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

[Luck_Club]

Simple - we become what we think about

With regard to being a "victim" employee..

My biggest motivator during my lifetime was Earl Nightingale. His words of wisdom guided me during my early years, and if taught to all our young people would guide them as well. There are no masters and slaves in America anymore. We are still free to make our own choices in life. We are free to reason through the propaganda which is spewed at us from social and main stream media.

https://en.wikipedia.org/wiki/Earl_Nightingale

With regard to excessive executive compensation..

It may have gotten too incestuous requiring regulation. Allow me to explain. When a company is privately owned executive compensation should be as high as the owner wants it to be, and he or she is free to pay what ever the market requires to attract the talent required to get the job done. However, when the private company goes public, ownership has been diluted to the point where owners don't have a direct enough connection to the market for labor. Others have stated that the boards are loaded with other executives from private companies who agree to a quid pro quo the pay packages. The ones who are stolen from the most in this system are the individual share holders. Especially since there are still many public corporations with very lucrative employee compensation and benefit packages.

What if a regulation were put in place that executive comp is limited to 40 or 60 times the average company wide salary? Would that encourage increases in corporate wages beyond sustainability, more non wage benefits, or would it encourage higher corporate profit eventually benefiting the shareholders?

 

[DrRoy]

Another article that talks about "wages" not "total compensation".

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

At my former megacorp, as medical costs increased, so did mine. The Co passed much of the increase along.

 

[marko]

Seems that we've crossed some line somewhere where we now believe that wealth is a zero sum game. That somehow I managed to buy my boat not because I was wise with my money but because I stepped on someone else's back.

My own nephew, thinking he was complimenting me, commented: "you must have cheated a lot to get where you are". (After that comment, he'll find out who got cheated when my will is read), but until then the idea of saving, investing and being careful with your money seems to be an odd, outdated concept.

We're now in envy realm vs aspiration; the guy driving the Rolls is a bad guy now instead of someone you want to be.

 

[mpeirce]

For many this is where they grew up and their family and friends are all here.

That's all well and good, but if you aren't willing to make a move for a better opportunity for you and your family, your chances of success have gone down appreciably. And that's not society's fault, that's your own doing.

 

[joeea]

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!

A welfare queen reference! Wow. Takes me back to the 80s...

And you know she was "on SNAP" how?
And you know she drives an Escalade how?
And you know she ate "better" than you did how?

 

[MichaelB]

Seems that we've crossed some line somewhere where we now believe that wealth is a zero sum game. That somehow I managed to buy my boat not because I was wise with my money but because I stepped on someone else's back.

An important distinction, usually missed. More compensation for some does not mean less for others. CEO compensation is, by any measure, excessive, and the process is deeply conflicted. That money comes from shareholders, who are limited in their ability to act, and has no impact on average employee compensation.

Likewise, to say businesses with high profits could (should) pay employees more is circular reasoning. Profits are high because employee costs are constrained.

Real (after inflation) hourly wages have remained constant, increasing about 10% over the past half century. They declined, but recovered and grew over the past 20 years. To grow wages more, there also needs to be growth in labor productivity, and this seems to have stagnated. That’s is the real issue (IMHO) but very complex.

The real loss here is a slow decline in relative standard of living for the median wage, which is difficult to measure. CPI hedonic adjustments disguise real price increases (relative to CPI). Of course, that may be offset by chained CPI, which suggests that buyers are able to offset some inflation without any change in standard of living. Not sure they offset over long periods, but they matter.

 

[marko]

And you know she was "on SNAP" how?
And you know she drives an Escalade how?
And you know she ate "better" than you did how?

Don't know about the poster you're responding to but it becomes obvious when the EBT card won't pay for some non-approved items (usually some higher end food product...let's not go there) they're buying along with other stuff so he/she has to use cash and creates a double transaction while I'm standing there 3 feet away waiting to pay for my quart of milk.

 

[joeea]

Likewise, to say businesses with high profits could (should) pay employees more is circular reasoning. Profits are high because employee costs are constrained.

