New York Times Article Perpetuates Short-Sighted Management Attitudes

One of the reasons American management isn’t what it used to be is that most companies do not give a rat’s ass about employees. Yes, you’ll get the usual human resources blather about how “our employees are our most important asset”, but actions on this front speak vastly louder than words. In the 1970s and early 1980s, management gurus and the business press argued that one reason German and Japanese manufacturers were trouncing their American counterparts was that they had better employee relationships. But even though there is still a mini-industry dedicated to producing corporate “leaders”, US companies too often see employees as costs, and their objective is to get buy spending as little as possible on them, rather than treating them to the extent possible as allies in building a more successful, profitable venture.

An article in the “You’re the Boss,” a New York Times column, demonstrates how deeply these warped values have taken hold in American business. Now admittedly, this feature focuses on small businesses, and these enterprises are often on the knife edge of survival. At the same time, every now-big company was a small company once, and presumably a venue like the New York Times is trying to help these companies perform better and for those that have significant potential, to chart a path that increases their odds of achieving it.

So consider this discussion:

Last spring I exchanged e-mails with Amy Christensen-Waddell, president of Albion Swords, which makes reproduction swords and armor (and I thought my business was niche!). Discussing employee pay, she asked: “If your people are making a lot of money, do you find it makes them more loyal?” I didn’t give her an immediate answer, but the question has been in the back of my mind since then. Here’s my current thinking….

But what about for the rest of us, for the unglamorous companies with mundane work, for the bosses with feet of clay? We’re going to have to think of loyalty differently. We’re going to have to buy it — by which I mean providing a package of pay, benefits, and workplace atmosphere that’s good enough that our employees can’t easily find better pastures…..

Unfortunately, for many years I was paying my people more than I could afford, and more than they could find elsewhere. Making that payroll was often excruciating. My employees were very happy with their paychecks, but the high costs were bleeding the company white. I cut wages by 20 percent in 2008 and partially restored them in 2009. Through all of that, I had no defections. My conclusion: I was paying more than I needed to.

There’s got to be a sweet spot in the middle where you pay enough to prevent defections but no more. Additional wages and benefits, beyond your employee’s next best choice, are paying extra for something you have already bought.

Now on the surface, this all sounds reasonable enough: employees can’t be relied upon to be loyal, so since they are mercenaries, the boss should pay just enough to keep them from bolting, but no more. But read the language more carefully. The author sees himself as having to buy loyalty, which is barely a step removed from seeing workers as commodities.

And how we got here is conveniently omitted from this picture. Managements at companies big and small have institutionalized short job tenures. But many people, particularly those who do not see themselves as being on a career fast track, value stability and the social contact that comes from a steady job. And if you’ve ever run a small venture, or even a small department in a company, having someone quit is hugely disruptive. You have to scramble and try to get the same amount of work done with fewer hands, and you run the risk of losing customers if you miss deadlines or let your product/service quality slip. And it’s a drain on your time to find and screen potential replacements, and a new person needs to be trained. So there are real risks and costs associated with losing staff. Yes, the author advocates paying enough to avoid attrition, but his attitude is employees come, employees go, rather than employees are the guts of his enterprise.

My experience over and over again is that hiring better people pays for itself, and once you get them, it’s worth it to pay more to keep them. In some industries, the output gap between “high” and “normal” can be very wide; in software development, top programmers are estimated to be ten times more productive. If you’ve ever had the good fortune to hire a superb secretary, you’ll similarly know that supposedly low level staff can be hugely efficient and critical working oars in larger teams. And there are other ways to pay people besides hard cash, for those that are strained. One firm I know was very tolerant of staff maintaining weird hours as long as they kept in touch with the mother ship and got their work done on time; it attracted people of a Bohemian temperament who in return for an interesting combination of indulgence of their quirks but insistence of high standards on client work, got considerable bang for its limited buck.

I’d be curious to get reader input, but I have a sneaking suspicion that most companies that made the transition from startup to long lived ventures didn’t get there by setting wages as just above the level where employees would actively shop there resumes. Running a small business is hard, and cash-strapped employers often have to make difficult compromises, but I am bothered by the fact that this piece sets standards so low. An employer not have the luxury of treating his employees as well as he would like to, or as his workers might deserve, but if he fails to set this as an aspiration, it is guaranteed not to happen.

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  1. Michael Gersh

    I have always found that one is always advised to keep benefits and wages at a level above norms for people with similar CVs, but that does not buy loyalty. People need to be treated right, respected, and they need to see a goal that they can reach. Equity participation is a great tool for this, but the NYT piece seems to be a bit outside my experience. It is about people, not money. I have had the best loyalty at a company I started where we went through a real lean year and a half, missed a few payrolls and dumped benefits for a while, but everybody worth their salt stayed with us, and things got quite a bit more lucrative for them down the line.

    No two situations are the same, but I feel that managing people is the most difficult and rare skill, and plenty of companies never get it right. Any company’s most important asset is its people – the cost of hiring, training and motivating people must be conserved. Losing people is about the most disruptive thing that can happen when you are small and trying to grow. Giving people more money is important, but it is far from the most important, and timing is key. You can not starve the horse you are riding – the employees must feed on what is left.

    1. Ray L Phenicie

      {People need to be treated right, respected, and they need to see a goal that they can reach.}
      This is the key to what so many American companies are not doing. In small companies, where a the number of mangers is in the small single digits, one person who knows nothing about management can turn the work environment into an intolerably toxic place. To a new employee, this ongoing situation may not be apparent until months later, a fight of flight mentality sets in and the situation degrades to the bottom; pay is not really the issue. In large companies, the toxicity of the work environment may be the same but the safety in numbers factor may operate as there seems to be another counterweight in the form of either personnel managers or a higher up or a peer reviewer on the same level as the would-be Darth Vader type who wishes to strangle all innovation. But here too, eventually all of this juggling and shuffling, which does inevitably arise, is going to wear out the average person who again, like myself, would give up 2-4k/ year to move to a ‘better’ job.

      Since managers are unable and indeed are not asked to think globally (the quickest way to get yourself attacked in corporate America is to look over the top of the silo you are in, questions about
      1. Environmental quality in and out of the work place
      2. Social injustices in and out of the work place
      3. Constructing the business world around larger questions of social and economic justice
      will just end in being trashed along with the person asking the questions.

  2. leroguetradeur

    My experience is that salary is a hygiene factor. Salaries have to be competitive. The case described was one in which the salary levels were not working for the company. If the owner or the management team are constantly on the edge because the level of costs of staff is too high for the company to afford, they are in trouble. If this is because they are paying more than the competition, its hard to see what else they do but lower salaries (or other compensation costs).

    If you look at the US car industry, the classic problem is that the costs of production were set by union settlements, but the price level started to be set by imports. The variable then became quality of the product, and that became uncompetitive leading to falling sales and market share. UK was the same, and it put Rover aka British Leyland out of business in the end.

    What do you do? The unions would have wanted protectionism and tariffs. Is that a way you want to go?

    One odd aspect of your post is where you say “US companies too often see employees as costs, and their objective is to get buy spending as little as possible on them”.

    Its not the company which sees them as this, is it? It is some people in the company. But who exactly? The level of people who have to deal with costs goes quite low down in a medium sized company. It may be that you are talking about CEO and direct reports? Yes, that could be. It could be that one of the changes that has happened in the last 20 years, with rising salary differentiation and ever rising executive compensation, is that the senior management starts to see themselves as a different species, and regards the rest of the company in increasingly instrumental terms.

    I have been through both situations, one where we were responsible for keeping a company going, but owing to previous management idiocies, we had huge overstaffing, a huge sense of entitlement in some departments that were literally doing nothing useful, just making work for themselves and others. Another, earlier, in which we were treated really as inputs with a cost label on us. I did not stay. I’ve also been in a situation where completely crazed union rules and behavior made it impossible to take the obvious commonsense measures we needed to improve quality and customer experience.

    Agreed very much with the spirit and conclusions of the last poster: “I have had the best loyalty at a company I started where we went through a real lean year and a half, missed a few payrolls and dumped benefits for a while, but everybody worth their salt stayed with us, and things got quite a bit more lucrative for them down the line.”

    Loyalty is about how people are treated and the sort of implicit long term bargain and communication you have. In that mix, salary is a hygiene factor.

