread that might be pertinent. There’s not a God-given, Natural Law type \*\*right \*\*that the owners of something should reap the reward, or that risk has to be compensated or any of that stuff. It is however, the way that the world and humans seem to work if left to our own devices, and in capitalist systems, it’s a matter of law and convention. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [July 24, 2013, 7:56pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/265 "2013-07-24T19:56:51Z")
Law, convention, and pragmatism. It works, and the other kinds of plans don’t. It’s as if someone has rediscovered the great wisdom of Pol Pot. We must close the factories, because they exploit the workers. Everybody should earn their bread in the sweat of their brow. Back to the farm, homies! We’re all equal now! That worked well, didn’t it? ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 25, 2013, 4:16am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/266 "2013-07-25T04:16:43Z")
> [@Hellestal](#): > > This comment has already been pointed out, but I’m going to repeat what **bldysabba** said because it’s such a ostentatious mistake, and it is the exact same category of mistake as “unearned income”. > There is no such thing as a literal risk-free rate of return. It does not exist. > > Yet again, this is another metaphor that is being treated like a literal truth. But in this case, the literal meaning is self-evidently untrue. We use the words because we need some label to describe the situation, so most often we settle on a substandard term for historical reasons. It’s just a label. Placeholder. Shorthand. Term-of-art. Taking the label literally is an equivocation. > > Every asset in the world has risk. US Treasuries have risk. Those “risk-free” Treasuries often have a negative rate of return. The US government has often borrowed money, and then charged its lenders a fee. A nice business, if you can manage it. The borrower earns interest instead of the lender. In countries with massive inflations, government bonds will lose almost all their value, and even in the US, it remains an open possibility that Treasuries could lose almost their entire value in a sufficiently bad situation. It’s not likely, but it’s possible.m > The owner gets paid for their decisions as owner. I’d argue owners get paid for being owners, not for making decisions. Take a slightly different context. Suppose I can work at McDonald’s, or I can work at Burger King. If I decide to work at McDonald’s, would you say I’m getting paid for deciding to work at McDonald’s, or for working at McDonald’s? Now, granted, one decision may be better. Maybe Burger King has a profit sharing plan. But that doesn’t change what the pay is for. Or suppose I don’t want to make any decisions as an owner. So I hire somebody else to do it for me. If the profits still flow to me - the owner - doesn’t that imply that the profits are for being the owner, not for making decisions? > [@](#): > > Choosing to maintain ownership of a particular asset is a decision. Selling it is another decision. Owners could easily sell all their various businesses, dig a hole in the ground, dump the cash in, and bury it. That is a perfectly valid decision an owner can make. > > How safe would that be? Not very. They could buy US bonds. Would that preserve the value of their investment? No guarantee of that, as already noted. Money market mutual funds were specifically designed to try to maintain at least the nominal value of the accounts. “No risk.” But when Lehman fell, the Reserve Primary Fund broke the buck, and a supposedly safe fund lost value. This caused a massive run on all the money markets, which put even more stress on the system. The government felt they had to bailout the money markets to prevent a broader catastrophe. Even in supposedly no-risk and low-risk situations, risk is everywhere we look. > > People can become owners through luck. But after they’ve become owners, they must still decide _what they want to own_. That’s always a risky decision, even if the owners are blissfully unburdened with the knowledge of how risky it is. So I guess my question is, so what? I mean, you’re right: the mere fact of having something entails the possibility of losing it. In fact, the only thing that’s absolutely certain is that eventually you’ll lose everything (in the long run, everyone is dead.) What, if anything, does that say about the relationship between _the people who do the work_, on the one hand, _and the people who consume the work of others_? ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 25, 2013, 4:33am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/267 "2013-07-25T04:33:40Z")
