Dan Price raises minimum wage at his company to $70,000 a year

[RavenSky]

Are you suggesting that is what Dan Price is doing?

That is what he's doing. In negotiation it's call betting against yourself. But he's half owner of the company (his brother is the other half). Like Cartman, he can do what he wants.

So you and Dismal have crawled inside Dan Price's head to determine that HE thinks his employees are NOT worth what he wants to pay them?

It could not POSSIBLY be that he DOES think they ARE worth every penny of the $70,000 plus salaries he has offered

"I would not do this if I thought I was doing anyone a favor," Price told his employees. "I just think this is what everyone deserves."

http://www.nbcnews.com/nightly-news/seattle-business-owner-raises-minimum-pay-70-000-n341546

 

[barbos]

It could not POSSIBLY be that he DOES think they ARE worth every penny of the $70,000 plus salaries he has offered?

These are frailing clerks in a frailing credit-card processing company for frail's sake.
and he is offering them non-english literature PhD level salary. I am all for raising minimum wage to reasonable level but you should not lose perspective here. So if he really thinks (which he does not) that then he has no sense of reality.

 

[DBT]

In an ideal world the minimum income would be no less than $50k with the maximum offering at no more than $500k for CEO's.

 

[barbos]

In ideal world people doing the same work would get the same wage.

 

[dismal]

That is what he's doing. In negotiation it's call betting against yourself. But he's half owner of the company (his brother is the other half). Like Cartman, he can do what he wants.

So you and Dismal have crawled inside Dan Price's head to determine that HE thinks his employees are NOT worth what he wants to pay them?

It could not POSSIBLY be that he DOES think they ARE worth every penny of the $70,000 plus salaries he has offered?

He currently pays them far less than $70,000 for their work regardless of how much he values them. Thus I assume if he freely pays them $70,000 the extra amount is not because he suddenly values their work more but because he values the charitable feeling he gets from doing it.

 

[dismal]

In ideal world people doing the same work would get the same wage.

Do you think this guy should be banned from paying so much more for clerks than others do?

 

[barbos]

In ideal world people doing the same work would get the same wage.

Do you think this guy should be banned from paying so much more for clerks than others do?

No, but he should not expect universal respect from people for this kind of charity. At least not from me.

 

[SimpleDon]

He has demonstrated he can get Person A to come work for him of $X and elects instead to pay $X+30,000 then what do you call that $30,000?

An investment.

Mafia economics, he is buying their loyalty.

 

[SimpleDon]

The fallacy is that the labor market pays what the labor is worth. That some magical clockwork mechanism sets wages to the proper level that all of the factors of production are set to, the level that represents the marginal value added by the production factor to the product, especially if the government says out.

By the magic mechanism theory then profits are higher because capital is scarcer and must be rewarded with more than it use to, executive salaries are higher because executives contribute more than they use to and labor is paid less because they contribute less than they use to. But this is a magic and that doesn't exist and never existed.

In the real world,

• Businesses pay the wages that they have to pay, and no more.
• The less that they have to pay in wages the more profit they make.
• The more profit they make the higher the executives' salaries are.
• Executives don't have to work as hard to make profits and higher salaries.
• Marginal businesses are better able to stay in business.
• Wages are lower when the workers feel insecure in their jobs.
• This occurs when unemployment is high and when employment is low.

Conversely,

• When unemployment is low and employment is high then workers can demand and get higher wages.
• When everyone who wants a job has a job profits are low.
• When profits are low executives' salaries are low and executives have to work harder to raise the profits to raise their salaries.
• Marginal businesses are more likely to fail enabling better more productive and more innovative businesses to increase their business.

So the choice is how are we going to run the economy. On what basis, what are we trying to do with the economy?

The current answer is clear. Over the last thirty five years we have run the economy to produce more profits and relatively lower wages. We have done this by maintaining higher unemployment and lower employment, by redistributing less money through the tax system and by increasing workers' insecurity by other means like making it harder for workers to organize, sending increasing amounts of production to low wage countries and by reducing government regulation over wages and work rules, that is regulations like the minimum wage and time and half for overtime. Businesses reduced non-wage compensation such as pensions, health care, sick time, vacation days, etc.

All of these boosted profits, increased executives salaries, etc.

So the question is, what is it that we want from the economy? Is this it?

You seem to be suggesting that some third party, err government, ought to be in charge of setting wages and earnings. I hope you're not. But if you are, screw that.

I am not suggesting anything. I am explaining the facts of the matter.

