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Don´t Blame the Corporations, Blame the Economics System They are in

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posted on May, 31 2013 @ 04:25 PM
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)

posted on May, 31 2013 @ 04:38 PM
The system is complex by design. The game is rigged by those who are winning it and can change the rules at a whim. I fully blame the corporations, and the corrupt people who they buy off in order to get ahead by unfair means.

The bigger the corporation, the more say they have in government policies and law. The world is inherently unfair because of the greed of those at the top of the game. Its human nature, they call it survival of the fittest. Ironic though isn't it that because these fittest survive, that the planet is being destroyed.

I agree in part with your explanation regarding wages. The main issue here is that while the shop floor workers are paid a pittance, the management and boards are paid vastly more. It seems unfair that those who do the harder, dirty work should struggle to make ends meet, while the people who sit around making decisions live in luxury.

Simply, if they cannot afford to pay all their workers a fair salary, then why should they pay themselves what they pay 10+ workers? It IS down to greed. They should pay themselves less and pay their workers more, so the salaries are evened out. This will not affect shareholder dividends. But of course that will never happen and there are a million excuses they will use in order to not do so.

It is the PLAYERS who play the game, exploit its loopholes and screw everyone to get to the top.
edit on 31-5-2013 by Firefly_ because: (no reason given)

posted on May, 31 2013 @ 04:56 PM
Let me help the poor babies out. I am encouraging as many people as possible to do the same. I am going to stop buying as many products as I possibly can, starting with growing most of my food, in a small back yard. We hunt for our meat, not big meat eaters anyway. We are not traveling anymore. We go to the store once a month. We buy used clothing except shoes. I will continue to find ways to stop spending my money and sit on it like the corporations. I have come to like this way of living, actually having money in a savings account, which we pretend is not there. Sooner or later, they are going to have to have real paying customers instead of accounting tricks to make money. Yeah, I know, if everyone did this, there would be job losses. Fine, lets all go down together.

posted on May, 31 2013 @ 05:01 PM
Ok lets see, lower wages and higher cost of life with a dash of over qualified workers. I do hope you trust whoever sold you the idea. Idle minds foster uncontrolled growth in detriment to the established.

posted on May, 31 2013 @ 05:06 PM
reply to post by Cabin

company a
we sold 100 million dollars worth of widgets,
and made no money at all

employee a
i haven't had a pay rise in ten years while working longer and using new equipment that allows me to make 10X the widgets i used to make ten years ago, where is my pay rise?

company a
well we have a subsidiary in the cayman islands, where we don't pay tax,
and because we ship our profits to another country we dont have to show a profit here,
and therefore we cant "afford" to pay you more even though you are 10X more productive,
if we payed you more wages we would go broke

employee a
so i dont get a pay rise in ten years because you have an offshore tax haven "paper company"?

company a
thats right we can show zero income in your country, and can plead "it will bankrupt" us to give you even a small increase in wages even tough your labour now creates 10X the products you did ten years ago.

employee a
but your taxes have halved in the last 10 years, surely you can afford to pay us a small raise to keep in line with inflation over the last 10 years?

company a
but we dont pay taxes on profits they are booked to offshore companies as "costs" to our onshore company,
so we dont have to pay taxes on earnings. so we get no benifit from the tax breaks you are talking about

employee a
so with little or no onshore taxes, and tax "avoidance" schemes in the caymans you can hide your profit,
and even though you are making 10X the profit, you cant afford to give me a pay rise because it would bankrupt you?

company a

now you want me to feel sorry for company a?

op you sob story omits some of the facts as to WHY these companies are making record profits while paying record low taxes on profits, and then attempts to make the worker look greedy for asking for a pay rise.

your premise is self serving and inaccurate


posted on May, 31 2013 @ 05:08 PM
This is along the lines of saying "don't blame hitler, blame the political structure of Germany"

Yes, they both have blame in the matter. But it foolish to disregard one for the other.

posted on May, 31 2013 @ 05:28 PM
reply to post by Cabin

I understand what your saying, but do you really believe this is exactly how it goes down??
no no no no no. There is alot more to it than you think and most of the time if not always it involves corruption. Those guys that make billions are NOT saints. There is a reason why they love money and theyll sacrifice so much until they get what they want.

Maybe you understand the Economic system, but you dont understand the Business. Business is dirty
edit on 31-5-2013 by Tlexlapoca because: (no reason given)

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