I decided to make this thread, as I have seeing more posts not understanding the basics of current economical systems.
Looking at the billions of profit made by big corporations, the low wages of the majority of employees and the high wages of CEOs/Board Members, it is
easy to "connect the dots" and assume it is all about the greed.
"The company is earning 5 billion a year and my salary is only 10k a year. These "greedy" bast*rds!"
Unfortunately the system is not that easy. The whole economics system is extremely complex. In this tread I will try to explain it in very simple
terms to make you understand better that often the corporations do not have much choice in paying higher wages to its employees.
I am not justifying the environmental pollution or greed, but giving you a look from the corporate viewpoint.
I was recently having a chat with a friend of mine, who is in the board of one of the largest retail stores round here. We were talking about the
current economical situation and I asked him:
"Why are the salaries so low in your company?".
He gave me simple answer:
"If I rose the salaries of every lower level employee by only 1 € an hour, the company would be in extreme loss and bankrupt within a year
1000 $/€/£ does not seem as a large amount, especially when compared to the profits the large corporations are making. Yet one has to consider that
you can not rise the salary of only one person. If one lower-level employee gets 1000 extra, everybody has to get their salaries raised.
Now imagine a company has 10,000 workers. Rising everybody´s salaries by 1000 $/€/£ a year would cost 10,000,000 $/€/£ for the company. Raising
the salaries by 1000$/€/£ in a month would mean 120,000,000 $/€/£ of extra costs.
I took one well-known British retail company Sports Direct. I do not know how well they are paying there workers, based on Google search I found job
offers varying from 14k £ to 20k £ in a year, which is not a lot in UK.
They have around 18,000 workers based on Wikipedia
, Now imagine rising the salaries of all
of them by merely 1000 £ a month , it would mean around 216,000,000 £ extra cost on salaries. Their operating income (before taxes) was 158 000 000
If salaries of all employees were raised by a mere 1000 £ a month, it would means 58 000 000 £ loss in a year.
If Walmart raised the salaries of all their employees by 10,000 $ a year, leaving 200,000 highest paid employees without a raise, it would mean the
company has 5,000,000,000 $ loss every year. (2,2M workers, 15B profit)
McDonalds would be losing around 2 billion $ if we left out 800,000 of the highest paid workers without a 10,000$ yearly raise. (1,8 M employees, 8
Billion profit before taxes)
There are so many people working in every major company that even small raises add up to a huge amount of money for the company, as if one gets raise,
everybody has to get one.
We can also not forget the stockholders - random people who have invested their hard-earned money in the stocks of a company. After all, the
stockholders make the value of the company based on basic supply/demand. If nobody wants the stocks, the value of the company is low.
If I as an investor buy some shares, I do not want them to lose value. In order to earn well from the dividends I need to make quite an investment.
Apple is currently paying 3,05 dollars dividends on every share this year. Every share costs 450 $. Paying 450 $ to earn an extra 3 $ is quite a risk,
isn´t it? One needs to pay 450k to earn 3k dollars every 3 months. Imagine now if the profits were lower then many people do not want to own these
shares anymore, the share loses 10% of its value. I have lost 45,000 $. Playing in the stock market is high risk/high reward game, which can be
compared to gambling. The value might increase, it might decline in a matter of minutes, Even the smallest newspieces, rumours can influence the value
of a share.
The CEOs have extreme responsibilities in front of shareholders. 10% loss in company value might lose billions of invested money, of the money of
others who have decided to purchase the stocks. That is one of the main reasons why they are paid that well, not many people can tolerate such a
pressure. If one can earn extra billion for the shareholders, they are willing to pay him extra 100 millions to do it...
The system is created to be like that, it is not good for the lower-level workers and never can be, as there are too many of them and the company
holds also responsibility over people who have given them their money to operate with. The profits are not high enough for everybody to earn well, as
the investors have taken a great risk in order to earn even something from the stocks (Paying 450k to earn 3k of dividends with the risk of losing
much more than 3000 $ is a significant risk.
We can not blame the corporations that much. They are just playing the economics game that the system has created for them. If one fails to expand and
rise profits every year, their shares lose lots of their value and the opponents who kept growing, go past that company. Less finances to invest in
product development=less innovation = less products sold=loss=cutdown on low-level employees=bankrupt in the long run.
The current system is not efficient in the long run. One way or another, at some point monopolies will develop. When one keeps growing and growing,
expanding themselves, at some point they have reached their limits. There is not enough room for everybody in the market. It is a matter of survival.
No large corporation is able to pay a fair amount to all of its thousands of employees, considering that the people who invested in the company also
want their risks justified and get their investment back.
Don´t hate the player, hate the game.
edit on 31-5-2013 by Cabin because: (no reason given)