      1. jake chase

        Business management in the corporate sector is mostly about fragmenting work to the point that any marginally qualified idiot can do it. Highly motivated employees soon understand their career path is up or out. Those unable to move up soon become overpaid in an environment of even trivial annual increases. Over time, technology allows more work to be extracted from fewer people. Combine these two elements and management has every incentive to chop heads. Under monopoly capitalism employees are simply a cost. This is why a predatory executive culture enjoys no natural restraints.

        Changing this is a political problem. Not changing it presumes that we permit large corporations to exist in order that a cadre of overdressed bullshit artists can swoon in the lap of luxury, while an army of producers is marginalized, trivialized, patronized and discarded

    1. DownSouth

      leroguetradeur said: “If you look at the US car industry, the classic problem is that the costs of production were set by union settlements… The variable then became quality of the product, and that became uncompetitive leading to falling sales and market share.”

      This is a distortion and a half-truth. To lay all the blame for U.S. auto manufacturers’ failure to compete, both cost-wise and quality-wise, at the feet of the unions is nothing but a reactionary, right-wing union bashing.

      The reality is much more complex. There were management failures too, as well as a host of other problems.

      For a much more complete look into why American auto manufacturers failed to compete there’s this documentary from This American Life. It paints a far different picture than the partial truths and gross simplifications offered up by leroguetradeur.

    2. Jim the Skeptic

      leroguetradeur said: “If you look at the US car industry, the classic problem is that the costs of production were set by union settlements, but the price level started to be set by imports. The variable then became quality of the product, and that became uncompetitive leading to falling sales and market share.”

      Union settlements. Do you mean negotiated union contracts? What was management thinking when they signed these contracts if they were so outrageous?

      The General Motors auto plant in Fremont California had a terrible reputation and the employees were seen as the problem, so GM closed the plant in 1992.

      The Japanese reopened that GM auto plant, rehired most of the same bad GM employees, retrained them, and got production efficiencies and quality as good as their plants in Japan.

      Take a listen to this at about 38:00 for about 10 minutes:

      This is as simple as dirt! American managers are incompetent at the highest levels. They set up processes that are doomed to fail, whether they dealt with their suppliers or their employees.

      1. attempter

        What was management thinking when they signed these contracts if they were so outrageous?

        Even though the contracts are so self-evidently bad, for some reason the fact that management signed them is never taken as evidence that management is incompetent and doesn’t deserve what it extracts.

        But then, after 2008 and what has followed, anyone who still defends management pay is either morbidly stupid or a criminal. Either way, we’re no longer at the stage of development where debate any longer has any value.

        “If I’m accused of stealing the Towers of Notre Dame, all I can do is flee the country.”

        – Anatole France.

        And anyone who still defends corporate management’s continued existence, let alone their continued robberies and assaults, is obviously an enemy who wants to completely strip and enslave America. There’s no other way to explain such a position, since we have the proof.

    3. Ray L Phenicie

      {that the costs of production were set by union settlements, but the price level started to be set by imports.}

      What numbers do you have from the real world to back this up? As none were given I guess your reader can ignore this statement and a lot of the rest of what you say.
      Please look at this carefully constructed study that shows current labor costs to represent 13% of the cost of manufacturing high tech autos. Giving the employees in the factory a $2 or even $5 and hour haircut would then save say %1-2 or even less?

      American auto companies have refused to invest in
      1. Job Training-yes Virginia, better educated workers will potentially leave you but they may leave a residue of betterment on the way to the exit.
      2. Research and development in the industry-I will not speak to the value of this because if it is not self evident then we can’t communicate.

      American auto companies failed to look the huge costs of the social injustices around them and failed to take a stand on the larger issues in the society. When organizations fail to be in touch with the real world, that real world may come along and give a huge clobber to the cerebellum leaving the said organization brain dead on the table.

    4. Seth

      “If you look at the US car industry, the classic problem is that the costs of production were set by union settlements, but the price level started to be set by imports.”

      But what made those settlements so bad? Skyrocketing health care costs. They added a couple of thousand dollars to the price of every car. Naturally, the senior management of the Big Three has spent the past 20 years campaigning for Democrats and were among the biggest backers of a single-payer health care system, since it would instantly make their products more competitive.

      Oh, wait.

  3. Spencer Thomas

    One thing that I think we should be asking is “what created this in the first place?” There are a couple of answers, I think:

    1) A culture of short-termism. Over the past few decades, this has become deeply embedded. I suspect it has something to do with general anxiety and insecurity in America. A fear that it could “all end tomorrow” (because of war, government collapse, revolt, whatever) so we better get what we need/want today. Of course, this manifests itself in everything from shareholder pressure (for public companies) to outright looting (in all sorts of companies), to the “squeeze my workers/squeeze the company” attitude indicated in your post.

    2) An overall distrustful society. As exposited in “The Cheating Culture”, we have a culture where many believe that everyone is trying to “get over” on them. With this in mind, is it any surprise that worker-company relationships are as they often are?

    Given these two postulates, how can we fix this without fixing the culture? Is it even possible? If not, what will it take to change that culture?

    1. JTFaraday

      What if you have the causality backwards and it’s actually the business ethos that’s damaging the culture?

    2. Francois T

      The culture of short-termism comes directly from Wall Street and their monomaniacal obsession with quarterly results and guidance in between damnit, wam-bam-thank-you-mam…who’s next?

      And let’s not start about the whisper number and all this skulduggery so antithetical to the obvious need for a long term vision real business projects demands.

      On the other side of the “trade” you have investors that suffer from expectations inflation.

      Warning: Incoming anecdote

      When Indiana wanted to sell their highway network to balance their budget, the deal was a big lump sum in return for the rights to mount toll booths and the obligation to maintain and upgrade the network during 50 years.

      It turned out there were no American bidders. IIRC, 3 Europeans corporations were competing; they stated this was a very good and fair deal, with an estimated 12% net profit per year once the initial investments had been accounted for.

      OTOH, local folks were very upset that no US corporations were present and radio talk shows lines were full of irate callers wondering what the heck was up with that. Secretary of Transportation had to repeatedly explain that the State had made lots of efforts to get American investors on board but that he had received all sorts of variations of the same answer: “We can get better returns elsewhere. 20% + is what we’re looking for.”


      These clowns believed they could get better than 12% net profit per year for several decades, almost risk-free??

      Not really; but they were looking for 20%+ for that 12 months period.

      Oooh!…and what about the next 12 months period? 20%+ again? And so on and so forth?

      It cannot be surprising to witness such short-termism permeate the general culture when the money masters are living this way.

      1. Rex

        “The culture of short-termism comes directly from Wall Street and their monomaniacal obsession with quarterly results and guidance in between damnit, wam-bam-thank-you-mam…who’s next?”

        I totally agree. I almost posted, last night, about this pleasing Wall Street every quarter as the prime goal. I started noticing this at the silicon valley company where I worked in the early- to mid-90’s.

        Seems any company producing stuff should be looking at a business model focused at least two years out and making decisions to steer toward a good potential in that (rather near) future. Instead I saw constant pressure to never have bad numbers at the end of any quarter — do what ever we need to, be it smoke and mirrors, to reach this checkpoint 1 – 2 months away.

        Keeping Wall Street happy continuously runs counter to having a wisely guided company, and doing what is best for their real business and long-term survival.

  4. Jojo

    Looking to pay cheap really stands out in the Sales arena. A lot of smaller or scumbag companies only want to offer straight commissions (you get nothing pay from the company until you make a sale).

    Sure you may get 20-50% of the sale – IF you make a sale. But if you don’t, you could starve.

    And if you don’t produce a sale in some time period (typically 3-6 months), the company may just terminate the relationship, with them retaining any prospecting work and pipeline building that you have done including the data entry in a CRM system, while you wind up with nothing.

    This is why you generally walk away from straight commission pay deals, unless you are able to maintain exclusive control of the work you are doing in prospecting and pipeline building. That way, at least you will have something to negotiate with if the relationship falls apart.

  5. attempter

    Making that payroll was often excruciating. My employees were very happy with their paychecks, but the high costs were bleeding the company white. I cut wages by 20 percent in 2008 and partially restored them in 2009. Through all of that, I had no defections. My conclusion: I was paying more than I needed to.

    That’s stupid logic. The employees were happy, and they stayed during a temporary cut, which I assume had its reasons and provisional nature explained to them ahead of time.

    Based on that I’d draw the conclusion that this mini-Galt wannabe benefitted from the goodwill he’d accumulated by paying a good wage in the first place.

    But as we can see, he’s only trying to convince himself that he’s being a sap by paying a decent wage. We’ll see how well that works out during future tests of “loyalty”.

