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Author Topic:   Wealth Distribution in the USA
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 436 of 531 (701172)
06-12-2013 3:56 PM
Reply to: Message 435 by Jon
06-12-2013 1:39 PM


Re: Estimating Economic Benefit
Jon writes:
Companies don't ultimately care about the utility of their products. Companies don't ultimately care about the economic benefit they offer the world.
Or to modify this slightly, companies care about those qualities that enable them to sell their products. Actual for-real utility might be one of those qualities that matters, or it might not. An example of when actual utility doesn't matter are companies that sell homeopathic medicines. It's what people think is the utility, not the real utility.
Their position is strewn with subjectivity. They're making up terms that can't be quantified and then constructing upon them their own science of economics in the clouds.
Companies only care about income and expense. The expense of labor must be justified by the creation of income.
My gosh, , it's almost...Darwinian! Companies will modify their structure and behavior so as to maximize revenues and minimize costs.
In terms of the balance sheet, instead of "income" I think you should say "revenue". "Income" is usually reserved for profit/loss.
--Percy

This message is a reply to:
 Message 435 by Jon, posted 06-12-2013 1:39 PM Jon has replied

Replies to this message:
 Message 437 by Jon, posted 06-12-2013 4:58 PM Percy has replied

  
Jon
Inactive Member


Message 437 of 531 (701178)
06-12-2013 4:58 PM
Reply to: Message 436 by Percy
06-12-2013 3:56 PM


Re: Estimating Economic Benefit
Where's your position on all this?
Do companies ever consider the revenue generating capacity of a particular job compared to the market rate for that job when deciding whether to fill it or not?
Edited by Jon, : No reason given.

Love your enemies!

This message is a reply to:
 Message 436 by Percy, posted 06-12-2013 3:56 PM Percy has replied

Replies to this message:
 Message 438 by Percy, posted 06-12-2013 5:08 PM Jon has replied

  
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 438 of 531 (701180)
06-12-2013 5:08 PM
Reply to: Message 437 by Jon
06-12-2013 4:58 PM


Re: Estimating Economic Benefit
Jon writes:
Do companies ever consider the revenue generating capacity of a particular job compared to the market rate for that job when deciding whether to fill it or not?
I'm surprised you ask, because I think we've both been saying the same thing. The "revenue generating capacity of a particular job" cannot be known for most jobs, and even if it could it could never be a factor in determining wages because revenues, profits and losses belong to shareholders, not employees. Wages are determined by market forces.
Making money is the job of companies. Making things fair is the job of government.
--Percy

This message is a reply to:
 Message 437 by Jon, posted 06-12-2013 4:58 PM Jon has replied

Replies to this message:
 Message 440 by Jon, posted 06-12-2013 6:41 PM Percy has replied
 Message 443 by Dogmafood, posted 06-12-2013 9:35 PM Percy has replied

  
Panda
Member (Idle past 3712 days)
Posts: 2688
From: UK
Joined: 10-04-2010


(1)
Message 439 of 531 (701184)
06-12-2013 5:25 PM
Reply to: Message 434 by Percy
06-12-2013 1:19 PM


Re: Link
Percy writes:
Here's a table of how much a company benefits in terms of dollars from hiring the new employee
I would want their other overheads to be included with their wage - but it seems ok as an example.
Percy writes:
On the top line it says "$100,000". If the new hire enables the company to earn an additional $100,000, then you'd like to believe that the economic benefit of that job to the company is $100,000. That figure is close enough to his salary as to almost seem reasonable.
*nods*
Seems reasonable.
Percy writes:
It gets even more ridiculous if one tries to claim a link between this supposed "economic benefit" and salary. In that case you'd have salaries changing constantly due to normal fluctuations in a company's revenue and earnings (which can both be negative, though usually only the latter).
My salary is linked to inflation, but I only get the increase once a year - despite inflation constantly changing.
Percy writes:
That's because it isn't that job that's contributing $5,000,000 to the company's bottom line. All that additional job does is allow the company as a whole to perform in way that enables it to make an additional $5,000,000.
But it is that employee contributing $5,000,000 to the company's bottom line.
And you could show that it is, by sacking the employee and watching the $5,000,000 disappear.
Percy writes:
But the last scenario in the table says "$5,000,000". If the new hire enables the company to earn an additional $5,000,000, then you'd like to believe that the economic benefit to the company of that job is $5,000,000. But that's ridiculous, isn't it.
Sure - it's a really big number, but the numbers are fictional.
I see nothing wrong with it, in principle.
Why do you think it is ridiculous?

