Friar Bijou wrote:
In brief, Bob is pocketing that $1 mil after paying all his expenses everywhere.
And I'll again point out the extreme silliness of the example itself. In the real world, Bob would pay his various employees different amounts of money based on their specific jobs and skill, some of them near minimum wage, some of them much much more than that. He'd have to, or they wouldn't continue to work for him, and certainly not well enough to earn a $1m/year profit. It's pretty monumentally unlikely that a set of 100 unskilled workers could generate a yearly output valuable enough to pay their minimum wage salaries, plus the equipment lease costs, plus building costs, plus utility costs, and materials cost and have a million dollars left over.
And if they could, they'd just go into business for themselves, because they're like amazing or something. Keebler elves maybe? It's a silly example and not remotely like the real world.
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Lost in my story was the point, which being: harm.
Imaginary harm.
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If Bob is going home at the end of the year with 1/3 of a million instead of a full million and his employees are better off and are less of a burden on the general public, then Bob's loss is far outweighed by the gain.
No. Objectively his dollar loss is exactly the same as the collective dollar gain to his workers. I'd argue that subjectively, his loss of $625k/year is far more of a burden on him than the relatively small gain of $6.25k/year is for each of his employees. As Ugly mentioned above, you're also ignoring things like risk and debt. How much did he have to borrow to start this business? It's quite possible that he's paying hundreds of thousands of dollars back each year in loan payments on a $1m/year profit business venture. How much variation in revenue is there going on? What is the net profit rate? Most businesses operate at around 5% or so net profit (and certainly the ones that have lower pay workforces do). So that means he's taking in $20m/year in revenue to make that $1m/year in net profit. So a bad year or three can easily wipe him out, even while you might think on paper that he's rolling in dough.
It's just not as simple as you're trying to make it out to be. It's not as easy as just declaring that Bob should share more of his profits with is workers. He should instead pay his workers an appropriate wage based on the value of their labor to his business relative to similar businesses in the same industry. Pay too much and he's losing out on profits and may increase the odds of going out of business. Too little and his best workers will go work for his competition. It's a balance of factors, and honestly "how much the worker needs" isn't really part of it. The worker's needs drive the worker to increase the value of his labor, and seek out employers who will pay him more. And yes, this is the force that pressures Bob to pay his workers more. You don't need some kind of legislative fiat to accomplish this. All you need is enough legislation to ensure free market/labor competition (ie: anti-trust style laws) and the system works.
You have a solution in search of a problem.
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In gbajiland. this makes Bob a victim somehow.
He's out $625k/year. That sure seems like harm being done to him.
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And, unless I'm unclear, this isn't about Bob being forced to do this. This is about Bob aught to do this because it's the right thing to do. I see it as a matter of patriotism, quite frankly.
Ok. That wasn't actually clear. I assumed we were talking about something like minimum wage increase, given that this bit about wages grew out of my arguments about the harmful effects of government regulation increasing the cost to operate a business. It seemed reasonable that your comment was about some kind of regulation forcing Bob to pay his employees more. If it wasn't, then I'm not sure how your post has anything to do with the conversation about government regulation hurting businesses by increasing operating costs (that was kinda the point with the whole "insurer dropping Obamacare" topic).
Um... I agree that Bob should pay his workers more in that situation. in fact, I find it hard to imagine a business operating like that that isn't already paying their employees much more than minimum wage (as I pointed out in both my previous posts). So yeah, I guess this is you searching for a problem. This is already how things are. What the aren't is like the example you started with.
I'll also point out that this isn't done because it's the right thing for Bob to do from some kind of moral standpoint (although he's free to do so if he wants). It's the right thing to do because it's the right thing to do from a business standpoint. Anyone wanting to grow their business to the size of Bob's business will have to pay their employees wages appropriate to the value of the labor (which is a function of the costs charged to the businesses customers for the good/services his workers provide or create). Their wages aren't really set by him, but by those customers (just like with my fryolator example earlier). A widget factory worker will earn more than a McDonald's fry guy not because of any difference in need by the worker, but because of the relative value placed on widgets versus fries. If Bob owns a bunch of burger franchises, his employees will likely be paid less on average than if he owns a custom luxury car parts manufacturer/installer. Why? Because people will pay more for the latter than for the former. That's why. It's all market driven.
The best way for people to improve their wages is to engage in labor that others value more. Period. There really is no short cut or cheat to this. Trying to artificially declare that the fry maker's labor should command X dollars more per hour is completely counterproductive since the value we place on the output of each workers labor is relative. Dollars are just a median for exchanging those relative valuations. You can't cheat that fact. Well, not for long, and not without harmful side effects to your economy. Which is why it's a bad idea.
Edited, Dec 11th 2015 4:56pm by gbaji