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There are many usually smaller sized businesses that simply won't work because of the nature of their economics and would cease to exist if you raise pay too mu

• CM30 8y ago
  Isn't the answer then that said businesses simply shouldn't be trying to hire too many new employees yet, or should shut down? Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet. If a company's business model doesn't work, then it shouldn't really stay open/continue to exist.
  • devoply 8y ago
    Maybe. From an overall perspective of entrepreneurship and job creation no. The reason being that many companies are bootstrapped on the backs of cheap labor until they reach a point where they can sustain jobs. You are basically saying that bootstrapping should never happen and you should always have investors to create companies... unless maybe if the founder can make a company based around a very small team work somehow who are working for next to nothing for equity.
    • kristianc 8y ago
      You’re welcome to set up a company and pay yourself as little as you want - that doesn’t mean you can compel others to accept mediocre wages too.
      • Thiez 8y ago
        Not a native speaker, but doesn't mediocre mean average? Surely most people are working for a mediocre salary or less?
        • consp 8y ago
          Normally yes, but it is also used as a degenerate term, though in this case other words might have been a better choice.
        • thaumasiotes 8y ago
          In modern American usage, mediocre is a pejorative word. To Horace, aurea mediocritas was a good thing, but we translate that as "golden mean" because mediocrity is, by definition, bad. The sense of "middle" has been lost.
          • sam0x17 8y ago
            It goes deeper than that. Average is viewed as negative in American culture. When people say mediocre they are thinking "eww average" in the back of their mind.
        • roel_v 8y ago
          Didn't you get the memo? Our goal is to pay everyone above-average wages! Anything else is a terrible injustice!
    • NeedMoreTea 8y ago
      Bootstrapped usually means cheap labour of the founders, as part of the risk they took founding the business. Not paying unreasonably low wages to all around. Job creation comes after the business has become self-sustaining.
      • starbeast 8y ago
        Recently got told by some founders doing a farming technology startup that nobody gets paid because "We don't even pay ourselves!", but if I would like to volunteer my time doing automation and robotics R&D, then that would be great. I always think that you should account a startup as though you are going to be paying everyone properly even when you cannot, and then start to pay out based on a combination of need and who has the oldest outstanding credit, when money starts to appear. If you do this, then your company accounts are actually useful documents that you can project costs off going forward and actually attract investment, rather than living in some optimistic dreamland where the numbers you have do not represent anything like the actual costs of running the business properly.
        • consp 8y ago
          > Recently got told by some founders doing a farming technology startup that nobody gets paid because "We don't even pay ourselves!", but if I would like to volunteer my time doing automation and robotics R&D, then that would be great. So they are saying you should do slave-labor? I hope they expected to give you plenty of equity (which is cheap as the company is worthless as there is no money being made yet), otherwise it would be idiotic to expect people to work without compensation.
        • imtringued 8y ago
          Those founders are getting paid by having 100% ownership in the business. If in 5 years the business becomes profitable then the original unpaid employees won't see any of that money. The only way this payment structure can be morally sound is by treating every unpaid employee as a founder and giving them an equal share of the company.
          • 8y ago
    • darawk 8y ago
      Businesses aren't bootstrapped on the back of cheap labor. They're bootstrapped on the back of high cost variance labor. They're paid in equity that may be worth nothing or may be worth a lot. You convince people based on the merit of your idea. They evaluate whether or not your idea has a sufficiently high probability of success to be worth their time. The labor isn't cheap, it's just not paid for with cash.
      • adrianN 8y ago
        I think historically a lot of businesses were bootstrapped on cheap labor.
        • rusk 8y ago
          Not meaning to be facaetious, but this sounds like something an 18th Century sugar plantation owner might say. Historically, there were slaves.
          • adrianN 8y ago
            That's exactly my point. A lot of the big companies today have at some point in their past exploited workers. Basically every manufacturing company started before WW2 or so.
            • rusk 8y ago
              Sorry, do you mean your comment could be a candidate for the `/s` tag?
            • Retric 8y ago
              Early factory workers where not exploited in terms of pay, they made more money than the average worker of their time period. Safty is a different story.