Government policies do effect the economy. I don't think that anyone of any denies this.

It can't be any other way, government establishes the economy by defining the rules under which the economy operates.

The government doesn't set wages or prices, its policies determine to a large extent how the income is distributed between profits and wages.

What I am saying is that government policies can increase profits at by reducing wages or they can increase wages by reducing profits. And currently and for the last thirty five years government policies have been set to increase profits by reducing wages.

I don't see how this can be controversial either. It is the mechanism of neoliberal economics, that is supply side economics. To increase the money available for investment by increasing profits and the incomes of the investors by lowering wages. That is by increasing income inequality.

And I listed some of those government policies.

And finally I asked if this is what we want.

If you still don't understand that you will have to ask more questions of me. Or if you don't believe this you could explain what you believe that are the facts.

 

[Jolly_Penguin]

It sounds to me like he is suggesting that a second party, err workers, ought to have some say about their wages and earnings, rather than being pushed into a race to the bottom by the threat of replacement and unemployment. I hope you don't find that idea hugely objectionable. But if you do, screw that.

They do have a say. If someone says "do you want this job it pays $35,000 per year" they can say "yes" or "no" or even something exotic like "I'll take it at $37,500" or "Magic Brownies".

The problem with that is that they really don't have much of a choice. It is work or starve for them. Labour is a commodity with zero shelf life (you can't store it for later) and one that must be sold, for the cost of not selling it is higher than the cost of not selling any other commodity (you starve and die).

I think the solution to this is guaranteed minimum income, paid through reverse taxation. Get rid of the massive imbalance in bargaining power, and you've got a true supply and demand mechanic that could lead us to the actual worth of the labour in question. This along with good health and safety regulators could make unions far less necessary.

 

[dismal]

They do have a say. If someone says "do you want this job it pays $35,000 per year" they can say "yes" or "no" or even something exotic like "I'll take it at $37,500" or "Magic Brownies".

The problem with that is that they really don't have much of a choice. It is work or starve for them.

I'm curious how you reconcile this "ZMGFOG if they don't take this $35,000 job they'll starve" argument with the "ZMFOGG he should pay his clerks $70,000 because if he doesn't they will leave" argument.

Is it that the clerks leaving their $35,000 jobs who would have stayed for $70,000 are opting for starvation?

 

[SimpleDon]

You seem to be suggesting that some third party, err government, ought to be in charge of setting wages and earnings. I hope you're not. But if you are, screw that.

As I understand it SimpleDon can peer at things and intuit their intrinsic value.

A diamond is worth 436 gallons of water, for example.

Intuition has nothing to do with it. There is nothing in my post about intrinsic value, I was simply stating the facts of the matter. If you have a problem with my post address them. If you intuit things differently present your views.

From what I have seen of your posts they consist of questions, no answers and non sequiturs like this one.

If you believe that intrinsic value has anything to do with the aggregate wage and profit levels, what economists call the labor share and the capital share of the economy, please explain how you think that it does. How do you intuit intrinsic value?

Hint: I believe that the market sets the wage/profit split based on the government policies that I listed. That the government doesn't set wages and prices but that government policies broadly determine the split between wages and profits across the entire economy, on aggregate as economists say.

That discussions about intrinsic values are part of the magical mechanism that sets wages and profits to equal their contribution to the value of the product, that this is the intrinsic value of the labor or of the capital contribution. Or more exactly I should say that it would set wages and prices to equal their intrinsic value if we had a truly free market devoid of government interference EtEC™ which we don't have.

 

[dismal]

How do you intuit intrinsic value?

I don't in that I understand it not to exist.

 

[Jolly_Penguin]

Whether or not this is charity depends on whether or not he expects that the additional money he is paying out in salaries will be brought back in with increased productivity and profits. Does he?

Do you think it will?

I think paying more than the other employer by a notable amount will get you a better choice of applicants and less turnover, and probably higher productivity, but how will that affect the bottom line? I doubt a leap from $30,000 to $70,000 would be a sound business investment. $40,000 may have been a better bet.

But maybe this IS charity, and he has decided to pay his people more because he wants them to have better lives, regardless of how that affects his profits. That would make him a good guy, not a good CEO.

You may also want to factor in the publicity this has gotten him. Maybe that publicity will translate into more customers and therefore more profits?

 

[SimpleDon]

So the question is, what is it that we want from the economy? Is this it?

Part of the problem is that what "we" want from the economy is predicated on the idea that "we" will not wind up the recipients of lower wages, lower employment, etc.

