Why work has failed us: Because companies aren’t sharing the profits

[joeea]

Union! Union! Union!

That's the solution. But I sure don't see much movement in that direction.

 

[CaptTom]

OP here. Good discussion so far. A lot of very valid points.

Non wage compensation gets increased to cover higher health insurance costs, but since that's not a "wage increase" it's invisible.

Having lived through all kinds of HR BS trying to convince us that MegaCorp's routine cuts in employee benefits were made to help us, I struggle to believe this. I know first-hand that my own real wages, absent a promotion, went down every year for the last 10-15 years in spite of token raises. I tend to favor the view that employees are getting less - much less - while CEO's and a small circle of others are getting much, much more of the pie.

The point that the linked article was directed at private venture capitalists was not lost on me. However, I tend to expand that to include what I somewhat flippantly called the "investor class." Again based on my own experiences (and anecdotes from other MegaCorps) it seems there's a strong herd instinct among MegaCorps. Just about every benefit cut and paltry raise was justified by saying they'd "benchmarked" their practices against "industry standards." Another way of saying "we're cutting your pay because we think we can get away with it."

Again, I'm not advocating against capitalism. I'm a member of the "investor class" in that my only available income streams (pension and 401k) depend on investments. As was pointed out, you play the hand you're dealt.

Edit: One more thing. I also benefit from wage stagnation, as my pension is fixed. That doesn't make it a good thing for the economy, overall.

 

[RAE]

Let us distinguish Capitalism, which is an economic system based on private ownership of capital assets, from Greed, which is a human vice which predates capitalism by millennia. The two concepts are entirely unrelated. There's no end of greedy socialists/communists/anarchists out there piling up their own stacks while condemning you for yours.

I would not say that they are entirely unrelated. Yes, greed can certainly occur without capitalism, but some who have studied and written about capitalism believe that greed (to some degree, anyway) is actually necessary for capitalism to function properly. I'm not sure that I would go that far, but I do believe that capitalism, without appropriate regulatory mechanisms in place to protect workers, provides the OPPORTUNITY for greed to harm (or at least shortchange) those workers. Just look at the destruction of unions in this country for evidence of that.

 

[Red Badger]

I would not say that they are entirely unrelated. Yes, greed can certainly occur without capitalism, but some who have studied and written about capitalism believe that greed (to some degree, anyway) is actually necessary for capitalism to function properly. I'm not sure that I would go that far, but I do believe that capitalism, without appropriate regulatory mechanisms in place to protect workers, provides the OPPORTUNITY for greed to harm (or at least shortchange) those workers. Just look at the destruction of unions in this country for evidence of that.

I would assert that there has been a fair amount of union self-destruction over the years.

 

[nwsteve]

I would assert that there has been a fair amount of union self-destruction over the years.

+1 Plenty evidence of corruption in union leadership and abuse of rank and file for benefits of politicians. IMHO. Why be part of an organization and pay dues when all you see if more for the leadership.

Like many things, it is not all one or none of the other and clearly things are out of balance on this topic as well as many of society mores

 

[Onward]

It's no tragedy that investors are making money. It's a tragedy that more people aren't investing.

When any U.S. citizen can open a brokerage account, there is no more "investor class." There are only people who make good decisions and people who make bad decisions.

It's easier to find $$ to invest when you earn a lot, but high earners are high earners because they provide highly valued, and valuable, services. This is a GOOD thing, especially since what I earn doesn't in any way detract from what you earn.

If you earn more than I do, I don't begrudge you that. Somebody values your services more than mine. I'm going to find a way to increase my value to others, so my earnings rise.

If the average CEO now makes more, vs. the average employee, than he or she did in decades past, then he or she is probably providing more relative value than in decades past. That's what the market is telling us, and it knows more than you or I.

Labor unions, once very useful, have lost their way and their usefulness, unless you like graft, compulsion, and strong-arm tactics.

Private property and the free market, including the investments they imply, have done more to improve human lives than other system, or manifesto, ever has.

Flirting with Marxism was fun in college. It's time to grow up now.

 

[ls99]

A few times I had to explain to new hires just out of school: You are exchanging your skills, specialized techniques which we will teach you at no cost to you, for a set amount of time at a dollar figure we agreed on, to perform tasks we hired you for. That means you show up for work on time, perform the tasks assigned in a diligent and timely and skillful manner.