    (I’m not trying to belittle the struggles of a small business. But it sounds like there’s more going on here then just this employer’s financial constraints.)

    Here we again see how anti-human and rotten the whole concept of wage work is. What human being would want to live in such a cesspool of meanness, when there’s more than enough wealth produced for those who produce it to live good lives while working far less?

  6. Diego Méndez

    If someone among NC’s knowledgeable commenters hasn’t noticed it yet, I’ll say it out loud:

    A world where companies pay consistently higher salaries than their competitors is a contradictio in terminis.

    1. burnside

      On the contrary, Yves makes the point that attracting and holding strong performers – in her example, executive secretaries or IT professions – is a part of the compensation calculus.

      Businesses often take a position that a job is worth the salary cap listed at HR. When you’ve got a stellar performer, that view becomes as foolish as it is prevalent.

      1. Dave of Maryland

        Paying for first-class people is a great incentive for average joes to make themselves into first-class people, so they can get that salary for themselves. Generosity – and fairness – makes everyone better.

        1. CHRSB

          “Paying for first-class people is a great incentive for average joes to make themselves into first-class people, so they can get that salary for themselves.”

          Ah, hold out the carrot of hope-a-rope-dope that one day the slave might me the slave-owner and rule a plantation of his own.

    2. craazyman

      dood, somehow it works in the other direction.

      ratchet, ratchet and bingo, baby.

      -John E. Cash, CEO


      “E” is for easy. Gotta love my board of directors and compensation consultants. They’ve even persuaded me that I’m worth it.

      1. MichaelC

        Yikes. I think that’s Faustian business model vs a sharing the fruits of skilled labor equitably model.

        It does refute Diegos point, and if your business is looting it probably does make sense to pay, or agree to share more of the loot than your competitors. Maybe some industries shouldn’t be so egalitarian with their ‘workers’

  7. DownSouth

    Discussions like this offer up a reductio ad absurdum of classical economic theory.

    According to this theory, as Deidre McCloskey puts it in “The Secret Sins of Economics”: “Human beings are supposed to be calculating machines pursuing Prudence and Price and Profit and Property and Power—-‘P variables’.”

    While these cartoonlike cutouts of human existence may provide some insight into human behavior, the problem comes when people start believing they represent real persons, real living beings.

    Perhaps the best encapsulation I have ever seen of this was a postcard I once saw. It had a photo of some zebras like this one with the caption: “Why watch the world in black and white when you can see it in living color?”

  8. Jack Rip

    Another way to explain lowering pay and treating employees as replaceable parts is the following. In the last 30 years, management has become close to royalty. Managers, CEOs in particular, are better than we are; they are worth a lot of money; they can treat employees like garbage.

    Unions, therefore, are a form insurrection against the ruling royalty and have to be put down. Social security is resource that can be better used by the royalty than by the replaceable worker, therefore, royalty can confiscate its funds for the “better good.” Companies, always owned by royalty, are now citizens and entitled to same civic rights (ask the Supreme Court).

  9. Dan Duncan

    This post begins with a ridiculous, unfounded assumption and goes down from there…

    First on the ridiculous assumption: Yves writes, “most companies do not give a rat’s ass about employees.”

    This is just sophomoric. It’s uninspired, un-measurabable and un-falsifiable. Seriously, this is the type of opening line I would expect from a high school sophomore writing on labor relations.

    As for the descent into the rest of the analysis….

    Yves bakes in a Survivor Bias. She asserts “her suspicion” that companies which made the transition from start-up to long-lived ventures bridged the divide by establishing generous compensation packages. Yves is attempting to draw conclusions from only the readily available data, ensuring a biased conclusion.

    And she does all this in the same post where she writes: “And how we got here is conveniently omitted from this picture.” Yet Yves conveniently fails to those “who didn’t get there.”

    You cannot have this discussion (rationally) without also considering the Non-Survivors. Specifically, how many Non-Survivors failed to bridge the divide from start-up to long-lived venture while actually offering generous pay packages?

    Nowhere is this crucial question even contemplated in the analysis.

    Another huge problem with this discussion is with the the term “generous”. It is a loaded term that can mean whatever you want it to mean…

    Define “generous” first and then go about exploring the underlying hypothesis: Generous pay packages are important to the survival of start-up businesses.

    But please, also include some room for the null-hypothesis. Don’t you see how inadequate and foolish it is to draw any conclusion about this matter, when lurking in the file drawer might be data to the effect that “many Non-Survivors actually offered generous pay packages”?

    Of course, this is hard work. You have to access data that’s not readily accessible. But until you do, you’re just entertaining metaphysical speculations…and dull ones at that…

    …like a really uninspired, un-eloquent, corporate version of Hamlet: “To offer a generous pay package or not to offer a generous pay package? That is the question.”

    1. DownSouth


      Somehow you managed to completely miss America’s transition from a manufacturing and merchant oligarchy to a rentier oligarchy. The evidence of this is everywhere, and books like Jacob S. Hacker’s The Great Risk Shift go to great lengths to document the devastating consequences of this change on workers.

      You may elect to turn a blind eye to this, but it doesn’t alter the fact that the boats of 90% of Americans are either stagnant or sinking, while a few luxury yachts are riding a tidal wave into the stratosphere.

      1. Francois T

        Yup! Another couple of decades like that and Al-Jazeera will be reporting popular manifestations in DC.

        Tahrir-on-the Potomac…how poetic is that?

        Make no mistake Dan Duncan: At the rate our Constitution and laws are being subverted, (Read Glenn Greenwald for much more on that) combined with the shift to a rentier oligarchy, it’s going to get much uglier before it gets better…assuming it does.

        We can chicane as much as you want on the meaning of “generous” and all that, but let’s not sodomize the flies. There are much bigger issues at stake here.

    2. Ms Xeno

      @Dan Duncan

      I picture you as this fatter, bald version of Larry “the porcine Merlin” Summers. Sitting at a Starbucks, typing away on your laptop. A right-wing Republican, of course, the kind of guy who listens to Limbaugh and always agrees with the WSJ editorial page. The kind of guy who never saw a corporation he didn’t like, and who never saw an employee who had been mistreated. Just so long he’s not the one who has to get up every morning and go to work for them…..

    3. KenG

      “This post begins with a ridiculous, unfounded assumption and goes down from there…

      First on the ridiculous assumption: Yves writes, “most companies do not give a rat’s ass about employees.””

      I think it’s dead nuts on, and not only do most (large) companies not care about employees, they don’t care about customers, either. They care about hitting their profit numbers, and will only do whatever they have to do to meet those targets. They train their customer-facing employees to read a script when answering support calls, to be extremely polite, all while they’re telling you to fly a kite. They act like they care, but to many large companies, employees are just like any other resource, they can be replaced.

      Defenders of companies that employ this attitude say that this is their job, to maximize profits. That is a fallacy. The job of management is to do what is best for the company, and unless the company was designed to only last a few more quarters, doing best means making decisions that will allow the company to sustain a profitable and growing business. Treating employees like bolts in a machine that can be screwed when necessary does not build a sustainable company. Nor does providing as little value as possible for as much money that can be extracted from customers, who will leave at the first opportunity (see ATT -> Verizon).

      I started and ran a few tech companies (one successful exit, two not so), and whenever we hired somebody, we asked them what they wanted to get paid. If we couldn’t meet their expectations, we wouldn’t make an offer. It’s not good to hire somebody who is unhappy, they are not likely to do well.

      The management philosophy that is practiced at most big companies is based on the beliefs that everything can be quantified, and the whole = the sum of the parts. This is why CFOs who become CEOs usually fail, unless they are running a monopoly.

  10. Chief11

    As the owner of a small business for over 20 years, experience tells me that the dilemma of proper compensation along with the need for productivity, can be among the most difficult with which business owners must deal.

    One simple, but very difficult approach to implement, is that of ‘open book management’ combined with ‘high involvement planning’, as outlined in Jack Stack’s book, “The Great Game of Business”.

    I would argue that it provides both business insight and dignity in compensation issues for employees, and it offers productivity gains for employers.

    Our employees make budgets for their departments, and profit from the bonus dollars they generate. Yes, they stay. Yes, they are paid higher than our competitors. Yes, they create their own job security. Yes, it is a difficult program.

