Posted 2 years, 3 months ago at around evening time by oso
Maybe some of you have been here. You’re working at a company, or for an organization, or even at a restaurant and it dawns upon you that you do all the work and your boss gets all the money. It’s a clichéd truism, something that gets talked about during happy hour at least as much as the weekend’s weather forecast and Tom Cruise’s parenting techniques. You can only assume that your boss also once had such conversations and grievances … until (s)he started making two or three (or 300) times as much as you. Humans are great at justification.
It’s also the message - and the only message - in the useless bestseller Rich Dad, Poor Dad: “make others work for you instead of you working for others.” Because, that’s how we decided to organize capital in our society: if you own a business you get to be rich, if you work for a business you are poor. Here are some examples of salary differences between people who work and people who tell them to work.
- Lee Scott: $30 Million in 2004 versus Average Wal-Mart Salary: $9.26 an hour
- Dwight C Schar: $58.1 million in 2004 versus average Drywall Installer: $38,315.
- Henry Silverman: $60 million in 2004: versus median cook salary: $31,876
- John Mackey: $2.7 million in 2005 versus average Whole Foods employee salary: $32,000
Before we go on, please ponder how you would spend your monthly paycheck of five million dollars.
Of course there are plenty of defenders of the reality that CEO pay is more than 300 times that of their workers. Elan Journo for example says that:
On the gridiron, the baseball diamond and the basketball court, we see and admire the physical prowess of a superlative athlete–one who earns the title of MVP–and we understand that it is morally proper to reward him accordingly. Though the efforts of CEOs are not televised on Monday Night Football, their achievements are real and have a profound benefit to all our lives. It is time that we learned to appreciate the work of successful CEOs and recognize that they deserve every penny of their salaries.
Morally proper?
Despite my own morals being clearly perverted, I’m skeptical that a high CEO to average salary gap is good for a company’s overall performance. I’m much more inclined to agree with Bob Sutton who has shown that “companies that had the widest range of pay scale between top and bottom performers, suffered the poorest financial results.”
As far as I can understand, there must be two competing management philosophies. One is that, by making CEO salary so (unreasonably) attractive, the average lowly worker will strive and strive as hard as possible to one day fill the shoes of the grand master. The other idea - by limiting CEO pay - employees won’t feel exploited and will feel valued by management.
I mean, if a CEO makes 400 times the amount of money as one of their employees isn’t that sending the message that the employee either does 1/400th the amount of work or is 1/400th as important?
If I work at McDonalds and my manager makes twice as much as I do, I can quite happily justify doing half the amount of work. Of course, there’s the argument that decisions by managers are more important, riskier, and therefore more valuable, but as someone who has both managed and been managed, I can tell you there is no question which position is considered the promotion.
One of those CEO salaries I listed above should have stuck out. Unlike Silverman’s $60 million and Scott’s $30 million, Whole Foods CEO John Mackey made a “relatively modest” $2.7 million in 2005. There’s a reason why. Despite some controversy over Mackey’s stock options, Whole Foods has a CEO salary cap at 14 times the average employee salary.
Mackey wrote an article in the special Newsweek edition of ideas for 2006 (kept my brain buzzing all the way from Barcelona to LAX), about wage transparency.
At Whole Foods Market, one of our more unusual management practices is to let all team members look up what anyone in the company is being paid. It’s a system we put in place a long time ago. most companies keep wages a secret because there are significant injustices, and they’d prefer people not know about them. But when wages are secret, people tend to think many people are getting paid more than they really are. Because we make our pay very transparent, people can see what everyone else is making so they can see that the system is fundamentally fair. When there are injustices, they are clearly seen and can be corrected.
Anyone can ask, “How come Tom is making $3 an hour more than me?” Team leaders can say, “If you did what Tom did and had that level of responsibility, I’d pay you that same amount.” And if in fact Tom has too good a deal, it brings that injustice to the light of day, and that will get corrected over time. If you’re giving someone a pay increase, you’re not doing it secretly - you know everyone is going to find out about it, so you’d better make sure in your own mind that you can defend your own pay decisions. Envy is always going to be there in any compensation system. The advantage in a transparent system is the envy can come out in the open and be dealt with.