        • roel_v 8y ago
          If someone starting a business works many hours themselves for $2/hour, and asks their spouse/children to chip in, and calls in favors from family and friends to get things going - then that's bootstrapping on cheap labor, but nobody in their right mind would call that 'slavery'. When starting a business when you have nothing, you have to be frugal, yet you can't do everything alone - that doesn't mean all ways you can get work done at below-market rates are sleazy or immoral.
    • woolvalley 8y ago
      Usually you get that cheap labor with lower experienced and younger employees. You do get what you pay for in many ways, but you do find those talented young people who can be really good for the first 1 or 2 years, or do things that many big companies refuse to do, like hire remote or give things like flexible work arrangements in exchange for cheaper pay.
    • SimonPStevens 8y ago
      But where is the line? Can I import hundreds of people to manually have them dig coal out of the ground with their bare hands because I can't afford the machinery yet and claim I'm bootstrapping a mining business. We would typically call this exploitation. Many types of business can't be bootstrapped. That is not unusual. Bootstrapping is primarily a popular approach now due to easy computer automation that makes a small subset of companies viable with the very small staff and no expensive hardware. It certainly isn't a default across all industries. The labour pool is a market. You are not entitled to cheap labour just because you want it. If you can't find someone willing to do your work at the rate you want to pay it's because someone else is paying more for the same work, so you need to pay more to attract the labour. Importing people from abroad is something that only exists as a solution because of the imbalance of development levels around the world right now. I expect that this is an anomaly that we are going to see correct itself in time once all countries reach a similer level of development. Where will you import your cheap labour from then? In the UK we used to employ children to work in the mines and the mills. This was eventually realised to be exploitative and made illegal. I'd bet that all the business owners at the time complained how would they ever be profitable without the cheap child labour. But they either adjust or die, and I'm happy with that tradeoff. If a business is only viable with child labour I would prefer it didn't exist at all.
      • thaumasiotes 8y ago
        > Importing people from abroad is something that only exists as a solution because of the imbalance of development levels around the world right now. I expect that this is an anomaly that we are going to see correct itself in time once all countries reach a similer level of development. This has never been the case in the past; there is no reason to expect it in the future.
        • ben_w 8y ago
          Disagree. In the past, “abroad” was physically closer and in what is now the same country. Londoners can pay the Welsh less, but they can’t go on literal slave-gathering raids c. 999 AD. It’s all a matter of degree. Degree of progress, degree of wage difference, etc.
    • briandear 8y ago
      Businesses are bootstrapped on the backs of the founders who exchange high personal risk for potential reward. I have had a bootstrapped company and my employees always got paid first and correctly. I don’t hire people unless I can pay them what they fairly cost. Any shortfalls came from my pocket and savings and never on the backs of my team. Maybe I am an outlier. It seems to me that the Amazons and Ubers of the world are built upon “cheap” labor more so than bootstrapped companies. Those types of companies have a competitive advantage from their access to cheap labor that is magnified at scale. Your typical bootstrapped company isn’t at the scale where exploitive labor makes much sense.
  • dingaling 8y ago
    Or they could invest in training instead of expecting perfectly-qualified staff to walk in the door. Every week I see job ads with "${INDUSTRY_CERTIFICATION} essential". Companies are lazy and spendthrift and have some illusion of a vast labour market just itching to retrain themselves in MIG welding or whatever. The last ad I remember that said "full training will be given " was for a bakery!
    • pytester 8y ago
      Training requires loyalty to work - if companies can't expect trained personnel to stay then the investment is pure overhead. To be fair, it's corporate America that burned that bridge in the 80s with layoff culture, citing "economic efficiency".
      • ForHackernews 8y ago
        You could build some measure of "loyalty" into a contract: * We train you for six months and pay you full salary. * You have to work for us for two years past the end of your training period. * If you leave before that, you owe us 50% of salary from the training period. (or whatever) In a competitive market, you might even see other companies willing to buy employees out of their contracts.
        • k_sh 8y ago
          This would be illegal in some (most?) places - labor laws ban employers from clawing back pay for almost any reasons. In California, for example, you can't even dock someone's final paycheck if they fail to return a uniform - if someone worked the time to earn a wage and you don't pay them in full, you're going to find yourself in court.
