Pay vs. Profits

rake

TheStone wrote:

Frank the tank wrote:

I would say the most successful economies are ones with higher wages. The more dispossable income people have to spend the more they will, thus driving the need for new goods to be manufactured and more services will be used.

If only a very few %agewise have any decent amount of income what drives markets to produce more.

As some on here would seem to drive wages down and down, if ultimately (for the sake of argument) all of us too thick or frightened to be self employed or be an employer had to work for nowt. Who would be able to buy the goods being made? Who would be able to afford the service provided, errrr, no-one thus demand would be non existent thus no profit for the company owner.

If low wages was a prerequisite to a nation being wealthy Sudan would be a superpower and we'd be having whip rounds for the Germans every other year.

Wages are relative.

If a country existed on it's own, it doesn't matter if wages are high or low, they'd still be able to purchase the same proportion of the goods available.

When you import and export it becomes more complex. To buy stuff from another country, you have to be able to sell* them something of equal value in return. The relative value placed on the hours taken to produce those two things, creates the difference between high and lower relative waged economies.

* what you sell in return doesn't have to be goods. It could be services, property, investments and obviously debt.

The problem right now is that the relative wage difference between the East and West can't continue. The West have a lot of debt and no purchasing power, whereas the East have the savings. They're likely to begin consuming their own production and increase their own standard of living at the expense of the cheap consumerism the West has enjoyed.

The 'Keynesian' West seems to believe that China needs to West to keep buying their stuff or they'll all starve, but the key is production. If you produce more than you need, then your standard of living should be high. If you don't, it will be low.

i wonder weather frank was speaking about wealth split here as he mentions percentage low wages i.e 20% extremely well off with 80% struggling.

Frank the tank

The main point I was trying to make was If the masses have nowt to spend it can't be good for the ecconomy generally. Only those at the top benefit and only then if they export. If every other country has the same outlook though I.E. the masses have sweet fa to spend you're going to find it hard to find a market.

Perhaps an over simplification but the principle is plain, the less you have less you can afford, the more you have the more you can afford.

alihisgreat

Frank the tank wrote:

The main point I was trying to make was If the masses have nowt to spend it can't be good for the ecconomy generally. Only those at the top benefit and only then if they export. If every other country has the same outlook though I.E. the masses have sweet fa to spend you're going to find it hard to find a market.

Perhaps an over simplification but the principle is plain, the less you have less you can afford, the more you have the more you can afford.

That's not really the case, not many people have money sitting idle doing nothing.

the more well off just spend more money, on bigger houses, cars, clothes, school fees etc. and the money is still in circulation stimulating the economy regardless of who is spending it.


and with the super rich, yes they may have a lower marginal propensity to consumer than the poor (i.e. they consume less extra goods/services when they receive one unit more of income than if the poor received that unit)

...but that's a simplification, as often the rich pump huge amounts of money into the economy through other channels, like investment or through taxes that allow higher government spending. (taxes may be a weak example given the amount of tax evasion.. :roll: .)


also exports are good given the fact that the UK runs a trade deficit and imports more than it exports.

rake

ALIHISGREAT wrote:

Frank the tank wrote:

The main point I was trying to make was If the masses have nowt to spend it can't be good for the ecconomy generally. Only those at the top benefit and only then if they export. If every other country has the same outlook though I.E. the masses have sweet fa to spend you're going to find it hard to find a market.

Perhaps an over simplification but the principle is plain, the less you have less you can afford, the more you have the more you can afford.

