20 ms·

Too much cash? Pay people more! Really that simple. Money has a momentum, a speed by which it flows through an economy. Eventually those mountains of capital wi

Too much cash? Pay people more! Really that simple. Money has a momentum, a speed by which it flows through an economy. Eventually those mountains of capital will disappear because there is no one left to buy what is being sold.

Agustus 11y ago
Those are profits, if you are able to operate your company to the degree that one is able to accumulate the cash, then there is no reason to increase liabilities to accomplish a task. If you want to spread the wealth around, then you need the government to perform this task.
zanny 11y ago
It is in no companies fiscal interest to pay their employees more. They want you to work for as little as you agree to while producing as much return for the company as possible. The real solution is to just do a UBI. If this is not an obvious call sign of how the efficiencies of recent decades are obsoleting human labor in general I don't know what is. Redistribute that money so consumers have spending power again.
- revscat 11y ago
  > It is in no companies fiscal interest to pay their employees more. I'm actually not sure this is true. From a short term perspective, perhaps. But longer term it is more beneficial for everyone if there is more money to be spent.
  - savanaly 11y ago
    You said you're differentiating between long and short term, but I think you're actually talking about the difference between "one company's interest" and "all companies' interests". It is possibly in all companies' interest to all pay their employees more as it would stimulate demand for their products. But any given individual company's own workers are such a vanishingly small fraction of its own customer base that it could hardly ever be argued that it would be best for that particular company to pay its own workers more for the purposes of stimulating demand.
    - lfowles 11y ago
      Your workers will be more invested if they can comfortably afford the product, though. Obviously this depends on the market.
      - savanaly 11y ago
        Oh, no doubt that can be a reason. The literature around the "efficiency wage" is well developed [1], my comment was only disputing that there were a reason to pay above market clearing wages for reasons of stimulating demand. [1](https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage)
      - ktRolster 11y ago
        Your workers will be more invested if they can comfortably afford the product, though. Most of the companies I've worked for I would never buy their product: either because I didn't need it, or because I knew its true quality, or both.
  - SpaceCadetJones 11y ago
    I wonder if this is different for companies like Walmart / Costco / Meijer where they carry the majority of goods you need day to day. What if they started paying their employees higher wages, meanwhile giving them discounts at the store to encourage them to spend there? Maybe the lowered profit margins could be made up by the increased spending at their store. Not to mention it would also be a good PR move
    - tanker 11y ago
      Obviously, you would have to avoid the "Company Store" problem. I think it could be a terrible PR move. If you effectively pay your employees less and justify by giving them discounts. A program that begins with good intentions could end badly. Especially if the program is conceived in an era of high profits. In low profits, management makes different decisions. Also, you often get new management.
      - SpaceCadetJones 11y ago
        I'm a bit confused, where does the effectively paying less come from? I suggested they increase their pay while also giving them a discount at the store to give them an incentive to spend their new income at the store.
        tanker 11y ago
        I communicated poorly. Paying your employees more and giving them a discount is harmless. Lots of employees receive a discount. I meant you run into problems when you end up effectively paying them less and justifying via a larger discount. Management could end up doing this gradually as times get tough. For example, a company announces lay offs and pay cuts, but softens the blow with a larger discount. I guess I'm recommending caution. I would avoid making a discount a major part of employee compensation. A worker deciding to apply for jobs at Walmart and Costco could end up weighing a better health plan against a higher discount on basic goods. That seems problematic to me.
        11y ago
- incongruity 11y ago
  It is in no companies fiscal interest to pay their employees more. In the short-run, yes. In the long run, perhaps not. From retention to training to quality issues, it can make sense to pay more. Universal basic income is a bandaid on the fact that the short-term, market-driven focus of capitalism under-values people and seems to be creating a winner take all game that will eventually end the game itself, if balance isn't restored. I'm not opposed to UBI – it may well be the best option at this point, but I'd also like to figure out how to incentivize the system to look at long-term consequences as well. (Though, I recognize I'm far from the first down this line of thought).