  11. Christian

    I do not run a company, but this is a topic I try to teach to HS students, so I have a few thoughts. The problem notd in the original article seems to be the issue that the economists that discus “efficiency wages” (Akerlof/Yellen/Stiglitz) or “internal labor markets of firms” (Alchian/Demsetz) explain. In addition, most of the political economy literature on Europe and Japan (e.g, Fritz Scharpf; Peter Swenson, Charles Sabel, etc.) discusses the bargain between management/captial and labor in these terms. On one hand, we pay more than the marginal wage to reduce transaction costs (finding replacement workers, interruptions) and to foster the develop of firm-specific human capital. There is also a lot in labor/economic histories of those countries about how indutrial relation institutions developed.

    In the United States, the acrimonious relationship between capital/management and labor leads to situations where everyone pursues a short-term, rational self-interest to the detriment of long-term performance for both. I would note also that certain types of industries have a greater interest as a long-term going concern than others, so perhaps this dynamic applies more to big firms than small.
    I make this point to my students that only one original firm (GE) of the DJIA is still listed, while most of the comparable firms in Western Europe and Japan are still there.

    I think a main difference of seeing employees as “costs” vs. “productive assets” is that in the US we have not encouraged consistently the development of skills and so labor is reduced to a indifferentiable commodity as you suggest, at least for those not finance, marketing, and management. There is one model, it seems, where managers appreciate that their workers produce value and their role is to enhance their performance by acting as an auxilliary to them. The other “master of the universe” model embodied in most CEO memoirs, is where the manager sees themselves as the creator of value and employees are costs to be economized, i.e., a good CEO is someone who can fire people.

    Once again, this may refer to the dynamic that Thorstein Veblen described nearly a century ago about the transition of managers from “engineers” — those whose authority was based on a knowledge of the firm’s production process to “businessmen” — mostly financial and marketing types — whose goal was to allocate the distribution profits, but did not enhance the productivity of the firm’s basic business.

    1. JTFaraday

      In other words, the rise of business schools over the past 30-40 years and the rise of finance within business schools over the past 20 years has progressively destroyed American business?

      “I think a main difference of seeing employees as “costs” vs. “productive assets” is that in the US we have not encouraged consistently the development of skills and so labor is reduced to a indifferentiable commodity as you suggest, at least for those not finance, marketing, and management”

      I disagree that the problem with employee pay is that non-managerial employees fail to develop their skills over the course of their careers. If you dan’t have a business degree, you absolutely have to develop your skills and trade on those. If you are a tech, meanwhile, and you don’t constantly upgrade your skills, you’ll simply be out of a job.

      I think it’s more the case that the formal institutional structures that business schools represent enable the managerial class–and especially the financial managerial class– to create and circulate an ideology that maintains the fiction that the managerial class is the sole creator of value.

      Just look at the managerial consultantcy racket–have the younger people who get recruited worked even a single day in their lives? Maybe a few, but too much. Frequently they are just trading on their educational credential. (Yes, some of them may be elite liberal arts grads, but that doesn’t alter the way the firm itself is viewed as offering value enhancing business expertise).

      This idea that the managerial class is the sole creator of value is, in turn, supported by the outreach practices of business schools in terms of developing relationships with industry and in placing an emphasis on recruiting that is simply not found in other schools at the university, except maybe the law school (or medical internships).

      In return, business schools have rapidly become real players in the traditional research university, with their faculty among the highest paid and with ties to upper administration, populated by (what else?) business managers, and these in turn have ties with the wealthy corporate, finance, and real estate development types that people university boards.

      In other words, it is a whole culture unto itself.

      Of course, this clubby glad handing doesn’t necessarily extend itself to mid level managers who are, I think, particularly pressured between demands from the top, including demands to wring every ounce out of their departments, and those same put upon employees.

      But, it works pretty well towards the top. In fact, the biggest part of the problem may well be that people trained by business schools, benefitting from that culture, trading on an ideology, and milking the services of compensation consultants are failing to develop throughout their careers. Because–they don’t have to!

      Thus there is, at the top, both a leadership gap when it comes expressly to “creating value,” alongside extractive practices that are supported by the entire business culture.

      1. readerOfTeaLeaves

        I think it’s more the case that the formal institutional structures that business schools represent enable the managerial class–and especially the financial managerial class– to create and circulate an ideology that maintains the fiction that the managerial class is the sole creator of value.

  12. ComradeAnon

    Employees are usually more “loyal” to fellow employees than their employer. Did the business owner tell the employees that he would at least try to raise salaries back to earlier levels? I hate looking for another job. I’d be willing to stick it out through a company wide pay cut if I was told that it would probably be a temporary thing.

  13. LeeAnne

    It isn’t any more difficult than pricing your product or service; different inputs, same output. You do it right or go out of business. Unless the laws are unjust. Under current unjust laws, you may be required to screw employees or have agents do it in order to remain competitive.

    You do it subject to the rules and laws and the protections that go with it that you have also had a hand in creating if ruled voluntarily by a democracy; or you do it subject to gangsters where rules are dictated to you. Ambiguity in the law belongs in the latter category.

  14. Mickey Marzick in Akron, Ohio

    Focus on wages/benefits is only part of the equation. There are more intangible aspects of work that are difficult to measure despite the best efforts of the latest crop of project managers with MBAs [More Bullshit Again?].

    This broader issue takes me back to an article published 30 years ago in the Harvard Business Review: “Managing Our Way to Economic Decline.” In it the authors laid out a number of factors “employed” by MANAGEMENT to bring about economic decline in companies as well as in this country at large. It was a classic and became my “benchmark” – a litmus test – with which to acquire a perspective and/or evaluate what was transpiring in this country. Read it and judge for yourself.

    30 years later… le plus ca change, le plus c’est la meme chose.

    But as gainful employment becomes more scarce and unemployment/underemployment remains stuck at ever higher levels with a return to the pre-crisis [5.4% Dec 07] rate not likely for several years, if ever, [See Bernanke’s recent testimony on Feb 9th on the nexus between recovery and employment] it becomes obvious that the DECOMMODIFICATION of LABOR is of paramount importance.

    Otherwise, millions of human beings will be condemned to a life that is nasty, brutish, and short because their labor power is increasingly superfluous. Unable to find work they are free to starve. And I’m not talking about “emerging markets” in the former 3rd World but much closer to home! For implicit in AUSTERITY is the “NO WORK NO EAT” iron fist… Is that where we want to go?

  15. Jim

    One of the nastiest assumptions in this whole debate is that employees are motivated exclusively by money. Yves gives some other alternatives (stability, social atmosphere, etc), and there are indeed plenty of factors that motivate employees besides just compensation. So to frame the debate in (almost always) the terms of compensation is to engage in a vicious reductionism, where the binary alternatives are for the company to always gain at the expense of the employee and vice versa.

    I work for a company that (thank God!) gets the importance of having a culture that respects employees, pays decently (but by no means at top levels), tries to hire colleagues who “get” the culture, offers comprehensive benefits (medical, dental, 401K, life) to all employees, and has a “take as much as you want” vacation policy besides (and with no guilt if you do take vacation). The office atmosphere is relaxed and cordial, and you never have managers hanging over you to get work done. It’s also a private company without the demand facing public companies to increase profit inexorably year after year. Because of the company’s culture I would prefer to never leave. I had always thought that I would never be able to work for an American company, after having worked in Germany for three years.

    Culture is tremendously important and doesn’t reduce to dollar and cents, and clever businesses find ways of making employees feel valuable beyond just paying them more. In fact, I suspect that the practice of simplistically viewing pay raises as the only corrective exacerbates the problem that pay raises purport to correct (i.e., employee turnover, etc). Such a practice simply incentivizes employees to look only at their own bottom line as a measure of their job satisfaction and to fully discount other cultural factors that provide satisfaction.

  16. grayslady

    Unless employees have changed a great deal since I was active in the corporate world, money isn’t the only aspect of work that matters to employees. In a large corporation, a boss whose actions make it clear that her goal is to see you succeed, is worth a lot more than immediate salary. Being treated with dignity, respect, and as a normal human being with traditional failings is also worth a lot more than just the salary.

    When I ran a small manufacturing company, my non-union staff knew that they were the kings and queens of their domains; they were allowed to be individual entrepreneurs within the overall goals of the company. There was also no “sick days” policy, so employees knew that they could stay home until they were well, come in for half-days–whatever worked for them. They were even allowed to call in and say they needed a “mental health” day, and no one abused the policy because they liked the benefit. When people decided to move on for more money, I sincerely congratulated them and simply looked at their departure as part of a network of well-trained, friendly allies should I ever need to contact them in future. As long as the boss remembers what it was like to be a bag-carrier, and treats employees accordingly, employees are likely to respond with their best efforts, even if they think they might want to move on at some point.

