Sunday, August 7, 2011

Profit Sharing is Caring!
and The Trickle-Up Effect

If you've been paying attention to the news lately, it's no doubt that we're in a serious mess. Our lowered credit rating makes us a laughing stock on the international market, and people are only going to further tighten their wallets. Unemployment is still high, estimated to be in the high teens assuming you count the unreported millions who do not or can not collect government benefits. Gas is upwards of $4 a gallon, and companies are consistently laying people off while collecting record profits. So what are we as a nation to do?

The more I consider the economy, the more I realize we are powerless to end the shareholder-minded profit maximization ideals that companies subscribe to. At least without some revolution that would involve some sort of devastating teardown of our country. But this mentality isn't necessarily a horrible thing for the economy. Ideally we want big, rich companies… they are indeed what keeps an economy strong.

We just need to invoke some sort of profit sharing mandate.

That’s right, enforced profit sharing. As in a set percentage of what a company makes need be distributed fairly through the workforce that allowed the company to make said profit. While some economists theorize we need to place caps on salaries or the size of companies, this allows and encourages businesses to grow. There’s no fear of increased regulations or per-worker costs that make hiring unattractive to big companies. The only cost is a function of the gains that everyone works for. Since this is an after-profit bonus, companies can still boast to their shareholders that they increased profits for the year, which hopefully won’t devastate a logically minded stock market. And this cost all goes into building a stronger work environment.

Most companies these days tend not to reward employees for additional effort. Maybe it’ll lead to a promotion down the line, but there’s no direct compensation for immediate effort that leads to an immediate gain in profits. Does the grill chef at McDonalds get more money if the store is packed that night? Probably not. Does the cashier at WalMart make extra money if the line is out the door her whole shift? Doubt it. The customer service rep during a company recall? You get the point. Add in the ability for companies to make salaried workers round-the-clock employees for no extra pay, and you see the mess we’re in. To quote the immortal words of Peter Gibbons, “It’s a problem of motivation. Now if I work my ass off and Initech ships a few extra units, I don't see another dime, so where's the motivation?”

Fire bad, Profit Sharing good. Staplers better!

Profit sharing is a direct investment in your workers. Well compensated workers tend to be happier workers, right? Show them their added effort, that extra money the company made from their labor, is worth something. If Initech had profit sharing, Peter would have seen a few dimes from working his ass off. And trying to lay off people won’t be a ‘fix’ for this issue, since a mandatory percentage is enforced whether the company has a thousand employees or a million. So workers taking on the burden of a downsized department would actually see an increase in the money they make.

We’ve been reading reports about runaway executive compensation for years. Million dollar bonuses for people on the upper levels in return for corporate success. Why do we stop there? Is it fair that only certain people get rewarded? I mean, in football, even the practice squad gets a ring if their team wins the Superbowl. Obviously these companies have the money to distribute to their staff, executive or not. Now this is their chance to reward the rest of the staff for that same hard work.

Now I have to predict that there are some wingers out there who are going to squawk their favorite buzzword… Communism. How dare I try to mention the idea that we tell a company what to do with their money in this country?!? And I’d like to point out that the communist argument just doesn’t hold up. This system still encourages companies to grow. Free markets and all. No tax increases. All the money stays in the company family. One of famed Republican Ronald Reagan’s legacies is the “trickle-down effect” in which we’d develop a system in which those that make the most money pass it through our economy by hiring and buying things from those economically below them… so on and so on down to where the higher populated lower classes have opportunities that leaves them financially stable (ie not struggling to put food on the table) and able to themselves contribute to the economy, creating a cycle that keeps our economy going. And ideally this is a good, reasonable plan.

Except it has never been enforced. Nowadays, the upper class is notorious for hoarding their money, leaving it in banks and big corporate investments. They cut down on the number of people they hire, lest their profits and stock price take a hit. And those who are not as financially stable are forced to follow suit. And none of this is necessarily for amoral reasons, but for security, as the future holds no certainty. We as struggling citizens are forced to cut back on extraneous expenses, ie going out to dinner, or buying that new car, or even going to school to better ourselves.

And this just compounds the problems we are seeing. Now the once-profitable restauranteur can’t afford a new car, and now the car dealer can’t afford to send his kids to a good school, and the kid can’t get a job because he didn’t go to a good school. Didn’t we say the trickle-down effect was a good thing?

What will help jumpstart our economy is a “trickle-up effect”. It’s proven that lower classes spend a higher percent of their income. So if the lower classes had a few extra bucks to spend, they could potentially buy that dinner once a week, and the restaurant owner seeing a rise in business can buy that new car. And the car dealer can send his kids to a good school. We need to encourage domestic spending, and keeping money out of the hands of the masses isn’t the way to do it.

No handouts, no rewarding people for not working, no deterrent to hiring. Just making sure credit is given where credit is due. It may be the only good ‘credit’ we see for a while in this country. And things just might come out ok in the end…


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