I can’t for the life of me understand how salary has become a privacy issue. Why are we so scared to ask how much someone makes? In Mexico a newish law made the salaries of all civil servants publicly available on a website. Excellent. If I were dictator, I’d make all salaries publicly available period. Not only does it make sense internally for a company for the reasons that Mackey gives, but it just makes sense in general. Part of the reason that salaries so poorly correspond to job occupations is that no one knows who earns what. I really believe that if salaries were made public, it would provoke a debate about who gets paid what for doing what and that we’d inch closer to meritocracy.
All publicly traded companies have to report executive salary information to the SEC. Here’s the information for Exxon-Mobil (may cause anger and hostility). There’s actually an argument to be made that the reporting of executive salaries is counter-productive because every CEO will demand more than what Joe CEO at Company X got last year - much like in professional sports it creates a salary war. And personally, knowing that this ugly mug got a $400 million severance package makes me nauseated.
Yeah, I concentrated too much on CEOs in this post. I really only had two points - 1.) that pay scales should be much narrower and 2.) all salaries (not just CEO’s should be transparent, at least internally if not publicly.
I like this exchange:
I’m with you. I don’t think there is any theory that can justifying paying anyone as much money as these people make, especially when it comes at the expense of average workers. That $400 million is $3,252 for each of the 123,000 employees of Exxon. I’d like to hear anyone contend that it wouldn’t be better for society in general to have that money go to them than one dude who already has hundreds of millions of dollars. Or to go in to research for alternative sources of energy, or exploration for cheaper sources of oil…
Since when are you writing about business? Wanna come work for me? I’ll be sure to pay you what you are worth.
Abogado your girlfriend is luck, I want a man who makes statements like “Here’s the information for Exxon-Mobil (may cause anger and hostility).” —that my dear is H O T. As one of the Daily Show comedians once said I’d like to find someone can “cause growth in my private sector”.
Jennifer hire me! Please! I need a job. And you can pay me half of whatever Oso is worth. Man last week I went to a job interview where they asked me if I spoke Hispanic (they were looking for someone bilingual) and asked me if I cook Spanish dishes and could I bring in some to work. Man someone please hire me.
Dictator Oso - I love it!
Cuando empieza la revolucion?
Right on. That’s why it’s mildly amusing to listen to libertarians argue that capitalism is the best economic system for the poor. How can social mobility be achieved while the gap between the have and have-nots keeps getting wider?
I don’t quite fall for Marx’s assumption that “to make money you have to take it from someone else”, but when the Exxon CEO has a cozy $400 million pay and retirement package while the general population of most oil-producing nations live in abject poverty, well, something’s wrong.
Equality and transparency have much more complex cause and effect than competing management philosophies, but yeah… besides, how many poor libertarians do you know?
“That’s why it’s mildly amusing to listen to libertarians argue that capitalism is the best economic system for the poor”. — Steven Mansour
Nobel Laureate economist Robert Lucas Jr, in an article for the Federal Reserve Bank Of Minneapolis titled, The Industrial Revolution , discusses economic history and concludes with:
Or to put it another way, Walter Williams states it this way:
The reason that libertarians, conservatives, and even liberals, say that capitalism is the best economic system for the poor is because history has irrefutably shown it to be.
Sure, it’s not perfect, it may not solve all of societies problems, for example, poor people in capitalist countries now - instead of having a starvation problem like in the past - have an obesity problem, and there is no doubt that capitalism has contributed to that. But while it is not perfect, it still remains the best economic system we have out there.
