The “spirit” of the debate is employees should benefit to some extent from a profitable business.
Left to themselves and emcaknight’s sensibilities employees have no right to expect that. The owner takes all the risk thus the owner should take all the profit.
We do not have to imagine where that leads us. We know it because it has happened. An employee may have a theoretical ability to negotiate whatever wages he or she can but the reality is nothing like that. Look to the early 20th century to see what ability workers had to negotiate a safe work environment, job security, freedom from discrimination and a living wage.
As a result we got minimum wages, child labor laws and safety requirements imposed on businesses to set at least a floor on this stuff. Unions came along to apply negotiating leverage that the individual does not have in these sorts of jobs.
Hell, I noted that American football players used to paint houses and such because they were paid so little to actually play football. Meanwhile the owners were making out like bandits. Eventually the football players had to unionize. Does anyone here think the football players had no claim on a better wage than they were getting?
We are now seeing a wholesale assault on those rights. Maine, for example, wants to increase the allowable hours they can work and decrease the minimum wage for child labor by $2.25 ($7.50 - $5.25). Gets better, that $2.25 reduction bounces back to regular minimum wage after 180 days. Know what will happen? Employers will fire the employee at day 179 and hire a new one rather than face a 30% wage increase. Know who won’t get hired as dishwashers? Adults who cost more. Not as if there aren’t plenty of unemployed adults wanting a job that we need to add to the labor pool.
You badly misunderstand my argument. I’m saying that people deserve a piece of the profits in proportion to their contribution to them. I’ve repeatedly said that the dishwasher almost certainly has a commodity type job, and is therefore not likely to add to the profitability of the restaurant, and therefore doesn’t deserve a part of the upside. I can imagine a case where this isn’t true, but it isn’t very likely.
The OP is saying that no matter what the staff does to increase profits - even someone in a crucial position like the chef - they don’t deserve any of them, and will get a benefit in terms of reputation. Screwing the employee who makes you successful by making him more marketable while not giving him anything seems kind of suicidal to me. So the OPs position is nonsense both ethically and pragmatically.
That’s right. The social contract, since the '50s at least, has been to split productivity improvements between workers and capital. It worked very well. Now it has changed to capital and executives with power taking most or all of the productivity gains for themselves. The result has been a disaster. Where as before workers could fund lifestyle improvements from salary gains, during the last decade it got funded from the housing bubble, and we all know how that turned out.
If employees don’t add anything special or unique to the success of the business (eg what many are using the dishwasher example for), then I fail to see why they should see any reward beyond basic wages/salary. Their roles are replaceable by almost ANYONE else.
A chef whose great cooking leads to the restaurant’s success, on the other hand, may not be so easily replaceable. The owner knows this, and therefore will pay him as much money as he believe his irreplaceablity is worth. If the owner of the restaurant is not willing to give the chef a raise above $80k, then he is in effect saying that he COULD find another chef that’s just as good for the business for $80k.
The employees are competing in a labour market that determines their salaries, while the owner is competing in the restaurant market. If the owner succeeds, I believe he should reap the rewards the the market pays him (just as the $80k chef’s salary is determined by his market).
Those who contributed uniquely will get a salary appropriate for their work, just as the owner gets his.
In order to implement some sort of forced profit-sharing system, you’d effectively have to rewrite the definitions/laws surrounding property. What if instead of paying higher wages/bonuses to employees, the owner wants to start a franchise and open up 6 other restaurants? Should the employees have the right (through partial ownership?) to prevent the owner from doing so?
The problem I see posters having, is that merely investing in something and taking a risk does not amount to “work”. A rich man can double his wealth and do nothing more than sign off on a few papers, and sit on a nice beach in the Bahamas while the cash rolls in. Is “risk” a good enough reason to get paid? Well, morally/ethically speaking, probably not.
But would we have to implement some sort of economic system where ALL people get income based on labour ONLY? This is probably the most equitable way of doing things… but then, who will start new businesses, and how, and with what money?
I agree it is a commodity type job but while not directly adding to the bottom line of a restaurant they are critical to its operation. I have worked as a waiter and saw what happened when the dish washing machine broke down. It brought the restaurant to its knees in short order. The managers and anyone else they could rope in were back there washing madly by hand. It was a big mess.
In short, the restaurant cannot operate without a dish washer. No operation, no profit.
Is it okay to let individuals who have acquired wealth through the work of others (in addition to themselves, usually) - wealth that we as a society have decided to allow them to possess - make independent choices as to what they do with this wealth?
If not, then who exactly should decide? And how would you implement such a system?
