Wealth Distribution in the USA

So are they receiving a fair wage, that is the right portion of the economic benefit they provide to the company, or not? How do you tell?This all started because it was claimed that someone who made X dollars a day was being screwed because they were surely adding more economic benefit to the company than that. But there's nothing sure about that at all. We don't know how much benefit they added.People also seem to think that working hard means your worth more, or the jobs that make the product come to life (like the shoe maker) are adding an awful lot to the whole company. Meanwhile, the executive who just landed a huge increase in sales with a couple of emails, well, he hardly did anything so he's overpaid.They're not measuring anything with anything other than their heart. They feel like its unfair so therefore it must be. And if we don't jump on the bandwagon then we're evil too. But how do you know if they are anomalies or not if you can't even determine if it is fair for the jobs that you do know a bit about assessing. Why should I think you are correctly assessing these jobs that you don't know anything about? How much economic benefit do they really add? More or less than the franchisee who put forward the capital investment to open up the stores in that town in the first place? None of those people would even have that job if he didn't do that. But now because he's sitting at home collecting the profits he's all of a sudden the bad guy? One sole min-wage worker provides almost no economic benefit whatsoever.Also, it takes a whole bunch of the min-wage workers to get it done. If it takes 10 min-wage workers to run a McDonalds, that $77/hour... $160,000/year. If the franchisee is collecting that same salary to do the books, is he being unfairly paid too high and they're being unfairly paid too low? How do you tell?And where do you think most of that public expense comes from? The wealthy pay for most of the federal government, so they're already getting some of their wealth redistributed back to the low wage workers they employ. Its just a convoluted loop that isn't giving people the warm fuzzies, so therefore it must be wrong even though they cannot show that it is. Its easy to paint a picture of this great wage anomaly when you get to pick the details. But what is really happening out in the real world? Most people with big salaries are actually the ones who are providing all the economic benefit to the company. Its not the lowly wage workers. And that's besides the fact that they're a dime a dozen and we've got 50 applications in the cabinet if we need to scoop up another one. Good executives are a lot harder to come by and they're in a much more competitive market. But you're assessing the economic benefit with your emotions, not with facts. Why should I believe that you've assessed them correctly?I think you're entirely wrong about how much benefit each side is providing. If you want to claim that a person is unfairly paid because they're not getting enough of a portion of the economic benefit that they are adding to the company, then you should be able to show that the portion is in fact low. If you can't, then how do you know that its unfair?

Again, I'd like to point out your generalization isn't entirely correct (just like I did with the minimum wage differences, state to state). For instance, the company I work for isn't owned by stockholders - it's an international private company, and they do offer limited partnerships to us, the employees. So I do own part of the company that employs me. In fact, all partners must be employed by the company; once we retire, we liquidate our ownership and no longer are LPs.

My previous employer was similar - it was an "employee-owned" company, meaning only employees were allowed to purchase or retain stock, and shares were given as a portion of the 401(k) "matching" offered by the company. Virtually every employee was a shareholder, and the company was not beholden to anyone else. Leaving the company for any reason (like when I quit) forces a liquidation of all shares.

Are you actually denying that businesses can, and do, estimate the economic benefit derived from filling individual positions within a company?Do you think that when businesses hire a new memebre of staff they simply throw their hands in the air and proclaim - We have some work that needs doing but the value to the business of this work is a complete mystery. It might exceed the cost of employing someone to do it. Or it might not. We have no idea. It's impossible to say. Because (to quote Percy) "It would be like trying to assign a value to each of your cell's contribution to your life."Is this really how you think the real world operates?I refer you to Message 195 where I detail how the sort of cost benefit analysis done in real companies for real positions is undertaken. Business cases rely on evidence grounded estimates. If I put in my business case "I feel the emotional need to employ a new network engineer" I wouldn't get very fucking far would I? Let's consider an extreme example for purposes of illustration: Imagine an employee who provides little economic benefit to a business but who is by far the best paid member of that company. Now imagine an army of workers whose work is essential to that same company but whose combined starvation wage salaries total a mere fraction of the salary paid to the single employee mentioned above. Now you could just throw up your hands and say "market forces". Or you could seek to highlight the fact that the company in question would arguably barely miss the presence of the single highly paid employee but be utterly financially fucked in the absence of the poorly paid workforce generating the profits for the company. One could further suggest that in such situations the single highly paid employee is overpaid and that the starvation wage workforce are underpaid given the relative economic benefit they provide to the company in question.In the hypothetical case above would you disgaree with that assessment? If the entire wealth of the entire nation were in the hands of ten people they would need to pay all the tax to keep the entire population functional. However in this scenario I don't think we can conclude that the problem is that these ten people are being taxed too much. Instead I think we can conclude that the problem is that the wealth of the nation is too concentrated in too few hands. Now put the same argument to the situation as it exists today. Do you get what I'm saying here......?