  - pessimizer 11y ago
    > From retention to training to quality issues, it can make sense to pay more. Depends on how consolidated the industry has been, and whether the firms that are left can collude or silently set norms to put ceilings on pay and quality.
  - TDL 11y ago
    Capitalism isn't inherently short-term oriented. This has more to do with the incentives in & the regulatory framework of the system (consider requirements for quarterly reporting & the whole expectations game that has risen from that requirement.)
    - incongruity 11y ago
      Capitalism isn't inherently short-term oriented. No, but people do tend to be. We seem to be wired to value near-term gains much more strongly than long-term gains -- http://www.behavioraleconomics.com/mini-encyclopedia-of-be/time-temporal-discounting/ http://www.behavioraleconomics.com/mini-encyclopedia-of-be/t... This then drives us to create the systems that focus on near-term rewards – like the quarterly reporting and equities that can be traded at a moment's notice, etc. etc.
    - eldavido 11y ago
      I see a lot of parallels with the political system. If you let the masses take charge, you're going to a get a more wild, dynamic, unpredictable outcome. In the stock market this new "democracy" manifests as extremely short hold times, in the political arena, as fringe candidates that party elites would never have let win the primaries, had they been in charge. I, for one, hold stocks for a long time, and hope companies do optimize for the long term, but I realize I may be in the minority.
- jandrese 11y ago
  > It is in no companies fiscal interest to pay their employees more. Henry Ford realized just how wrong this is almost a hundred years ago. He realized that if you don't pay your workers enough they you won't have demand, and growth is driven by demand. It's a feedback loop. This is why having so much wealth concentrated at the top is so bad, it stifles growth. You end up with a stagnant middle ages type economy.
  - mortehu 11y ago
    Based on the documentaries I've watched, the real reason Henry Ford lifted wages to $5 was to solve retention issues. Working at the car factory was a pretty bad job, and employees were constantly leaving. Before the wage hike, he hired 52000 people in a year to maintain a staff of 14000.
    - rm_-rf_slash 11y ago
      More or less the same reasoning: if you spend more on employees they can cost you less in the long run, just as spending more on shoes means they will last you far longer than junk that wears away.
- soundwave106 11y ago
  One hope of mine, an actual capitalist solution to this problem of capitalism, is that companies start investing in their service employees more as an asset, not as a disposable automaton (eg, using higher quality service as a differentiation, which I think is even possible in the low margin / low price areas of business). Already in service industries, it seems like current companies that focus on employees more have higher reputations overall, and often have higher growth despite higher expenses on employees. Costco and Trader Joe's vs. Wal-Mart is the frequently cited example of this sort of case scenario, but there are plenty of others. Unfortunately, I'm not sure that a large portion of the investor class is really great for evaluating long-term value, and too focused on the quarter end. (Quite a number of the better service oriented companies are not public owned.) For the same reason, I'll be honest, while UBI is another way around increasing automation, I just can't see the same short-term oriented investor class fully getting behind this concept, at this time. The last time we had a similar scenario (the Gilded Age), it took a lot of unrest for things to get better for the manufacturing worker class. Unfortunately I wonder if a similar future will happen for the service worker class if something doesn't change...
  - rfrank 11y ago
    > One hope of mine, an actual capitalist solution to this problem of capitalism, is that companies start investing in their service employees more as an asset, not as a disposable automaton (eg, using higher quality service as a differentiation, which I think is even possible in the low margin / low price areas of business). A sentiment I agree with, but if the recent Yelp call center fiasco is any evidence, I don't find it terribly likely.
  - Kalium 11y ago
    I think competing on service quality is only possible where either consumers will accept a price differential or you can manage to avoid any kind of price differential. If I'm at a self-service gas station using the self-service pump and paying at the self-service machine, I really don't care if there's good service from the person behind the counter inside. I certainly wouldn't want to pay more for better service from a person I don't ever interact with.
  - 11y ago
Scirra_Tom 11y ago
What's their incentive?
madaxe_again 11y ago