That's not really the case, not many people have money sitting idle doing nothing.

the more well off just spend more money, on bigger houses, cars, clothes, school fees etc. and the money is still in circulation stimulating the economy regardless of who is spending it.


and with the super rich, yes they may have a lower marginal propensity to consumer than the poor (i.e. they consume less extra goods/services when they receive one unit more of income than if the poor received that unit)

...but that's a simplification, as often the rich pump huge amounts of money into the economy through other channels, like investment or through taxes that allow higher government spending. (taxes may be a weak example given the amount of tax evasion.. :roll: .)


also exports are good given the fact that the UK runs a trade deficit and imports more than it exports.

thats the majority of people told then, keep hoping the greedy ********** can have bigger cars and houses because we're all better off for their superior spending and investments, which as we know they do for charity and dont line their pockets any further from it. Am i on the right track :?:

alihisgreat

yeah everyone is better off when people spend money.. as the economy grows and the wealth trickles down... its not an even distribution but you can argue that it is reasonably fair when you consider the amount of tax the rich pay.


what would be more fair? taking 80% of the income of the rich... that they have earn'd.. and giving it to the poor who haven't earn'd it?

MaxwellBygraves

ALIHISGREAT wrote:

what would be more fair? taking 80% of the income of the rich... that they have earn'd.. and giving it to the poor who haven't earn'd it?

You'd be a rubbish socialist

Frank the tank

ALIHISGREAT wrote:

yeah everyone is better off when people spend money.. as the economy grows and the wealth trickles down... its not an even distribution but you can argue that it is reasonably fair when you consider the amount of tax the rich pay.


what would be more fair? taking 80% of the income of the rich... that they have earn'd.. and giving it to the poor who haven't earn'd it?

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

alihisgreat

Frank the tank wrote:

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

What's the alternative? impose a higher minimum wage? well then you get higher unemployment.. although a wage rise means more people are willing to enter the labour market, resulting in higher supply of labour there is less demand for labour as producers can't afford as many employees.. so you actually get lower employment than before!

you can't pay a burger flipper £15 an hour because there is no profit in that... at the end of the day someone has to be at the bottom doing the jobs that no one else wants to do, for no money.

That''s just the way the system works, some succeed and some don't... the public seem to have been brainwashed by the champaign socialists party over the past 15 or so years into thinking that the UK can be this glorious country where everyone can have everything... walk out of school with 2 GCSEs in childcare and sewing straight into a university course on origami and then onto a high paid job. (and they tried to make it work by borrowing horrific amounts of money.. and look where the national debt is now).


This is where limited redistribution of wealth comes in... to ensure that those at the bottom at least get some help.. and this money pays for public services that the poor use, as well as transfer payments in the form of benefits

verylonglegs

ALIHISGREAT wrote:

Frank the tank wrote:

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

What's the alternative? impose a higher minimum wage? well then you get higher unemployment.. although a wage rise means more people are willing to enter the labour market, resulting in higher supply of labour there is less demand for labour as producers can't afford as many employees.. so you actually get lower employment than before!

you can't pay a burger flipper £15 an hour because there is no profit in that... at the end of the day someone has to be at the bottom doing the jobs that no one else wants to do, for no money.

That''s just the way the system works, some succeed and some don't... the public seem to have been brainwashed by the champaign socialists party over the past 15 or so years into thinking that the UK can be this glorious country where everyone can have everything... walk out of school with 2 GCSEs in childcare and sewing straight into a university course on origami and then onto a high paid job. (and they tried to make it work by borrowing horrific amounts of money.. and look where the national debt is now).


This is where limited redistribution of wealth comes in... to ensure that those at the bottom at least get some help.. and this money pays for public services that the poor use, as well as transfer payments in the form of benefits

The previous government were nothing like socialists, I'm amazed at how many people still talk like they were. I guess it just proves how easy it is to fool the electorate.

redjeepǃ

Frank the tank wrote:

ALIHISGREAT wrote:

yeah everyone is better off when people spend money.. as the economy grows and the wealth trickles down... its not an even distribution but you can argue that it is reasonably fair when you consider the amount of tax the rich pay.


what would be more fair? taking 80% of the income of the rich... that they have earn'd.. and giving it to the poor who haven't earn'd it?