I've worked in various businesses - both very large and very small - including a 10 year stint doing investment appraisals for major investments but I've never seen a business case for an employee and would find it very difficult to know where to start.It is, of course, possible to build a reasonably objective case for an additional employee, but I've never seen anyone attempt a real cost benefit analysis - in almost all cases the post is justified on work load.In your network engineer example, if the new employee is justified on the possible damage that could be done in a disaster, his value to the company could be measured in positive billions or negative thousands, depending on whether it happened or not. In this case he's an insurance policy and an overhead. Either way, he gets paid the same.If the network engineer is part of a production platform, his work can be exceedingly valuable but his salary is not set by the wealth he might generate - which is the property of the businesses owners - but the value that the market has put on that group of people with that degree of knowledge.Generally, a network engineers pay is within a fairly narrow range which is only very indirectly if at all linked to the contribution he is likely to make to the business.The more directly an employee is involved with the income generating part of a business the easier it is to probe worth - this is why most sales people have relatively low salaries but high bonuses. They are, with various degrees of difficulty, able to say that they personally brought is xm business this year. (And often he wins the business at a loss - but that's another story.)As soon as you get down to those jobs that are further away from the operational side of a business, it becomes impossible to make any real cost benefit analysis at all. These kind of support jobs - receptionists, janitors, HR, finance, transport, logistics, sysadmin, maintenance, and so on are pure overhead.

No, but it doesn't happen for the vast majority of jobs. No, because the cost of employing them is rarely exceeded. Usually, there's no question that employing one more person is affordable. Usually the business is making plenty of money to warrant the new hires, otherwise they don't go hiring people. If you stand to loose millions of dollars if you don't hire them, then its a no brainer if your paying them tens of thousands of dollars a year. If you network engineers are still having down-times, then you need another guy.But at no point do you actually go: this engineer will provide the company with X number of dollars, so therefore we are going to pay him Y number of dollars. That's the point you're missing. No, but the only way you can answer the question is with an unrealistic example that has the answer pre-loaded into it.In the real world, even in your own job where you know about the details, you cannot answer the question.

If your position is based on the premise that the economic benefits of individual positions within a company cannot be estimated then your premise is demonstrably wrong thus so is your position. Let's hope you don't flip flop between accepting this and denying this in the way that others have in this thread...... Unless businesses are assessing these things with reasonable competence they will be employing people they don't need at unnecessary cost and failing to fill positions that could be of enormous economic benefit to the business if filled.The fact is all businesses are making these sort of estimated assessments regarding the economic benefits of positions within the business all the time. Even if they don't formalise the process of doing so. Not to do so at least reasonably competently would be economic suicide for any business. The question as to whether my position provides the company with economic benefit estimated to be far in excess of the costs of employing someone in my position most definitely can be answered. Positions within my company (indeed whole sections and even departments) are under constant review and if the estimated economic benefits don't justify the costs redundancies are made. It's not the point I'm missing but nor does it have any great bearing on the point I am making.The point I am making is this - The labour of low wage workers can indisputably be demonstrated to provides huge economic benefit to many businesses. Economic benefits that are far in excess of the cost of hiring these low wage workers. Yet these businesses won't pay these workers a salary that will allow them to feed, clothe and house themselves such that they can continue working for that business without their wages being topped up by government at huge public expense. Meanwhile these same businesses are quite happy to pay huge salaries, pensions and payoffs to senior managers even when these senior managers are responsble for economically disastrous mistakes or hold positions which no cost-benefit analysis could possibly justify (honourary paid positions on the board, high paid executive positions for the chairman's son, consultancy exercises with the CEO's brother-in-law etc. etc. etc. to cite some obviously extreme yet not entirely untypical examples).So we have a situation where the government is effectively subsidising businesses such that they can underpay those who demonstrably provide enormous economic benefit so that those at the top can make huge gains regadless of whether they provide any economic benefit or not.That absolute ripping up of the expectation that one's economic benefit to a business will have some bearing on reward, even just to the extent of a wage one can live on, is the "discrepany" I am talking about.

