Wealth Distribution in the USA

You're somehow still failing to see the implications of statements like this from your Message 312: And of what you just said: You are failing to incorporate simple and obvious facts into your thinking. You don't seem to understand that a company is a combination of many jobs working in concert together. Removing any job isn't a measure of the "economic benefit" of that job because all jobs are necessary to varying degrees, different jobs make different contributions, and some jobs can have an immediate impact if removed (with no truckers no products move to market), while others won't have an impact for a considerable period (with no product designers there won't be any new products, but that won't have an effect on business for a year or two), while still others will have almost no impact at all (cafeteria workers, receptionists, night watchmen, janitorial staff, etc.).So when the truck drivers go on strike, shut the company down, and cost it millions of dollars a day, that is no more a measure of their "economic benefit" to the company than if the cafeteria workers go on strike, people have to bring their lunch, and it costs the company nothing at all. In fact, the company probably saves money while the cafeteria workers are on strike.The reality is that it is not possible to calculate or estimate the economic benefit to a company of any job, and certainly not in the way you suggest. Furthermore, you can't postulate a link between wages and an unknown value, one which you can't even know is positive or negative.It is apparently necessary to again mention that pointing out to you that it is flawed thinking to believe a link should exist between a job's wages and some imaginary "economic benefit" of that job does not mean one thinks executive pay scales are reasonable or that nothing should be done about poverty wages.--Percy

Paul Krugman's conclusions aren't supported by the excerpts you posted from the paper Center For Economic And Policy Research - Why Does the Minimum Wage Have No Discernible Effect on Employment? John Schmitt Feb 2013: In fact, nothing in Schmitt's excerpts supports Krugman's statement that "the simple Econ 101 story doesn't seem to work," and I don't think he really meant to imply that supply and demand doesn't apply to minimum wage levels, because earlier in that paragraph he makes clear he's only talking about "raising the minimum wage near current levels."What I think he was really trying to say is that modest changes in minimum wage don't necessarily follow the law of the supply and demand, and given the slack in any economy this must of course be true. It's the same with many things, for example, gas prices, which as long as they range between $3 and $4 seem to affect the economy little, but raise them to $5 and it will have a significant impact (that's per gallon, folks, apologies to everyone not living in the USA for our unconscionably low gas prices).Increases in the minimum wage that are in line with inflation, which is what politicians have attempted to do over the years and which is what the studies examined, should have little impact on employment, and this is what the studies apparently show. But, counter to what Krugman claims, the law of supply and demand has not been repealed, and whenever politicians vote increases in the minimum wage that are out of line with inflation then it will negatively impact employment to the degree that they are.I mentioned earlier in this thread that the minimum wage in the US was $1.50/hour in 1969, so as measured by inflation the minimum wage is too low right now. I expect it will be increased once we're safely out of the economic woods.--Percy

You're still operating under the delusion that you can somehow know this economic benefit for any specific job. You can't. You not only can't even know it approximately, you can't even know whether it is positive or negative. I'm telling you that you can't even know whether it is positive or negative. You have nothing upon which to base your claims. You're just assuming executives contribute little and the rank and file contribute a lot. You have no numerical data upon which to base this assumption because, as has been explained many times now, it isn't possible to know the "economic benefit" of any specific job, not even approximately, not even within an order of magnitude, not even whether it is positive or negative.Even more importantly, the revenues, the profits, the losses - they all belong to the shareholders in their entirety. Employees have no claims upon them whatsoever.You make a lot more sense when you talk about the need for jobs that pay a living wage.--Percy

