Ed Hudgins

Is a $70,000 Base Salary Unjust and Corrupting?

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They're comparable in that the business owners of both companies are attempting to fulfill a perceived need that is undefined and not supported by the market. They're comparable in that both situations address income inequality as if it is an ill that needs curing. They're comparable in that neither business can sustain the changes long term and still remain in business which means that everyone is going to lose. Maybe that's okay with Dan Price. Maybe that's the ultimate income equality he's going for - everyone to be under the bridge with a sign reading "Plz Help."

I found those to be very tangential "comparables."

The 20th Century was structurally different and metaphorical, whereas these are real companies and in Price's case it was a leveling of salaries because his analysis, undisclosed, found that that was what a person needed to survive well.

However, I am willing to listen.

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They're comparable in that the business owners of both companies are attempting to fulfill a perceived need that is undefined and not supported by the market. They're comparable in that both situations address income inequality as if it is an ill that needs curing. They're comparable in that neither business can sustain the changes long term and still remain in business which means that everyone is going to lose. Maybe that's okay with Dan Price. Maybe that's the ultimate income equality he's going for - everyone to be under the bridge with a sign reading "Plz Help."

I found those to be very tangential "comparables."

The 20th Century was structurally different and metaphorical, whereas these are real companies and in Price's case it was a leveling of salaries because his analysis, undisclosed, found that that was what a person needed to survive well.

However, I am willing to listen.

I find them to be tangential, as well. However, to your points....

You say Price leveled salaries as if that's a good thing. It isn't. The proper thing to do is an overall market adjustment IF the market calls for it and the business can support it. I believe I've addressed that in two posts now, and his own financial advisor addressed it with him directly. He substantially increased the salaries of a few and either did not increase or only increased very little everyone else's. That is not the way to do it.

What analysis did he do? If it was undisclosed, how are you privy to it? The article only says that he made his decision based on a friend who was worried about paying her rent and her student loans on her $40,000 salary. Was that the extent of his analysis? If so, it's piss-poor analysis.

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Tony nailed it. I don't see how anyone doesn't get it, or how Adam doesn't see the parallel with Twentieth Century. "From each according to his ability, to each according to his need" doesn't work anywhere, anytime. Dan Price "The idea struck him when a friend shared her worries" is an idiot and I wouldn't want to work for him for that alone. Incidentally, when I first looked at this article I read the first paragraph and clicked on the link. I posted my reply without reading the rest of the article. My connection to the Twentieth Century Motor Company was completely independent of the rest of the article. So, again, I don't see how you don't get the connection.

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They're comparable in that the business owners of both companies are attempting to fulfill a perceived need that is undefined and not supported by the market. They're comparable in that both situations address income inequality as if it is an ill that needs curing. They're comparable in that neither business can sustain the changes long term and still remain in business which means that everyone is going to lose. Maybe that's okay with Dan Price. Maybe that's the ultimate income equality he's going for - everyone to be under the bridge with a sign reading "Plz Help."

I found those to be very tangential "comparables."

The 20th Century was structurally different and metaphorical, whereas these are real companies and in Price's case it was a leveling of salaries because his analysis, undisclosed, found that that was what a person needed to survive well.

However, I am willing to listen.

I find them to be tangential, as well. However, to your points....

You say Price leveled salaries as if that's a good thing. It isn't. The proper thing to do is an overall market adjustment IF the market calls for it and the business can support it. I believe I've addressed that in two posts now, and his own financial advisor addressed it with him directly. He substantially increased the salaries of a few and either did not increase or only increased very little everyone else's. That is not the way to do it.

What analysis did he do? If it was undisclosed, how are you privy to it? The article only says that he made his decision based on a friend who was worried about paying her rent and her student loans on her $40,000 salary. Was that the extent of his analysis? If so, it's piss-poor analysis.

Whoa... I made no statement as to what a stupid ass he is.

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They're comparable in that the business owners of both companies are attempting to fulfill a perceived need that is undefined and not supported by the market. They're comparable in that both situations address income inequality as if it is an ill that needs curing. They're comparable in that neither business can sustain the changes long term and still remain in business which means that everyone is going to lose. Maybe that's okay with Dan Price. Maybe that's the ultimate income equality he's going for - everyone to be under the bridge with a sign reading "Plz Help."