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

Unfortunately the wages you can demand depend upon how unique your skills are. Kick a ball like Tevez, play a guitar like Mathew Bellamy, lead a successful company like O'Leary or be able to remove a benign tumour with a scapel (can't think of a role model for this one!) and you'll always earn more than somebody whose only skill is to be able to flip a burger.

Companies will always try and minimise all forms of expenses in order to remain competitive, and this will always include salaries and benefits, which will mean that they will pay no more than they have to to get the job done. In most of Western Europe the problem is that the salaries are much higher than in other countries. The only way to compete is to remain more productive, make a better quality product or be innovative, otherwise why would your customers buy your product ?

Ask yourself if you were offered two identical products, one made locally that cost £100 and one made in China that cost £50, which would you buy. Honestly.....

rake

why cant the chinese run our banks for half price? they couldnt make it any worse.
those with the less common skills usually need educating to get on like anyone else, but why invest in people when they can be sourced else where. those high earners now should be thankfull they climbed the ladder while there were still rungs on it.

alihisgreat

verylonglegs wrote:

ALIHISGREAT wrote:

Frank the tank wrote:

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

What's the alternative? impose a higher minimum wage? well then you get higher unemployment.. although a wage rise means more people are willing to enter the labour market, resulting in higher supply of labour there is less demand for labour as producers can't afford as many employees.. so you actually get lower employment than before!

you can't pay a burger flipper £15 an hour because there is no profit in that... at the end of the day someone has to be at the bottom doing the jobs that no one else wants to do, for no money.

That''s just the way the system works, some succeed and some don't... the public seem to have been brainwashed by the champaign socialists party over the past 15 or so years into thinking that the UK can be this glorious country where everyone can have everything... walk out of school with 2 GCSEs in childcare and sewing straight into a university course on origami and then onto a high paid job. (and they tried to make it work by borrowing horrific amounts of money.. and look where the national debt is now).


This is where limited redistribution of wealth comes in... to ensure that those at the bottom at least get some help.. and this money pays for public services that the poor use, as well as transfer payments in the form of benefits

The previous government were nothing like socialists, I'm amazed at how many people still talk like they were. I guess it just proves how easy it is to fool the electorate.

that's why I describe them as champaign socialists... they were just a load of reasonably well off people with similar backgrounds to the conservative party who supported the vague ideas and principals of socialism in theory.. over a glass of champaign after the debates in the Oxford and Cambridge unions.. then when it came down to it created a 'third-way' which was incredibly centrist in order to gain votes.

Frank the tank

ALIHISGREAT wrote:

Frank the tank wrote:

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

What's the alternative? impose a higher minimum wage? well then you get higher unemployment.. although a wage rise means more people are willing to enter the labour market, resulting in higher supply of labour there is less demand for labour as producers can't afford as many employees.. so you actually get lower employment than before!

you can't pay a burger flipper £15 an hour because there is no profit in that... at the end of the day someone has to be at the bottom doing the jobs that no one else wants to do, for no money.

That''s just the way the system works, some succeed and some don't... the public seem to have been brainwashed by the champaign socialists party over the past 15 or so years into thinking that the UK can be this glorious country where everyone can have everything... walk out of school with 2 GCSEs in childcare and sewing straight into a university course on origami and then onto a high paid job. (and they tried to make it work by borrowing horrific amounts of money.. and look where the national debt is now).


This is where limited redistribution of wealth comes in... to ensure that those at the bottom at least get some help.. and this money pays for public services that the poor use, as well as transfer payments in the form of benefits

Employers should pay a decent living wage. The minimum wage forcing unemployment up argument was used when it was going to be introduced, it didn't happen. Why is it to get the best ceo's more money is the incentive yet the best cleaner is the one that will work for the least, surely you want the best cleaner, and to get the best you have to pay more.

alihisgreat

Frank the tank wrote:

Employers should pay a decent living wage. The minimum wage forcing unemployment up argument was used when it was going to be introduced, it didn't happen. Why is it to get the best ceo's more money is the incentive yet the best cleaner is the one that will work for the least, surely you want the best cleaner, and to get the best you have to pay more.

