That’s kind of what I was trying to get at with the law firm comparison, in a roundabout, not terribly articulate way. What I was trying to say is what he said, only that many of the highest paid jobs in today’s society (doctor, lawyer, financial wonk, etc…) are the modern equivalent of that semi-skilled worker getting 1% of the income.
The high pay and bonuses is in a sense, the capital being invested in knowledge-based businesses. It has a ROI, as long as you manage to attract and keep better people than your competition.
Raising wages in non-knowledge based businesses generally has the exact opposite effect- it directly raises the cost of goods sold, and therefore, drops profits. The only way that raising wages in a non-knowledge based company pays off is if it keeps valuable experience or skill (see above) or it can be shown to improve productivity or quality. Anything else just costs the company money.
Demand shot up. Financial transactions and financial products account for more and more of the global economy than ever before. The law has always struggled with losing talent to banking. Now medicine is facing similar challenges.
You can’t look at European and Asian CEO pay and necessarily say ours are overpaid. There may be regulatory issues at work, as well as non-monetary compensation at play. And anyway, CEOs don’t generally set their own pay; that’s what the board of directors does, and by extension, the stockholders. Apparently Euro/Asian boards and stockholders don’t like the idea of high CEO pay, while US ones do.
A lot of people have these vague, vaporous notions about how much a person’s labor is worth, and it’s usually a combination of sour grapes and misunderstanding market mechanisms. Essentially, the labor market comes down to the same two strategies that products do - low cost or differentiation. “Low cost” workers are interchangeable; one garbageman is very much like every other one; it’s stupid to pay one more than another, and equally dumb to pay any of them any more than what anyone else is paying them, because you’re just throwing money away at that point.
People who differentiate themselves are the people who have a combination of skills, experience and education that makes them different from everyone else. They may have the same job title, but since the work they do isn’t so cookie-cutter like, the better ones get paid more than the lesser ones.
I agree that the market’s not efficient, like say… the soybean market, but with all the vagaries of people and their performance, it’s probably about as good as it’s going to get.
I thought that was the whole point of the OP. Why has the owner of the machine been getting almost all of the benefit of the increases in productivity over the last several decades?
Its not JUST the machines that are creating all that additional production.
The stockholders have a collective action issue when it comes to executive compensation. It is a pretty small percentage impact on the bottom line so the incentive is not there to police executive compensation.
Executive compensation committees are pretty incestuous. I put you and three other CEOs on my executive compensation committee and I am on each of their compensation committees. We each think the world of each other and think we are worth whatever our respective companies can afford.
I’m not arguing that a cashier should make as much as a neurosurgeon, I’m saying that the way our economy has evolved in the last few decades places almost all of the additional value generated from increasing productivity to the person who owns the cash register and almost none of it to the cashier.
And when considering that the pricing mechanism is particularly flawed in the employment market, even if we concede that this might be as good as it gets, doesn’t that argue that the current wage level is the result of something more than mere market forces at work?
I thought the absurd numbers would make it clear it was outrageous and merely meant to denote an idea.
As I recall in the tax debate Obama just gave the republicans what they wanted on the Estate Tax. Except as I recall John Boehner had already said he would extend unemployment benefits.
No negotiation. No trade. Just, “Here ya go.”
Were republicans suitably impressed and become nicer or less recalcitrant? Nope.
As I said, if the other side refuses to negotiate at all and does nothing but be as obstructionist as possible why would your side continue to negotiate? It takes two to negotiate and I see precious little coming from the republicans.
Something unique (in my lifetime, anyway) that’s happened in the U.S. is that labor (and labor unions) are looked down on now by both the right and the left wing. This has been a long-term thing with the Right and its championing of industry and business in general. What’s surprising is the contempt for blue-collar workers and unions on the Left*, particularly in the encouragement of illegal immigration that dilutes the labor supply primarily in relation to entry-level, service and factory jobs (the latter already declining due to jobs moving abroad). It’s only in recent years that I’ve seen pundits and editorial writers in left-leaning publications deriding American workers for not jumping at low-pay jobs that will not support their families (that low pay often being heavily related to expansion of the labor pool by immigrants).
Of course this view is related to the perception that blue-collar American workers have declined in influence and may hold politically undesirable views, while immigrants are seen as permanent converts to the Democratic Party. (I raised these points in a recent GD thread to less than universal acclaim).
If you’re referring to the Dope, its membership is not exactly synonymous with the working man/woman, and apart from political motivations it’s nice to be able to buy goods and services made cheap by cheap labor.
*except where pro-union sentiments can be expressed in a direct anti-Republican fashion, as in the case of Wisconsin public workers.
The question really comes down to whether the employee added that value themselves, or was just there using better tools.
For example, let’s say a sandwich shop owner moves to a big rotary Hobart slicer from having his employees use knives to slice their meat and cheese.
He’s increased his productivity and his quality, hopefully translating into greater sales and more money.
The employees making the sandwiches haven’t added one penny of that value; if anything, their value has been reduced, because slicing meat thinly and accurately with a knife is a skill, while just manning a semi-automated slicer doesn’t take any skill.
Why should the employees share in any of that money? Their job didn’t really change much, they didn’t put any money into the slicer cost, and they’re ultimately not as valuable as they’d been before. They’re still making the compensation they agreed to when they took the job, so I’m not sure where the grounds to bitch are, other than sour grapes that the boss is making more money and they’re not.