I found those to be very tangential "comparables."

The 20th Century was structurally different and metaphorical, whereas these are real companies and in Price's case it was a leveling of salaries because his analysis, undisclosed, found that that was what a person needed to survive well.

However, I am willing to listen.

I find them to be tangential, as well. However, to your points....

You say Price leveled salaries as if that's a good thing. It isn't. The proper thing to do is an overall market adjustment IF the market calls for it and the business can support it. I believe I've addressed that in two posts now, and his own financial advisor addressed it with him directly. He substantially increased the salaries of a few and either did not increase or only increased very little everyone else's. That is not the way to do it.

What analysis did he do? If it was undisclosed, how are you privy to it? The article only says that he made his decision based on a friend who was worried about paying her rent and her student loans on her $40,000 salary. Was that the extent of his analysis? If so, it's piss-poor analysis.

Whoa... I made no statement as to what a stupid ass he is.

that's my position. He could be the most bone headed CEO in the world, his "financial lady" (sorry about that DL, I couldn't remember her title) who helped with the analysis could be stupid as well. Hey even the guy who left after preparing to get a 40% raise could be an idiot, my only point is that this is not comparable to the 20th century nor is it comparable to forced socialism, nor is it even "leveling" as some have said. He never said that anyone was losing salary (except for him) and he never said every would get paid the same. He only created a minimum salary. That's it.

20th century explicitly set out to take from some in order to give to others. This guy explicitly thinks that 40,000 is not a living wage so he, with his own money and company, decided to move on his values and provoke change where he can.

As a property owner, when people work for me, I can choose to (attempt to) pay someone 10 dollars for 5 hours work, or I can choose to say that this guy, whether he decided to take the compensation or not, should probably get paid enough to eat lunch, catch the bus home, and buy dinner. I'm not a socialist for that and neither is this guy.

Again he could be wrong and it could collapse around him but if that's what he chooses to do, then its up to him.

Leesa mattress company gives away one mattress for every ten they sell because they see a need. Are they socialist?

Toms shoes, whose give away one pair of shoes for everyone sold charity collapsed, still cannot be considered a socialist.

http://www.forbes.com/sites/ashoka/2014/10/08/a-better-way-to-buy-one-give-one/

Unless you say that because he didn't give the extra profit to the shareholders ..... like they deserve everything .......

If Dan Price would have said "I'm announcing a new base pay of 20,000" would this criticism even exist? And if it wouldn't, why not?

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Everybody's against me. Everybody's for Derek.

--Brant

~whimper~

Hey! I agreed with you.... tangentially. :-)

I'll get back to your point by point argument (which I appreciate) after I eat DL

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....but before I go I just have to say one thing because it appears to me that some people may need to be reminded what socialism is.

Its not a set of business practices, nor is it a political doctrine, those are mere symptoms of the true nature of socialism which is the idea that every is the same. They all think the same, they all like and dislike the same, want the same, and reason the same.

This is why socialism will never work, it spits in the face of reality but with that being said, calling any business decision that you don't agree with socialism, in effect IS SOCIALISM. Just the idea that everyone has to follow your rules sickens me.

If we get to the point where anything that you disagree with is promoted as socialism, which is no different than the race card being pulled at all instances where things don't go your way, then we are indeed in for a long hellish ride.

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We're probably in agreement on one thing, Derek. It's his company, he can do with it what he wants. I respect his right to do so, no matter how stupid I think he is.

This is my sticking point:

20th century explicitly set out to take from some in order to give to others. This guy explicitly thinks that 40,000 is not a living wage so he, with his own money and company, decided to move on his values and provoke change where he can.

Price did take from some in order to give to others. In order to set this minimum salary, he passed over some people for raises entirely and others were given only very small raises - many employees who, according to his financial manager, were more deserving of that money than the people he did give it to. Why? Because of some vague notion of what those people need. Not based on anyone's merit or productivity or their value to the company, but because a friend mentioned that she worried about her rent and school loans. Who doesn't worry about their rent and school loans? Was the friend living above her means? Did it take her 22 years to finish school? Further, he has put his company in serious jeopardy. If the business goes under, he will have taken from everyone to give to no one. Again, why? In his own words, because... income inequality. That is not a value that we ought to want to spread in popularity, especially in the private sector.