  17. Hungus Caton

    Democracy in the workplace? No fucking way. The IT field in particular can be like a custom slaughtering operation – companies hire, fire and churn relentlessly. It’s all about the bottom line for big Inc. Look- it also works because the office sociopaths know if they tow the Corporate line, they too can rise up and avoid the “devil take the hindmost” of wage slavery. It’s another symptom – No homes, no jobs, no peace, no mercy – Rome Falls!

    1. kievite

      The IT field in particular can be like a custom slaughtering operation… the office sociopaths know if they tow the Corporate line, they too can rise up and avoid the “devil take the hindmost” of wage slavery. It’s another symptom – No homes, no jobs, no peace, no mercy – Rome Falls!

      “I feel your pain” ;-). It’s true that downsizing and outsourcing made IT pretty frustrating environment. But still in many respects it does provide a better working environment then other corporate departments.

      It’s also all true about widespread incompetence and sociopathy in mid and high management ranks. One problem with IT managers is that if you are promoted to management you lose your technical competence very quickly, commonly within 5-7 years. The other is that managing IT projects with their unrealistic deadlines is the work where ruthless sociopaths unfortunately have some edge.

      At the same time rank-and-file workers are no innocent victims. Nopotism shines, “protected minorities” are a probem and incomptence among rank-and-file is almost as widespread as among middle managers. Or slightly less. Marxism-style idealization of rank-and file IT personnel unfortunatly does not provide a realistic picture :-).

      Like in any complex ecosystem parasites exists on all levels, althout the higher the level more parasitism you can encounter: there is simply more opportunity for it. And among mid-level IT managers often there are some decent people.

      As for rank-and-file staff for various reasons many of them are simply incompetent. IT field requires specific talent and supply of such people is limited. Probably more limited then supply of literary talent. And we know how many wannabe writers exists. My feel is that in many large corporations IT departments only 20-40% of staff are competent despite layoffs. There is also a problem with “protected minorities” in IT. For example, I feel that percentage of sociopathic managers among female managers is substantially higher then among males. And they are pretty skilled in using their gender as a bulletproof west.

  18. john

    I read the article when it came out and had the same first reaction, but because I know Paul Downs my second thoughts ran somewhat differently. He is very good at what he does, in fact the best. His people are equally good within the field.

    What I suspect you are seeing as a cynicism about workers is in fact an almost despairing resignation about the realities of declining margins in an craft notorious for poor margins. Millworkers are the last vestige of artisan production in modern construction and Paul’s artisans are closer to the pure art of hand made furniture than most.

    These are smart and capable people who chose to make things rather than make money on the bet that if they could make beautiful things they might make a decent wage. All the camaraderie and familial bonds of a good small business are there, but Paul was asked to write something for an economics column, and like him, when I look at my business through the lens of economics and compare it to the organized and legalized theft of the corporate world, it is easy to sound cynical: you really like your people, you’re pretty sure they like you, but your the boss so who really knows and at the end of the week you have to sign all those damned checks. And all of this in an environment where our political and economic elite think it would be a better idea for all those jobs to be in China.

  19. Sauron

    I give a rat’s about my employer. I used to be different. Loyal employee; giving it my all; working 12 hour days, even on weekends; volunteering for some very demanding jobs that no one else would do.

    Then I realized it didn’t count for shit with the organization. Now I do enough to maintain a modicum of professional pride and no more. It hasn’t made one iota of difference which me showed up for work.

    I save my drive for personal pursuits and family now.

  20. CHRSB

    When are you all going to finally understand that capitalism only serves the interests of the owners of capital? You are telling yourself a lie if you say that you are a capitalist but do not have people who you command as labor. Labor is the breath or capital, for without the labor, a lump of ore would be useless.

    The writer has an epiphany; “I was paying more than I needed to.” So, is he paying them what they are worth? Is he paying them based on effort, quality, or production? Or paying them based on ho much profit he makes? Shouldn’t one’s value of labor be independant of profit?

    No matter how good you treat your workers they are still YOUR workers. Do you hear the hint of ownership in that statement? This push and pull of labor was evident during slavery and is evident now.

    I love your blog Yves becuase I feel, that with a nudge, you will slide easily into libertarian socialism.

    1. Michael Gersh

      CHRSB – You have it backward when you say that labor price should be independent of profit. The only reason to pay anybody is BECAUSE of profit. No profit, no job, no wages of any kind for anybody. And libertarian socialism? That’s a new one, there has never been a socialism that produced liberty. Won’t keep you from dreaming about it, I suppose. Rich fantasy life, the triumph of ideas over experience.

      1. DownSouth

        Funny how the bankers don’t need any profits to pay themselves massive compensation packages, either that or the “profits” are manufactured out of thin air through accounting tricks or outright fraud.

      2. CHRSB

        libertarian socialism is another term for Anarchism. The reason it works is that there is no STATE. As in state socialism (communism) or state capitalism (fascism).

        And wages are independent of profit. Have you ever heard of non-profit organizations?

        1. DownSouth


          When Michael says “there has never been a socialism that produced liberty,” he acknowledges the coercive element inherent in socialism. However, I suspect you would be hard pressed to get him to admit that “there has never been a capitalism that produced liberty.”

          Neither political system has ever produced liberty for mankind. However, both systems have produced liberty for some men. For instance, capitalism as it is currently practiced in the United States certainly liberates the corporate honchos, even though it enslaves multitudes.

          Necessity is “the whip” that capitalism uses to coerce. “For the liberation of the laboureres in the initial stages of the Industrial Revolution,” Hannah Arendt explains, “had liberated them from their masters only to put them under a stronger taskmaster, their daily needs and wants, the force, in other words with which necessity drives and compels men and which is more compelling than violence.”

          Capitalist ideologues deny the coercive power of necessity. The only coercive power they acknowledge is violence. But, as Arendt goes on to explain, necessity and violence have historically been joined at the hip:

          All rulership has its original and its most legitimate source in man’s wish to emancipate himself from life’s necessity, and men achieved such liberation by means of violence, by forcing others to bear the burden of life for them. This was the core of slavery.

  21. dave

    It all depends on the business and what you are doing. Skilled knowledge workers tend to pay for themselves because single decisions can make lots and lots of money. So it doesn’t hurt to try and pay them well. Maybe one day some super smart AI will replace them, but not today.

    However, lots of skilled manual labor has been replaced by machines, and these people really don’t have a lot of marginal product anymore. If 300 people apply for one position at Wal Mart, can you really blame them for paying a low wage. We have a surplus of unskilled labor in the developed world.

    1. CHRSB

      “If 300 people apply for one position at Wal Mart, can you really blame them for paying a low wage.”

      Yes, I can blame them. Why is it the workers fault that there are not enough jobs at high enough pay? Why is it the workers fault that they have no choice to work for themselves? What a sick kow tow to the corpratists. Poor Wal Mart with $3.6 Billion profit in 2010 can’t pay its lowest wage employees any more money.

      1. dave

        “Why is it the workers fault that there are not enough jobs at high enough pay?”

        There are no jobs with high pay for them because their marginal productivity of labor is low. Their marginal productivity of labor is the result of many factors over the course of their life, some of which they had little control over, but most of which they had a great deal of control over.

        1. DownSouth

          It was all so painfully obvious to Jurgis! It was so incomprehensible how a man could fail to see it!… The whole balance of what the people produced went to heap up the fortunes of these capitalists, to heap, and heap again, and yet again—-and that in spite of the fact that they, and every one about them, lived in unthinkable luxury! And was it not plain that if the people cut off the share of those who merely “owned,” the share of those who worked would be much greater? That was as plain as two and two makes four; and it was the whole of it, absolutely the whole of it; and yet there were people who could not see it, who would argue about everything else in the world… They could not see that “economical” management by masters meant simply that they, the people, were worked harder and ground closer and paid less! They were wage-earners and servants, at the mercy of exploiters whose one thought was to get as much out of them as possible; and they were taking an interest in the process, were anxious lest it should not be done thoroughly enough! Was it not honestly a trial to listen to an argument such as that? ….