> [@bldysabba](#): > > I think you’re wrong here, if you’re talking about the risk free rate. If you invest your money at the ‘risk free’ return rate in US treasuries, which \*\*LinusK \*\*seems to be talking about, you’re _certain_ to lose their entire value given enough time. And the time wouldn’t be too long either. I’d say 10-20 years at most. (And if I hadn’t forgotten all the finance classes I ever took, I would have happily calculated just how much time. Maybe someone else will step up? [Here](http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield) are the real yield rates. **LinusK** , notice the long column of negative numbers? People lose money by investing in short term US securities.) So in a sense, the US ‘risk free return’ rate is actually risk free. There is no risk at all of you making anything other than a massive loss. The rates have only been negative in the last couple of years. But I think the negative rates are interesting: they show that a return on an investment doesn’t have to be positive in order to induce people to buy it. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [July 25, 2013, 4:45am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/268 "2013-07-25T04:45:36Z")
> [@LinusK](#): > > . . . So I guess my question is, so what? This is what we’ve been asking you all along. So what? What if your ideas were 100% true and correct? So bloody what? > [@](#): > > . . . What, if anything, does that say about the relationship between _the people who do the work_, on the one hand, _and the people who consume the work of others_? That the relationship can be symbiotic, and is not always parasitic, as you insist on portraying it. Sometimes, it is parasitic, in which case there are remedies. If Mr. Howell tries to act like he owns the air, The Skipper is going to bash him one on the snoot. At a more moderate level, we have property taxes, to get back some of the value of the wealth of the investing class. Demonstrate to us you aren’t Pol Pot. Actually recommend a set of reforms that address the problems you (and only you) perceive. Or…y’know, just ask the same damned questions over again ten more times without actually making a point. Me? I’m opening a Pit thread… ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [July 25, 2013, 12:46pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/269 "2013-07-25T12:46:54Z")
> [@LinusK](#): > > I’d argue owners get paid for being owners, not for making decisions. You can argue the moon is made of cheese, but that doesn’t make it true. > [@LinusK](#): > > Take a slightly different context. Suppose I can work at McDonald’s, or I can work at Burger King. If I decide to work at McDonald’s, would you say I’m getting paid for deciding to work at McDonald’s, or for working at McDonald’s? Both. The latter doesn’t happen without the former. If you can show me an example of a person who decides not to work at McDonald’s and then pulls a double-shift, I might change my mind on that. McDonald’s wants to rent some human capital. The owner of that human capital must make a decision, and of course, they’re going to make the best decision that they think is available, the one with the highest rate of return. (In this case, the return naturally includes the psychological and physical factors of labor, in addition to the remuneration). It’s not slavery. McDonald’s isn’t just getting labor by itself, divorced of consent. It’s purchasing _willing_ labor, and to do so, the owner of that human capital has to decide whether this opportunity is the best available. So yes, McDonald’s is paying for a decision. > [@LinusK](#): > > Now, granted, one decision may be better. Maybe Burger King has a profit sharing plan. But that doesn’t change what the pay is for. The crux of ownership is that the pay will be different based on how the owner of the working body _decides to allocate their resources_. The worker has a decision, and they will be better rewarded if they make the right decision. So yes, if a worker can pull in an extra buck fifty an hour by making Whoppers instead of Big Macs, then they are earning a return on their good decision. That decision is a kind of work, the abstract work of the owner. It’s harder to calculate, like, a percentage yield from wage labor but the underlying principle is the same. It applies to owners of capable bodies just as easily as it does owners of green paper. > [@LinusK](#): > > Or suppose I don’t want to make any decisions as an owner. So I hire somebody else to do it for me. If the profits still flow to me - the owner - doesn’t that imply that the profits are for being the owner, not for making decisions? I almost posted this response after your OP. It would’ve been one of the first responses of the thread. I decided it was unnecessary, because you would soon see how ridiculous this question is. I was wrong.LinusK: “Hello, Hellestal.” Hellestal: “Hell, Mr Owner Sir.” LinusK: “As owner, I want to make no decisions whatsoever. I leave every decision to you. But I still expect to be paid profit as owner.” Hellestal: “Yes, of course.” LinusK: “Business seems to have been brisk.” Hellestal: “Yes, sir. Very much so.” LinusK: “How did