Even comparing mixed capitalism like they have in France, Germany, and so forth to that of the United States, still shows that purer capitalism is better. For example, in Europe in general they have a much larger gas tax, higher price of gas, higher taxation, more social programs for the poor, a more generous social safety net, etc…but even with all of that you don’t see a higher standard of living for the poor, on the contrary, the standard of living is lower in Europe than in the United States. In addition, social mobility in Europe, at best, is equal to that of the United States. However, if the recent France riots are any indication, there is a strong reason to believe that social mobility in Europe is significantly worse than in the United States.
So if a higher standard of living or higher social mobility does not come from higher taxes, more social benefits for the poor, and a generous social safety net, what does? Well just to take Europe as an example, the answer is: a higher unemployment rate (especially for the poor minorities), low income mobility, lower standard of living, and most harmful to the poor, lower economic growth.
In an imperfect world, it is really easy to throw mud at something for not being perfect, far harder it is to stand on firm ground and defend it, and so I ask, if capitalism is not ‘the best economic system for the poor’, what is?
Abo,
My bleeding heart betrays me: $400 million is also 1,000,000 times the average per-capita income of Haiti. In other words, that severance package for one person could have supplied the yearly salary of one-eighth of the entire nation.
Jennifer,
Please child, you are talking to the guy who embarrassingly devours Business Week and the WSJ, not to mention who just got done picking out his investment portfolio. If your business is unambiguously good for society, I’d love to come work for you, whatever you’re willing to pay.
Elenamary,
Please help me understand the 21st century sexualization of the policy wonk. We are only months away from Wonkette and Abo on the cover of Maxim.
Xolo,
I don’t know, but when it does we will smoke bay area style blunts, not cigars. There’s the real recipe for peace.
Steven,
Your right - when transparency and equality are actually implemented into management, it brings about a lot of unintended consequences and a lot of time-consuming internal bickering. Unfortunately, there are so few case studies to look at and see what works best. That’s why Sutton’s research interests me.
HP,
Your comment is such a beautiful segue into the second post of this series that I will excuse you for your incessant hand-jobbing of every person you cite. “Nobel laureate” this, “Harvard professor” that. I dont’ know how many times I have to say it: we’re into ideas around these parts, not titles.
…
Damn Firefox, I don’t know what happened but my computer froze about an hour ago, and when I restarted it, all my Firefox bookmarks were gone, so were all of my engines I had installed. Now it won’t allow me to install any search engines, it doesn’t even come with the default google one either. I’ve tried re-installing and upgrading y nada…How good does Opera work?
Anyway, I don’t quote titles, I only quote economists, and only when it is fitting. After all, if economists can’t be trusted on issues regarding the economy, well, how much less so will my stand alone statements be trusted?
Btw, if ‘price gouging’ is what you are truly interested in, why don’t you also include the entity that is taking in the most financial gain because of high gas prices - the government?
i have been through the hiring process three times now and it is hard to find someone that is worth what i’m willing to pay them per hour. i want to pay someone a really great wage to do some really great work. but what i find is that most people want to do as little as possible for as much as i’m willing to pay them. i have found 1 really great programmer, though, who actually does what he says he will and works as hard as i do. he makes almost as much as i do an hour and i feel great about it. another more recent hire, that might not make it to the end of the week, tries to do so little that i almost see no work getting done. and this was the person that was so worried about getting paid ‘a fair wage.’ i feel cheated paying them the wage we agreed on even though it is less than half of what i make an hour.
HP,
Sorry boo … ever since getting my mac, my trouble-shooting has become very rusty. Just not enough practice. I do protest any switch to Opera though because this blog’s design is horrendous on that thing.
I’m not sure where you’re quoting “price gouging” from, but I will comment on why I’d rather see a higher percentage of my gas bill go to the government than to Lee Raymond and it has to do with the second part of this post’s title: transparency. Most public spending is publicly available. The government is much more accountable (often thanks to conservative groups) than is Mr. Raymond. So, while Alaskan bridges to nowhere are regrettable, at least we know about them. And at least we can vote the representatives out of office who call for such wasteful spending. None of that is true with the former Exxon chairman. He could spend $400 million on pornography and there’s nothing we could do about it. Besos.