Can you imagine a scenario where a business can have high profits, yet still increase real wages?

 

[joeea]

Don't know about the poster you're responding to but it becomes obvious when the EBT card won't pay for some non-approved items (usually some higher end food product...let's not go there) they're buying so he/she has to use cash and creates a double transaction while I'm standing there 3 feet away waiting to pay for my quart of milk.

Ah. So you saw one too?

 

[marko]

Ah. So you saw one too?

Almost every single time I go to the grocery store.

 

[joeea]

Almost every single time I go to the grocery store.

So this one person who eats better than you shops the at exactly the same times you do.

Or else the parking lot if full of Escalades.

Okay.

 

[marko]

So this one person who eats better than you shops the at exactly the same times you do.

Or else the parking lot if full of Escalades.

Okay.

C'mon Joe. It's a different person every time.

(plus you're responding to a different poster than me; go back and read the thread)

 

[mpeirce]

A welfare queen reference! Wow. Takes me back to the 80s...



And you know she was "on SNAP" how?

And you know she drives an Escalade how?

And you know she ate "better" than you did how?

My DS worked at a food store in high school. One day he told us about a customer who paid for a big box of lobster with SNAP.

It was quite the eye opener for him.

 

[Lukeee]

I work at a unionized manufacturing plant. You'd be astonished what people will believe. Barely half contribute to their 401k, despite a dollar-for-dollar match on the first 6%. Why? "I don't want to give Megacorp any of my money."

And just in case you aren't sufficiently appalled, remember this: they are allowed to reproduce, and their vote counts as much as yours.

Seems that we've crossed some line somewhere where we now believe that wealth is a zero sum game. That somehow I managed to buy my boat not because I was wise with my money but because I stepped on someone else's back.

My own nephew, thinking he was complimenting me, commented: "you must have cheated a lot to get where you are". (After that comment, he'll find out who got cheated when my will is read), but until then the idea of saving, investing and being careful with your money seems to be an odd, outdated concept.

We're now in envy realm vs aspiration; the guy driving the Rolls is a bad guy now instead of someone you want to be.

There are a surprising number of people who are willing to think the system is skewed against them (imo a combination of who you surround yourself with and lately where you get news from) . It’s easy some to blame someone else when you aren’t where you really wish to be in life (financially / socially...or what is important to them). I have spoken to a few Opinionated individuals that are beyond help with regards to FI. It’s almost like they can’t see beyond the next week let alone 30 years. I’m sure that these same people will happily spew how the system was rigged against them.

Sadly a byproduct of this realization for me is that I’ve become less generous .. more picky about who I help.

 

[USGrant1962]

Pew Research has a good article on this, with data.

For most Americans, real wages have barely budged for decades | Pew Research Center

Inflation-adjusted wages have been flat for decades; but wages have not "gotten so low", workers are not "getting nothing", and the "growing cost of basics" has not exceeded wages.

Benefit costs have increased by 22.5% in real terms since 2001, so that is where a lot of compensation growth has gone.

IMO, C-suite compensation has increased too much, but that is a shareholder issue and only tenuously related to workforce compensation.

 

[perez99]

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.

We share the same hobby
Its a good portion of my discretionary spending plan (Starting OMY in 2020).

 

[Cassius King]

 

[hopefullyoneday]

Seems that we've crossed some line somewhere where we now believe that wealth is a zero sum game. That somehow I managed to buy my boat not because I was wise with my money but because I stepped on someone else's back.

My own nephew, thinking he was complimenting me, commented: "you must have cheated a lot to get where you are". (After that comment, he'll find out who got cheated when my will is read), but until then the idea of saving, investing and being careful with your money seems to be an odd, outdated concept.

We're now in envy realm vs aspiration; the guy driving the Rolls is a bad guy now instead of someone you want to be.