we do?” Hellestal: “Well, revenues were a million dollars this year. And if you count up all our expenses except labor, including rent, utilities, inventories, and maintenance, our costs were only half a million dollars.” LinusK: “Oh excellent, excellent. All profits flow to me, you know. So what’s my profit? What do I get as owner?” Hellestal: “Nothing. As sole decision-maker for this business, I set my salary at half a million dollars this year. Profit this year is zero.” LinusK: “Well, that’s perfectly reasonable. As you know, owners only get paid for being owners and for nothing else.” Hellestal: “I knew you’d think so, sir.” LinusK: “Carry on, then.” As I’ve already said, it’s impossible to avoid making decisions as owner. You have to decide what to own. But even if you decide to ignore this point because it’s an inconvenient fact that interferes with whatever strange fantasy you’re religiously defending, it is nevertheless still true, and self-evidently true, that owners cannot possibly avoid making even more detailed decisions about the allocation of resources. The best posts in this thread, hands down, have been by **Lemur866** , but I might quibble slightly with what he says here: “Oh, but why couldn’t the worker have got the saw for free? BECAUSE SOMEONE HAD TO MAKE THE SAW. It is a curious business model to make power saws and hand them out to carpenters for free.” I would say instead, BECAUSE SOMEONE HAD TO ALLOCATE THE SAW. The saw might already exist, but it doesn’t necessarily exist in the right hands, at the right time, in the right place, to make the world a little bit more productive and efficient than it used to be. The decision of ownership is about allocating these resources. This is the abstract work of the owners, which is just as legitimately work as the tangible work of deciding to flip burgers. Owners allocate resources. It doesn’t have to be so specific as a single saw. The owner of the construction company might never allocate a single use of a saw… but a successful owner _will_ allocate enough resources for their employees so that a good employee (hired by someone who was hired by someone _who was chosen by the owner_) will realize that a saw in this person’s hands, at this time, in this place, will lead to faster production. That decision of the owner, to allocate resources to set up this system of sub-allocations, is the abstract work of the owner. Nobody else can make this decision. The incentives are wrong. Would you give me your savings to manage, the savings you own, without any further decision at all on your part on how I might be instructed to carry out this work? I sure as hell hope not. My commissions for handling your money would be somewhere close to 100%. The work of the owner is making decisions about how resources are to be allocated. It starts with what they choose to own, but it obviously doesn’t stop there. Ignoring this work does not make it go away. > [@LinusK](#): > > So I guess my question is, so what? So this: You are mistaken when you say that profits are a tax on workers. You are mistaken when you say that owners have no unique decisions to make. You are mistaken when you say that owners do no work as owners. You are mistaken when you claim that profits are “unearned”. You are mistaken when you say there is such a thing as a risk-free profit. And finally, you are mistaken if you think that arguing your own peculiar form of “morality” is going to convince anyone of anything. At least one of the above might be a value judgment, subject to valid differences of opinion. But most of these are simple facts that anyone without your strange perspective can see without difficulty. Owners do work. It might not be hard work, and they might not take it seriously, and hell, they might have inherited the job (nepotism!) instead of struggling to earn a seat in the big chair. Doesn’t matter. Low intensity or not, it’s still work, and even more than that, _it’s an essential kind of work that is necessary for our society to function_. That’s why successful owners get paid so well for this abstract work, even if their result is more luck than anything else. We need to encourage good decisions about allocating resources. Owners need the incentive to do their work well. > [@LinusK](#): > > What, if anything, does that say about the relationship between _the people who do the work_, on the one hand, _and the people who consume the work of others_? People who consume the work of others? So now you’re complaining about Social Security recipients? You can’t be talking about owners here. Owners belong to the class of _the people who do the work._ Even the lazy ones. There’s one further point here, though, very important. When I left grad school, I had very little money to my name. (Don’t get me wrong. I was born on third base. I’m just saying that my bank accounts didn’t have much money in them.) Over the not-so-terribly-many years since grad school, I have saved, and now, I could buy a modest house with cash. I am becoming an owner. How did this happen? By _not consuming_. I timed the stock market recovery fairly well with my investments, and I’ve received a nice return. I would say I earned this income. I didn’t consume it. I saved it. I will continue to save as much as I can, and thereby become an even bigger owner. It’s the act of not consuming all of our incomes that turns people into owners in the first place. And then you complain about the subsequent return that they get for their good decisions, which they were able to make by not consuming their entire income. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [July 25, 2013, 1:13pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/270 "2013-07-25T13:13:10Z")
I’m curious to see what you’d say about massively robotic factories. Let’s say that I’m the owner of a factory where the only actual work to be done by a person is to unload trucks or railcars or whatever, and get the supplies ready for the robots. Let’s take it a step further and say that this isn’t a hard job- you unload a pallet of something from the truck, unwrap it, and stack the already-loaded magazines in the robot feeding rack- from there, the robots do the rest. Let’s also say that the profit margin on this stuff is insane- like for every $1 in the door of supplies, we make $50 in profit. Who’s _earning_ that $49 in profit? That unskilled guy who unloads a pallet and stacks things? The people at your supplier who have been paid a fair wage to create the supplies and load them into magazines? The soulless metal automatons who actually assemble the finished widget? ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 25, 2013, 4:59pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/271 "2013-07-25T16:59:06Z")
> [@bump](#): > > I’m curious to see what you’d say about massively robotic factories. > > Let’s say that I’m the owner of a factory where the only actual work to be done by a person is to unload trucks or railcars or whatever, and get the supplies ready for the robots. Let’s take it a step further and say that this isn’t a hard job- you unload a pallet of something from the truck, unwrap it, and stack the already-loaded magazines in the robot feeding rack- from there, the robots do the rest. > > Let’s also say that the profit margin on this stuff is insane- like for every $1 in the door of supplies, we make $50 in profit. > > Who’s _earning_ that $49 in profit? That unskilled guy who unloads a pallet and stacks things? The people at your supplier who have been paid a fair wage to create the supplies and load them into magazines? The soulless metal automatons who actually assemble the finished widget? What I’d say is that the robots are tools. Because they’re tools, they have to be made by somebody. They have to be programmed, and serviced and maintained. The people who are responsible for the production of whatever the robots are producing are the people who constructed them and installed them and programmed them etc. Along with the people who came up with the technology in the first place. They are the people who are creating value. In principle robots are no different than any other tool. The value created by the guy with the hammer is created by the guy with the hammer, along with the guy who made the hammer, and the guy who came up with the concept of the hammer in the first place. Now maybe the singularity will come along and robots won’t need us anymore. They’ll program themselves and maintain themselves and make new little baby robots to replace themselves. Then we can all relax and luxuriate in the abundance provided by our robots. ---
**Author:** ![Human\_Action](https://avatars.discourse-cdn.com/v4/letter/h/ac91a4/32.png) [@Human\_Action](https://boards.straightdope.com/u/Human_Action)\ **Post date:** [July 25, 2013, 5:06pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/272 "2013-07-25T17:06:59Z")
> [@LinusK](#): > > They are the people who are creating value. If there’s no value in financing productive activity, why don’t people start up productive activities without financing? Are they just stupid, oppressed, what? ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [July 25, 2013, 5:55pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/273 "2013-07-25T17:55:19Z")
> [@LinusK](#): > > The value created by the guy with the hammer is created by the guy with the hammer, along with the guy who made the hammer, and the guy who came up with the concept of the hammer in the first place. Does the guy who owns the hammer add any value? The carpenter cannot create any value without it. Regards, Shodan ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [July 25, 2013, 7:18pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/274 "2013-07-25T19:18:31Z")