          It was enough to make a mule laugh, to hear arguments like that; and yet it was no laughing matter, as you found out—-for how many millions of such poor deluded wretches there were, whose lives had been so stunted by Capitalism that they no longer knew what freedom was! And they really thought that it was “individualism” for tens of thousands of them to heard together and obey the orders of a steel magnate, and produce hundreds of millions of dollars of wealth for him, and then let him give them libraries…
          ▬ Upton Sinclair, The Jungle

        2. CHRSB

          Oh Dave, How can one control their “marginal productivity of labor” if they cannot get a job from the producers? Newsspeak!

          You talk in the grandiose terms of the economist, but it means very little. And you are speaking to an ex-economist.

        3. DownSouth

          The middle classes were proud that their property, unlike that of the inheritances of the leisured classes, sprang from character, industry, continence and thrift; and they were therefore quite certain that any one endowed with similar virtues could equal the competence which they enjoyed. Failure to achieve such a competence was in itself proof of a lack of virtue. This middle-class creed sprang so naturally from the circumstances of middle-class life that it ought perhaps to be regarded as an illusion rather than a pretension. But when it is maintained in defiance of all the facts of an industrial civilization, which reveal how insignificant are the factors of virtuous thrift and industry beside the factor of the disproportion in economic power in the creation of economic inequality, the element of honest illusion is transmuted into dishonest pretension.
          ▬Reinhold Niebuhr, Moral Man and Immoral Society

          1. dave

            I don’t know what country your living in man. Its really really easy to become middle class. Its amazing to me that people who have it so good complain how tough it is to get ahead, when anyone I’ve ever met who put the slightest bit of effort into life has managed to achieve a standard of living higher then that of any feudal king.

            Christ, if your posting here some of you must have some education. Was it that hard to study in school? Was it that hard to work a 9-5 job? Was it that hard to learn some basic job skills? 90% of the population didn’t grow up in some crack house. They grew up in an average middle class household where they never had to worry about food, shelter, or any other necessities. They were required to do no work and provided with free schooling for 18 years. Is it really that hard to become middle class after all that? You don’t need to be the kid of an investment banker to get a decent job with health insurance and a house of your own. I did it, like millions of others. I grew up surrounded by people with the same lower middle class working family background, they had no reason to end up losers. But a lot of them did. Some didn’t want to study, some didn’t want to work hard, some weren’t practical and thought American Idol was a career path. I saw the choices these people made with my own eyes. I don’t feel sorry for any of them. They made choices, they live with them. If the result of those choices is the only job they can get is at Wal Mart, don’t expect me to shed a tear.

            There are people in shitty third world countries like China that really can’t get ahead in spite of massive effort, because they are overcrowded and have little capital. I feel sorry for those people. But I sure as hell don’t have sympathy for most people growing up in America, its just too fucking easy and too much of a disappointment when they squander advantages away.

          2. DownSouth

            Jurgis had come there, and thought he was going to make himself useful, and rise and become a skilled man, but he would soon find out his error—-for nobody rose in Packingtown by doing good work. You could lay that down for a rule—-if you met a man who was rising in Packingtown, you met a knave. That man who had been sent to Jurgis’s father by the boss, he would rise; the man who told tales and spied upon his fellows would rise; but the man who minded his own business and did his work—-why, they would “speed him up” till they had worn him out, and then they would throw him into the gutter.
            ▬ Upton Sinclair, The Jungle

            It had come to his [Squealer’s] knowledge, he said, that a foolish and wicked rumor had been circulated at the time of Boxer’s removal. Some of the animals had noticed that the van which took Boxer away was marked “Horse Slaughterer,” and had actually jumped to the conclusion that Boxer was being sent to the knacker’s. It was almost unbelievable, said Squeraler, that any animal could be so stupid. Surely, he cried indignantly, whisking his tail and skipping from side to side, surely they knew their beloved Leader, Comrade Napoleon, better than that? But the explanation was really very simple. The van had previously been the property of the knacker, and had been bought by the veterinary surgeon, who had not yet painted the old name out. That was how the mistake had arisen.

            The animals were enormously relieved to hear this. And when Squealer went on to give further graphic details of Boxer’s deathbed, the admirable care he had received, and the expensive medicines for which Napoleon had paid without a though as to the cost, their last doubts disappeared and the sorrow that they felt for their comrade’s death was tempered by the thought that at least he had died happy.

            Napoleon himself appeared at the meeting on the following Sunday morning and pronounced a short oration in Boxer’s honour. It had not been possible, he said, to bring back their lamented comrade’s remains for internment on the farm, but he had ordered a large wreath to be made from the laurels in the farmhouse garden and sent down to be placed on Boxer’s grave. And in a few days’ time the pigs intended to hold a memorial banquet in Boxer’s honour. Napoleon ended his speech with a reminder of Boxer’s two favourite maxims, “I will work harder” and “Comrade Napoleon is always right”—-maxims, he said, which every animal would do well to adopt as his own.
            ▬George Orwell, Animal Farm

          3. dave

            Alright, you keep your quotes from fiction to determine how the world works. And I’ll keep my entire life experience.

            Its funny how you are an ardent leftist but most of your quotes come from a book about how a leftist government turned to tyranny and oppression.

        4. Ms Xeno

          dave said:”Their marginal productivity of labor is the result of many factors over the course of their life, some of which they had little control over, but most of which they had a great deal of control over.”

          You’re so full of shit, it’s hard to know where to begin to refute this vile garbage.

          However, the previous commenter did a pretty good job with that quote from Upton Sinclair, the problem is that it won’t make the least impression on the likes of you, simply because you’re one of those “people who could not see it, who would argue about everything else in the world”.

        5. anon2

          dave said: “They made choices, they live with them. If the result of those choices is the only job they can get is at Wal Mart, don’t expect me to shed a tear.”

          I’ve often wondered why many poor people seem to despise the middle class even more than they despise the rich. Now, I think I’m beginning to understand it better.

          Thanks Dave, for helping to make this clear.

          1. dave

            Why would I care if they despise me? Most of the people I’m talking about already despised me growing up. The people in my peer group who grew up to be the townie losers persecuted those that did well in school or achieved anything of meaning. The jealousy and hate in their hearts for those that put their own failings in stark light was there from a young age.

          2. anon2

            Dave said: “Most of the people I’m talking about already despised me growing up.”

            But you’re such a likable guy, Dave. I can’t imagine why anyone would despise you.

          3. anon2

            Dave said: “You’d probably despise the people I’m talking about too, if you met them.”

            My Dad was a truck driver and I’ve probably had more hardship then a lot of you. Making it in America just isn’t as hard as you make it out to be.”

            You could be right, Dave, it’s possible I would dislike the people you’re talking about if I met them. And you and I might get along, if we met in a sports bar. I’d buy you a beer. Your Dad was a truck driver, mine was a janitor when he wasn’t unemployed. Neither of us comes from a privileged background, and I admire you for working hard to achieve something in life. It sounds like you’ve earned it.

            We just have a different way of looking at things. We could agree to disagree, although I would try to change your mind.

            What we’re really discussing here is what kind of society we want to live in. It’s not about personal feelings.

            For instance, say we’re in a sports bar, having a beer. (That I paid for, remember.) Take that homeless guy on the park bench outside the window. I look at him and think to myself “I’m lucky to be here, but if things had been different I could be that guy out there”. But it sounds to me like you look at the same homeless guy and see a pathetic loser and you tell me it’s his fault.

            Maybe. But wait a minute, not so fast. What if his Mom was an alcoholic. What if his Dad beat him or abused him. What if came from a broken home and so he joined the army at age 18 to escape from a terrible domestic life. Got sent to Vietnam, or Iraq, and after three tours of combat duty, he came home with post traumatic stress syndrome. So his girlfriend left him and started drinking and then he lost his job or couldn’t find a job due to his hands trembling from PTSD, and so that’s why he ended up homeless. And that’s why we’re inside this nice sports bar, drinking and watching the ball game, while he’s outside shivering on a park bench.

            How can you be so sure that the homeless guy’s misfortune is his own fault and that it’s not due to circumstances beyond his control.

            Do you still say it’s his own fault?

            While you’re thinking about it, I’ll buy you another beer.

          4. dave

            Do some people get a really bad lot in life, sure. There are people in this country that grow up in horrible conditions and I feel sorry for them. But I don’t think that makes up a majority of the underclass/working class. Like I said, most of them seem to have grown up in the same neighborhood as me, they just underachieved and grew up to be rather mediocre. I’ve met lots of people in shitty jobs that didn’t grow up in a crack house, they were just kind of bumish. Now they want something from me?

            I dunno, I’d probably have a lot more compassion if:
            A) I didn’t have such a huge portion of my income taken by the government supposedly in these peoples benefit.
            B) Someone actually asked me instead of telling me its part of “my fair share” and just taking it involuntarily through taxes.