          • ForHackernews 8y ago
            I'm not familiar with CA labor laws, but money is fungible so it could be just be structured as "This is a three year contract, and if you quit early, you're in breach and owe us $X". Then it's not "clawing back" pay, it's just a fine for breach of contract. I do think laws should prevent low-wage employers from screwing over their employees for piddling stuff like uniforms, but I think that's different than something like a professional apprenticeship.
  • C1sc0cat 8y ago
    And rely of corporate welfare or working tax credits as its known in the UK - I don't mid my taxes paying for nurse doctor or teacher training subsidising Starbucks baristas not so much
    • NullPrefix 8y ago
      Should punctuation training come from welfare money?
      • gpderetta 8y ago
        Welfare, no. Education budget, definitely.
    • Delmania 8y ago
      > subsidising Starbucks baristas not so much I'd recommend you read the Power of Habit. The author talks about the training program Starbucks puts its employees through to build willpower.
  • sinxoveretothex 8y ago
    I think the question you should be asking is why are people taking these "too low" wage jobs? Companies do close down all the time because expenses are higher than revenues. Restaurants are a very well-known industry where that is super common (and it's not because restaurants tend to pay exhorbitant wages). It's literally a meme to accountants that having a restaurant as a client is a good way to never get paid (they may close down in the 30 days after delivery they are typically given to pay you). Also, in a way, we already "shut down" companies that pay too little: you just can't even offer to pay someone 2$/hour. The question I'd ask is "who would take that job if it were allowed?" In essence, having low wage jobs should never be an issue: if you're of the opinion that these companies shouldn't exist in the first place, you're essentially saying that those workers have better options already available. Do we really need to fire them to get them to go for those?
    • minikites 8y ago
      >you're essentially saying that those workers have better options already available If you're following the fable of capitalism, those people should start their own, more efficient businesses if none are available.
      • sinxoveretothex 8y ago
        Yes? Or just get hired by one? Or change field? Or move? It's no fable. Some of us don't have what it takes to start their own company, that's true. Probably there is no hope for some. I don't know how you'd show that there is a system that doesn't suffer from this problem. I mean, you'd have to show that even with less incentive to produce and more demand for products (since everyone is owed "decent living" or whatever it's called nowadays), there is no possibility for demand to exceed production.
    • FranzFerdiNaN 8y ago
      Because capitalism forces them between a job that does not pay enough and no money to buy food and housing and clothing and such. The solution is of course something like a basic income to liberate people and break the power of companies.
  • logicchains 8y ago
    >Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet. Do you think the employees would prefer being unemployed or being underpaid? The business closing doesn't magically create new, better-paying jobs for them. If better-paying jobs existed that they were capable of doing, they'd already be doing those instead.
    • AnIdiotOnTheNet 8y ago
      > Do you think the employees would prefer being unemployed or being underpaid? Depends on how underpaid doesn't it? There's a line for everyone where all that work just isn't worth still not being able to afford a decent standard of living.
      • logicchains 8y ago
        >There's a line for everyone where all that work just isn't worth still not being able to afford a decent standard of living. Then shouldn't this be up to the workers in question to decide? Closing their low-paying workplaces just cuts down their options, it doesn't create new jobs for them.
        • deleted 8y ago
          [deleted]
        • androidgirl 8y ago
          Workers do decide on things such as the minimum wage, through voting. If a business wants to offer more pay to attract more employees, that's their call and their right.
          • logicchains 8y ago
            >Workers do decide on things such as the minimum wage, through voting. That's a much weaker form of decide. A vote only means at least 50% of voters wanted it, so you can only say with certainty that there's a 50%+ chance that any given voter wants it. Whereas if a worker has chosen to work for a particular salary, there's a 100% chance he's chosen that as nobody else can make that decision for him.
  • merpnderp 8y ago
    You perfectly make the point that the true minimum wage is $0/hour. Raising minimum wage has often reduced the number of jobs, often creating black markets of cash workers who often compete directly against people not allowed to legally work in US, further depressing wages. The real question is if a worker and an employer agree to a pay rate, why do you get to call it "underpaying"? Are they not adults, ostensibly free to live their lives how they see fit?
