Democrats Doing Their Part To See That Entry-Level Employees Are Replaced By Entry-Level Robots
At Pajamas Media, they quote Ed Rensi, the former CEO of McDonald's:
"If you look at the robotic devices that are coming into the restaurant industry -- it's cheaper to buy a $35,000 robotic arm than it is to hire an employee who's inefficient making $15 an hour bagging French fries," Rensi told Fox Business. "It's nonsense and it's very destructive and it's inflationary and it's going to cause a job loss across this country like you're not going to believe.""It's not just going to be in the fast food business," Rensi continued. "Franchising is the best business model in the United States. It's dependent on people that have low job skills that have to grow. Well if you can't get people a reasonable wage, you're going to get machines to do the work. It's just common sense. It's going to happen whether you like it or not."
Cosh.
Crid at May 25, 2016 5:42 AM
The irony of this is that if minimum wage kept pace with inflation, it would be closer to 22 dollars an hour.
Unfortunately, when minimum wage was created, a CEO made about ten times as much as his median employee. Now the average is 204 times as much, with top CEOs making 300 times.
You're not about to convince CEOs that they don't need 300 times as much and aren't worth 300 times as much, even though they don't and aren't.
Patrick at May 25, 2016 5:44 AM
@Patrick: You're not about to convince CEOs that they don't need 300 times as much and aren't worth 300 times as much, even though they don't and aren't.
Maybe so, but according to Fortune, the head of Wal-Mart pulled down about $25.6 million in compensation in 2014. An average hourly Wal-Mart employee would have to work about 2.8 million hours (at the 2014 rate) to make that kind of money. That amounts to more than 1,300 years.
So let's say the CEO works for free, and that dough gets rolled back to the hourly employees. According to Wal-Mart's corporate web site, the company employs "more than 1.5 million U.S. associates at more than 5,000 stores and clubs nationwide." Taking the CEO's compensation and dividing it up among the employees will give each one about $17.07 annually. That's three packs of smokes in Virginia, and maybe a pack and a half in Manhattan.
Whether Wallyworld can afford to pay its employees more than they do is a good question, but how much the head of the company makes is kind of rear elephant.
Old RPM Daddy (OldRPMDaddy at GMail dot com) at May 25, 2016 6:35 AM
Actually, Patrick, who are we to determine if the CEO is overpaid? If the CEO candidate demands high pay and gets it, who are we to say he or she isn't worth it? That's the job of the Board of Directors.
And, keep in mind, that the CEOs are the akin to the All-Stars of the business world. No bank loans a corporation money and no investor buys the company's stock because Bob is manning the phones in the Boise call center. But, they do invest or loan based on what strategy the CEO elucidates, on their faith in the CEO's ability to implement his vision, and on their faith in him to choose an executive suite team to manage the company.
Higher CEO pay attracts higher caliber candidates. That's why a CEO search is a major undertaking and staffing the call center is left to contracted staffing companies.
The CEO generally takes the blame if something goes wrong, even if what went wrong was beyond his control. It's the price of the job. Try getting another job after you've been blamed for a corporate meltdown.
The average tenure of a CEO is 9.7 years.
And, yes, sometimes the choice of CEO goes bust - as it does with All-Stars. Sometimes the board chooses an Al Dunlap or Marissa Mayer and the company goes ker-plop. Sometimes they choose a Larry Page or a Satya Nadella and the whole company benefits (including the Bobs in Boise).
Of course, such lionization of an individual is usually unwarranted. The successful operation is not due to one person, but a multitude of people cooperating and clashing. Even in those environments, the CEO sets the tone for such success. So, even if you dismiss the great man theory of history, the CEO still plays an important role in collaborative success stories.
The first minimum wage was created in 1938. The corporate world was a very different place then.
Competitors from overseas were faced with daunting shipping costs to compete in non-domestic markets, so most markets were mostly self-contained. Container freight would later reduce shipping costs to the point that factories could be located in the lowest-cost labor market with little impact to the product's final price. But not in 1938.
Larger countries had colonies and territories overseas with which to create captive markets for domestic industries.
CEO searches in 1938 meant stopping by the Ivy League old boys' club. And the candidate wasn't usually weighing multiple offers from various high-powered start ups. Lavish pay wasn't necessary to attract the best candidate.
And the best candidates were always men. Good bye Marissa, Meg, Mary (boy, a lot of high-profile female CEOs have names that begin with M). Maybe the higher salary is the price we pay for opening up opportunities to the fairer sex.
A semi-trained monkey could have run a successful US company in the 1950s. With overseas competitors devastated by World War II and pent up demand in the domestic market, all it took to be successful was getting a product to the shelves. The contributions of the executive team were better recognized then and, because the market was less chaotic then, easier to recognize and keep track of.
Not to mention that the minimum wage has the effect of tamping down wages for non-unionized employees. That means your comparison is flawed - the CEO makes more than a worker making an artificially depressed wage rate.
Conan the Grammarian at May 25, 2016 6:57 AM
"Unfortunately, when minimum wage was created, a CEO made about ten times as much as his median employee. "
I keep seeing that quoted, and it doesn't add up. By this logic, the average CEO annual salary would have been around $80,000, but there were plenty of large company CEOs making over a million. I think there is a couple of things they are missing. One is that, back in the day, not very much of a CEO's total compensation was in the form of salary. A big hunk of it was in benefits; the CEO's house, car, and other large assets were on paper owned by the company, and it probably provided him with a bunch of day-to-day services ranging from dry cleaning to car repairs, not to mention comprehensive medical insurance. Another big hunk was in stock options and dividends on stock. Additionally, the CEO had probably incorporated himself, and a lot of his spending was technically spending by his corporation rather than spending by him personally.