If you can't understand the above, go somewhere where they will pay you to indulge in your daydreams while employed.


By the way I worked in a union shop, in a NO right to work state.

 

[Walt34]

If companies suffer from attrition, they will sweeten the pot for the workers.

No they won't. They will offshore.

Well, that depends on the nature of the work. Nurses are a prime example, as is any other occupation that demands "hands on" work. I just read an article about a coming shortage of aircraft technicians, electrical line workers, police officers, and many other jobs that require a physical presence at the location. It's kind of hard to offshore those jobs and the pay scales are beginning to show it. An aircraft technician earns ~$70k a year, not bad for a job that doesn't require a college degree.

A hobby of mine is flying radio control airplanes. The ones I buy are made in China, but all of the design, marketing, and product support work is done in Chicago.

 

[CaptTom]

If you earn more than I do, I don't begrudge you that. Somebody values your services more than mine. I'm going to find a way to increase my value to others, so my earnings rise.

Right! This is as it should be.

If the average CEO now makes more, vs. the average employee, than he or she did in decades past, then he or she is probably providing more relative value than in decades past. That's what the market is telling us, and it knows more than you or I.

Here's where things start to break down. CEO's are certainly not providing 400% more value now than in the past. It's not a "free market." No-one values these CEO's at that rate except other CEO's, who all sit on each others' boards.

This myth of the "free" market needs to be examined. A marketplace needs structure, rules, regulations and processes. If there's a level playing field, the best players rise to the top. If there are no rules, the biggest bully takes advantage of everyone else.

I suspect we're well down that path right now. The problem comes about when all the other kids on the playground finally get sick of being bullied. I don't really want to live through that.

 

[brucethebroker]

The only strategy that works (no matter who pays or what your salary is) is to stop making "buying stuff" your hobby. Save a bunch and spend less. Pile it up until you can walk away. Early or "on time".

You are correct. The world is filled with stories of folks who saved their way to wealth. There are still plenty of opportunities out there. But many are not willing to pay the price: no second job, no continuing education to improve their career, no investing hobbies (fixing up houses, starting a business, self taught stock investing, etc.). No getting out of debt. No putting off fun (expensive vacations, fancy cars and clubbing lifestyles).

There are those who can make it and save it under nearly any circumstances and market conditions. And those who do not want to try. Too many writers ignore the former and illuminate the plight of the latter. Guess it sells papers that way...

 

[marko]

. The problem comes about when all the other kids on the playground finally get sick of being bullied. I don't really want to live through that.

But I wonder if these new kids are changing the dynamic. What I see are young people willing to exchange lower but fair (going rate) wages for more free time.
"Ok boss, make your big money, I'm off to meet my friends at the coffee shop ".
Maybe they don't see themselves as bullied, having decided a more balanced life path, they already see themselves in control. Maybe we're using an outdated yardstick?
Just an idea.......

 

[RetireBy90]

While there are problems in all systems of civilization, my momma used to say our system is the worst except for all the others.

Changes in executive compensation could be had and may even benefit the masses, how much would taking $40M from an executive and parsing it between “workers” change the average “worker”? I added “ because many of the posts assume C suite just sit around and don’t “work”. Splitting that$40M might only add $1,000 or less to the employees. Is this about how much I make, or jealous of how much another makes? How much does that exec pay in taxes? How much does the exec contribute to charity?

I may be the worst one to comment, but I survived 40+ years of work by making myself more valuable to the guy who cut the paychecks. How many times have I heard about the wage at a fast food place not eno ugh to support a family? That used to be an entry level job you would only do for a year or so. Get educated or get a skill. Provide more benefit to your employer and if they don’t pay what you are worth, get another job. Take on responsibilities at work, volunteer for a task nobody wants to do. I’ve heard the same advice from some smart folks, so don’t think I’m trying to tell anyone what to do or that I’m better than anyone else. Just advice on how to advance and get promotions from some smart folks.

 

[daylatedollarshort]

The only strategy that works (no matter who pays or what your salary is) is to stop making "buying stuff" your hobby. Save a bunch and spend less.

Pile it up until you can walk away. Early or "on time".

