Wealth Distribution in the USA

So, just to get this clear, you are still denying that "...they can at least approximately figure out the value to the company of an employee doing a given job", but are not denying claims identical to that in meaning?

Yeah, right, brilliant. --Percy

Who said, or suggested that getting the fact that an employee adds more to the bottom line means that the employee is being exploited? I don't believe this to be anyone's argument. It certainly is not mine, and Dr. Adequate explicitly denies that it is his.I'm trying to imagine how a business could even operate successfully without the employees in toto creating value in excess of their salaries. Isn't creating value what employees are supposed to do.

You're missing a piece of the argument, maybe I should have spelled it out in more detail, I just thought this part was more obvious than I guess it is. The argument includes the belief that the value contributed by the employee to the company actually belongs to the employee, and that the difference between this value and his wage is the amount by which he is exploited.You yourself have been an advocate of this point of view in this very thread. For example, here's you in Message 83: This sure looks to me like an argument that wages should factor in value created and not be just a function of the market (which includes the regulatory environment, unions, etc.). But the diamond cutter example falsifies this view.But you've also made statements I can agree with, for example, when you just said this: Yes, precisely.--Percy

And if it was true, most CEOs in the USA would be paid a fraction of what they are now.

Oh wow! A snarky one-liner. You really are pushing the boat out for encouraging civil discourse aren't you? I hope that gratuitous display of self-gratification really felt as good as I suspect, because it otherwise looks pretty pathetic. Gosh, you really nailed me, you son of a gun! If it vexes you that I take issue with your accusations or your tu quoque, and you consider it 'harassment' when someone asks you to support your attacks...stop making them and apologize. I've apologized to you for coming across as harassing and passive aggressive. It really isn't tricky.Since it is clear I'm not getting an apology for you engaging in personal attacks. Since I am not going to get an apology for you blaming me for starting it...I'll just continue (probably foolishly, I realize) trying to discuss the topic with you one last time...What would you prefer: More employment, at wages that won't pay rent and food at the same time (ie., what happens when we let non-human market forces decide), or less employment at wages that do pay rent and food?Edited by Modulous, : No reason given.

I think this part of the discussion began with objections to western use of cheap labor in the third world. The low wages were viewed as abuse or exploitation. "Slavery" was another of the characterizations. This is the problem presented by the entire wealthy class. Mitt Romney has a lower overall tax rate than many who are nowhere near wealthy, including me. It's not the being wealthy part that I object to. It's that at a time when western economies are struggling, governments are starved for cash and can't provide assistance programs or maintain infrastructure while the wealthiest fail to pay their fair share.I forget the percentages, but the wealthiest percentile does pay a surprisingly high percentage of the total tax revenue of the US, but that's because they're so incredibly wealthy, not because their effective tax rate is anything fair. If you look at it historically, as high as that percentage of total tax revenue is, it's been steadily declining and is the lowest it's been a long, long time, maybe since the 1920's.--Percy

Part one of the problem require our tax laws to change so that the wealthy pay their fair share. That should be non-controversial - but of course it will be.But even more contentious is the claim that because the pay differentials between the least paid employee and the highest paid are now so extreme - in the private sector at least - it's harming the societies that we live in.There have recently been discussions here in the UK around what the optimum pay differential might be - many say x20 - that is, the highest paid employee should get no more than 20 times the lowest. (It's currently x262 for the FTSE 100 UK companies; I imagine that it is much higher in the USA)More unequal societies have worse health and lower life
expectancy, more people suffering from drug problems and
mental illness, rates of teenage births, obesity and violence are
higher, and more people are in prison It is hard to escape
the conclusion that the high levels of inequality in our societies
reflect the concentrations of power in our economic institutions.
The institutions in which we are employed are, after all, the
main source of income inequality.Kate Pickett & Richard Wilkinson, social epidemiologists and authors of The Spirit Level.The other issue is about transparency. In Sweden, the tax affairs of individuals are publicly available. This seems to have a controlling effect all of its own - though it's not something I'd be terribly happy about.

It is an argument that $2 a day is inappropriate, yes. But it is not an argument that the laborer should be paid and that no one else should make any money. The laborer will always be paid some fraction of the value he creates. I'd argue that some people manage a ratio greater than 1. It falsifies a view that nobody holds. In my view getting paid $2 a day is so grossly unfair that it need not be explained by the value of what he makes. The worker is paid as he is because his access to the global labor demand i almost non-existent.I'll be explicit about my position. Coyote has expressed the view that redistribution of wealth is unfair to those who create wealth. In my view that is a completely bogus view of the way wealth is actually created. That bogus view is a supported by the bogus accounting that you are promoting in which we pretend not to be able to notice that employees as a group are creating wealth and value in excess of their salaries.Yes, the calculation of value is difficult to make for some individual employees. Even for the diamond cutter we can ask whether he is solely responsible for the extra value generated by his work. After all the cut stones must be set and sold. (Yet somehow you accept that we can calculate the value added by the diamond cutter and reject the idea that we can calculate the value added by a single worker making pairs of sneakers.)But the main idea is that saying that the individual calculation is too difficult for people not in production, so we'll just call the net gain (value-wages) zero is a lie of the highest order. As you have agreed, the workforce, as a whole, does create value. And that value does not come from summing a bunch of zeroes. Edited by NoNukes, : No reason given.Edited by NoNukes, : No reason given.Edited by NoNukes, : No reason given.

