Friday, August 9, 2013

Sorry, It's Not A 'Law Of Capitalism' That You Pay Your Employees As Little As Possible

Henry Ford used to pay his employees $5/day when the going rate was $1.  When he was challenged on that by his peers he told them that if his employees couldn't afford to buy his cars, then who would?  And he was right.

Sorry, It's Not A 'Law Of Capitalism' That You Pay Your Employees As Little As Possible

Henry Blodget [Business Insider]

A customer... and a "cost."
 
One of the big reasons the U.S. economy is so lousy is that big American companies are hoarding cash and "maximizing profits" instead of investing in their people and future projects.

This behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth — the vast American middle class — of purchasing power. (See charts below).

If average Americans don't get paid living wages, they can't spend much money buying products and services. And when average Americans can't buy products and services, the companies that sell products and services to average Americans can't grow. So the profit obsession of America's big companies is, ironically, hurting their ability to accelerate revenue growth.

One obvious solution to this problem is for big companies to pay their people more — to share more of the vast wealth that they create with the people who create it.

The companies have record profit margins, so they can certainly afford to do this.

But, unfortunately, over the past three decades, what began as a healthy and necessary effort to make our companies more efficient has evolved into a warped consensus that the only value that companies create is financial (cash) and that the only thing managers and owners should ever worry about is making more of it.

This view is an insult to anyone who has ever dreamed of having a job that is about more than money. And it is a short-sighted and destructive view of capitalism, an economic system that sustains not just this country but most countries in the world.

This view has become deeply entrenched, though.

These days, if you suggest that great companies should serve several constituencies (customers, employees, and shareholders) and that American companies should share more of their wealth with the people who generate it (employees), you get called a "socialist." You get called a "liberal." You get told that you "don't understand economics." You get accused of promoting "wealth confiscation." You get told that, in America, people get paid what they deserve to get paid: Anyone who wants more money should go out and "start their own company" or "demand a raise" or "get a better job."

In other words, you get told that anyone who suggests that great companies should share the value they create with all three constituencies instead of just lining the pockets of shareholders is an idiot.

After all, these folks say, one law of capitalism is that employers pay their employees as little as possible. Employees are just "costs." You should try to minimize those "costs" whenever and wherever you can.

This view, unfortunately, is not just selfish and demeaning. It's also economically stupid. Those "costs" you are minimizing (employees) are also current and prospective customers for your company and other companies. And the less money they have, the fewer products and services they are going to buy.

Obviously, the folks who own and run America's big corporations want to do as well as they can for themselves. But the key point is this:

It is not a law that they pay their employees as little as possible.

It is a choice.

Read more: http://www.businessinsider.com/companies-need-to-pay-people-more-2013-8#ixzz2bVzynCZy

1 comment:

  1. This last great recession that we had was not enough to wake the people up.
    Many suffered and are still suffering.
    But it was not enough.
    Americans have been fooled long enough when it comes to their hourly wage, benefits, and most of all standard of living.
    Corporate capitalism has shown its barbaric face to the world.
    No we must not turn the other cheek.
    Our system of capitalism can not be legislated, regulated, amended or improved upon.
    It must be beheaded once and for all.
    The only replacement that will serve the people is socialism.

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