To address another of your previous points, that one guy who left because he said he thought the raise would discourage him from starting his own business. Ahead of that, he also cited this:

"Now the people who were just clocking in and out, were making the same as me," he complained. "It shackles high performers to less motivated team members."

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20th Century Motor Company lite...

I had only heard about this clown a month or so ago and only on the radio.

I thought about 20th Century Motors a lot when I heard about this guy because that whole underlying "core story" [OL's conductor has taught us about that] had tremendous influence upon me because I could see it happening as the inner city, my great city of NY was beginning to decay with the empty factories toothless grin mocking us.

It began to make me realize how powerful the parable of that tree was in the beginning of the novel...

A...

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It began to make me realize how powerful the parable of that tree was in the beginning of the novel...

The great oak tree had stood on a hill over the Hudson, in a lonely spot of the Taggart estate. Eddie Willers, aged seven, liked to come and look at that tree. It had stood there for hundreds of years, and he thought it would always stand there. Its roots clutched the hill like a fist with fingers sunk into the soil, and he thought that if a giant were to seize it by the top, he would not be able to uproot it, but would swing the hill and the whole of the earth with it, like a ball at the end of a string. He felt safe in the oak tree's presence; it was a thing that nothing could change or threaten; it was his greatest symbol of strength.
 
One night, lightning struck the oak tree. Eddie saw it the next morning. It lay broken in half, and he looked into its trunk as into the mouth of a black tunnel. The trunk was only an empty shell; its heart had rotted away long ago; there was nothing inside—just a thin gray dust that was being dispersed by the whim of the faintest wind. The living power had gone, and the shape it left had not been able to stand without it.
 
Years later, he heard it said that children should be protected from shock, from their first knowledge of death, pain or fear. But these had never scarred him; his shock came when he stood very quietly, looking into the black hole of the trunk. It was an immense betrayal—the more terrible because he could not grasp what it was that had been betrayed. It was not himself, he knew, nor his trust; it was something else. He stood there for a while, making no sound, then he walked back to the house. He never spoke about it to anyone, then or since.
 
Eddie Willers shook his head, as the screech of a -rusty mechanism changing a traffic light stopped him on the edge of a curb. He felt anger at himself. There was no reason that he had to remember the oak tree tonight. It meant nothing to him any longer, only a faint tinge of sadness—and somewhere within him, a drop of pain moving briefly and vanishing, like a raindrop on the glass of a window, its course in the shape of a question mark.

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Socialist principles applied by force (government) are immoral. When applied by private individuals on a group (business) are simply stupid. They don't work in either case. If you find an example where they do, please share.

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Thank you William.

And specific feeling that Eddie has of a great betrayal is hidden in the back of every decent Americans mind heart and soul.

It is what is fueling this Trump crusade to make America Great Again...we all have felt this...

It was an immense betrayal—the more terrible because he could not grasp what it was that had been betrayed. It was not himself, he knew, nor his trust; it was something else. He stood there for a while, making no sound, then he walked back to the house. He never spoke about it to anyone, then or since.

And now is the time to take our shot.

A...

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I'm having a hard time understanding how he did the long term employees wrong. He made a minimum for all employees, he didn't cut anyone's wages correct? Was someone due a raise and didn't get it? Its a good possibility that a liberal CEO had many people working for him long term who actually weren't very productive, isn't that what happens in government? The long term employees left because they didn't start at 70K? If that's the case then should every long term employee leave every other job on the planet because the new hires get paid more than they did when they were hired? Are there examples of other CEOs who decided to pay more (Henry Ford I believe is one) and were still highly successful? Don't silicon valley jobs offer relatively high base pay along with free food and day care services? I'm sure that base increases with inflation, why don't the long term employees quit? Sounds like the ones who are being immoral are those few long term employees who think they deserve the world

Maybe I should just read the article smh......

....oh, I just read "long-term employees" - five years !! LOL

Employee A who is very productive sees Employee B who is barely adequate getting the same wage. It is not hard to understand why A could become annoyed. A says "I have done much more for this company than B, why am I not getting more than B?"

and so it goes....