> [@Lemur866](#): > > OK, there’s this carpenter. He works for a year and saves $100. He uses that to buy a power saw. This power saw enables him do three times as much work as before, and next year he makes $300. > > …Now imagine that the worker didn’t save money to buy a power saw. Instead, a capitalist loaned him the saw. The worker makes the extra money, and pays back the capitalist, plus extra. Did the capitalist steal the extra money? Did everyone else have to have a lower standard of living? No, everyone has a higher standard of living, because extra work was done. The problem is that over the past 30 years or so, the owner of the powersaw has been taking about $180 of that $200. the bitchingand moaning these days isn’t really about the owner of the powersaw getting anything at all (the OP notwithstanding), its about the owner of the powersaw getting virtually all the extra productivity created by the powersaw. > [@LinusK](#): > > Are you arguing that confers a moral right to owners to profit? Because if you are, that’s one thing. But I don’t know if that’s what you’re saying. What does morality have to do with any of this. Equity, sure, but morality? > [@bump](#): > > I’m curious to see what you’d say about massively robotic factories. > > Let’s say that I’m the owner of a factory where the only actual work to be done by a person is to unload trucks or railcars or whatever, and get the supplies ready for the robots. Let’s take it a step further and say that this isn’t a hard job- you unload a pallet of something from the truck, unwrap it, and stack the already-loaded magazines in the robot feeding rack- from there, the robots do the rest. > > Let’s also say that the profit margin on this stuff is insane- like for every $1 in the door of supplies, we make $50 in profit. > > Who’s _earning_ that $49 in profit? That unskilled guy who unloads a pallet and stacks things? The people at your supplier who have been paid a fair wage to create the supplies and load them into magazines? The soulless metal automatons who actually assemble the finished widget? Lets use a real world example. A single stitch sewing machine costs around $100 used (maybe $200 new). Lets say a skilled sewing machine operator can produce 50 times as many stitches as a skilled seamstress. Sewing machines are low tech. Operating a sewing machine takes a bit over a week of trial and error if youa re relatively dextrous and good with your hands. If a an operator and a sewing machine can earn 50 times as much as a seamstress with a sewing needle, how much of that extra $49 should go to the sewing machine operator and how much to the owner of the sewing machine? Eventually, the price of the clothes SHOULD drop enough that noone is getting really rich off of this but over the last 30 years or so, the owners of the sewing machines have been taking virtually all of the additional gains from increases in productivity. In the past, increases in productivity used to result in corresponding increases in the wage level. > [@LinusK](#): > > Now maybe the singularity will come along and robots won’t need us anymore. They’ll program themselves and maintain themselves and make new little baby robots to replace themselves. > > Then we can all relax and luxuriate in the abundance provided by our robots. I’m waiting for this day. If I have to hook myself up to a chair to provide energy to operate the robots then so be it. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 25, 2013, 7:21pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/275 "2013-07-25T19:21:03Z")
> [@Human\_Action](#): > > If there’s no value in financing productive activity, why don’t people start up productive activities without financing? Are they just stupid, oppressed, what? Businesses have to pay for access to money for the same reason farmers have to pay for access to land: because they need it, and the owners won’t allow it to be used, without being paid. ---
**Author:** ![TommyzNR](https://avatars.discourse-cdn.com/v4/letter/t/edb3f5/32.png) [@TommyzNR](https://boards.straightdope.com/u/TommyzNR)\ **Post date:** [July 25, 2013, 8:36pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/276 "2013-07-25T20:36:19Z")
> [@Damuri\_Ajashi](#): > > Lets use a real world example. A single stitch sewing machine costs around $100 used (maybe $200 new). Lets say a skilled sewing machine operator can produce 50 times as many stitches as a skilled seamstress. Sewing machines are low tech. Operating a sewing machine takes a bit over a week of trial and error if youa re relatively dextrous and good with your hands. If a an operator and a sewing machine can earn 50 times as much as a seamstress with a sewing needle, how much of that extra $49 should go to the sewing machine operator and how much to the owner of the sewing machine? Eventually, the price of the clothes SHOULD drop enough that noone is getting really rich off of this but over the last 30 years or so, the owners of the sewing machines have been taking virtually all of the additional gains from increases in