+1. No more working longer and longer hours to buy more and more consumer goods for us. We're more aware and leery of advertising these days. We buy used when we can; reduced our energy and water consumption; cut our energy and water usage; and patronize local credit unions, mom and pop businesses and nonprofits as much as we can.

Except for Amazon. It would be really hard to give up Amazon with their low prices and two day delivery to our front porch. My social conscience still has its limits.

 

[mpeirce]

Yes, greed can certainly occur without capitalism, but...

Greed exists in all societies and economic systems.

Thinking you can eliminate greed - or other human weaknesses - is just naive.

 

[Teacher Terry]

Poor people don’t have any money left over to invest.

 

[Mdlerth]

Your majesty, the peasants are revolting!

While there are problems in all systems of civilization, my momma used to say our system is the worst except for all the others.

Changes in executive compensation could be had and may even benefit the masses, how much would taking $40M from an executive and parsing it between “workers” change the average “worker”? I added “ because many of the posts assume C suite just sit around and don’t “work”. Splitting that$40M might only add $1,000 or less to the employees. Is this about how much I make, or jealous of how much another makes? How much does that exec pay in taxes? How much does the exec contribute to charity?

All your observations are sound, and their implications regarding our own motives are worth pondering.

But consider that it may not be relevant. Wasn't the point of the (undoubtedly biased and inflammatory) article cited in the OP that, compared to an earlier era, companies today treat their low-level employees shoddily while heaping riches on the top tier? Surely no rational observer would be surprised at the resentment this arrangement will spark.

Does a CEO actually produce $40M worth of goods and services to merit such compensation? Of course not. Neither do pro athletes or rock singers or movie stars. That they manage to convince somebody to pay them that much is amazing and grotesquely funny. But I'm not trying simply to grouse about a CEO's W2, although I can see that my earlier posts may have given that impression.

Whether spreading the CEO's $40M among the workers would make a palpable difference to their standard of living doesn't matter. Whether he pays a lot of taxes or gives to charity also doesn't matter. What does matter is whether workers think that the CEO's wealth was achieved by stealing it from THEM. This is a critical distinction.

My favorite college course was The History of Revolutions. It covered uprisings over most of the past 1000 years. I learned that revolutions don't automatically occur simply because times are hard. Famines, plagues, Visigoth invasions... all these and more have happened without starting revolts. What incites the populace to overthrow their masters is when they believe times are bad AND it's because the masters have hogged all the goodies.

I don't think we are nearing societal collapse... yet. Neither did Marie Antoinette.

 

[corn18]

Poor people don’t have any money left over to invest.

How poor are you talking about? My DD is a manager at a fast food place making $11/hour and manages to save money (with no assistance from us).

 

[JDARNELL]

The business world is not about fairness it’s about efficiency. If you are more efficient with your time you have more time to do other things if you choose. I don’t want to be in a part of the world that is about fairness. The majority might be fairly miserable compared to how they could be. I like the world of incentives.

 

[HI Bill]

Poor people don’t have any money left over to invest.

It's partly about choices. Alcohol, drugs, ciggarettes, lottery tickets [and iPhones] are all choices (that not only poor people make, just look at the opiode crisis)...but many in poverty do make poor choices that keep them from raising themselves up and getting out of their poverty. I saw a lady on SNAP driving a Cadillac Escalade. She couldn't save money because of her lifestyle. She ate better than I did!

People want to blame others on their being poor, because they are victims. Sometimes, prejudice does inhibit upward mobility, but there are many who are able to rise above. There are those who cannot or will not. We are born in an 'accident of birth', with no say in who our parents are, how much physical or mental ability we inherit through our parent's genes, or where in the world we are born. It is what we do after, with what we have, that matters.

 

[Walt34]

Poor people don’t have any money left over to invest.

It's partly about choices. Alcohol, drugs, ciggarettes, lottery tickets [and iPhones] are all choices (that not only poor people make, just look at the opiode crisis)...(snip)

People want to blame others on their being poor, because they are victims. Sometimes, prejudice does inhibit upward mobility, but there are many who are able to rise above. There are those who cannot or will not.