So instead of teaching (educating) your nephew on how you came about owning a boat you are just not going to leave him anything in the will. People who are not willing to correct somebody on their wrong assumptions are usually the ones with something to hide.

Just because a guy drives a rolls does not mean his employees drive yugos.

 

[hopefullyoneday]

There are a surprising number of people who are willing to think the system is skewed against them (imo a combination of who you surround yourself with and lately where you get news from) . It’s easy some to blame someone else when you aren’t where you really wish to be in life (financially / socially...or what is important to them). I have spoken to a few Opinionated individuals that are beyond help with regards to FI. It’s almost like they can’t see beyond the next week let alone 30 years. I’m sure that these same people will happily spew how the system was rigged against them.

Sadly a byproduct of this realization for me is that I’ve become less generous .. more picky about who I help.

I agree, you have to determine who is putting in the extra effort worthy of compensation as oppose to those just doing enough. Unfortunately after time the one working harder without better compensation than those doing just enough will eventually give up and just go with the flow.

 

[marko]

So instead of teaching (educating) your nephew on how you came about owning a boat you are just not going to leave him anything in the will. People who are not willing to correct somebody on their wrong assumptions are usually the ones with something to hide.

At 46 years old, he's a bit beyond educating on how hard work, saving, good money management and LBYM is worth it.

He's quite sure in his mind on how the world works, that is: cheat to get ahead, do as little as possible for yourself, your boss is out to get you, 'they' won't let you win, and hope someday to hit the lottery.

He'll get something but, with a drinking and gambling problem, I'm not sure if leaving that guy a half a mil would be in his best interest. There's 9 other nieces and nephews who'll benefit more

His comment had nothing to do with the boat but on our general affluence. He's from DW's side so he isn't quite up to speed on how generational wealth works and, in his case, I'm afraid he'll never find out.

 

[pb4uski]

I agree, you have to determine who is putting in the extra effort worthy of compensation as oppose to those just doing enough. Unfortunately after time the one working harder without better compensation than those doing just enough will eventually give up and just go with the flow.

Why wouldn't the one who is working harder without better compensation just change jobs? That is a better path than giving up.

Though in some cases it could be that the person working harder is not resulting in better results/outcomes and that is the reason that the better comp isn't happening. IOW, some people need to work harder just to keep up.

Very situational.

 

[CaptTom]

Random observations:

I don't hear people saying CEO compensation is the cause of the problem. It's one of many symptoms. It's an easy one to point to, because anyone can see that the CEO is not worth 400 times more than the skilled employee producing the product or service. I don't think anybody is suggesting that cutting CEO pay will help that employee.

We can also probably all agree that a large percentage of people who claim to be down on their luck are simply those who made poor decisions. Maybe the "welfare queen" stereotype is overused, even cruel, but there ARE some who fit the profile pretty well. Just as often men as women, by the way.

Interesting comment about a zero-sum game. From my perspective, it seems about 10-15 years ago, MegaCorp management started seeing things that way. Before then, they talked about "stakeholders," meaning customers, stockholders AND employees. A justifiable decision was framed as a win-win-win situation.

The turnaround was very abrupt. The employees and customers became the enemy. It's only gotten worse. They don't even pretend any more. They take exactly as much as much as they can get away with, and raw greed is the only justification they even bother to give.

 

[daylatedollarshort]

Data shows that in general people on food stamps tend to buy the same kinds of foods as households not on food stamps:

"Though people like to complain about food stamp recipients using their benefits for unhealthy things like soda and extravagances like crab legs, new data show they buy basically the same food as everyone else."

https://www.huffingtonpost.com/entry/food-stamps-diet_us_582f4bd7e4b058ce7aaadea0

 

[daylatedollarshort]

We can also probably all agree that a large percentage of people who claim to be down on their luck are simply those who made poor decisions.

I don't know all the posters on this board, but in real life I can't think of anyone I know who would agree with that statement.

 

[pb4uski]

FWIW, I agree with CaptTom.... in most cases it is simply a decision to live beyond their means rather than below their means.