Thursday, December 5, 2013

Redefining "profit"

 For what shall it profit a man, if he shall gain the whole world, and lose his own soul?
I've argued before that we need to redefine what we think of as "profit" away from the simplistic (money money money) to something that includes other values (employment, for example, and community, and the common good).  After all, if you are a bazillionaire, you don't notice if your taxes sneak up a bit.  You already have way more money than you can spend.  Say what you will about the gilded age, but a lot of those railway moguls founded libraries and universities.  Money is good (I'm not a true socialist), and it can do good, but it isn't the only good.

In response to Obama's "big inequality speech", one pundit calls out the problem. It's the wages, stupid.
The real problem is that companies in the U.S. do not pay enough, and that they have conditioned themselves (and their investors, and board, and employees, and politicians) not to raise wages even as their profits and cash holdings rise to record levels. Consider that corporate profits have soared from $1.2 trillion in 2009 to about $2 trillion this year, and that between the end of 2006 and mid-2013, corporate America’s cash holdings rose from $850 billion to $1.48 trillion. And yet the response to this remarkable turnaround has been effectively to reduce wages. Median household income in 2012 was below where it was in 1999, and has risen in only five of the last 12 years (PDF).= 
This is not a problem that can be corroded by a higher minimum wage, or stronger unions, or universal pre-K. Rather, it would require a wholesale change of heart among America’s business class. They’d have to start taking pride in offering higher wages each year—rather than, say, offering higher dividends or stock buybacks each year. They’ve have to make it part of their strategic mission to aspire to pay above the median, and thus help drag wages up.... 
Unfortunately, many of America’s largest employers—including Walmart and McDonald’s—have made paying the lowest possible wages a bedrock component of their business model.
There are companies that recognize that paying your employees well is good for business (Costco, REI, and others).  Plus, as Henry Ford famously pointed out, if you don't pay them enough, they can't buy what you're selling.

But as long as companies are beholden to the short-termism of Wall Street, which rewards stocks for cutting jobs, then we won't see it.  And the Masters of the Universe of lower Manhattan will continue to rake in their obscene lucre for doing .... nothing of true value.


JCF said...


RIP/RIG, Nelson Mandela. Holy Mandiba, pray for us!

Chelliah Laity said...

Those who seek higher wages are told to be 'realistic'. Yet, the high earners are given big bonuses.