Exactly. Here's a thread from a few years ago, a pizza delivery driver who had accumulated assets of $675k by starting saving when he was a teenager and taking LBYM to heart. He didn't stick around long (our loss) but he showed that it can be done.

http://www.early-retirement.org/for...aiming-at-fire-in-a-few-more-years-72212.html

 

[RetireBy90]

All your observations are sound, and their implications regarding our own motives are worth pondering.

But consider that it may not be relevant. Wasn't the point of the (undoubtedly biased and inflammatory) article cited in the OP that, compared to an earlier era, companies today treat their low-level employees shoddily while heaping riches on the top tier? Surely no rational observer would be surprised at the resentment this arrangement will spark.

Does a CEO actually produce $40M worth of goods and services to merit such compensation? Of course not. Neither do pro athletes or rock singers or movie stars. That they manage to convince somebody to pay them that much is amazing and grotesquely funny. But I'm not trying simply to grouse about a CEO's W2, although I can see that my earlier posts may have given that impression.

Whether spreading the CEO's $40M among the workers would make a palpable difference to their standard of living doesn't matter. Whether he pays a lot of taxes or gives to charity also doesn't matter. What does matter is whether workers think that the CEO's wealth was achieved by stealing it from THEM. This is a critical distinction.

My favorite college course was The History of Revolutions. It covered uprisings over most of the past 1000 years. I learned that revolutions don't automatically occur simply because times are hard. Famines, plagues, Visigoth invasions... all these and more have happened without starting revolts. What incites the populace to overthrow their masters is when they believe times are bad AND it's because the masters have hogged all the goodies.

I don't think we are nearing societal collapse... yet. Neither did Marie Antoinette.

So what is the real problem if the pay of a CEO is not it? Is it the way workers feel? There will always be those that make more than you do. There are always going to be those with a nicer car, bigger house, etc.

My point was or is, many of those that will complain have not done what is needed to get ahead. Some, certainly not all, expect something to be guaranteed. If what you are doing isn’t paying the bills, then try something else?

 

[Mdlerth]

I don't know how to say it more clearly

So what is the real problem if the pay of a CEO is not it? Is it the way workers feel? There will always be those that make more than you do. There are always going to be those with a nicer car, bigger house, etc.

From my previous post:
What does matter is whether workers think that the CEO's wealth was achieved by stealing it from THEM. This is a critical distinction.

 

[sengsational]

There was a thread a while back where we discussed pass through voting for mutual funds and ETFs. I said it was possible if the owners filled out a profile for how they'd like their shares voted, but I "lost" to the "it can never work" crowd. But as the owner of 30 individual stocks, I see how repetitive these things are. It would be easy to have a profile that said to vote against executive compensation changes to accept share holder proposals and the basics. I do agree that unless your fraction of shares could be voted using a profile, it would be too laborious for fund holders. What if in the future you have a AI that you train that votes your shares?

 

[pb4uski]

The article states "A common effect of a private equity buyout is liquidation; if the company can’t keep up with its interest payments or isn’t able to create a big enough profit, the firms will sell the organizations for parts. This is still often considered a success for shareholders because they made a return."

I worked in M&A and many PE firms were our clients. I NEVER saw a deal that was premised on liquidation, though I am aware of some unsuccessful deals that ended up with that result.... in most cases, the PE investors took it on the chin.... ask Ceberus about Chrysler... and the owners of ToysRUs are taking a $1.3 billion bath as well.... but that is capitalism and risk.

Typically, our clients would look to buy business with good bones but operational challenges at a discounted price, bring in expertise and improve them and then sell them to a competitor or the public... when it worked, they made out like bandits and when it didn't they took a bath.

While I don't follow ToysRUs, an educated guess is that they were on the ropes even before Bain, et al LBOed them in 2005 and it just didn't work out.... and they lost $1.3 billion.

KKR, Bain Capital, and Vornado Realty Trust, financial firms run by billionaires, pushed Toys "R" Us into bankruptcy protection in Virginia this week, abandoning any hope of ever recovering the $1.28 billion they invested to purchase Toys "R" Us over a decade ago. Vornado was already carrying its $428 million investment in Toys "R" Us at zero prior to the trip to bankruptcy court, according to its Securities & Exchange Commission filings.

 

[Red Badger]

Compensation is evenly distributed in North Korea for most workers in the "private sector." NK GovCo makes out pretty well. I'll settle for the unfairness of a capitalistic economy with a republic style of government.