That's partly the 'superstar' CEO culture... the perceived impact of a CEO is much greater than the actual impact... and actual performance depends more on other factors like the general economic conditions. The Welches, Jobs etc. create an image of a CEO that demands a high wage.

you could also make other arguments, for example a CEO oversees a firm, that may be worth billions, and therefore CEO decisions are much more valuable because of their impact on £millions of profits.

a cleaner is a cleaner is a cleaner... if they don't clean properly a complaint is filed and they loose their job.. and someone gets frustrated that the floor is dirty.

if a CEO doesn't make the right decisions, £millions or £billions are lost... so you want to make sure you pay for the right person.

Circlip

Some interesting reading on this thread. I am MD of a business and since my accounts lady was off sick today, I have just finished some preparation for month end. Bit of relaxtion to read the forum (admire the pics ) before it all starts again at 7am tomorrow. Anyway the thread prompted me to post for once.

From the OP

The give plenty of reasons why more people are unemployed or in less skilled employment but that doesn't explain why even in highly profitable companies, pay hasn't kept pace with the profit growth. My own observation is that the top bods seem to be creaming the growth off into their personal bank accounts be it in the form of salaries of bonuses. Slightly bemused as to why this doesn't seem to get any attention in the article.

Nearly 7yrs ago I left employment (salary £50k) and bought my business from 2 retiring founders. Since I took over, my business has grown from sales of £750/800k pa to (on course for) £2m this year and staff nrs up from 9 to 21 + 3 apprentices. I have support from 2 directors/family members - one is an accountant and is our FD. He is paid about £100/mth salary, but is employed full-time in his job. The other is 'retired', but assists few hrs each day for £400/mth.

As we have grown I am expecting to make a profit this year. It is big change from 3 yrs ago when Everybody took a 5% pay cut for a few mths so I didn't have to make any redundancies. Back then one of the guys was moaning that I would 'still get a dividend' - I had to laugh as we made £135 profit that year. That after 12 months in which I bust my balls for the business.

Not looking for sympathy guys - I made my own choices to do this. However if any of my guys think I am 'creaming the growth into my personal bank account' then I would be angry & upset in equal measure. Firstly I am 100% sure I could not have achieved what we have done without a great team. I am equally clear that the business would still be running as it had if I hadn't come in and invested my money, my time and my effort to drive it on.

It is only last year that I put my salary back up to £50k. Around the same time, the three Directors finally paid off large *personal* loans that we took out (in addition to my savings that I invested) ....and we still owe over £125k to the bank. I still work 7 to 7 actually at work, plus most evenings at home, Saturday mornings at work - and Monday is stressful if I haven't worked sunday night. And yet, things have got easier! My boy started school (sept) and it was only when Wife was ill in early Dec I had to take him and I saw him in his school uniform for the first time.

I aim to keep the business growing - but I want profits, not just larger sales. I think we are under-staffed, but if I take people on, I am not 100% convinced of how the economy will run - again I don't want to have to cut people I have invested in. Also if I recruit others, it leaves less in the pot for the current staff - unless sales/profits happen to grow at same rate.

(exlcude the apprentices) My staff wages vary from £16k (driver) to over £40k for some of the top guys. At Christmas, they all got the same (i took nil). I am yet to decide what to pay at year end, and who gets what. It will be a difficult decision. I also know I need new machinery, 2 x vans, pay off loan, lots of other investment in next year.

So from my perspective:
1) the majority of the profit will be left for reinvestment and re-pay bank overdraft
2) the guys will get a chunk to reward their hard work - I would like it to be a good whack but I am working towards bonus, not pay rise....I need to keep the business lean to remain competitive and keep customers coming back.
3) I will split some my other Directors.