Indeed, but unfortunately everything has been set up to provide a strong motive to hoard rather than spend cash. The thing is, when you hoard wealth as numbers on a balance sheet rather than spending it, you are actually destroying that wealth. Money which is not in motion is not money. I find it absolutely insane that we take the excess, the bounty, the benefit of the efforts of centuries of technological and industrial progress, and rather than enjoying those benefits, convert them into numbers in a ledger that one can look at and go "uh huh", which provide no benefit to man nor beast. It's the biggest scam ever pulled, and we all willingly engage in it. Marx pointed it out as "the accumulation and destruction of crystallised labour-time by the owners of the means of production" (I paraphrase) in Kapital - and absolutely bingo has changed since then. UBI is in my mind the way to go - tax the ever living hell out of cash reserves, which would promote re-investment and the use of cash - and use the proceeds from that tax to pay a UBI.
- karmajunkie 11y ago
  > Money which is not in motion is not money. Absolutely the most important thing that can be said. My response to moralizing and angst over how the economically disadvantaged spend welfare money, or judgment about "lazy" people who wouldn't continue to work in the face of basic income is "who gives a fuck? As long as they spend the money, its moving and the economy moves with it." Money has gravity. It will always move towards those concentrations of wealth that exist at the top and away from the bottom. Without a mechanism of some kind to remove it from the top and inject it into the bottom, it will never move in any way that provides benefit to the larger economy, and might as well be a closed system.
  - Goladus 11y ago
    A bit of a tangent here, but: > "who gives a fuck? As long as they spend the money, its moving and the economy moves with it." What they spend it on matters. The economy and thus society is shaped by consumer demand. Not just how much people want(and can afford), but what people want (and can afford).
- iofj 11y ago
deleted 11y ago
[deleted]
jonas21 11y ago
This is a tragedy of the commons. It's in almost everybody's best interest to pay people more. But any individual company has a strong incentive to keep labor costs as low as possible, as long as all of their competitors are doing the same.
gmarx 11y ago
if you pay people more it could show up in inflation numbers and the Federal Reserve might have to stop printing so much money.
sdgsfsfgfg 11y ago
We are currently playing a larger version of the game tic tac toe from the movie "War Games. The only way to win is to stop playing - but the system as a whole is currently far too stupid to realise it. Corporations exist in a symbiotic relationship with the consumer. Corporations are driven to ever greater profit margins, but this weakens the consumer, to an ever greater extent. The system is inherently unbalanced, it's trivially obvious to anyone able to separate out their politics from reasoned thought. If they win the game they are playing then we all lose. I feel like I'm watching two Siamese fighting fish fighting to the death
gnaritas 11y ago
> Too much cash? Pay people more! Companies have no incentive to do that. Paying your employees more doesn't directly lead to more profit.
baddox 11y ago
If a firm has market power (which airlines certainly do, in no small part because of the massive regulatory and financial barriers to entry) there's no economic reason for them to pay people more money just because they have extra cash.
gniv 11y ago
In some cases (Google, Facebook), they are paying more, but since the number of employees is relatively small, it makes little difference in the amount of cash they accumulate. This might be true for many large corporations, but hard to study, since aggregate salaries are not public for any one company.
zardo 11y ago
It's a public goods game. It's in everyone's best interest to pay all employees more, but it's in no one's best interest unless everyone else does it too.
jganetsk 11y ago
Capitalism provides an answer, but it's not to pay people more. Wages are determined by the labor market, and employers should pay market prices. Rather, capitalism's answer is for companies to return the cash to their shareholders. This can be done either through stock buybacks or dividends. I'm not enough of an expert to speculate on what happens next. Maybe this would just shuffle the hording problem around. But this would be a very simple first step that works entirely within the parameters of our current system.
nikanj 11y ago
That would require repatriating that cash, with tax consequences. An incredible amount of wealth has moved from the US economy to tax haven bank accounts for tax reasons, and the IRS doesn't want to set a precedent where you would be allowed to bring it back tax-free.
simo7 11y ago
About giving it back to shareholders instead? They are the ones to which that money is entitled too.
MicroBerto 11y ago
Sounds great, but you're asking a group of separate entities to make microeconomic decisions in order to have macroeconomic impact. And unfortunately, it must doesn't work that way. Same way that it's better for the local economy if I were to go out to eat every night. But it's definitely not better for ME, which is why I don't do that. You need a better solution or incentive than "macroeconomic hope".
- deleted 11y ago
  [deleted]