In the coop scenario, what would have been paid as wages becomes profits. Money is fungible. If there isn’t enough to pay the dishwasher in the coop scenario, then all things being equal, there is not enough money to pay the dishwasher in the conventional scenario as well.
Not true. Stock options are about as worthless as lottery tickets for next weeks lottery. IOW, their value is valuirable and contingent but there is a value you can assign to them today. Even an option that is underwater has significant value if there is enough time value left in it.
That is teh right taht gives options the value.
I thought I had explained this before but stock options were a device marketed by management consultants. It was supposed to replace other compensation and align management interests with the interests of the shareholder. Well, it didn’t take too long before management decided that the really important aspect was the alignment of managemnt interests and not the replacement of fixed compensation so stock options were granted on top of exist6ing compensation.
Then when stock options started expiring worthless due to cyclical or industrywide price drops, the executives frequently argued successfully that it wasn’t their fault so their stock options should be renewed at lower strike prices. When the market rebounded, tehre was no mention of windfall gains.
As noted above, stock option valuation includes mroe than the intrinsic value, tehre is time value.
Dilution of shareholder profits is a cost, technically.
Everyone wants some of the upside, but who is willing to share in the downside?
I’ll say it again, the providers of capital risk losing that capital, and they weigh the potential upside against that loss.
The dishwasher loses nothing, but gains either way. My broker charges $5 commissions on each trade regardless of if it succeeds or fails. Ultimately, if I stop trading that’s bad for him, but the fact remains I put capital at risk, and he gets paid either way. Does he have a moral imperative if I pick a winner? Should I be sharing my gains?
Go back to the OP and consider again what happens when the restaurant fails:
*Owner loses the capital she put in and draws no salary. Regardless of how rich and powerful she was before, she is now worse off as a result.
The chef earned a salary and gained a year of experience. Her reputation may suffer and it’s unlikely she’ll walk into another headchef position right away.
Commissioned sales-staff will earn depending how bad sales were, and may also get a base salary.
General labour -> gets paid.
It is entirely possible (although unlikely) that after a year the dishwasher is better off than the owner.
Is everyone aware that for the entire year the owner might not draw a salary? There are no returns on capital for the first few months, how many other players are willing to go three months without pay?
In terms of a co-op, how many of Bob Redmill’s 207 employees are willing to go a year without pay? How many of them would bolt at the first sign of a downturn?
Capital is at least as fungible as labor. Why does so much of the additional welath created by higher productivity over the last few decades go to this fungible capital instead of being split more evenly with fungible labor.
I don’t recall anyone here arguing that the business owner shouldn’t get any sort of return on their investment.
Its not that we want to replace capitalism and notions of property rights with soemthing else. Its that we have seen a steady tilting of the playing field towards capital and away from labor and the OP is emblematic of the mindset that allowed this to happen.
We tax labor at up to 35%, we tax capital gains at 15% (or less). We see states cutting taxes on capital and making up the difference by increasing taxes on earned income. Its just seems a bit bass ackwards.
And here is born the labour union: Identify a critical but non-skilled component, and hold it hostage.
It is true that without the dishwasher the restaurant can’t function, or generate profit. But it’s also true that with the dishwasher the restaurant might not turn profit.
The dishwasher has no influence on profit or success, it is a job that is either done, or not done. Someone said “he might break fewer dishes.” No, producing clean unbroken dishes is the job. It can’t be done better, just done.
And with that said, there are great people who do a great job as dishwashers, but there is no justification for paying them more. If you want to reward them you move them out of the dishpit or offer them better hours.
You know what else is critical to the restaurant–> utilities. Without water/gas/electricity that dishwasher isn’t going to run. Should Xcel energy demand part of the profits as well? What if they turned off the power and asked for more compensation?
What if the landlord shows up on a busy Saturday night and declares that rent has doubled? Is he also entitled to a share of the profits?
Then there is garbage removal, which is waaaaay more important than the dishwasher. What if they refused to collect until they get their share of the profits?
And the city transit union, who is responsible for getting people to and from the restaurant. Also a critical function, and also want a piece of the pie.
Everyone wants the upside potential, no one wants to risk losing.
Because the increased productivity wasn’t the result of increased skill or increased workload.
Consider the absolutely most simple scenario of a guy that pushes a button for something, like an injection molding machine.
He is critical, if the button isn’t pressed widgets aren’t made and sales can’t happen.
So he shows up, pushes the button, and gets paid.
Then one day investors decide to buy a better widget machine that doubles the output each time the button is pressed.
Does our trusty hardworking button pusher deserve twice the salary? Productivity has doubled, but his work stayed the same. He isn’t pushing twice as hard, or working twice as long. Investors took a risk with a new machine in the hopes that they’ll be able to sell twice as many units.
