There’s been a lot of opinion and activity recently about the perceived wage disparity between employees and executives at various organizations. I’m specifically talking about the recent protests at WalMart and various fast food establishments, though I know the sentiment runs broader than that.
I generally stay away from voicing opinions online. The resulting conversations are rarely productive; sometimes, they’re disturbing. But a family member recently hosted a (very responsibly moderated) thread about this topic on his Facebook page, and I was compelled to join in.
I’m personally concerned about this issue, partly because I like it when people are educated before they launch criticisms, and partly because, when all is said and done, I’m a business man and I like business-y things. And I see some holes in this seemingly popular negative opinion.
I think what’s missing from this conversation, and a lot of other similar conversations, is pragmatism. As a society of human beings, we have this concept of “fairness”. When people aren’t doing well, they don’t think it’s fair. When people are doing well, they think it is fair. Usually, people in the opposite situation feel the opposite way. Occasionally, the people who are doing well try to help those that aren’t. But the concept of “fairness” is entirely un-pragmatic: it’s an idea that lives in our heads, and it’s very hard to effectively quantify in real life.
Here’s the nut: WalMart exists and thrives today because it has developed and stuck to a sound business strategy. That’s what successful businesses do. WalMart, fast food restaurants, and their ilk are discount retailers. They provide value. Their target market, their customers, feel like they are getting a lot of something (product) in return for a comparatively reasonable amount of something else (their monies). Hence, they provide a better value than any other retailer substitute on the market. It’s even in WalMart’s mission statement: “We save people money so they can live better.”
Discount organizations are very good at this. They save people money through supply chain efficiencies, economies of scale, and yes, by employing unskilled labor. How do companies like Acer Computers and Payless Shoe Stores keep their prices low? The same way. None of their employees are getting rich. Some are probably scraping by. But the shareholders of these corporations are profiting — and at the end of the day, any corporation exists to make money for the shareholders.
Is this “fair?” The answer is, it’s irrelevant. It’s not these organizations’ responsibility to “share the wealth” with everyone. It’s their responsibility to maximize profits for the shareholders.
How? As I said above, partly by filling unskilled positions or by hiring unskilled workers at or near the federally-mandated minimum wage. There is the argument that the minimum wage is not enough to live on. I understand that argument. For many people, trying to survive on minimum wage is surely a challenge. But for others, it affords an acceptable standard of living.
There is also the argument that organizations can afford to pay employees incrementally more per hour and be just fine. This may also be true. In reality, it’s just not feasible. The end result would be that each organization’s fixed costs would be higher. Organizations would make up these costs by rolling it into the products they sell. McDonalds’ dollar menu would raise to $1.17, for instance. Don’t think this makes a difference? McDonalds’ relies upon those dollar menu sales for a number of important reasons, not the least of which is retention of price-sensitive customers. If McDonald’s prices rose, it could potentially lose an unreasonable amount of business.
We’re fortunate to live in a society of at-will employment. We can leave at any time to find a better job, if we so desire. We’re free to improve ourselves so that we can command a higher wage in the marketplace. We are also free to walk out of jobs, or stage acts of civil disobedience, or post our displeasure of capitalism on social media.
I agree that it would be ideal to live in a world where every person makes a fair wage, gets enough to eat, and manages their money in the most wise way possible. That’s not reality, and that’s not business anywhere. Profitable companies are not humanist entities; they are decidedly very capitalist. That’s not going to change. Becoming a profitable organization is a delicate tightrope walk, and demanding organizations to pay a “more fair” wage to anyone is not a panacea to anything.