"There is no great invention, from fire to flying, which has not been hailed as an insult to some god." J. B. S. Haldane

This message is a reply to:
 Message 434 by Percy, posted 06-12-2013 1:19 PM Percy has replied

Replies to this message:
 Message 441 by Percy, posted 06-12-2013 8:05 PM Panda has not replied

  
Jon
Inactive Member


Message 440 of 531 (701186)
06-12-2013 6:41 PM
Reply to: Message 438 by Percy
06-12-2013 5:08 PM


Re: Estimating Economic Benefit
But I'm not asking you about all that.
I'm just asking you whether you think companies ever consider the revenue generating capacity of a particular job compared to the market rate for that job when deciding whether to fill it or not.
Do they?
Don't they?

Love your enemies!

This message is a reply to:
 Message 438 by Percy, posted 06-12-2013 5:08 PM Percy has replied

Replies to this message:
 Message 442 by Percy, posted 06-12-2013 8:34 PM Jon has replied

  
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 441 of 531 (701188)
06-12-2013 8:05 PM
Reply to: Message 439 by Panda
06-12-2013 5:25 PM


Re: Link
Panda writes:
But it is that employee contributing $5,000,000 to the company's bottom line.
Really? All by himself? Seriously?
A company determines that if they hire an additional person on the assembly line, they can remove a bottleneck and produce $5,000,000 in additional product per year. You really think that $5,000,000 is the contribution of the new hire? What are all the other guys who were already on the assembly line, chopped liver?
Once again, for the who knows how many'th time, you can't know the contribution of any job once it's subsumed within the matrix of a company and all its other jobs and processes and infrastructure.
--Percy

This message is a reply to:
 Message 439 by Panda, posted 06-12-2013 5:25 PM Panda has not replied

  
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 442 of 531 (701189)
06-12-2013 8:34 PM
Reply to: Message 440 by Jon
06-12-2013 6:41 PM


Re: Estimating Economic Benefit
Jon writes:
I'm just asking you whether you think companies ever consider the revenue generating capacity of a particular job compared to the market rate for that job when deciding whether to fill it or not.
I'm not sure why my previous answer wasn't sufficient, particularly since what you've been saying agrees pretty much with what I've been saying. Tangle described it best, but for the most part companies can't know the "revenue generating capacity of a particular job."
But whether a company knows that "revenue generating capacity" or not, I can't see why it would be a factor in deciding the wage for a job. They'd use the market rate. If they pay less than market rates they'd be unlikely to attract qualified applicants, and turnover could be a problem. If they pay more than market rates then they'd be more likely to attract top talent, but that could cause issues competing with other companies in the same business who pay the lesser market rate.
One factor preventing any consideration of "revenue generating capacity" by company officers is that they have a fiduciary responsibility to the shareholders to maximize company performance, usually measured by the profit and loss column. Paying more than market rates runs counter to that responsibility.
--Percy

This message is a reply to:
 Message 440 by Jon, posted 06-12-2013 6:41 PM Jon has replied

Replies to this message:
 Message 445 by Jon, posted 06-12-2013 10:54 PM Percy has replied

  
Dogmafood
Member (Idle past 348 days)
Posts: 1815
From: Ontario Canada
Joined: 08-04-2010


Message 443 of 531 (701191)
06-12-2013 9:35 PM
Reply to: Message 438 by Percy
06-12-2013 5:08 PM


Re: Estimating Economic Benefit
Making money is the job of companies. Making things fair is the job of government.
There is something fundamentally wrong with this approach to the world. Making things fair is the job of people who want to live in a world that is fair.
Once again, for the who knows how many'th time, you can't know the contribution of any job once it's subsumed within the matrix of a company and all its other jobs and processes and infrastructure.
I don't know if this point has been raised but how then do you justify the enormous pay at the executive level if you can't know the value of their contribution?