Leah,
I’ve often thought about starting my own business. In fact, for tax purposes (because I’m paid mostly with invoices), I do run a business. If I were to hire an employee, I would not pay an hourly wage, but rather a percentage of the company’s overall net profit. Let’s say I wanted to start a small home renovation business that focused on interior painting and lighting. I would pay both my full time painter and electrician 25% of the company’s net profit. I would take out 35% for myself and reinvest the remaining 15% back into the company. And most importantly, I’d be 100% honest with my employees about how the company’s pay structure is organized. As a matter of fact, employees would have access to all the company’s financial information. This way it’s not a matter of their hard work potentially paying off years down the road, but instead an immediate vested interest that equates hard work with quick rewards.
Best of luck with the business - it’s stressful, but also lots of fun being an entrepreneur.
Ahhhhh, but there is also transparency in the private industry as well, after all, you do know how much he - and every CEO of a company - has received in income and bonuses, it is all public record.
And just like you can ‘theoretically’ vote out wasteful politicians, you can also ‘vote with your feet’ on gas prices, in fact, this is the very argument liberals have made in support of higher gas prices - it will lead to reduced gas consumption. In addition, you can drive less, stock holders can vote out boardmembers, and everybody else can buy less oil stock. So I don’t see the transparecy issue as being that much of a dividing factor.
In addition, even if the CEO of Exxon wastes all of his $400 million on porn, it pales in comparison to the amount of wasted tax money (in the billions) the government wastes every year, but with a very significant difference, atleast with the oil industry, a good chunk of the remaining amount of profit has to be used on further oil exploration. In other words, atleast some of the money given to oil companies will be used to help reduce the price of future gas prices, yet none of the ‘price gouging’ the government does will be used for that.
So in the end, if there is ‘price gouging’ going on, it is by the government itself, and everybodies anger should be directed there!
Hi Oso,
I was going to wait to post on this until you finished your series, but I thought I’d comment on your business scheme as it most likely will not come up again.
You state:
Sounds like an interesting plan. I’d just point out that most companies rely on savings for years before they turn a profit (i.e. their own capital, venture capital, private equity, etc.). It would be tough to get employees to wait that long until their first paycheck.
With regards to that point we need look no further than John Mackey of Whole Foods who had this to say about starting his business:
Of course, no one is smart enough to declare that “X” is the best way of doing business. In a dynamic economy like ours Exxon gets to try their ideas, Mackey gets to experiment with his, and if you start a business you will be free to try your approach.
Maybe yours will be superior to the rest. If it is, other companies can follow your model and that helps everyone in the long run.
Good ideas win out… no dictator needed.
Hi HP,
You quoted Robert Lucas Jr:
Ironic that he used India in that dated quote. India - with the exception of West Bengal (the world’s longest serving democratically elected communist government) - has embraced capitalism voraciously over the past 15 years, privatising this and that and reducing government controls on foreign trade and investment. However, in the world’s biggest democracy, almost a quarter of the population live on less than $1 a day; 700 million more live on less than $2 a day. Poverty is still rampant in India - free-market capitalism hasn’t distributed the wealth back down to the people. Is this another one of those examples of “capitalism being the best economic system for the poor because history has irrefutably shown it to be”?
I think your heart’s in the right place when you quote:
But, no. That’s the potential for improving the lives of CEOs, as we’ve seen. Ramping up production on a shiny new oil platform buys Exxon’s CEO a new Ferrari for every grain of rice that gets redistributed to the the hungry. Sensationalism, exaggeration, maybe. But you get the idea.
There’s no question that socalist economies don’t fare as well economically - in a free-market world. Poor countries are given two choices on the global economy - adapt to U.S. free market policies so that we can sell you our junk and/or plunder your resources, or stagnate and remain poor.