            I’m pretty generous with money. I tip very well. I give Christmas gifts to most of the people who serve me frequently (doorman, maid, etc). I don’t mind picking up the tab. If I meet a bum on the street that I don’t immediately suspect will buy booze I sometimes give them something. And while I do alright for myself, I’m definitely not making IB money, I have a budget and this kind of generosity matters as a % of income.

            But I’m the one giving here, and I have a pretty good handle on both where its going and not so much that it bankrupts me. That isn’t the case with taxes. They take what they want, even if it threatens my standard of living, and they give it to people and purposes I don’t approve of. Let me give a simple example of what I’m saying.

            I was in the hospital a year or so ago, was very sick. Had to wait to get a bed for hours, eventually was sat next to a loud drunk homeless bum. From his conversation with the nurses he was something of a regular, drank himself near death every few weeks. He was abusive to the nurses and made the entire ER uncomfortable. Some might consider this harsh or emotionless, but I really wish that guy would die in a gutter somewhere. He’s worthless trash. Whatever difficulties he may have had he looked 40 or 50, by that point in your life you need to fucking have it together to some degree. I don’t want my tax dollars going to pay for him through medicare, medicaid, or the hospital overhead. I have no empathy for the guy. I’m not a Christian, I don’t think all life has value, I just wish he would die and get out of everyone’s way.

          5. skippy

            @Dave…your misery has spoken to my attitude, whence your pain becomes to great, give me a ping. I have dispatched so many in the name of stability and extraction, giving you the tools and means to achieve your goals, that one more will not sully my dark past.

            Skippy…at you service.

        6. A.Lizard

          You sound like one of those people the old saying “born on third base, thought he hit a triple” was written to cover. Enjoy your gated community and your trust fund while they last.

          1. dave

            My Dad was a truck driver and I’ve probably had more hardship then a lot of you. Making it in America just isn’t as hard as you make it out to be.

          2. econimus

            Well A.Lizard, I know people like this too…they blame everyone but themselves for where they are in life. And Dave it right. It really isn’t that hard if you are dedicated, keep up with change, and get some (any) education. I didn’t read in his posts that he despised the “middle class” or the “poor”, just certain personality types. We all know them. So lay off. Unless, of course, he’s hitting a little close to home…

      2. econimus

        The answer to your question is really easy, but hard for some people to get: certain jobs are only worth a certain amount of pay. Period. That level is driven by the market. That’s really it. Don’t blame Wal-Mart. Blame the people that shop there. Personally I never do because I hate their policies, politics and what they do to the surrounding economy. So do you shop there?

        1. DownSouth

          econimus said: “…certain jobs are only worth a certain amount of pay. Period. That level is driven by the market.”

          The fact is…that economists continue to anthropomorphize property, speaking of land and capital as if they were embodiments of will and energy who would not perform their tasks if “they” (not their owners) were not motivated or rewarded by income. In this way, “land, labor, and capital” are identified as the “factors of production,” thereby tacitly eliding the crucial social difference between labor and property.

          It is in this manner that economics spreads its ideological veil over capitalism, shielding from inspection its regimelike character and allowing us to see instead a depoliticized and desocialized “price system.” The belief-systems by which we perceive capitalism in this manner present for our analysis very different kinds of problems form those that would strike us if we perceived it as otherwise. By screening out all aspects of domination and acquiescence, as well as those of affect and trust, it encourages us to understand capitalism as fundamentally “economic”—-not social or political—-in nature.
          ▬Robert L. Heilbroner, Behind the Veil of Economics

          1. econimus

            Well a book on philosophy never describes the read world now, does it? You can quote all you want, and theorize all you want too, but my statement stands as real-world fact. A job is only worth a certain amount of money. Your quote reads as if it could have been lifted from Marx, and we all know how that philosophy worked out.

            What a job is worth also depends on the local conditions and demand. For example, senior software engineers here in my area make around $50. In eastern europe $15 TO $20. Maids around here are not paid very well. In Mexico they make a better living than teachers do.

            There is no “veil” here, just facts. You may not like them, or your political philosophy may be different, but this is the way it is under ALL systems.

  22. Ray L Phenicie

    I wish I could spend more time with this subject.
    I would like to see a work environment where pay was commensurate with skills and ability balance with needs and wishes.
    Above that though for me,and several others I know, the desire is to work for a company that has a real connection with the society that is surrounding us.
    A company that refused to take a stand on social issues is a company that is refusing to be involved and a company that therefor cannot be respected.
    An auto company that is denial about global warming is not a company that I can respect and there for would not really respect me.
    Entities in the health care industry that ignore the high cost of health care that result directly from environmental toxicity are entities that deserve to be placed on the sidetrack.

  23. Doc Holiday

    Short-Sighted Shrimp & Carcinogens Link

    Rebuilding an Appetite for Gulf Seafood after Deepwater Horizon

    See: Some Gulf residents take issue with these consumptions assumptions, pointing out, for example, that “four shrimp don’t even make a Po’boy.

    ==> Go ahead, pig down as much tained seafood as yah can, you dumb retarded hillbiillies …

    Also taste this: Since we know that microbes ingest oil, and now plankton apparently do too, one must ask–how long until we start finding Deepwater Horizon hydrocarbons in our secondary and tertiary consumers??

  24. Ron

    From what I’ve seen working in a major corporation is that loyaty isn’t rewarded. I’ve seen managers who, in one year create great success in solving problems and starting new profitable paths, but in the second year fired for not doing it twice. “What have you done for us LATELY” seems to be the law.

    I have seen managers and workers, become guerrilla snipers within a company in order to damage it. They do so over some imagined or real slight, more times real I have noticed. I can’t calculate the damage from such rebellion but it pops up every week.

    The Holy Grail for our operation is the monthly budget. When the last week of the month arrives, it seems any decision that can be made to meet or beat the the budget requirments is allowed. The long term damage to the customer, employee or company is never really taken into account as the only reward (which is not being screamed at or threats to be fired) is to come in under budget.

    Short term profit, short term everything, from my viewpoint, never did pay off.

    1. kievite

      “Short term profit, short term everything, from my viewpoint, never did pay off.”

      From my point too, but contrary to our opinions corporations continue to exist and remain profitable. Some even manage to produce decent products. It always amaze me how mismanaged some well regarded and profitable large corporations are.

  25. Max424

    YS: “…most companies do not give a rat’s ass about employees.”

    SHOCK…and giggle. You’re the best, you really are. That sums it up too.

    YS: “One firm I know was very tolerant of staff maintaining weird hours…it attracted people of a Bohemian temperament…”

    This Bohemian worked three/thirteens — for 15 years. Loved it. Worked hard, worked perfect. Appreciated being able to live life; four days per week.

    Then my small company was bought out by Fidelity; and that was the end of that. As they say.

  26. 1whoknu

    Ah, where to start. As other commenters have pointed out it’s not always about the money. I had a job for a few weeks that paid me more than I ever had made before. I wanted that job so badly just for the salary. Then when I started working there I found that they believed working month after month, year after year until 9 o’clock at night was the norm. Everyone hated the hours. I stayed around long enough to figure out that no one was interested in figuring out how to fix it, then I left. I then took a job that was for a salary that was a lot less but offered a regular schedule with challenging work. I stayed because it happened to work for me and my situation at the time.

    Long ago I worked in a pure production job. We were paid by the piece. We could set our own salary if we worked hard enough. Some made a decent wage, some struggled. Most did okay with an average of twice the minimum wage. People left all the time because management was really not involved in day to day production. We were given work to do, edicts about how much needed to be done, and then left alone. Breaks were spent complaining about the rules, management, each other, whatever, but no one complained about the pay because they had control over that.

    Just a note about those in the story who did not leave even though they had their salary cut… Well, it happened to me recently and I had no choice but to stay because a lower salary was better than no salary so the statement

    ” I cut wages by 20 percent in 2008 and partially restored them in 2009. Through all of that, I had no defections. My conclusion: I was paying more than I needed to. ”

    If I remember correctly, 2008 was a pretty bad year for switching jobs.

  27. A.Lizard

    The old saying “‘A’ people hire ‘A’ people, ‘B’ people hire ‘C’ people.” is relevant here. To which I’d add “and ‘C’ people don’t know the difference”.

    “A” people will not work for “B” or “C” wage levels and treatment for longer than it takes to find another job and are likely to make a very big hole in one’s company when they are driven out.