We've been sold on the idea that with a little elbow grease and effort, everyone who wants to can become an "entrepreneur" and make enough to buy that nice McMansion in the gated community with the BMW parked out front. Hey (the narrative goes) you don't have to worry about the minimum wage or health care because you - yes you - are a special person who can start their own business and become not just the boss, but a "job creator." As everyone knows, "job creators" are far more important to the economy than some schlub working at the Circle K, right? So even if you're a schlub working at Circle K, don't forget to vote Republican because when you do finally start that million-dollar business and sell it to the guys on "Shark Tank" or win the lottery, you're gonna want lower regulations on business and lower taxes on the wealthy!


Because you - yes you - will someday be a wealthy businessman. Why worry about income inequality when you're never going to have to worry about it? (that is, once you get your business going)


And if by chance you read about some guy who decided to split his profits with his employees, or some business that pays far above average even if it hurts their bottom line, well you can safely look down your nose at their lack of business acumen because remember...you are special. Never mind that the 70k a year CEO is already rich. Never mind that Costco is very successful despite paying a living wage. No, you're smarter than those guys.


We have the economy "we" want now because "we" have bought into the bullshit notion that we've actually got more than a ghost of a chance to become one of those high paid captains of industry, and that we've got to make the economy more favorable to our inevitable rise into the 1%.

I think that is a part of the story. I do remember of a paper that I read, which I can't find right now, said that the main motivation behind the middle class voting against their own interests and for increased inequality wasn't so much that they thought that they had a shot at being in the 1% or even if their children did but rather it was the fear that the government would boost the incomes of the lower class to the point that the lower class wages would be equal to or exceed their own. They aren't looking up with anticipation, they are looking down with fear. Fear is so much easier to generate.

 

[dismal]

Whether or not this is charity depends on whether or not he expects that the additional money he is paying out in salaries will be brought back in with increased productivity and profits. Does he?

Do you think it will?

The article makes it pretty clear its coming at the expense of profits and his salary which for a proprietor is essentially the same as profits.

 

[coloradoatheist]

Whether or not this is charity depends on whether or not he expects that the additional money he is paying out in salaries will be brought back in with increased productivity and profits. Does he?

Do you think it will?

I think paying more than the other employer by a notable amount will get you a better choice of applicants and less turnover, and probably higher productivity, but how will that affect the bottom line? I doubt a leap from $30,000 to $70,000 would be a sound business investment. $40,000 may have been a better bet.

But maybe this IS charity, and he has decided to pay his people more because he wants them to have better lives, regardless of how that affects his profits. That would make him a good guy, not a good CEO.

You may also want to factor in the publicity this has gotten him. Maybe that publicity will translate into more customers and therefore more profits?

Let's see what happens with the company in 5 years. Unfortunately the numbers we could look at usually aren't public. The question would be turnover at the different levels in the company.

 

[DBT]

Do you think this guy should be banned from paying so much more for clerks than others do?

No, but he should not expect universal respect from people for this kind of charity. At least not from me.

I'd say it's more along the lines of fairness, a small example of what we should be doing as a society.

Which is not what we are doing, where those at the top grant themselves incomes that are far too high, those with their snouts in the trough, and pay those who are beneath them in terms of perceived value (not necessarily actual value) far too little.

 

[DBT]

Whether or not this is charity depends on whether or not he expects that the additional money he is paying out in salaries will be brought back in with increased productivity and profits. Does he?

Do you think it will?

The article makes it pretty clear its coming at the expense of profits and his salary which for a proprietor is essentially the same as profits.

Not necessarily so that all of the profits are drawn as income by a proprietor. A proprietor may be drawing a percentage of personal income from net company profit and re-investing the remainder.

 

[barbos]

No, but he should not expect universal respect from people for this kind of charity. At least not from me.

I'd say it's more along the lines of fairness, a small example of what we should be doing as a society.

and you think $70k is a fair amount? why not $470k?

Which is not what we are doing, where those at the top grant themselves incomes that are far too high, those with their snouts in the trough, and pay those who are beneath them in terms of perceived value (not necessarily actual value) far too little.

This guy (and his brother) owns that company and therefore salary is not all he gets. All company income is effectively his. Yes, he gave his employees some undetermined amount of money above what they were normally getting, but we don't know if company profit is actually 10x or even 100x of that.

And it is a big question if this is what we should be doing. I think extravagant perks (which many companies like google, apple use) are actually bad overall. They are inefficient and actually an indicator that people at the top don't know what to do with profits