Agustus 11y ago

Those are profits, if you are able to operate your company to the degree that one is able to accumulate the cash, then there is no reason to increase liabilities to accomplish a task. If you want to spread the wealth around, then you need the government to perform this task.

zanny 11y ago

It is in no companies fiscal interest to pay their employees more. They want you to work for as little as you agree to while producing as much return for the company as possible. The real solution is to just do a UBI. If this is not an obvious call sign of how the efficiencies of recent decades are obsoleting human labor in general I don't know what is. Redistribute that money so consumers have spending power again.

revscat 11y ago
> It is in no companies fiscal interest to pay their employees more. I'm actually not sure this is true. From a short term perspective, perhaps. But longer term it is more beneficial for everyone if there is more money to be spent.
- savanaly 11y ago
  You said you're differentiating between long and short term, but I think you're actually talking about the difference between "one company's interest" and "all companies' interests". It is possibly in all companies' interest to all pay their employees more as it would stimulate demand for their products. But any given individual company's own workers are such a vanishingly small fraction of its own customer base that it could hardly ever be argued that it would be best for that particular company to pay its own workers more for the purposes of stimulating demand.
  - lfowles 11y ago
    Your workers will be more invested if they can comfortably afford the product, though. Obviously this depends on the market.
    - savanaly 11y ago
      Oh, no doubt that can be a reason. The literature around the "efficiency wage" is well developed [1], my comment was only disputing that there were a reason to pay above market clearing wages for reasons of stimulating demand. [1](https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage)
    - ktRolster 11y ago
      Your workers will be more invested if they can comfortably afford the product, though. Most of the companies I've worked for I would never buy their product: either because I didn't need it, or because I knew its true quality, or both.
- SpaceCadetJones 11y ago
  I wonder if this is different for companies like Walmart / Costco / Meijer where they carry the majority of goods you need day to day. What if they started paying their employees higher wages, meanwhile giving them discounts at the store to encourage them to spend there? Maybe the lowered profit margins could be made up by the increased spending at their store. Not to mention it would also be a good PR move
  - tanker 11y ago
    Obviously, you would have to avoid the "Company Store" problem. I think it could be a terrible PR move. If you effectively pay your employees less and justify by giving them discounts. A program that begins with good intentions could end badly. Especially if the program is conceived in an era of high profits. In low profits, management makes different decisions. Also, you often get new management.
    - SpaceCadetJones 11y ago
      I'm a bit confused, where does the effectively paying less come from? I suggested they increase their pay while also giving them a discount at the store to give them an incentive to spend their new income at the store.
      - tanker 11y ago
        I communicated poorly. Paying your employees more and giving them a discount is harmless. Lots of employees receive a discount. I meant you run into problems when you end up effectively paying them less and justifying via a larger discount. Management could end up doing this gradually as times get tough. For example, a company announces lay offs and pay cuts, but softens the blow with a larger discount. I guess I'm recommending caution. I would avoid making a discount a major part of employee compensation. A worker deciding to apply for jobs at Walmart and Costco could end up weighing a better health plan against a higher discount on basic goods. That seems problematic to me.
        11y ago
incongruity 11y ago
It is in no companies fiscal interest to pay their employees more. In the short-run, yes. In the long run, perhaps not. From retention to training to quality issues, it can make sense to pay more. Universal basic income is a bandaid on the fact that the short-term, market-driven focus of capitalism under-values people and seems to be creating a winner take all game that will eventually end the game itself, if balance isn't restored. I'm not opposed to UBI – it may well be the best option at this point, but I'd also like to figure out how to incentivize the system to look at long-term consequences as well. (Though, I recognize I'm far from the first down this line of thought).
- pessimizer 11y ago