I found this amusing, considering that I’m from the camp that states capitalism itself is the root of a plethora of the major social problems we have to deal with today. So, poor capitalist countries don’t have starvation problems anymore? Well, that’s news to me.
The riots in France had a lot to do with rights and freedoms that are expected by a certain class of citizens, but not delivered. The poor I’ve met in American are tired - they don’t “expect” anything anymore - they’ve grown disillusioned with the idea of ever obtaining justice, equality or freedom, and have given up the will to fight for it. Indicentally, Cleveland is the single most depressing example of poverty I’ve ever confronted - including anywhere in Cuba. Getting the short straw is all the more biting when you’re looking across the street at the powersuit-clad business execs sipping their Starbucks lattes and getting into their Cadillacs.
That’s what we’re here trying to find out, isn’t it?
Okay, let’s use India. Here is a little background on India, The New York Times writes:
But lest you lose all hope, India has been showing significant progress lately. What is the cause of that progress? Economist Gary Becker writes:
These economic reforms have resulted in India’s rising prosperity, a rising prosperity that has included millions of otherwise poor people. Of course, India still has a lot more to go, but the current progress, specifically because of capitalist changes, cannot be ignored.
Just to give an insiders description of what economic reforms have done to India, Amit Varma, from India Uncut writes:
He goes on to directly rebut the claim that capitalism results in the rich getting richer and the poor getting poorer, he writes:
So with all of this progress, what is hampering India’s continued rise to wealth, why haven’t even more poor people benefited from India’s rapid rise in wealth? Well, the answer to that is very simple, you see, India has that very well known group of people that are the primary enemies of economic growth and poverty alleviation around the world: modern day liberals. Liberals in India continue to be one of the strongest opponents of further economic reforms, blocking everything from further deregulation to the liberalization of the labor market - all things that would help alleviate poverty even more.
Amit continues with:
This is why Indian economist Jagdish Bhagwati is so strongly in favor of capitalism and free trade; he has seen first hand what they have done to his native homeland.
India is not unique either, we can use examples in China, where small capitalist changes have started turning the country around to becoming one of the worlds most quickly developing nations, or we can talk about the East “Asian Tigers”, which have experienced the greatest alleviation of poverty in the history of man. In half a century, Hong Kong, Taiwan and South Korea have gone from subsistence to First World status all because of capitalism. The list goes on and on…
Sure, there is still alot more to do in these economies, most of these economies have only experienced moderate capitalist changes, but it is an almost one-to-one link, the more capitalist changes a country performs, the wealthier its citizenry becomes, and the above countries are examples of that.
You make a couple of other points of which I’d also like to respond to. You write,
There’s no question that socalist economies don’t fare as well economically - in a free-market world.
Ahhh,but socialist/communist economies didn’t fare well in any world, remember the cold war? Remember, the fall of communism? Remember all the human rights violations, environmental problems, and most of all, poverty that communism caused? There is a reason why we now live in a ‘free-market world’; it’s because we have tried the alternative and seen what that resulted in. If you don’t remember, it’s worth checking out the museum of communism here.
You also write,
The poor I’ve met in American are tired - they don’t “expect” anything anymore - they’ve grown disillusioned with the idea of ever obtaining justice, equality or freedom, and have given up the will to fight for it.
I agree there is still alot more that needs to be done in the United States to help the poor, just to give one example, I am one of the strongest opponents of arguably the #1 reason for continued poverty and income inequalities in the United States: the government monopoly of our public education system. I too argue in favor of ‘justice, equality or freedom’ for the poor by pushing strongly for privatized vouchers, vouchers that give the poor the very same opportunities rich people have: choices of where to send their kids to school.
But just because there is still alot more to do in the United States does not mean that we are in anyway comparable to non-capitalist countries like Cuba. After all, it isn’t children from Compton, Cleveland or any other poor American city risking life and limb trying to reach different parts of the United States. All those people that risk their lives coming from Cuba are doing it because they have heard from Cuban relatives what the economic situation is here. People would only risk life crossing the ocean if the economic situation back home was really bad, and the fact that many Cuban citizens do this yearly, testifies to the true circumstances back home in Cuba.