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I'm having a hard time understanding how he did the long term employees wrong. He made a minimum for all employees, he didn't cut anyone's wages correct? Was someone due a raise and didn't get it? Its a good possibility that a liberal CEO had many people working for him long term who actually weren't very productive, isn't that what happens in government? The long term employees left because they didn't start at 70K? If that's the case then should every long term employee leave every other job on the planet because the new hires get paid more than they did when they were hired? Are there examples of other CEOs who decided to pay more (Henry Ford I believe is one) and were still highly successful? Don't silicon valley jobs offer relatively high base pay along with free food and day care services? I'm sure that base increases with inflation, why don't the long term employees quit? Sounds like the ones who are being immoral are those few long term employees who think they deserve the world

Maybe I should just read the article smh......

....oh, I just read "long-term employees" - five years !! LOL

Employee A who is very productive sees Employee B who is barely adequate getting the same wage. It is not hard to understand why A could become annoyed. A says "I have done much more for this company than B, why am I not getting more than B?"

and so it goes....

In this instance I can agree with Moralist since I care nothing about what someone else makes. But I can also appreciate (just not relate) to the fact that some people do care to measure their monetary dicks up against others and in that instance they are free to leave the company.

Using that logic I could say that I (symbolic I) should get paid more than the CEO who spends his time on the golf links, or the stock holders who perform almost NO productive function. But no, I wouldn't think that. There is a base pay for CEO's and an financial agreement with those who invest in the company. If the contract is not up to your liking then I'm sure you can go elsewhere.

Personally I went 5 entire years without even asking for a raise since I didn't need it. Didn't effect my ability to pay my bills one iota when someone else got a raise.

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Derek said:

At what point is any proof offered to even imply that the bottom employees are less productive.

Maisey McMaster is quoted in the article:

“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” she said.

But she's just "the financial lady who did the math," so perhaps her five years with the company and her position as financial manager doesn't count for much? Again, making salary adjustments like this isn't a huge deal... unless you do it in a way that your business can't support.

Actually she said that the decision did work mathematically and she was only apprehensive about the social repercussions of the public announcement

Derek said:

Well that's the market, deal with it!

But that's the point, this isn't the market. It's one guy who made a very public and unpopular display that the author of the article and many others think was just as much for the publicity as for anything. As I said before, market adjustments in regards to compensation are common in the business world, but they have to be driven by the market to be successful, not by one dude with 120 employees.

So, you are saying that the market is not based on individuals making decisions? The agreed upon base pay for ANY industry started with some CEO deciding to pay someone such. But just to clarify, my point for bringing this up was to confront the idea that businesses were outraged or otherwise leaving him. Those who felt such feeling were only reacting to the possible pressure being brought on them to raise wages if salaries rose in the local market. I have no mercy for those who cannot operate in the market environment and expect protectionism.

Derek said:

Also the numbers reported say that the company was averaging 200 ne clients a month before the announcement but that number went up to 350 in the month after the announcement.

The article also reports that those new clients won't start bringing in revenue for another year. A fact that Mr. Price failed to plan for under his new salary structure.

what does that have to do with anything? I make decisions all the time that wont pay off until later. So what? If Mr. Price failed to see that, then his financial adviser also failed to acknowledge the way business works and they all should be fired.

Derek said:

This is a problem of simply knowing what others make, nothing more nothing less. In fact its not even a problem because from what we have presented to us, only two people left and one because he didn't want to love the raise too much.

And this is why so many companies have rules about sharing salary information with coworkers. It just isn't done, so why would a supposedly business-savvy wunderkind CEO make such a move publicly? Poor, poor business decision that even the most green business owner ought to know better than to make. Regarding the two people who left, according to the article they were "two of Mr. Price's most valued employees." When someone says an employee is valued, they are talking about more than money.

"valued" this pull quote has as much impact on me as a bill board I read one time on a local bank that pulled this exact quote from Fortune magazine "....best rates...."

I'm going to need to see some numbers

Derek said:

Again from my first post, did anyone actually lose pay?

Dan Price did. Just sayin'.

That was by his own choice. He didn't force it upon anyone and your later comment that he did because (paraphrasing) "someone else could have gotten a raise" is a stretch. Any raises given to any CEO could have instead been given to the employees .... and? Any capital investments could have instead went to share holders... and?