If they’d hired a special Japanese sandwich chef or something crazy like that, and he improved the profits of the restaurant through better recipes, etc…, then sure, he should share in the profits, but if the company does something to improve productivity, or sales just increase, then no, workers don’t get a share, unless they increased the value that they add.
Go into a casino and stand next to someone betting. When they win, ask for part of it.
If you consider “entering a casino” to be “risk” then you’d think you were entitled to a share of the winnings. You showed up that day, where is your reward?
The guy that bought the machine risked his capital. If the business fails he loses his capital. The guy that pushes the button risked nothing.
Labour has been losing power/influence because they have been systematically reducing the level of risk. The same group of guys could start a coop and all make the same salary. What you’ll find is that guys at the bottom have no desire to risk what little capital they have.
A skilled athlete takes a risk when he signs on with his first team, he only has a couple of years to make a name for himself. If he chooses wrong he’ll miss his shot at a championship. Even before considering salary, think Yankees or Mets? Which has a better shot this year? If a team already has three good pitchers, are you going to be number 4? Or would you rather be a starter for a shitty team.
The guy working hourly at the concession stand makes money regardless of the team’s success. So it doesn’t matter where he works. If he loses his job he doesn’t lose his ability to earn. Are you able to see that distinction?
Here’s another example where you fail to understand risk.
A neurosurgeon invested time and capital going to school, and then years training. His earning potential doesn’t kick in until his late thirties.
The store owner had to get a lease, and invest capital to renovate the shop. They he/she had to invest capital in the form of inventory. There is a risk to that. If you buy too much what do you do with the left overs?
What does the cashier risk? He shows up every day and either sells a shirt or doesn’t. If the store fails he goes and works at another doing the identical job.
He invested nothing, we means he stands to lose nothing. He also misses the rewards.
If, on the other hand, that cashier is skilled things change. If the cashier has talent as a salesmen he as responsible for profits as the designer. We reward that by paying commissions. Sell more, earn more. And then quarterly bonuses.
In that case, where skill is involved, a salesman takes a risk. Is he better off working for a Toyota dealership or Saturn? Now he doesn’t just lose a job, he loses earning potential.
Labour has never had power or influence as long as labour has never taken risk.
Money means power and choices, which most people do not have, since most live paycheck to paycheck.
I’m all for small business, but if any business ever gets large enough to have enough money to control the peoples choice’s, then we are no longer a representative democracy but one based on how much money you have.
I see it all the time, actually. Most machine shops and metal fab shops are started by guys (it’s always guys) who wroked in the industry, saved their pennies, and start their own shop, usually by either buying used machines or by buying a failed business and restarting it.
The cashier does not invest his time, he provides a service and in exchange he is paid a salary.
The owner invested his time. Months of work go into a store opening before any sales are made, and months can go buy before there is profit. The evil capitalist might go a long time without drawing a salary before there is enough revenue.
Again, I urge you to go to a casino, stand next to someone better, and demand part of their winnings. Maybe then you’ll understand risk/reward.
Kearsen - "But you also don’t see an equipment operator (employed by a company) forking over his/her dollars to buy that fancy piece of equipment either. "
This is a very important point. The US allows people to do that. Anyone working at GM at any time is allowed to set out and start their own shop (assuming they didnt’ sign a non-compete).
The point Kearsen was making is that few workers bring in a new punch press or a $20k injection molding machine.
Professional jobs usually pay more than manufacturing jobs, but most service jobs pay very little, and are difficult to unionize. This does not mean that service industry workers would not benefit from strong unions, however.
You have an unusual definition of “risk.” Many employees work from pay check to pay check. In this economy if one is unemployed it is very difficult to get a job. Most employees are much closer to becoming indigent than most investors.
When considering how the degree of economic inequality in the United States has increased since at least 1980 we should consider gross income and net income. Gross income is what you earn before taxes. It is less directly effected by political decisions.
I can think of two factors that have increased inequality in gross income. The first is the rise in the population, which in the United States has been caused largely by immigration. A rising population means more job applicants and more customers. Consequently it means lower wages and higher prices, other things being equal. It also means higher profits.
The second factor that has increased inequality in gross income has been the growth in computer technology. It reduces the economic value of jobs that are easy to learn, while creating careers that are difficult to learn. It also enables a small number of geniuses to amass vast fortunes. Computer technology not only leads to automation, it makes it easier to move jobs to other countries. Two or three decades ago this negatively impacted factory workers. Now many professional jobs, even for computer programmers, are being sent to India and China.
The reason this has not had more of a political effect is the breakup of the New Deal coalition, which began with the election of 1968. This has enabled the Republican Party to cut taxes for the rich, creating greater inequality in net income. Because of all these factors the rich make quite a bit more money than they did in 1960, while paying a lower percentage of it in taxes.
There are two reasons the American people are more accepting of inequality than the Europeans. The first is that the United States, and the thirteen colonies before the American Revolution, has lacked a hereditary, titled aristocracy whose wealth was based on land ownership. Until comparatively recently there has been more social mobility in the United States than in Europe. Consequently, young Americans imagine that hard work will make them rich. Middle aged Americans imagine that their children will become rich.
The second reason is that the work force in the United States has always been more heterogeneous than in Europe. Loyalties of race and ethnicity are usually stronger than loyalties of class. A heterogeneous work force is more difficult to organize than a homogeneous work force. In the United States white employees are often more prone to identify with their white employers than with black and Hispanic co workers.
What I have written may sound more dogmatic than I want it to. These are tentative assumptions, rather than doctrines to which I am emotionally committed to. I welcome discussion and disagreement.