In which case the economic benefits of doing that work Vs not doing it can be estimated. This is the basis for the sort of business case I have described for a network engineer. They are "overhead" but you still need to make economic decisions based on estimates which can be evidentially reasoned. How many HR staff do you need? Will having a highly paid employment law specialist within the HR team ultimately cost or save money? Should we outsource our IT funtion to India? Should we employ security guards or pay for the latest electronic security devices instead?These are all economic decisions based on estimating the economic effects of different employment decisions right down to indivudual positions. Those in this thread who deny that this is evn possible are simply in denial of reality Network engineers provide considerable economic benefit to businesses and (in London at least) are generally paid a decent wage at market rate for doing so. There is no great anomaly or discrepancy to be addressed. I have used network engineers as an example not because I am suggesting that they are underpaid but because I know a bit about assessing the economic benefits of employing network engineers.It is at the very top and bottom that the anomalies under discussion tend to occur. The minimum wage workforce whose labour is of enormous economic benefit to businesses but whose wages are so low that they have to be subsidised by government at huge public expense. The heads of business who continue to receive stratospheric salaries, fat pensions and vast payoffs no matter how economically disastrous the decisions they make may be. So we have a situation where the government is effectively subsidising businesses such that they can underpay those who demonstrably provide enormous economic benefit so that those at the top can make huge gains regadless of whether they provide any economic benefit or not.That absolute ripping up of the expectation that one's economic benefit to a business will have some bearing on reward, even just to the extent of a wage one can live on, is the "anomoly" I am talking about.I am certainly not pursuing this fuckwitted notion of Percy's that there must be some formula which proves exactly how much each individual position within a business contributes to the profit and loss position so that we can then base salaries on that. This is entirely a fiction of Percy’s own construction and has nothing to do with any argument I am making at all.

Again, what part of "I agree" don't you understand. But the "economic benefit" to the company of this business decision to add a job is not the same thing as the actual contribution to the company's balance sheet of this added job. They are two different things.Say the business impact of adding this new job isn't one million dollars, but instead is two million dollars. Is the network engineer job now worth still more? What about its value relative to the existing network engineer jobs within the company - do you somehow think this new job is worth more than the existing jobs? What if the new hire isn't the one to actually work on the project netting the million dollars, he only frees up an existing network engineer to work on that project, how do you calculate the value of the job then? What if hiring the network engineer now actually costs the company money in the next year or two and only pays dividends in years after that (in software engineering, many hires right of college fit into this category)? How, then, do you calculate the job's contribution to the company's balance sheet this year?How you can even think you can make such calculations for a job category you've conceded is overhead is even more baffling.Do you see now that not only can this contribution of a specific job to a company's balance sheet not be calculated, but that even if it could it isn't useful anyway given that it would provide highly variable answers to the same job type depending upon current business circumstances?To help me convince you that there are two different things involved I'll mention that Jar appears to agree that the confusion arises because there is more than one way to look at value. What you seem to think is just one single thing (your business case) is actually two things (the other thing is the job's actual contribution to the company's balance sheet, which isn't calculable). When I talk about the first thing, your business case, I agree with you. And when I talk about the second thing, the job's actual contribution to the balance sheet (which cannot be known for any specific job), you still think I'm talking about the first thing and think I'm contradicting myself.You insist that there's a discrepancy between the wage paid to the employee and the value determined in the business case made for hiring that employee, but hiring a new employee in order to carry out your business is no different than buying a new truck. The company is simply acquiring the resources necessary to successfully carry out its business. So if the business case says that the company will make an additional million dollars by buying the truck, what is the value of the truck you buy?When you actually get around to considering the implications of the answers to such questions you'll finally see why there's no relationship between any values you determine in a business case and the actual value of a job or a piece of capital equipment, whether you're talking about its contribution to the balance sheet (which can't be calculated) or its value on the open market.--Percy

Let me get this straight. I said that employees are not owners except to the extent that they're stockholders, and you're telling me this isn't "entirely correct" because you're a part owner of your company because you own stock. Come again?--Percy

And I think the point under debate is a very narrow one.I doubt anyone here would disagree that it's possible to make an objective assessment about hiring and firing employees. We're just arguing about whether it's possible to show, for any given individual in the company, what his quantifiable cost benefit is in /$. ie whether it's possible to calculate a rate of return for an individual as you would do for, say, a new product or service or even business.Both I and Percy believe it to be pretty much impossible - even for someone that is able to make a very direct impact on the company.Quite often in a large business, the majority of employees are simply support staff - including network engineers - their costs can't be allocated to any product directly and are therefore pro-rated on some semi-arbitrary basis in a product costing exercise.Generally, accountants will slap on an overhead to a product's costs which is the total of all support services on a percentage basis - so a product that has a direct cost of 10 will actually come out at 25 on a fully allocated cost basis. Part of that additional 15 will be our network engineer's time plus the chap in accounts that sends the invoices out, the guy that cleans the floors and the dinner lady that feeds the production line. But the detail of an individual's cost and benefit are totally unknown.(Arguable the chap in accounts that sends the invoices out every month is the most valuable employee because he generates the companies entire income, but we know he isn't.)If it's tough to quantify and correctly allocate the costs that an employee incurs on behalf of the company, it's even harder to quantify and allocate the benefits. The product which had an direct cost of 10 and an indirect allocation of costs (including our engineer) of 15 then has a mark-up of another 10 to get a sales price of 35, providing a notional profit of 10.How do we now allocate that 10 profit back to your engineer? Who made the most difference? If we need to sell 5 million to break even on our fixed investment in new production assets but only sell 2m who's to blame and how do we allocate the loss? I don't know.Your other points about low pay and excessive high pay, I fully agree with and are really what this thread is about.