  > From retention to training to quality issues, it can make sense to pay more. Depends on how consolidated the industry has been, and whether the firms that are left can collude or silently set norms to put ceilings on pay and quality.
- TDL 11y ago
  Capitalism isn't inherently short-term oriented. This has more to do with the incentives in & the regulatory framework of the system (consider requirements for quarterly reporting & the whole expectations game that has risen from that requirement.)
  - incongruity 11y ago
    Capitalism isn't inherently short-term oriented. No, but people do tend to be. We seem to be wired to value near-term gains much more strongly than long-term gains -- http://www.behavioraleconomics.com/mini-encyclopedia-of-be/time-temporal-discounting/ http://www.behavioraleconomics.com/mini-encyclopedia-of-be/t... This then drives us to create the systems that focus on near-term rewards – like the quarterly reporting and equities that can be traded at a moment's notice, etc. etc.
  - eldavido 11y ago
    I see a lot of parallels with the political system. If you let the masses take charge, you're going to a get a more wild, dynamic, unpredictable outcome. In the stock market this new "democracy" manifests as extremely short hold times, in the political arena, as fringe candidates that party elites would never have let win the primaries, had they been in charge. I, for one, hold stocks for a long time, and hope companies do optimize for the long term, but I realize I may be in the minority.
jandrese 11y ago
> It is in no companies fiscal interest to pay their employees more. Henry Ford realized just how wrong this is almost a hundred years ago. He realized that if you don't pay your workers enough they you won't have demand, and growth is driven by demand. It's a feedback loop. This is why having so much wealth concentrated at the top is so bad, it stifles growth. You end up with a stagnant middle ages type economy.
- mortehu 11y ago
  Based on the documentaries I've watched, the real reason Henry Ford lifted wages to $5 was to solve retention issues. Working at the car factory was a pretty bad job, and employees were constantly leaving. Before the wage hike, he hired 52000 people in a year to maintain a staff of 14000.
  - rm_-rf_slash 11y ago
    More or less the same reasoning: if you spend more on employees they can cost you less in the long run, just as spending more on shoes means they will last you far longer than junk that wears away.
soundwave106 11y ago
One hope of mine, an actual capitalist solution to this problem of capitalism, is that companies start investing in their service employees more as an asset, not as a disposable automaton (eg, using higher quality service as a differentiation, which I think is even possible in the low margin / low price areas of business). Already in service industries, it seems like current companies that focus on employees more have higher reputations overall, and often have higher growth despite higher expenses on employees. Costco and Trader Joe's vs. Wal-Mart is the frequently cited example of this sort of case scenario, but there are plenty of others. Unfortunately, I'm not sure that a large portion of the investor class is really great for evaluating long-term value, and too focused on the quarter end. (Quite a number of the better service oriented companies are not public owned.) For the same reason, I'll be honest, while UBI is another way around increasing automation, I just can't see the same short-term oriented investor class fully getting behind this concept, at this time. The last time we had a similar scenario (the Gilded Age), it took a lot of unrest for things to get better for the manufacturing worker class. Unfortunately I wonder if a similar future will happen for the service worker class if something doesn't change...
- rfrank 11y ago
  > One hope of mine, an actual capitalist solution to this problem of capitalism, is that companies start investing in their service employees more as an asset, not as a disposable automaton (eg, using higher quality service as a differentiation, which I think is even possible in the low margin / low price areas of business). A sentiment I agree with, but if the recent Yelp call center fiasco is any evidence, I don't find it terribly likely.
- Kalium 11y ago
  I think competing on service quality is only possible where either consumers will accept a price differential or you can manage to avoid any kind of price differential. If I'm at a self-service gas station using the self-service pump and paying at the self-service machine, I really don't care if there's good service from the person behind the counter inside. I certainly wouldn't want to pay more for better service from a person I don't ever interact with.
- 11y ago

Scirra_Tom 11y ago

What's their incentive?