As far as your Cleveland example goes, I also don’t buy it. For example, I grew up, until the age of 22, in Compton, California. Compton, California is one of the poorest cities in the United States, and while there certainly were wide income disparities between the rich and poor, there weren’t nearly as many as there are in non-capitalist countries. To stick with Cuba as an example, just compare the vast difference in wealth - and quality of health care, quality of housing, quality of food, quality of standard of living - between say the average Cuban citizen and the average member of Castros regime. For example, even growing up in Compton, most of my friends had a color TV, cell phones, a car, and the basic nutrients needed for daily living. The problem with poverty in the United States is not necessarily a lack of standard of living, the problem is primarily a lack of the family (another story for another day).
When I asked you to provide a better economic system for the poor than capitalism, you responded with,
That’s what we’re here trying to find out, isn’t it?
Which basically means you have none. Like I said, it is alot easier to throw mud than to stand on firm ground, so unless you can provide a better economic system for the poor, I am sticking to the one that has shown the most progress in actually alleviating poverty.
It’s amazing to watch this conversation (d)evolve from a very concrete example (we feel underpaid for the work we do compared to our bosses) to the oversimplification of ‘is capitalism good or bad?’ Before responding to individual comments, I’d like to bring the discussion back to my original - and hopefully less polarizing - suggestion that greater transparency encourages equality. That shouldn’t be a liberal or conservative issue … or does anyone want to argue in favor of secrecy and inequality?
I believe that humans are equally capable of being greedy and selfish on the one hand, and generous and equitable on the other. I also believe that we act our “best” when our actions are made public. It’s unfortunate that I’m more likely to help an old lady cross the street when a lot of people are looking on, but it’s also true.
HP,
I agree. Getting consumers to vote with their wallet just like they do with their ballot is (or should be) the holy grail for progressives and conservatives alike. I also think that consumer rights groups often do more harm than good because they try to righteously speak for consumers instead of educating them on the consequences of their purchases. Unfortunately, most of us often give into lethargy instead of following through on our best intentions.
This I do not agree with. You speak of public spending as if it should be spent the way that you want it to be. What is wasteful for one person is very often beneficial for someone else. It’s sad that our current campaign finance laws usually ensure that big donors are often the beneficiaries of public spending, but “political capital” is still much more evenly distributed in our society than is “business capital.”
Peter,
I knew that somone would take my “business proposal” literally. While I do claim a certain talent with indirect lighting and complimentary color schemes, I very much doubt that oso interior designs will ever take shape.
Of course there is such a thing as overhead and investment. And those who take the risk to invest in a company should be rewarded when it succeeds just as they will lose out if it does not. Like you, I too want as dynamic an economy as possible. But there are other things I also care about such as environmental conservation, labor standards, and income equality. While free markets have done wonders for innovation, competition, improving livlihood, and even democratization, they fail us when it comes to cleaner beaches and justifiable income distribution. Like HP says [markets], are not perfect, but they are much better than a government-centric command economy. I agree. And I think we can make those markets function even better by balancing them with some regulations.
When you say:
your definition of “superior” is based solely on profitability whereas I would rate the success of my business model on fairness first and profitability second.
I’m sure we both agree that there is no “pure capitalism” nor “pure communism” like HP insists. There has never been a society in which free markets operate without regulation. In fact, Abo likes to write volumes about how a “regulationless” market is a contradiction of terms. We have also both seen, first hand, that some economic competition does exist in Cuba despite its dictatorial government.
So I think I can speak for us both in saying that markets are good, economic competition is good, and that some degree of regulation (whether it be copyright or minimum wage) is necessary. Where we disagree is how much regulation should be put in place and what it should regulate. I hope that after this series our conversations will focus on those specific regulations and their specific consequences instead of this broad (and bogus) “socialism” versus “capitalism” debate.
