Somebody poke a hole in this.
It’s my new* theory about how businesses should pay workers. I just thought of it in the shower this morning, so it’s probably a little flaky.
First, we stipulate that the best way to hire workers is that you find the smartest, most competent and trustworthy candidates. All other things being equal, this should give you an edge against your competition in the marketplace. (If you happen also to have a great idea, or the best technology, or a huge head start, all the better.)
Once you’ve got your smart, competent staff that you trust, how do you determine salary structure? I suggest that you pay your people the most you can afford. You should run the numbers, find out what your revenue is and what part of that is profit, and allocate as much as possible of it to your labor force. The process should be as transparent as possible, so that the workers can be assured that they are, indeed, participating to the fullest extent in the wealth that they are, after all, helping to create.
As the owner, you should resist the temptation to pay yourself or your executives a hugely disproportionate piece of the available cash. You deserve something extra for taking a chance with your money, and the managers do, too, responsible as they are for making groups work together efficiently. But you must not go overboard, or you’ll lose the trust and respect of your employees. (For example, I would have to work almost 200 years with no vacations in order to make what the CEO of “my” company made last year. And I wouldn’t piss on him if he were on fire, much less contribute more than the bare minimum of my abilities to his bottom line You see how that works?)
In this way, you’ll find yourself with a happy, highly motivated staff who will do their best to make things better at your company. And qualified candidates from around the country will flock to your recruiting office to join your organization. Because let’s face it, when it comes to work, we’re in it for the money.
Supply-siders and free marketeers and “invisible handers” will argue that No, you should cut costs as much as possible to maximize profit, and you should try to “win” in your negotiations with labor by getting them to settle for less than they’re worth. Salaries are costs, after all, and should be pushed as low as possible. This is the perennial mistake that Capital makes. In fact, it seems to me that survival in the marketplace is much more likely when you’ve got the best people on your team. The focus should be not on reducing compensation, but on paying well and getting the most for your money: The most talent, the most loyalty, the most productivity and stability.
But then I’m working class, so I’m probably wrong.
* I confess I have not read the classic works of communism and socialism, but I’m guessing this is more or less what they say. If you’re a baby boomer, as I am, think about it: The most horrible monster in the universe, the thing to be feared, fought and avoided at all costs throughout most of your lives, was communism, a way for people to get what they deserve in exchange for honest work. To save ourselves from this scourge, we have built 10,000 hydrogen bombs and lived in fear and isolation for generations.