What is "reasonable," what is "fair." These words signify a death spiral in wage discussions. The reality is that businesses cannot increase prices forever and have a market that still wants to pay them. If I sell burgers for $10k and they're shit burgers then I'd make no money and have to shut it all down. Just like my friend who shut down his cabinetry business because he was paying his employees more than himself (doing the "right thing"). He is a one man shop working out of his van and is doing much better, but his employees' wages became 0.
The restaurant has been in business 10 years. I think that evidence makes me dismiss your comment as pessimistic hyperbole. If the wages really didn't work, the restaurant would have been long gone.
I acknowledge that you have seen something similar not work out, first hand, but in this case it is apparently different.
> What is "reasonable," what is "fair." These words signify a death spiral in wage discussions.
Another commenter commented on a burger-joint giving a share to "climate" causes. What a share entails in this case, whether it comes from profit, or whether they pass the cost of this cause to the customer is unknown.
Additionally I live in a place where there are reparations discussions and where unions agreed that teachers of a certain ethnicity would be eliminated first in the name of equity if it came down to staff cuts.
How does this play into the scenario if these types of events happen more often, even discussing these things is difficult and people could veer away from. I heard that Amazon inserted "woke" discussions into union talks in Georgia in an effort to de-rail them, not to engender unity.
> Just like my friend who shut down his cabinetry business because he was paying his employees more than himself (doing the "right thing").
I've listened to almost all the How I Built This episodes, and paying your employees more than you are paying yourself is fairly common. You need to pay everyone market rates to retain them, and there often isn't enough left over to pay yourself well (if at all).
What you are referring to is a zombie business. It does not offer enough value so it can only survive via low wages, something that is not guaranteed and is externally controlled. I think banks should does including this measure when it comes to financing. If have to pay your people below market wages to survive you don't have a business, you have a zombie that can't only survive as a parasite on others. Figure out how to manage the business or increase your value add or be explicate this is a passion project not a viable business. I cannot buy produce from a farmer for less than it costs them to grow it, but somehow businesses think they can pay people less than it costs to live.
> If have to pay your people below market wages to survive you don't have a business
How does one pay below market wages? Someone's market wage is established by observing what they are being paid. They will always be equal, unless you mean an employer is illegally withholding funds owed to the worker?
> I cannot buy produce from a farmer for less than it costs them to grow it
Haha. As a farmer, I have lost money selling my produce more times than I wish to count. The customer couldn't care less about how much it costs you to produce a product. They are only going to pay what it is worth to them and not a penny more. The secret to a sustainable farm business is understanding how to weather those times when it costs more to grow the food than what the customer will pay.
Well, probably the most traditional way is to hire for approx market rate... and then given little or no raises/cost of living adjutsments. Bam, 5 years from now, you're well under market rate.
The market rate is established by observing the sales that have taken place. If the sale price continues to be the same five years later, the market rate hasn't changed. You would not end up being paid an "under market rate" just because five years have elapsed. You would still be paid the market rate.
An under market rate would only be significant to outside interests. If I am paying someone $20 per hour and you want to pay the same person $10 per hour, then the $10 per hour offer would be under market rate. However, if for some reason the employee jumped ship and accepted your $10 per hour offer, you would not be paying an under market rate. $10 per hour would become the new market rate.
You're getting paid the market rate from 5 years ago. Due to inflation, this is 99.9% certainly less than market rate today.
You're ignoring the time element.
You hire the $10hr guy when the market rate is $10... and then give him just enough crumbs not to quit. So in a few years when the market rate is $15, he's making maybe $12. See how that works? Obviously many will jump ship, but many won't or can't (e.g. can't afford a gap in pay/insurance coverage).
> Due to inflation, this is 99.9% certainly less than market rate today.
There is no market rate until the market has made a trade. If I traded an hour of my time for $10 with you five years ago, and I again traded an hour of my time with you for $10 today, $10 is still the market rate.
> You're ignoring the time element.
It is not ignored. It is in there.
> So in a few years when the market rate is $15, he's making maybe $12.
The market rate for the given person in this scenario is $12. Maybe someone else will pay $15, but they have to prove that for the market rate to adjust. Some drunk guy at the bar saying "Oh yeah, I'd totally pay $15 per hour for that guy" does not establish this person's market rate as actually being $15. Talk is cheap, as they say. An actual trade has to take place to prove it.
Perhaps what you are trying to suggest is that people are fungible? If Joe is paid $15, and his identical in every single way twin is paid $15, then Sue – no relation – must also be worth $15, and paying her only $12 is below what actual sales have shown what the market is paying for a person of her kind? We do often talk about commodities that way.
But my experience with people in general, as a coworker, and as an employer, says people are most absolutely not fungible. Even for the same job, no two people are going to fit in equally. I think we can agree that some workers are better than others. In fact, we agonize over resumes and interviews to try and find the best of the bunch. If people were fungible, you wouldn't need to care. Just pick one at random. They're all as good as each other.
Since people are not fungible, the market value of an individual rests entirely on the trades an individual makes. It cannot be observed any other way. Their pay cannot go below their market rate. Any time their pay drops, their market rate comes along for the ride.
Some years ago a burger joint opened in my neighborhood, a very hispsterish kind of place. I went once, and saw a message attached to the menu, saying that 50% of the revenue obtained from every burger would be donated to some cause du jour, probably climate change related, bla bla bla. To me it signified that the burgers they sold were at least 100% overpriced when compared to what they should cost if they were trying to have a profitable business. Fun fact: they were, and their burger joint went under in a couple of months. Capitalism wins in the end, it doesn't matter if you want to fight it, the sun always rises again.