This message is a reply to:
 Message 438 by Percy, posted 06-12-2013 5:08 PM Percy has replied

Replies to this message:
 Message 444 by Percy, posted 06-12-2013 10:15 PM Dogmafood has replied

  
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 444 of 531 (701192)
06-12-2013 10:15 PM
Reply to: Message 443 by Dogmafood
06-12-2013 9:35 PM


Re: Estimating Economic Benefit
Prototypical writes:
Making money is the job of companies. Making things fair is the job of government.
There is something fundamentally wrong with this approach to the world. Making things fair is the job of people who want to live in a world that is fair.
It isn't fair that innocent children catch deadly diseases and die, yet that's reality.
So maybe you're right that it isn't fair that making money rather than fairness is the job of companies, but it *is* reality.
I don't know if this point has been raised but how then do you justify the enormous pay at the executive level if you can't know the value of their contribution?
I don't justify them. Generally, the larger the company the greater the executive pay and the less market forces play a role, plus friendly boards of very large companies often vote executive compensation packages that make no sense.
--Percy

This message is a reply to:
 Message 443 by Dogmafood, posted 06-12-2013 9:35 PM Dogmafood has replied

Replies to this message:
 Message 451 by Dogmafood, posted 06-14-2013 6:37 AM Percy has replied

  
Jon
Inactive Member


Message 445 of 531 (701193)
06-12-2013 10:54 PM
Reply to: Message 442 by Percy
06-12-2013 8:34 PM


Re: Estimating Economic Benefit
I'm not talking about deciding wages. I'm talking about deciding whether to fill a position or not.
Do companies ever consider a job's impact on revenue when making this decision?

Love your enemies!

This message is a reply to:
 Message 442 by Percy, posted 06-12-2013 8:34 PM Percy has replied

Replies to this message:
 Message 446 by Percy, posted 06-12-2013 11:30 PM Jon has seen this message but not replied
 Message 447 by Tangle, posted 06-13-2013 3:49 AM Jon has not replied

  
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


(1)
Message 446 of 531 (701194)
06-12-2013 11:30 PM
Reply to: Message 445 by Jon
06-12-2013 10:54 PM


Re: Estimating Economic Benefit
Do companies ever consider a job's impact on revenue when making this decision?
Of course. Making decisions that have an impact on revenue and profit/loss are the responsibility of the company's executive team.
--Percy

This message is a reply to:
 Message 445 by Jon, posted 06-12-2013 10:54 PM Jon has seen this message but not replied

  
Tangle
Member
Posts: 9489
From: UK
Joined: 10-07-2011
Member Rating: 4.9


Message 447 of 531 (701195)
06-13-2013 3:49 AM
Reply to: Message 445 by Jon
06-12-2013 10:54 PM


Re: Estimating Economic Benefit
Jon writes:
I'm not talking about deciding wages. I'm talking about deciding whether to fill a position or not.
Do companies ever consider a job's impact on revenue when making this decision?
I'm a bit puzzled by this question.
Businesses exist to make profit so (almost) every decision they make is related to increasing profit in some way. No sane business would employ people unless they needed to becaues they are a cost and costs reduce profits.
But whether an individual's contribution to revenue or profit can be established at the time of hiring is highly unlikely. Some jobs hope to be able to do this - the obvious example is sales, were a new hire will be given a revenue target and fired if it's regularly not achieved. But the guy who lubes the machinery, the lady serving lunch and the HR person making the hires can not have their revenue streams identified.
Those people are hired because they are needed to make the business work; they're support costs, overhead. Almost all jobs are created because someone thinks they're needed to support the business overall, not because they will generate an identifiable revenue.

