The world as we see it seems to be broken. We are constantly being told about how the rich have become so much richer than we can possibly imagine. If you listen to the Left, then apparently what we need to do is claw back those riches and give them to people who have less through one channel or another. The Right says it’s better in the hands of the rich because, as Captains of Industry, they are the ones that create the jobs via injecting capital into the system.
While I lean right on most issues, I do believe that the widening income gap seems to indicate that things are getting worse for the Average Joe while those at the highest levels continue to thrive. It might be attributed to the fact that income derived from labor has flowed out to cheaper sources overseas which has resulted in higher profits which has boosted the income levels of the rich. I tend to think that the reality is a bit darker than that.
My theory is that, to a significant degree, the rich use their riches and power to game the system. If they could tweak the rules of the game so that the outcome was that the guy looking to start his first job at McDonald’s was told that the starting pay rate was $1.00 per hour and anywhere else that guy looked for work he was offered $1.00 per hour, with the extra $7.00 worth of “savings” being converted directly into profit…they would do that.
Essentially, the goal of the uber-wealthy is squeeze as much profit as possible and pressing wages down as much as possible help achieve this goal.
The reason that this is a problem is that corporations (and mega corporations in particular) hold to the whole idea that the purpose of the Executive Team and the Board of Directors of any company is to simply maximize profits for shareholders- employee quality of life is of no concern. Just profit.
Must be nice to be a stock holder. Must be nice to be rich enough to have your money work for you and have people standing by at attention to do everything in their power to keep that money working for you while you enjoy a life of luxury. Must be nice to see your “top talent” in the corner office doing your dirty work of finding way to “legitimately” reduce the quality-of-life of those working for the companies you invest in to a level that floats just above dependent slavery. Rant done. Moving on.
So the problem with our current model is that with a sole focus on maximizing profits for shareholders, it causes the guys calling the shots in the board room to look at the paychecks of their workers with greedy eyes. Once all other areas of inefficiency have been trimmed, it makes it difficult to talk up your continuing great achievements to The Board and The Shareholders.
But what if you could cut worker compensation by 90% (or any significant percent for that matter) or hold it steady so that as the prices for the Corporation’s goods/services rose, the cost to produce them stayed the same – where labor is concerned. Now THAT is something that will show some PROFIT!
It is this type of thinking combined with the power to pursue such ends which makes me wonder if Adam Smith and his foaming followers got it slightly wrong. What would happen if we created a business environment where the CEO of the company doesn’t have just one mission (do whatever it takes to increase profits) but had a second one too? To improve the quality of life for the worker by increasing both his compensation and value.
This is where tying the minimum wage to top executive pay would come in handy.
(Please don’t start talking about tethering the pay of top athletes, musicians, and actors…were brainstorming for solutions here, not obstacles.)
If top executive pay was tethered to the minimum wage at a rate similar to what we saw in the 1950′s, it would create a framework where the CEO would both focus on increasing the profits of the company but only while doing so in a framework that puts employees first.
Success books like the Go-Giver are always telling us how we need to find ways to help others and put their goals first. In doing so, it creates an effect which turns around to benefit you in the long run. Lets let executives to start adopting this philosophy.
A CEO that wanted to make more money would push to find ways to back the increase of the minimum wage. He’d try to find way to pay, not just his OWN workers, but ALL workers more. It would be in his best interest and he set about to find ways to do this while still building a company which is profitable in spite of the new focus. Of course, the shareholders would not like to hear about how the minimum wage is increasing labor costs without those people bringing more value to the company. The wouldn’t like it at all.
The result? CEOs would come together formally and informally to find ways to invest in people so that they became more valuable to companies as a whole so that they could justify to their boards backing an increase in the minimum wage. Or they would just back it outright and skip the justification completely.
Think this sounds crazy? I don’t. Think the idea would never work and that companies that are forced to work from the confines of a business environment where the little guy gets paid more is doomed fo fail?
Then let’s consider CSX and the other railroads. I know people that work in the railroad industry. It’s one of the last places you can get a job where you get great benefits, great retirement plan, and great pay…all without having a college degree. That’s because there is “something” in place to ensure that this happens.
Now, let me say right now that I don’t want to underscore what the people working at the railroad do, but the reality of the situation is that without the railroad Unions being involved, the pay rate for all the non-management jobs would be cut by 40%. You can look at the job descriptions and you’d know that if the flood gates were opened to allow more people in with no Union standing in the gap propping up wages, then instead of the typical pay for a railroad working ringing in at about $24 p/hour…it would shrink to somewhere closer to $15. And someone would take it!
Now my point here is that people fight to get these jobs because they pay good. CSX and the other railroads are turning a happy profit WITHIN A FRAMEWORK which keeps wages at levels where a family can be raised on one income – like in days gone by.
Now the dark side of that coin is that if the Union were EVER to be removed from he picture, then those wages would be pressed down. The Executives would justify destroying the pay base and the quality of life of those workers and their families by talking about how they only have an allegiance to the shareholders and all that kind of crap. This means that right now, the shareholders and their Executives are (whether they admit it or not) staring at what they consider to be “excess pay” being doled out to their work force with greedy eyes. That gap between the $15 p/hour which represents what they think a lowly worker is REALLY worth and the $24 p/hour that they actually are getting paid is profit that should be going to shareholder, not workers. They want it and if they could take it right now – they would.
Tethering executive pay to the minimum wage would turn this on its head. Executives would want a raise (just like everyone wants a raise), but they couldn’t do so without getting the minimum wage boosted. They’d have to be willing to put a whole lot of other people first and find ways to justify backing the minimum wage boost in order to buy that new villa in Tahoe that they want. So they’d be innovative and find a way to throw their hat in the ring for the little guy. They’d also do it in such a manner which they would justify to the shareholders. They would seek a balance between their dual allegiance.
The result would be that wages would increase. Period. Companies would still turn a profit just like CSX does. That level of profit would be tempered though and the result would be better lives for a lot more people.
I’m interested in what others think about this. Obviously, there are tons of purists who would say that such a change would destroy capitalism, but my response is, if CSX can turn a profit that is satisfactory while paying workers at a much higher level then pretty much any other industry outside of the tech and medical fields – then why can’t other companies do the same?