(This is Part I of a multi-part series on the broader topic of economic truths and fallacies)
Rage and curiosity flooded my mind again today. Getting facebooked or “twittered” is an all too common experience for me and millions of others, regardless of socio-political ideology. It happens as we follow our joy and curiosity in what we find on Facebook – and other – social media platforms. As usual, this particular browsing episode also featured a wonderful video (wait, don’t click that ‘dessert’ yet! Eat this ‘vegetable’ post first!) of grandfathers interacting with their infant grandchildren. Okay, where was I?
Right, so then, there it was: another (actually truthful – how refreshing) meme about how a typical worker in a large company eek’s out a paltry existence in the shadow of their boss master’s hyper-wealth, another example of the absurdity of the economic injustice endemic throughout American society. Where did we ever get the idea that an owner, or executive of a business, merits earning several hundred – even several thousand – times more than those whose work actually provides the value and profits that the company makes that afford those at the top with royal compensation?
Now, I’m not saying that ‘the boss’ and those charged with the directorship of a company shouldn’t be paid more, and handsomely so, as compensation for their founding right (courage, creativity, persistence, vision and other initial investments), and their strategic and operational skills and responsibilities. Notice I didn’t say ‘level of education.’ Many very successful entrepreneurs haven’t even gone to college; some never finished high school! Level of education may be an entry bar, but’s it’s largely irrelevant (notwithstanding specialist, certification-required work, e.g. doctors, lawyers, nurses, teachers, etc.) when it comes to adding value to an organization and a company.
So where (who) does value come from in creating and sustaining the success and/or profitability of an enterprise? Simple; everyone who has an influence over and a stake in such: e.g., the owner, the board of directors, the management team, the supervisors, the operation, information technology, product research and development, goods production, marketing, sales, retail, and facility maintenance teams, among others. The point is that it actually does ‘take a village’ to care for and raise a business to become a responsible and productive member of society. Take away any part of that whole and the business will suffer. And it doesn’t matter whether a function gets ‘outsourced,’ it still needs to get done.
Outsourcing is beyond the scope of this post but, as it has certainly taken on a life of its own, should and will be discussed in ‘Part ?’ of this series. One thing does bear mentioning here as it’s relevant to the wage war theme of this article. Getting rid of direct (in the company) workers, particularly when cheaper, (i.e. less-regulated, more desperate/impoverished, and/or de facto slavery) workforces can be found in other companies, other segments of society (think immigrants), or other countries is advantages on two fronts: higher profits and lower prices to consumers. And I’m sure you can see the catch 22 here, but let me explain.
If you’re a business owner, you always seek a competitive advantage: make it cheaper, sell it cheaper, gain more customers, make more sales, make more money. This is the basic capitalist business model and it makes sense, up to the point where it bumps head-on into ethical and moral issues of the ‘greater good’ concept which posits that, for a society to function well, thrive and endure as such, there must be a just quid pro quo arrangement that creates a win-win relationship between all parties.
That’s also a basic tenet of why a people’s representative government is essential to keep this balance of fairness secure. But today, we have a government that, first and foremost, represents the will of a small majority: those with the wealth and power to influence decision-making in their favor, which is increasingly creating a win-lose scenario throughout our society.
If you’re a consumer, you also perceive an advantage. Notice the nuance. The advantage to consumers is not what it appears. And that’s why the companies and their media arms under their corporate umbrella built the propaganda machine that spews out a ridiculously inaccurate and false narrative about how our economy works. There’s a reason why cheaper common-use consumer goods are necessary in a society of people whose wages are lagging and/or falling relative to the GDP growth. Inflation is already occurring, it’s just being masked by an attempt to balance low wages with low prices for basic consumer goods. Where the pain of low wages is felt most is against the rapidly rising costs of housing, transportation, energy, education, healthcare, food, and more specialized durable goods.
Purchasing power, on a whole, is actually decreasing, not increasing, but again, this is being masked by extending loans and credit to cover costs that wages won’t. Covering payments rather than making full purchases gets the consumer what they want, gets a sale for the business and now, tah-dah! gets the bankers a piece of the action! It seems, at first run, to be win-win, right? Except that consumers are paying more than the list price of the good they will eventually fully own. This relationship, over time, exhausts consumers’ financial resources as they make less, but pay more for nearly everything. It’s not sustainable. It’s a slow bleed to the poor house.
A distinction must be made about relative income. Even as I write this post, I see that I’m much less of a victim than most people. But that doesn’t mean anything when I’m considering the well-being of more than 300 million people in the United States, two-thirds or better who are already drowning as a result of the systemically-drilled holes in the ‘American Dream’ boat. And another sixth of the population is clinging to the rails. In reality, we are all on the Titanic and, as long as we keep avoiding a discussion of the icebergs in our way, we are all more likely to be in the water as in a boat.
Consider also that the paltry and stagnant federal minimum wage has given businesses an anchor that helps justify keeping workers’ wages low and allows for heavy profiteering at executive levels where the ratio of people in these two camps is perhaps 1,000:1, more or less. So, in such a basic – and yes, simplistic – model, if you pay your workers an average of twelve dollars an hour when they should be earning twice that amount according to GDP growth, you’ve just found yourself with about twenty-four million extra dollars in annual revenue. Hmmm, what to do with all that ‘surplus?’ Better healthcare for the workforce that is making you rich? Maternity leave? Increase worker compensation, à la wages or productivity bonuses?
To be fair, there are some companies who do just that, but we only need to look at Wal-Mart, McDonald’s, Duncan Donuts, (yeah, that was the meme) and others to see that the choice usually made is to maintain and increase, often exorbitantly, executive compensation and, in turn, convince the government, at taxpayer expense, to provide public assistance to compensate workers for the low compensation provided by their company. How is this acceptable, but raising wages for workers is not?
Let’s just consider a question of worth. Do the guys or gals at the top of the company pyramid really do 1,000 times the work and add 1,000 times the value compared to the rank and file in that company? Hint: visualize that pyramid. Who is actually riding on the backs of whom? Getting hired to work for a company is not a charity offering, each worker adds value to the whole. Without all these people supporting the vision and mission of those at the top, there would be no production, nothing sold, and no profits, which means that there would be no company. Maybe, tying executive compensation to some multiple of base worker compensation is a smarter, fairer and more ethical model for capitalism and economic justice.
Which brings me to my final point in this post: the lie in the assertion that raising wages to a ‘living wage’ will create an inflation nightmare that will ‘hurt everyone’ must be soundly and clearly debunked. The exact opposite is actually what would result. It’s simple, yet complex. It’s not difficult and complicated. There’s a big difference. And it needs a thorough explanation. More to come …
In subsequent posts, I’ll tackle much more about the socio-economic-political triangle that has become mangled by greed and corruption and the injustice that arises from such.