Now tell me, if sales fall, and inventory backs up, is the button pusher willing to go without salary? Continue pushing for free until things pick up? Willing to cover the tab on that fancy new machine?
Yeah, we heard you the first twenty times you said it. We understand exactly what you are saying and the ptoential upside in bsuiness has been going up steadily for decades while the amount going to the dishwashers of teh world has been holding pretty steady.
money is fungible. What you call gains could jsut as easily become dishwasher salary. The question is why is so much of the additional productivity going to the owner rather than labor.
It is entirely possible (although unlikely) that after a year the dishwasher is better off than the ownerIs everyone aware that for the entire year the owner might not draw a salary? There are no returns on capital for the first few months, how many other players are willing to go three months without pay?.
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Once again you are positing the all in small businessman to gain sympathy and to add weight to your moral argument. I thought we were talking about the restaurant owner as n anlogy for the provider of capital, the dishwasher for the provider of fungible labor.
If its a coop, they have an investment. They will stick aropund until the paychecks stop coming just like any dishwasher under a conventional arrangement.
Taxes are an entirely separate issue. I’m all for taxing capital, hell, I’m all for taxing labour more too.
But look again and what you’re suggesting and note you use percentages: the dishwasher gets $20k a year so the government makes $7000, no matter what.
Profit on the other hand is variable, so I do need to ask is the government willing to GIVE the investor money when he loses?
And in theory, there is no limit to the upside potential, so at 15% the investor needs to earn $46,667 for the government to earn $7000. Yet for every dollar after that the government keeps earning.
No matter how much is produced through the labor and capital, any increases in productivity are almost certainly going to be the result of advances in technology and better equipment. So if we adopted the mentality that any increases in productivity should inure to the owners, then when would fungible labor ever experience an increase in their standard of living despite ever increasing productivity?
So I can now produce 2 widgets instead of one with the fancy new widget machine every time I push the button. Who buys that widget? Without additional salary, either the owners of capital have to buy all the additional widgets or the price of widgets has to drop by half (which won’t happen because you still need twice as much material to make twice as many widgets). So you don’t need as many widget machines as you used to have and then you need fewer button pushers. Rinse repeat and pretty soon you only need enough widget machines to produce widgets for the owners of capital. An economy based on providing goods to the owners of capital and the people who work to make stuff for the owners of capital is a pretty thin economy. Its why a thick vibrant middle class is so important for an economy.
Because the act of washing a dish hasn’t changed. It starts dirty and ends clean. Capital was invested to increase the productivity of the individual dishwasher. New machines, new techniques, new supplies.
If anything, the job of dishwasher is easier now than it’s ever been. I just climbed Kilimanjaro and those dishwashers worked their asses off. Water had to be carried in buckets up the side of a cliff then boiled. Now guys have a limitless supply of hot water from a high-pressure nozzle and an fully automated Hobart belt fed machine. They don’t even have an incentive to waste less water, just turn it on and let it run. Do you know how often I go back and see the [mechanical] dishwasher running without anything it in? Taps left on? Do you know how many scrubber brushes end up in the garbage disposal? None of that comes out of the dishwasher’s pocket, but it all comes out of the revenue. Do you think the dishwasher wants his salary contingent on the amount of water he uses?
Same goes for the cooks, they are still performing the same function of reheating bagged alfredo. But capital was invested making the alfredo better and marketing the shit out of it to sell it for more.
Like the guy in the widget factory, he’s still showing up and doing the same job, why does he deserve more or less money than before?
At any point any worker can try to alter the nature of their compensation. The widget man could be paid on a per widget basis. But chances are he doesn’t want that because when widget sales slow he’s going to take a loss. He’s also responsible for investing in new equipment if he wants higher output.
If you move the widget man to an independent contractor and draw a circle around him, you’ll see the same thing as the OP. And what I see is that general labour doesn’t want to take a risk with their capital. They want to show up, punch out, and get paid.
It seems as if it took a massive economic downturn for people to realize that salaries can’t go up 3% every year if sales don’t also go up 3% every year.
Then the dish washing machine should get profit sharing.
Everyone in an enterprise is reasonably critical, which is why the get paid. However, just about anyone in that kitchen can wash dishes if they had to, while not everyone could create dishes the way the chef could. (And when they can, like in a fast food kitchen, they are treated more like dishwashers than chefs.)
Don’t get me wrong, an owner who gives something extra to a dishwasher who stays around might build a better team and profit, but there isn’t the same moral obligation as to someone who directly contributes to the increased profitability of the enterprise.