madaxe_again 11y ago

Indeed, but unfortunately everything has been set up to provide a strong motive to hoard rather than spend cash. The thing is, when you hoard wealth as numbers on a balance sheet rather than spending it, you are actually destroying that wealth. Money which is not in motion is not money. I find it absolutely insane that we take the excess, the bounty, the benefit of the efforts of centuries of technological and industrial progress, and rather than enjoying those benefits, convert them into numbers in a ledger that one can look at and go "uh huh", which provide no benefit to man nor beast. It's the biggest scam ever pulled, and we all willingly engage in it. Marx pointed it out as "the accumulation and destruction of crystallised labour-time by the owners of the means of production" (I paraphrase) in Kapital - and absolutely bingo has changed since then. UBI is in my mind the way to go - tax the ever living hell out of cash reserves, which would promote re-investment and the use of cash - and use the proceeds from that tax to pay a UBI.

karmajunkie 11y ago
> Money which is not in motion is not money. Absolutely the most important thing that can be said. My response to moralizing and angst over how the economically disadvantaged spend welfare money, or judgment about "lazy" people who wouldn't continue to work in the face of basic income is "who gives a fuck? As long as they spend the money, its moving and the economy moves with it." Money has gravity. It will always move towards those concentrations of wealth that exist at the top and away from the bottom. Without a mechanism of some kind to remove it from the top and inject it into the bottom, it will never move in any way that provides benefit to the larger economy, and might as well be a closed system.
- Goladus 11y ago
  A bit of a tangent here, but: > "who gives a fuck? As long as they spend the money, its moving and the economy moves with it." What they spend it on matters. The economy and thus society is shaped by consumer demand. Not just how much people want(and can afford), but what people want (and can afford).
iofj 11y ago

deleted 11y ago

[deleted]

jonas21 11y ago

This is a tragedy of the commons. It's in almost everybody's best interest to pay people more. But any individual company has a strong incentive to keep labor costs as low as possible, as long as all of their competitors are doing the same.

gmarx 11y ago

if you pay people more it could show up in inflation numbers and the Federal Reserve might have to stop printing so much money.

sdgsfsfgfg 11y ago

We are currently playing a larger version of the game tic tac toe from the movie "War Games. The only way to win is to stop playing - but the system as a whole is currently far too stupid to realise it. Corporations exist in a symbiotic relationship with the consumer. Corporations are driven to ever greater profit margins, but this weakens the consumer, to an ever greater extent. The system is inherently unbalanced, it's trivially obvious to anyone able to separate out their politics from reasoned thought. If they win the game they are playing then we all lose. I feel like I'm watching two Siamese fighting fish fighting to the death

gnaritas 11y ago

> Too much cash? Pay people more! Companies have no incentive to do that. Paying your employees more doesn't directly lead to more profit.

baddox 11y ago

If a firm has market power (which airlines certainly do, in no small part because of the massive regulatory and financial barriers to entry) there's no economic reason for them to pay people more money just because they have extra cash.

gniv 11y ago

In some cases (Google, Facebook), they are paying more, but since the number of employees is relatively small, it makes little difference in the amount of cash they accumulate. This might be true for many large corporations, but hard to study, since aggregate salaries are not public for any one company.

zardo 11y ago

It's a public goods game. It's in everyone's best interest to pay all employees more, but it's in no one's best interest unless everyone else does it too.

jganetsk 11y ago

Capitalism provides an answer, but it's not to pay people more. Wages are determined by the labor market, and employers should pay market prices. Rather, capitalism's answer is for companies to return the cash to their shareholders. This can be done either through stock buybacks or dividends. I'm not enough of an expert to speculate on what happens next. Maybe this would just shuffle the hording problem around. But this would be a very simple first step that works entirely within the parameters of our current system.

nikanj 11y ago

That would require repatriating that cash, with tax consequences. An incredible amount of wealth has moved from the US economy to tax haven bank accounts for tax reasons, and the IRS doesn't want to set a precedent where you would be allowed to bring it back tax-free.

simo7 11y ago

About giving it back to shareholders instead? They are the ones to which that money is entitled too.

MicroBerto 11y ago

Sounds great, but you're asking a group of separate entities to make microeconomic decisions in order to have macroeconomic impact. And unfortunately, it must doesn't work that way. Same way that it's better for the local economy if I were to go out to eat every night. But it's definitely not better for ME, which is why I don't do that. You need a better solution or incentive than "macroeconomic hope".

deleted 11y ago
[deleted]