Hi Straggler,Now you've gone back to confusing two different things again. You think that when you make your *business case* for a new network engineer that you've somehow approximated the "economic benefit" to the company of that job, but you haven't. A *business case* is one thing, and this "economic benefit" to the company thing you keep talking about (which is fictional) is something else.When you've made your business case for a new network engineer, all you've done is approximated the "economic benefit" to the company of adding that job so it can work in concert with all the other jobs in the company upon which that new job depends in order to make any contribution at all, just as the "economic benefit" of all the other jobs in the company also depends upon all the other jobs in the company. You cannot separate out the separate contributions to the "economic benefit" of the company of any individual job, or even group of jobs.If you could approximate such a thing then you could also approximate the relative "life benefit" contributions of your heart, lungs, kidneys, liver, etc., but you can't. They work in concert together to give you life. They're all necessary. Breaking it down into separate "life benefit" contributions just isn't possible.A job is worth what someone is willing to pay for it that someone else is willing to accept. It has nothing to do with any imaginary "economic benefit" to the company. It's not how key a job is to a company's business that determines the pay. It's the number of people who can do the job that determines its value. A network engineer might be absolutely essential to a company's business, but if there's a million network engineers out there who can do the same job then the pay won't be much.--Percy

You mean like in the real world? My employer's Human Resources department subscribes to salary surveys. They try to keep our salaries competitive with other companies in the same and similar industries. In other words, they pay market prices.We went through an interesting experience earlier this year when we tried to hire five new people. Our offer to the first person we tried to hire was turned down. Our offer to the second person was turned down, too. Evidently things were turning around in our industry while we were between salary cycles. We adjusted our salary scale upward accordingly (not just because of my group - other groups in our company were experiencing the same problem), and we countered to the second person. They accepted. We were able to hire four more people over about four months.The adjusted salary scale will be reflected in the salary adjustments to current employees that take place later this year. If my employer doesn't keep salaries in line with what's available out there then we would start experiencing a talent outflow.In other words, employers pay wages at prevailing market levels. That's how they "decide if they are willing to pay a particular wage." They pay a little more for more talent and experience, and a little less for less talent and experience. Employers will also pay a little more if they prefer to minimize turnover.--Percy

Hi Straggler,You've expressed uncertainty about what I mean, so let me state it plainly again. For most jobs you cannot know the "economic benefit" to the company. What you've been calling an "economic benefit" is actually just part of the business case one makes to influence a business decision. Any details about a job's contributions to a company's "economic benefit" are lost when that job is subsumed within a company to mix with all the other jobs that also contribute. Tangle and CS have said the same thing. This isn't rocket science, and it isn't mysterious or confusing.This supposed "economic benefit," being that it cannot be known with any accuracy, not even whether it is positive or negative, cannot be used as a factor in setting wages. There is not the remotest link to wages. Wages are set by market forces along with other factors such as tariffs, unions, minimum wage laws, etc.You're other argument also makes no sense, that companies should pay their workers more because they make money from their labor. Workers sell their labor to companies for their wages. Employment gives them no claim on a company's revenue, profits or losses. They're not entitled to more money when the company does well, and correspondingly, they're not given less money when the company does poorly (except in dire circumstances).--Percy

You're again claiming a link between some incalculable "economic benefit" and wages. No such link exists. Wages are set by market forces. The CEO claims that under his leadership the company had $100 million in revenue that it otherwise would not have had. Prove him wrong. You'll quickly be deep into imaginary numbers. Unlike you, I don't believe that some minimum level of food, housing and healthcare should be conditional upon employment.--Percy

You made a business case arguing how much better or worse the company would do if they hired the new employee, a business case that took into account prevailing market level wages for that job. That has nothing to do with setting the employee's salary were he hired.--Percy

The misunderstanding must be arising because the "business case", which is how much the company might benefit from the added employee, is not the same thing as the "economic benefit of that additional employee" to the company. This is a distinction I was forced to make because of Straggler's claim that there must be a link between the "economic benefit" to the company and wages. He was making a business case for a business decision and calling it the "economic benefit" of the added job. That's wrong. The additional employee enables the company as a whole to additionally benefit - the additional benefit is not due to that one job all by itself.Here's a table of how much a company benefits in terms of dollars from hiring the new employee versus how much the salary should be for the new employee, using hypothetical figures, of course. Notice that no matter how much the benefit to the company, the salary is the same: Just look at the first column. 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.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.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.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).--Percy

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. 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

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

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

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

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 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

Of course. Making decisions that have an impact on revenue and profit/loss are the responsibility of the company's executive team.--Percy