  • closetohome 8y ago
    This has always been the argument against companies who claim they can't survive without using undocumented immigrant labor. If your business model relies entirely on not paying your employees reasonable wages, maybe your business model is a failure.
  • txsoftwaredev 8y ago
    There will always be a need to employee low IQ individuals, developmentally disabled, etc. Would you prefer those types not have a viable option for employment?
• darawk 8y ago
  There are definitely businesses that wouldn't exist due to their inability to find labor cheap enough to make their unit economics work. We usually say "those businesses shouldn't exist, then". For instance, you could make a version of AirBnB that was supported by ads alone, if instead of paying homeowners for the use of their homes, you simply compelled them to let you rent them out for nothing.
  • vincnetas 8y ago
    you mean https://www.couchsurfing.com https://www.couchsurfing.com?
• sgroppino 8y ago
  In this case these businesses should invest in tools that make fewer workers more productive.
• Ar-Curunir 8y ago
  Businesses that are only profitable because they short-change workers... should not exist. Businesses don't have a "right to labour".
• dominicr 8y ago
  Usually this is because customers have gotten used to paying less than reasonable prices. Paying people more is often hand in hand with customers paying more. But people like the first idea more than the second! Companies will try to only pay staff more when they can justify that to the shareholders as being a way to make more money for the shareholders. A public company exists solely for the benefit of the shareholders and all actions stem from that.
  • mooreds 8y ago
    > A public company exists solely for the benefit of the shareholders and all actions stem from that. Not sure about this. First off, there's the principal/agent problem that causes many public companies to be run for the benefit of their upper management. Second, this idea of the shareholder above all other stakeholders is a new phenomenon (since the 1980s). It's also primarily an Anglo Saxon idea (USA, Britain). Other countries include other stakeholders more explicitly. And the USA could as well, of the political will was there. I agree with you that this is how American capitalism is structured now, but it didn't spring from the mind of God, it's a human institution that can be changed.
    • jsmith45 8y ago
      Yeah. I've often said that in any business decisions there are the following stakeholders: Upper Management, The employees, the board members, the shareholders, the customers. Business decisions are almost always made looking at the perspective of perhaps 2 or three of these stakeholders. The employees are basically never considered in the US, often only the biggest one or two customer's desires are considered if any consideration is given at all, etc. And way too much attention is payed to certain Wall Street types who get all upset when earnings exceed the company's own projections, but fall short of wildly optimistic estimates by third parties.
• PeterisP 8y ago
  That's one loop of the self-balancing process - if there's a scarcity of labor, wages go up, some businesses can't afford it and close down, that reduces the needed number of workers and solves/balances the scarcity. And it's a beneficial process, as it moves these people from business where their labor is less valuable (as evidenced by the fact that it's not profitable to employ them at a slightly higher wage) to businesses where their labor is more useful. The least efficient businesses being forced to close is a good thing that allows the labor, facilities, land, materials, capital, etc to stop being used poorly so that they can be used better in the economy. The other balancing loop is that higher wages in some field is motivation for people to get the skills needed for that field, either through choice of education for younger people or by transferring from another type of job. This balances the supply side in a beneficial way, but as it's much slower than the balancing loop above, the largest immediate impact comes from the demand-side balance.
  • gronne 8y ago
    “And it's a beneficial process” only to an extend. To much volatility result in a net loss for the market and society.
• mikeschmatz 8y ago
  Shall we legalize slavery then? Just imagine how many business models would become viable if labor was free
  • idontpost 8y ago
    I wouldn't say slavery is free. You still have to pay someone to beat the slaves.
  • war1025 8y ago
    You still need to pay the slaves in the sense that since you own them, you are responsible for their upkeep, which takes resources.
• tomjen3 8y ago
  Then they will have to adapt. Here in Denmark we don't have greeters, we bag our own stuff and most of the time we have to put a coin in to get the shopping cart out, which will be returned when we return it. Of course there will be businesses that can't adapt. These will die out and those employees will then, slightly, decrease salaries.