Life, don't talk to me about life - Marvin the Paranoid Android

This message is a reply to:
 Message 445 by Jon, posted 06-12-2013 10:54 PM Jon has not replied

Replies to this message:
 Message 448 by Percy, posted 06-13-2013 7:21 AM Tangle has replied

  
Percy
Member
Posts: 22391
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 448 of 531 (701197)
06-13-2013 7:21 AM
Reply to: Message 447 by Tangle
06-13-2013 3:49 AM


Re: Estimating Economic Benefit
Tangle writes:
But whether an individual's contribution to revenue or profit can be established at the time of hiring is highly unlikely. Some jobs hope to be able to do this - the obvious example is sales...
But aren't even sales jobs problematic? The way I see it, the revenue stream of a salesperson can be readily identified, but how much of that is his actual net contribution can't be known. The truckers, stock boys, warehousemen, cashiers, janitors, etc., also make their contributions which must be subtracted from the salesperson's, but since we can't quantify their contributions and can't know how much to subtract, we can't know the salesperson's contribution either. It seems to me that the revenue brought in by a salesperson is a good measure of performance, but it isn't a measure of his actual net contribution to revenue or profit.
--Percy

This message is a reply to:
 Message 447 by Tangle, posted 06-13-2013 3:49 AM Tangle has replied

Replies to this message:
 Message 449 by Tangle, posted 06-13-2013 7:49 AM Percy has seen this message but not replied

  
Tangle
Member
Posts: 9489
From: UK
Joined: 10-07-2011
Member Rating: 4.9


Message 449 of 531 (701199)
06-13-2013 7:49 AM
Reply to: Message 448 by Percy
06-13-2013 7:21 AM


Re: Estimating Economic Benefit
Percy writes:
But aren't even sales jobs problematic? The way I see it, the revenue stream of a salesperson can be readily identified, but how much of that is his actual net contribution can't be known. The truckers, stock boys, warehousemen, cashiers, janitors, etc., also make their contributions which must be subtracted from the salesperson's, but since we can't quantify their contributions and can't know how much to subtract, we can't know the salesperson's contribution either. It seems to me that the revenue brought in by a salesperson is a good measure of performance, but it isn't a measure of his actual net contribution to revenue or profit.
It's very problematic, but it's the nearest direct relationship I can think of. They individually sell stuff so they individually claim to bring in $x revenues.
But, of course, if Fred didn't make the sale, Jane might have. And neither could have done it without the help of Mike in accounts who worked out the finances - and so on.
I also said earlier that sales people are notorious for selling stuff at any price - they quite often sell at a loss. (Below cost of sales - ie direct costs).
So no, you can't really get to profit from an individual sale and claim that without Fred it wouldn't have happened.
The bigger a company gets the less chance there is of making a relationship between individuals and profits. And the more like a service the output is, the worse it gets. (Because costs have to be apportioned across shared assets.)

Life, don't talk to me about life - Marvin the Paranoid Android

This message is a reply to:
 Message 448 by Percy, posted 06-13-2013 7:21 AM Percy has seen this message but not replied

Replies to this message:
 Message 450 by New Cat's Eye, posted 06-13-2013 9:57 AM Tangle has not replied

  
New Cat's Eye
Inactive Member


Message 450 of 531 (701201)
06-13-2013 9:57 AM
Reply to: Message 449 by Tangle
06-13-2013 7:49 AM


Re: Estimating Economic Benefit
I also said earlier that sales people are notorious for selling stuff at any price - they quite often sell at a loss. (Below cost of sales - ie direct costs).
Yeah, that's why manufacturers use rebates. You can sell a widget to a distributor for $100, but if they buy 100, then you give them $1000 rebate. The salesman only sees that the widget was bought for $100, so when he gives his buddy a super tremendous deal and sells the widget at cost for $100, then the company is still making money.

This message is a reply to:
 Message 449 by Tangle, posted 06-13-2013 7:49 AM Tangle has not replied

  
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