Oso,
You are starting to sound a wee bit Marxist.
“From each according to their ability, to each according to their need.”
Is that not equality? Does that not require transperancy?
Secrecy will always benefit those who control the means of production, where transperancy benefits those who don’t. If you can pay Juan less than Bill for the same work without creating problems, you will. This is harder (not impossible, though) if Juan does not know how much Bill is making. Moreover, if you have a monopoly or an oligarchy, it is not in your interests to disclose your production costs. You can then determine the elasticity of demand and set your price at a point where you maximize your profits (sounds a bit like the oil/gasoline producing markets right now, doesn’t it?).
Free markets (and most economic theory for that matter) assume perfect information flows. Thus a “true” free market would require full disclosure of salaries and wages. As you mentioned, we live in an imperfect world without the necessary information flows, without the free markets, and the irrationality of humans. That is where economics faces its greatest challenge. Economic theories control for it by claiming “ceribus paribus” (if all other things remain constant) and making assumptions - but all other things do NOT remain constant and the assumptions they make are usually not right.
Last, like you, I am amazed how quickly people fall into their respective ideological camps (more like fortresses).
This has been an entertaining dialogue - thanks for the provocation, Comandante Oso!
Xolo,
I’m trying my hardest not to sound “anythingist.” Sometimes I feel like the thinkers before us restrict how we discuss the issues of today. With that said, I’ve always had problems with the statement “From each according to their ability, to each according to their need.” How do you judge someone’s “ability”? Isn’t “ability” something that’s always in flux and dependent on how it is or is not applied? And isn’t “need” just as difficult to define?
I think that when that kind of perspective (do what you can, get what you want) is implemented in government, it invites even more corruption and more secrecy than our own flawed system. At least that’s what I saw in Cuba and what seems to be taking place in Venezuela.
Anyway, I absolutely agree with you - the ones who have the most to lose in an open society are the ones who are exploiting.
Using that quote was just a way to taunt (you and others) and set up my broader point: dogmas, ideologies, creeds, orthodoxies, etc. are all flawed (and as you point out, invite abuse). Life, culture, perspectives, preferences are always changing so there is no better and no worse. The best we can do is advocate for freedom of thought (and hence information).
As to letting previous thinkers restrict how we discuss issue today - that happens because the ideas become dogma rather than perspectives from which to ponder issues. The more perspectives you get without focusing on one, the clearer picture you will get. Is that the way to TRUTH? Now I am letting disorientation from the viruses in my sinus affect my words. Time to stop.
I’d like to comment on Rich Dad, Poor Dad. I spent an entire semester listening to my tax professor discuss this book. The book, surprisingly, is NOT useless, and in fact its central message is not that you need to sit back and have others work for you - in fact, it has nothing to do with who you work for or who works for you or whatever. The key is actually in NOT earning wages at all - because then you are free from income tax. It is actually pretty stupid that these CEOs are making million-dollar salaries, because they will end up paying 35% of those salaries (or maybe 30%, I forget) to the government.
The central theme of Rich Dad, Poor Dad, is actually that you need to buy assets in order to escape taxes. Of course, you need the money to do this first, but that doesn’t mean that you need to be a CEO. The key is, as my professor says, to buy, borrow, and die. You buy assets (like stocks or real estate) with your money. You let these assets appreciate, which is not a taxable moment according to our tax code. You borrow against the appreciation of these assets - make enough money after taxes (through wages) that you can pay the interest on your borrowing, and you will have plenty of money to spend, tax free. Borrowing is not considered income and is therefore not taxed. Finally, you keep your assets until you die, and then transfer them to your children or spouse. Upon this transfer, they get a stepped-up basis, meaning they will not have to pay taxes on the appreciation of your assets either.
