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Because free market is predicated on a business setting its margin to whatever works, aka the delta between what customers are willing to pay for the products a
by dvh1990 5y ago
Because free market is predicated on a business setting its margin to whatever works, aka the delta between what customers are willing to pay for the products and what it costs to run the business (salaries included).
Workers get paid based on market price for their work plus some premium for skill, depends on the worker. Why should a company pay more than what workers demand? How would that make sense as a strategy? Why not use the money to expand the company instead? Or pay the shareholders?
I know I'm playing devil's advocate here, but otherwise we're looking at socialism at best, weird charity at worst.
- clairity 5y agoit's odd that you'd prescribe value-based pricing for a company but not for labor (where you prescribe cost-plus pricing). in a set of fair markets, we'd expect both to be value-based. moreover, we'd expect competition to drive down profits to an appropriate risk-adjusted level, and worker pay to be more equitable with (and perhaps higher than) shareholders and executive managers. the latter is because worker risk is typically concentrated in their (often single) employer, whereas shareholders (and executives) are typically more diversified and less exposed to the risks of a given firm.