productivity. In the past, increases in productivity used to result in corresponding increases in the wage level. > . To make your real world example more real consider the additional costs of upgrading from a seamstress to a sewing machine operator. The company won’t just plop someone off the street in front of a sewing machine and say go at it. They will send them to training to learn how to operate the machine within expected tolerances. This will be a higher paying job than just seamstress. Then they have to hire a mechanic to keep the machine oiled, replace broken parts, install sharp needles, make modifications as requested by the operator or engineer who is also a new addition to the staff. They also need an electrician to troubleshoot any electrical issues with the light, motor, foot switch, speed control, etc. Your additional $49 is disappearing quickly. Your owner will have to look to the future and decide how much of what remains needs to be set aside for the future good of his company. Since making the change from seamstress to sewing machine operator he will be able to either slightly lower his prices or at least keep them steady to get a leg up on the competition. Since your $200 dollar new sewing machine will only last a month when operated on a 3 shift 5 day per week schedule. The engineer will have to purchase a new one, hopefully more industrial in design with new features and better ergonomic and safety considerations as required by law. Now your simple example, at least resembles the real world. Hopefully this also helps the OP understand that there is way more behind the scenes than just providing money to build a factory. ---
**Author:** ![bldysabba](https://avatars.discourse-cdn.com/v4/letter/b/ecccb3/32.png) [@bldysabba](https://boards.straightdope.com/u/bldysabba)\ **Post date:** [July 25, 2013, 8:56pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/277 "2013-07-25T20:56:45Z")
> [@LinusK](#): > > The rates have only been negative in the last couple of years. I’ll need to see a cite to believe that. ---
**Author:** ![SlackerInc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slackerinc/32/275_2.png) [@SlackerInc](https://boards.straightdope.com/u/SlackerInc)\ **Post date:** [July 25, 2013, 9:19pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/278 "2013-07-25T21:19:10Z")
> [@Shodan](#): > > Does the guy who owns the hammer add any value? The carpenter cannot create any value without it. What does “owns” mean? It has a legal definition, but I and other left wing oriented people do not see it as having some essential, metaphysical validity. This is particularly true of things people do not carry on them or at least store in their vehicles or (reasonably-sized) domiciles. ---
**Author:** ![Human\_Action](https://avatars.discourse-cdn.com/v4/letter/h/ac91a4/32.png) [@Human\_Action](https://boards.straightdope.com/u/Human_Action)\ **Post date:** [July 25, 2013, 9:37pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/279 "2013-07-25T21:37:36Z")
> [@LinusK](#): > > Businesses have to pay for access to money for the same reason farmers have to pay for access to land: because they need it, and the owners won’t allow it to be used, without being paid. So, does capital have value, yes or no? ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [July 25, 2013, 9:38pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/280 "2013-07-25T21:38:11Z")
> [@LinusK](#): > > What I’d say is that the robots are tools. Because they’re tools, they have to be made by somebody. They have to be programmed, and serviced and maintained. The people who are responsible for the production of whatever the robots are producing are the people who constructed them and installed them and programmed them etc. Along with the people who came up with the technology in the first place. > > They are the people who are creating value. Which is dandy, but they’ve all been paid when the factory owner bought the robots, because we’re assuming that they set their price high enough to adequately reflect that value that was created. They get the money for the robots, factory owner gets robots, and both feel like they got something good. Then once the robots are in use transforming say… spools of wire into rolls of chicken wire, and the only people working in the factory are the guys who load up the spools of wire, and who package up the chicken wire for shipping, who’s creating the value then? Clearly the wire goons aren’t really adding much value other than performing a repetitive task, and the robots are doing the actual work. The value creation for the robots themselves is long since taken care of at the purchase of the robots- who’s creating the chicken wire value? Who should get that piece of the profits? I’d say the owner. [Previous page](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283.md?page=13) [Next page](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283.md?page=15)