And note that last point... there were a lot more incorporated entities back then. From a tax standpoint, it was very beneficial to incorporate, and a lot more small businesses were incorporated than now. And many middle-class and above people incorporated themselves and their salary was paid to their corporation, a good tax-avoidance strategy at the time. So all this probably dragged down the "average" salary of the CEO. Most small businesses are not incorporated anymore, because it's disadvantageous tax-wise and it creates huge accounting headaches. There is little data available on what CEOs of privately owned entities are paid (since they aren't required to disclose it), so the pool of incorporated entities now is more made up of large companies, which naturally pay their executives more.
And as for the inflation thing: I just checked something with this inflation calculator. The minimum wage in 1980 was 3.35 per hour. Doing the inflation calculation, that works out to $9.72 in 2016 dollars. You can make an argument that a small raise was due in the last two years, but to do that you have to ignore the larger argument -- unskilled and un-experienced labor is an absolute glut on the market now. About four years ago, on these pages I had done a calculation of what unskilled labor was probably worth on an open market, and I came up with a number of $3.50 per hour. Allowing for inflation, it might be $4.00 now. And that's total value, benefits included.
Today, there is no motivation to build a business that requires a lot of unskilled labor. You can't make money.
Cousin Dave at May 25, 2016 6:59 AM
"who are we to determine if the CEO is overpaid? "
Shareholders, that's who.
Gog_Magog_Carpet_Reclaimers at May 25, 2016 8:26 AM
Shareholders, that's who.
And the fact that they allow it to happen should tell you everything you need to know about it.
I have had discussions with people who think pro athletes are over paid. My response to them has been when you get 15,000, 40,000, or 70,000 people to pay good money to watch you work in person and millions more to watch on TV, then you'll get paid millions of dollars.
Today, there is no motivation to build a business that requires a lot of unskilled labor. You can't make money.
And yet, the US Chamber of Commerce wants "comprehensive immigration reform" to make sure there are lots of available unskilled labor available. I can't imagine why?
I R A Darth Aggie at May 25, 2016 8:50 AM
It's not a robot, but the Bobcat that Husband's company bought last year paid for itself ($60k) in labor costs in just a couple of months. That's about two people that don't need to be hired at all this year- or thousands of hours that existing employees won't be working.
ahw at May 25, 2016 8:52 AM
"And the fact that they allow it to happen should tell you everything you need to know about it."
I know, I know.
'Troubles are just the shadows in a beautiful picture.'
Gog_Magog_Carpet_Reclaimers at May 25, 2016 9:21 AM
When we consider all US chief executives, the ‘CEO-to-worker pay ratio’ falls from 331 times to below 4 times average worker pay
http://www.aei.org/publication/when-we-consider-all-us-chief-executives-the-ceo-to-worker-pay-ratio-falls-from-3311-to-below-41/
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[edited] The multi-million pay packages of a few hundred CEOs get all of the media attention without revealing the small number of CEOs represented in the annual salary surveys.
The WSJ’s executive compenstation survey last year included only 300 CEOs at large, U.S public companies. The AP analyzed compensation figures for only 337 companies in the S&P 500 last year. The AFL-CIO looked at the CEOs of 350 companies in the S&P 500 in 2013 and computed a “CEO-to-worker pay ratio” of 331 times, up from a ratio of 300 ten years ago, and 200 twenty years ago.
Although these samples of 300-350 CEOs are representative of large, publicly-traded, multinational US companies, they certainly aren’t very representative of the average US company or the average US CEO.
In 2014, the BLS reports that the average pay for America’s 246,240 chief executives was $180,700.
=== ===
The statistics for the salaries of 350 CEOs of the largest public companies is like using Brad Pitt's income to comment on all actors appearing in a movie in any year.
Andrew M Garland at May 25, 2016 11:24 AM
"Shareholders, that's who."
That's right. And you can make a credible argument that some shareholders aren't diligent enough. But eventually that situation becomes self-correcting -- inattentive shareholders leads to bad decisions which leads to investors losing money. Shareholders get wiser when that happens.
You know when that breaks down? When you have cronyism. Because then things are opaque to the shareholders. The company may be making money, but they don't know how or why. They can't tell why one company makes money and another doesn't. And when investors can't tell what is going on, they sit on their cash. Which is what is happening now.
Cousin Dave at May 25, 2016 1:46 PM
Patrick, if you don't own stock in the company, why do you give a fuck how much CEO's are paid? How could your opinion, or that of anyone so uninvolved, possibly carry any weight?
Crid at May 25, 2016 3:15 PM
Unfortunately, when minimum wage was created, a CEO made about ten times as much as his median employee. Now the average is 204 times as much, with top CEOs making 300 times.
Umm, no. Somebody's been cherry-picking; this can't include Average, INC. with fewer than 50 employees, and there are THOUSANDS of these in the USA.
Meanwhile, this is just wealth envy being used to generate hate for people who know that big money is NEVER obtained on an hourly wage.
Radwaste at May 25, 2016 7:26 PM
You can fight over numbers all you want, but I think anyone who weeps over sheer disparities of income is FOS... And quintessentially childish.
There's no limit to the amount of wealth that can be created in a proper marketplace... By anyone who wants to create it.
People who say that the rich people are hoarding all the money are [A.] transparently envious, [B.] espousing the worst, least-literate readings of Marx rather than the best, and [C.] bogusly compassionate.
If you're really concerned about the wages of a "median employee," you can always pay them more out of your own pocket, right?
People, even these deeply-caring types, almost never wanna do that.
Isn't that sumthin'?
Crid at May 25, 2016 9:04 PM
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