  28. econimus

    This is an interesting point, and my specialty is going from start-up to a company with 50 to 100M in revenues. Then I leave not because of pay, but because I detest what companies have to become once they are above that mark…bureaucracy, silos, etc. It’s inevitable. Full disclosure I’m a C-level guy.

    There are three legs to the stool: your customers, your investors/stockholders, and your employees. Bad people at my level forget the last one, or even worse patronize people in order to make them believe that they are important when behind the scenes they aren’t. And believe me people know. It is absolutely stupid to think that a revolving door isn’t expensive, and it’s also stupid to think that you “buy” loyalty. Salary can only become a non-factor in everything. By that I mean you must pay slightly above market rates, always, to even get the best talent interested. So do that. Then it becomes other factors that retain people. Loyalty is PERSONAL, not monetary.

    Also, let me state, if you can’t pay people this way and you’re on the edge, you shouldn’t be in business. Full stop. Stop treating people like crap and cutting their salaries and just die and let someone else do your niche business better and more efficiently. Because, you know, someone else will anyhow. That’s what productivity and efficiency measures are all about.

    After salary there is bonus, profit-sharing, flexible hours, vacation time, the occasional lunch or gift certificate for a job well done, or even my coming over to you, leaning in to your work area, and telling you that you’ve done a good job. There’s my knowing the name of your partner, kids or even dog. All management people knowing when you’re going though a rough personal time and helping you balance your work responsibilities with whatever is going on. There’s a manager sending you a card for your 20th wedding anniversary…all these things are what build LOYALTY. NOT MONEY. Money is what prevents this from happening if you’re cheap on the pay, especially if you’re pulling up in a 70k vehicle every day. People like this disgust me.

    People ARE your greatest assets. They can also be your worst liability. Training people is expensive. Replacing people with institutional knowledge is impossible. And a high turnover in staff indicates management failing NOT the employees. Lay-offs also indicate crappy planning, and should be done only in extreme cases. Of course, if you’re public, then you have a different set of masters, but still people at my level can keep the personnel trimming to a minimum, especially if the lull is thought to be short.

    Anyone who follows or believes that story is positioning his or her company to get run over. If you can produce something, so can someone else. And if they can attract YOUR talent to do it, then more fool you. Your customers may buy your product, but your employees build it and deal with your customers. Always remember that.

  29. F. Beard

    1) The US has a government backed counterfeiting cartel, the fractional reserve banking system.
    2) Businesses steal purchasing power from all dollar holders including their employees when they borrow from that cartel.
    3) Business/employee relations would have to improve if that cartel was abolished. One thing employers might be forced to do, without a government backed counterfeiting cartel to borrow from, would be to pay their employees with common stock.

  30. nonclassical

    ..Americans havn’t at all realized the realities: CONTRACT
    WORKERS are the next panacea, to avoid ANY and ALL “benefits” create permanent churn of workforce, to eliminate overtime, healthcare, pension, etc…

    in education, the move is to “charter schools”, then it will
    be to internet education, so fundamentalists can completely
    control (Orwellian) history, through historical revisionism
    which is clearly already a permanent fixture.

    Meanwhile, Americans graduate 20% from 4 year university or
    vocational equivalent, while European competition graduates
    over 70%. I doubt even very well educated Americans on this forum understand dynamics involved in relative educations…the U.S. will never attempt a “fully educated workforce”-look what it has done to Egypt…of course Americans have no idea young Egyptian university grads are in the majority there..leading to…

    1. jibber

      This would all be so different if we had, like some countries do, a universal health care system, a free higher education system, and a generous system of unemployment benefits. Having to rely on private companies to supply these things is our first mistake. Would liberal hiring and firing policies, etc. be a big deal if you were able to still get health care, not wind up on the street and such? Nope. You wouldn’t even need unions.

      That’s what we really need here.

      1. econimus

        In the US rules for contract workers are pretty strict by IRS guidelines. So you’re wrong there. Contract workers are taxed different and we all know how badly we need taxes now. In some states it’s even worse. The general rule is that if you are supervised at all, or perform work on a regularly scheduled basis, you can’t be contract. It truly has to be temporary. Most companies use temp to hire full-time workers while trying them out. That works really well.

  31. Tom Crouser

    Well, this stirred up a hornet’s nest didn’t it?

    Okay, back to the article where it was stated -> There’s got to be a sweet spot in the middle where you pay enough to prevent defections but no more. Additional wages and benefits, beyond your employee’s next best choice, are paying extra for something you have already bought.

    I suggest looking at this differently.

    Wages and benefits are not paid to retain current personnel; rather are paid to attract replacements.

    If your rate and benefits are high enough to give you a good pool of replacement workers should one quit; then you are paying enough. If it won’t, then wages and/or benefits should be raised to be competitive.

    Paying more than this, however, buys nothing more than the time of qualified workers. Does not buy longevity, nor loyalty nor happy workers. Leadership and effective supervision is what buys these attributes; but they can’t be created on a foundation of poor pay and poor benefits.

    That’s my thought.

    1. Chief11

      You are right, that did stir up a hornet’s nest, and it stirred mine as well.
      I mentioned before that I have owned a business for 20 years, and I offered a
      method that helps with wages and productivity. All of the posts were just people wanting to vent, regardless of facts. Well, here are the facts, folks.
      I own businesses in the US and in Europe, and I have real, actual, non-theoretical experiences.
      What you get paid is determined by the laws of the countries in which you work, and the markets in which you use your talents. We do the same work in The Netherlands as we do in the US, and the same people get paid different amounts depending on which country they are working in at the time.
      Big businesses are dysfunctional. If you work, or worked for one, tough luck. Get smart the next time.
      Now, for all the left leaners, progressives, liberals, Marxists, and Commies,
      1. Unless you have family money, you have to work. Don’t care for what you get paid, tough, the world doesn’t work in warm, fuzzy, happy ways.
      2. There is no justice in this world, there has never been justice in this world, and there will never ever be justice in this world. If you think there should be, you are mentally ill.
      3. Life is difficult with some lovely moments, not the other way around.

      1. F. Beard

        Now, for all the left leaners, progressives, liberals, Marxists, and Commies, Chief11

        I’m none of the above. I insist the government backed counterfeiting cartels, the banking system, is the root of most of our economic problems. It steals purchasing power from all money holders including workers and the poor for the benefit of banks and “credit worthy” borrowers.

        You insist there will never be justice in the world yet the Lord commands it:

        Jeremiah 22:3

      2. PDC

        “There is no justice in this world, there has never been justice in this world, and there will never ever be justice in this world. If you think there should be, you are mentally ill.”

        mmmh… so, what is a mentally healthy person supposed to do? Crime seems a very reasonable choice, given the premise.

    2. jemster

      You are the only one here who makes any sense. In my experience pay is relative to the amount of frustration and craziness you have to put up with. If you are secure in your job, respected by your superiors, and you feel you are making more than the amount of craziness you have to put up with, you stay. If not you leave, if you can. But in the end it comes down to, you work for your boss, not the company. Its a shame that noone feels save any longer and few bosses really respect their staff anymore.

  32. Ep3

    Why yves, I think u r turning in to a socialist! Your thoughts are correct and coincide with economic theory. But employers are in it to make a profit. The words ‘human resources’ taken literally mean people as an input to be exploited and processed to it’s maximum productive capacity. And employers, especially those just scraping along, are not gonna pay workers more than what they are making, or pay them more than the business next door. Say a small restaurant. Why would a business owner pay waitresses more than the guy next door and squeeze his profits when he can pay less and people are still walking thru the front door? Maybe a quarter raise only increases revenues a negligible amount. Then why raise them and just stick the money in his pocket?
    Great post. I agree

  33. ep3

    Yves, I have an idea/question I want to put out for some thought.
    Why is labor not considered part of a company’s balance sheet? On the balance sheet we have land and capitol. Why not labor? Think about a small accounting firm. They would have a very small balance sheet (very few assets) yet may have 600 clients (personal and business returns). This could be a multi million dollar a year business. But our balance sheet wouldn’t reflect this. Same for doctors. But what is the most valuable “asset” at an accounting firm or doctor’s office? The employees. If I was buying an accounting firm, wouldn’t there be any value to the employees? Most firms rely on the staff to speak regularly with clients on daily matters. They are the key to a reputable firm. Now I understand most of these companies aren’t traded on stock exchanges for value purposes. And there probably is other ways to value.
    Just a thought.

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