There has been a lot written here about large companies, shareholders etc but I think we are typical of a 'family run' firm (the Mittelstand in Germany). To answer the OP's question: although my profits have grown, quite simply, life is easier for me if I keep a lid on the wages, (just the same as rent, stock purchases etc) My traditional economy business is a far cry from the world of million pound City bonuses. Do the bankers work harder than my guys? Of course not. What I aim to do is keep the business going in the right direction and try my best to make it a good place to work. As soon as we can, we share the rewards. But it won't be big pay rises.

We never split the £135 between 3! This year I will take some money as I can justify it: I put in the original stake. Then I invested in growth and additional acquisition. I put in the hours and I am sacrificing huge chunks of my life for the business. What profits we make are my rewards, not my "cream." I want to take my kids on a decent holiday.

Off to bed now, got work tomorrow
Hope this helps anyone who is looking at their boss wondering where the money is going....

MaxwellBygraves

ALIHISGREAT wrote:

verylonglegs wrote:

ALIHISGREAT wrote:

Frank the tank wrote:

A lot of people existing on the minimum wage work very f**kin' hard for very little and still end up claiming benefits.

The question is who are these benefits really subsidising, the low paid worker paid too little to earn a proper living despite working hard or the employer not paying a decent living wage?

What's the alternative? impose a higher minimum wage? well then you get higher unemployment.. although a wage rise means more people are willing to enter the labour market, resulting in higher supply of labour there is less demand for labour as producers can't afford as many employees.. so you actually get lower employment than before!

you can't pay a burger flipper £15 an hour because there is no profit in that... at the end of the day someone has to be at the bottom doing the jobs that no one else wants to do, for no money.

That''s just the way the system works, some succeed and some don't... the public seem to have been brainwashed by the champaign socialists party over the past 15 or so years into thinking that the UK can be this glorious country where everyone can have everything... walk out of school with 2 GCSEs in childcare and sewing straight into a university course on origami and then onto a high paid job. (and they tried to make it work by borrowing horrific amounts of money.. and look where the national debt is now).


This is where limited redistribution of wealth comes in... to ensure that those at the bottom at least get some help.. and this money pays for public services that the poor use, as well as transfer payments in the form of benefits

The previous government were nothing like socialists, I'm amazed at how many people still talk like they were. I guess it just proves how easy it is to fool the electorate.

that's why I describe them as champaign socialists... they were just a load of reasonably well off people with similar backgrounds to the conservative party who supported the vague ideas and principals of socialism in theory.. over a glass of champaign after the debates in the Oxford and Cambridge unions.. then when it came down to it created a 'third-way' which was incredibly centrist in order to gain votes.

Why do you think they were even 'champagne socialists' ?! You're right about the 'third way', but you speak like it was an accident or something, but this was Blair's intention all along (ask any academic). Blair was caught up in the whole third way thing with the likes of Anthony Giddens etc. It's fair to say Blair never had a socialist bone in his body. It's probably fairer to describe someone like Ed Miliband as a pretend socialist.

TheStone

MaxwellBygraves wrote:

Why do you think they were even 'champagne socialists' ?! You're right about the 'third way', but you speak like it was an accident or something, but this was Blair's intention all along (ask any academic). Blair was caught up in the whole third way thing with the likes of Anthony Giddens etc. It's fair to say Blair never had a socialist bone in his body. It's probably fairer to describe someone like Ed Miliband as a pretend socialist.

Would they be considered fascist?

MaxwellBygraves

TheStone wrote:

MaxwellBygraves wrote:

Why do you think they were even 'champagne socialists' ?! You're right about the 'third way', but you speak like it was an accident or something, but this was Blair's intention all along (ask any academic). Blair was caught up in the whole third way thing with the likes of Anthony Giddens etc. It's fair to say Blair never had a socialist bone in his body. It's probably fairer to describe someone like Ed Miliband as a pretend socialist.

Would they be considered fascist?

No.

verylonglegs

The most glaring omission from that article, as far as the low paid are affected anyway, is immigration. I don't think it's responsible entirely but it must be a factor that should at least be considered for any discussion to be credible.