Those who provide little or no economic benefit (or even worse - are an economic liability) to a business cannot reasonably expect to receive huge salaries and benefit packages.Those who provide considerable economic benefit to a business (economic benefit that is well in excess of their salary) can reasonably expect to earn enough to feed, clothe and house themselves.If you accept this much then you accept that there should be a link between the economic benefit one brings and the rewards ones receives. This isn’t the same as the sort of straw man apportioning of profits that you have been relentlessly banging on about. But it is indisputably a link.Do you accept this link or not?Do you agree that as things stand this link between the economic benefit one brings and the reward one receives has been broken? AAAAAAAAAAArrrrrrrrrrrGGGGGGGGGGhhhhhhhhhh!!!!!!!Which part of "straw man" is it you don't understand? I see you want to play with the word "value" again. Are we defining value in terms of utility? Or something else? If so how are you defining "value"...?But let's make your truck example more relevant to the actual issue at hand.If, despite the massive benefit-compared-to-cost trucks bring to the business, that business were only willing to purchase trucks at a price that requires truck manufacturers to go bankrupt unless subsidised by government, whilst simultaneously being willing to pay several times as much as the cost of a truck for Rolls Royce cars which provide little economic benefit to the business — Then I would suggest that the company in question should definitely consider paying more for it’s trucks and less for it's Rolls Royces.What do you think?Edited by Straggler, : No reason given.

But this impossible thing isn't the thing that I or anyone else I have seen in this thread is basing their arguments upon. I utterly agree that calculating the percentage effect any individual employee has had on the balance sheet is pointlessly impossible.But that doesn't mean that there is no link at all between the economic benefit one brings to a business and the reward one can reasonably expect to receive.Those who provide little or no economic benefit (or even worse - are an economic liability) to a business cannot reasonably expect to receive huge salaries and benefit packages.Those who provide considerable economic benefit to a business (economic benefit that is well in excess of their salary) can reasonably expect to earn enough to feed, clothe and house themselves.If you accept this much then you accept that there should be a link between the economic benefit one brings and the rewards ones receives. This isn’t the same as the sort of straw man apportioning of profits that Percy has been relentlessly banging on about. But it is indisputably a link.Do you accept this link or not?Do you agree that as things stand this link between the economic benefit one brings and the reward one receives has been broken?

There should be, and often is, a link between how well someone performs a job and how much they are paid. But other things being equal (such as skill level and experience), salaries are set by market forces. They are not set by any determination of how much an employee contributes to the company's balance sheet, which can't be calculated anyway.I'm sorry what I'm saying is frustrating you so much. I'm just saying the same thing as Tangle and Catholic Scientist. For my own part, it seems to me that your economics are based upon your own subjective feelings about a sense of fairness, and that you're trying to force the real world to make concessions consistent with it.When you're ready to deal with the extremely simple scenario I presented, let me know how much the truck is worth.--Percy

Well of course there are linkages, but You seem to want this to be very black and white but it obviously isn't.I say obviously, because if there was a direct link between an individual employee's contribution to a business and its profit, then we would have the perfect economic model of supply and demand and the individual would be paid exactly 1 more than his marginal contribution to the business.We can't calculate that marginal contribution so there is no direct link and we have what we have, an imperfect employment model where wages are set by many factors.In the finance industry - or at lease the investment capital markets - we had the nearest possible situation to the link between wages and benefits that I know of, where a trader could show directly his own personal profit and loss account and was paid a proportion of it (only when it was a profit of course - the lack of personal downside risk was part of the problem). That's a pretty pure model of the kind you seem to be looking for but we saw that the actual profits were in fact imaginary.Also, if it was true that an individual's worth to the company was obvious, at the other end of the scale, there would be no need for trade unions because wages would not need protecting.Now of course a dishonest/less moral employers would still want to drive down their wage costs to make higher profits, but that's why we have government interventions with minimum wage.What we are lacking is intervention to prevent excessive profits. (Although I'm not sure what that could be - the various monopoly laws don't seem to prevent it.)