Anyway, the point is that working and earning wages gets you NOWHERE, while buying assets and borrowing against them gets you EVERYWHERE. Ultimately, the only way to fix this is to change the tax structure entirely - but at least by including borrowing as income that is taxable. Rich Dad, Poor Dad isn’t necessarily saying our tax system is a good thing, it is just detailing how you can avoid it.
Xolo,
Some jalapeño should clear those sinuses right up. And I agree with everything you wrote.
Bobbo,
His guide to avoiding taxes took up maybe 1/10th of the book. Perhaps that’s the 10th that you read?
Yes, hence the housing bubble and the record personal debt …
I’ll admit that I just scrolled through this entire debate without reading it to say to ElenaMary: you do not want me to pay you half of what Oso is worth.
Totally my fault. The topic of salarial equity hits close to home, and I started another ideological flame war. I’ll be sure to stay on topic next time, as long as you talk about something unimportant.
I’m late to the party, but I thought this MJ article would be a bit of fuel for the fire: The Predator State
Steven,
I can think of at least one other person (not to mention myself) who could also share the blame, but I doubt he will.
Chris,
As with most either/or questions like this, the answer I would say is “both.”
Oso-
I want to make this brief, but I felt I should reply to your comment.
My definition of superior doesn’t define “profits” as the almighty end.
The end, like yours, is fairness.
I’d just stress that part of being fair involves convincing people of the merits of your argument as opposed to dictating them. It also means respecting the will of the minority when their actions cause others no harm.
Tying that into the discussion above on income equality and transparency, fairness means using your mind and a pen to persuade employers, employees, and consumers alike that wage transparency is a good thing. Layout the benefits and get as many people as many people as you can to voluntarily follow your lead.
But if employees in certain businesses, let’s say a waitress in San Diego or a metal smith in Bombay, don’t want their salaries broadcast to the world despite your arguments, it is important to respect those wishes. The use of the law to force them to compel with your vision seems wrong. This is especially true because their decision to keep their salaries private does not involve initiating force against any other individuals.
Income inequality does bother many people. But personally, I’m far more concerned with finding ways for the 1.1 billion people who make less than $1 a day to increase their incomes than I am with limiting the $700 million dollar income of people like Steve Jobs of Apple (highest salary to date). I’m all for suggesting to Jobs how he should spend that wealth to help out those disadvantaged 1.1 billion, but not for coercing him. Hopefully we can agree that the plight of those 1.1 billion should be at the top of the list.
And as the debate on regulation continues, I hope we can also agree that regulation is best in a decentralized manner. For example, it is better to have local school boards setting testing standards than it is having President Bush set them with No Child Left Behind. It is also better to have living wages implemented at the city level, instead of the state and federal. This allows people to vote with their feet in the case that the foresight of the policy makers is not perfect.
Peter,
Absolutely, I agree. Couldn’t agree more. I hope you don’t take my dictatorial aspirations seriously. I actually have tried very hard to convince the management at two of my jobs to institute a transparent wages policy. Not surprisingly, all of the “workers” were in favor, it was the management who was against the idea. I have no idea how much they are earning (though they obviously do know my salary) so I can’t say that they’re doing any harm, but if we’re doing the same amount of work and they get paid ten times as much for it, then yes, I would make the argument that “harm” (exploitation) is being done.
It’s not the “waitress in San Diego or a metal smith in Bombay” who want to keep their salaries private, it’s the people who earn millions off their work. Like Xolo said, “Secrecy will always benefit those who control the means of production, where transperancy benefits those who don’t.”
And even if a waitress or metal smith did want their salaries kept private, it’s worth noting the reason why - humiliation of their “low standard of living.” Whereas executives and managers would rather keep their salaries private to hide their greed and exploitation.
I had no idea that Steve Jobs makes that much money … now I have to rethink if I’m going to buy a new MacBook or not. Being a consumer is so time-consuming …
As far as federalism goes, I’ve said for a long time now that I prefer decentralized governing. I do have some exceptions - some of which are even contradictory - but overall, I’d much rather see policy get made at the local level.