For myself, artificial salary constraints like this aren't very appealing. I'm fine with someone earning x300 as long as their taxes are x400 or something like that. A half century ago one decent salary put a family solidly in the middle class. Now it takes two salaries, and (throwing in a personal pet peeve) local taxes are insufficient to fund public school clubs and sports teams that used to be free, so families not only have to pay higher taxes than the very rich, they also have to pay for services that used to be funded out of taxes.--Percy

Not in a country where $2/day is competitive with prevailing wages. Which it has to be, else they'll be unable to staff their enterprise. This looks like a response to what I explained to Dr A, that the value created by employees belongs to shareholders, not to employees. Employees are compensated by salaries, relatively stable except in the most dismal of corporate situations, while shareholders are the ones exposed to the vagaries of profit and loss. No, the laborer is paid the prevailing wage, which is controlled by market forces, not by the value he contributes to the company's bottom line. All that value belongs to the stockholders, as well as the risk that it will be sometimes positive and sometimes negative.And of course it isn't possible to calculate how much value most jobs contribute to a company's bottom line, and you can't calculate some fraction of an unknown number. Actually it falsifies the belief that the value created by employees should belong to them. If this were true then diamond cutters would make a million dollars a year, but they don't and no one thinks they should. This is very similar to your own personal belief, with the difference that you believe it should be some fraction of the value created rather than all of it. Now who's rebutting a view no one holds? No one is trying to hide the impossible to deny fact that "employees as a group are creating wealth and value in excess of their salaries." As you put it so well on Friday, that's the whole reason that companies have employees.That it's possible to calculate this value on a per-job basis is a myth. More importantly, you don't even want to make wages a function of this value anyway, because while it cannot be calculated on a per-job basis, publicly traded companies publish a net value every quarter under their profit and loss column, and the value in that column is negative on a fair number of occasions. Well, there may be a lie in there somewhere, but if so then it would be that someone somewhere is claiming that we should assign a value of 0 to quantities that are unknown.--Percy

Nonsense. If an employee's actions generate $10/hour in revenue for the company, then the company will be non-profitable unless it pays that employee less than (= a fraction of) that $10/hour. It's always a fraction; if not, he's out of a job. Then how do the CEOs do it? How does the managerial class decide whether to hire more people if there is no way whatsoever to figure out the value that those extra people contribute to the company vs. the cost of hiring them?Do they really just pull decisions from their asses? If so, sign me up. No one wants to pay people an amount equal to the value they contribute, just a larger fraction than they get now. The people creating the product that gets sold and creates the company's revenue are paid next to nothing while the CEO, who contributes nothing on account of it being apparently impossible for him to do the job he has been hired for, takes a salary hundreds of times larger than any of the other employees in his company.Do you not think this a problem? Edited by Jon, : No reason given.

The term "nonsense" more properly applies to what follows than what precedes. The ability to calculate a specific job's contribution to a company's bottom line does not exist for most jobs.You wouldn't want to base salaries on a company's bottom line anyway, because that bottom line isn't always positive. "Sorry, Joe, your base salary is $30,000/year plus 53% of the value you contribute to the bottom line, but this year the bottom line was negative, and so we have to cut your salary."But that's just a reason why you *wouldn't* want to let salaries be a function of the bottom line. There's a reason why you *can't* calculate salaries that way, something I just explained earlier today. The company is owned by the shareholders, and both the profits and the losses belong to the shareholders, not to the employees. Obviously not the way you think they do it. They (and their management team) have a variety of very effective quantitative tools available to them, just not the one you think. The one you think they use doesn't exist. This is the same position as NoNukes, but again, the fraction you want to calculate requires that you know how much each individual job contributes to the bottom line, and companies not only don't usually know that, for most jobs it isn't knowable.--Percy

A large proportion of jobs are overhead. They're just necessary expenses that don't contribute directly to any profitable activity.The bigger the company the less chance there is of attributing profitable activity to individual employees - generally, where that can be done, the individuals work on bonus.Business cases are rarely, if ever, compiled to recruit an individual. Normally recruitment is done on a replacement basis. When firms downsize, they go for overhead related people first.Percy is totally correct, the sort of calculation that is being argued over is naive.

No one wants to use this system. No one. What is the one that I think they use?