Someone simply saying they should get a raise is a smokescreen. Until someone steps up and says that I was due a raise, didn't get one and went I investigated as to why, I was told that the money was going to others or my investigation revealed that money was reallocated from my raise to the decision- then I'll be convinced. Instead we have the one guy who left, talking about others getting as much as he, though he was receiving a 40% raise. WTF?! He cant be satisfied until he gets the 40 and everyone else gets 15, or none? He really does need to run his own company, then he can make his own determinations on who is worthy of a raise.

When the federal minimum wage is raised, are CEO's morally obligated to give all other employees a raise to match the new base pay?

What happened to the whole getting paid based on what I'm worth? Seems like its more like getting paid based only what others get paid

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What happened to the whole getting paid based on what I'm worth? Seems like its more like getting paid based only what others get paid

Ah! That's the nub of it, a lack of objective standards and individual merit, so no value.

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What happened to the whole getting paid based on what I'm worth? Seems like its more like getting paid based only what others get paid

Ah! That's the nub of it, a lack of objective standards and individual merit, so no value.

You're right to the heart of the matter, Tony.

When entitlement trumps merit, it's no longer Capitalism.

Greg

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As I explained at length somewhere, wages and salaries are determined not by whim or by arbitrary decision but by supply and demand. In a free market, prices (including wages and salaries) get adjusted to where supply and demand are equal.

You want to test a theory by prediction? I make the following 2 predictions about the story of the $70,000 base salary:

1. Those employees who are are getting less than the free market salary will tend to leave and get more money elsewhere. If all top quality employees consistently get less than they should, the company will fold, as in a mini Atlas Shrugged.

2. Those employees who are getting more than the free market salary will tend to stay but the company will lose money on them.

Is that the way to run a business?

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As I explained at length somewhere, wages and salaries are determined not by whim or by arbitrary decision but by supply and demand. In a free market, prices (including wages and salaries) get adjusted to where supply and demand are equal.

You want to test a theory by prediction? I make the following 2 predictions about the story of the $70,000 base salary:

1. Those employees who are are getting less than the free market salary will tend to leave and get more money elsewhere. If all top quality employees consistently get less than they should, the company will fold, as in a mini Atlas Shrugged.

2. Those employees who are getting more than the free market salary will tend to stay but the company will lose money on them.

Is that the way to run a business?

If the employee produces more value for the company than he is payed it does not matter if he salary is above the average makret salary for his position. If the company is willing to pay his salary than by definition he is receiving the free market wage for his labor.

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As I explained at length somewhere, wages and salaries are determined not by whim or by arbitrary decision but by supply and demand. In a free market, prices (including wages and salaries) get adjusted to where supply and demand are equal.

You want to test a theory by prediction? I make the following 2 predictions about the story of the $70,000 base salary:

1. Those employees who are are getting less than the free market salary will tend to leave and get more money elsewhere. If all top quality employees consistently get less than they should, the company will fold, as in a mini Atlas Shrugged.

2. Those employees who are getting more than the free market salary will tend to stay but the company will lose money on them.

Is that the way to run a business?

If the employee produces more value for the company than he is payed it does not matter if he salary is above the average makret salary for his position. If the company is willing to pay his salary than by definition he is receiving the free market wage for his labor.

Unfortunately Baal, JTS is immune to the actual effects of reality (like the way free market prices and wages are determined) and would prefer to continue his standard drive-by-spewings of theoretical models and well trodden philosophical truths. I'd be willing to bet that not only hasn't read the article but he also hasn't read but a few of the comments on this thread.

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One of the inherent failures of the government union paradigm is the frozen structure of rewards.

Teachers are a perfect example. Merit pay is critical and there should be no minimum salary.

Problem is the corrupt school boards and departments of education which are labyrinths of larceny.

A...

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1. Those employees who are are getting less than the free market salary will tend to leave and get more money elsewhere. If all top quality employees consistently get less than they should, the company will fold, as in a mini Atlas Shrugged.

2. Those employees who are getting more than the free market salary will tend to stay but the company will lose money on them.

This likely won't add to your credibility :wink: ... but what you said makes perfect sense to me, Jerry.

Companies only inflict self harm when they try to bugger the free market.

Because the free market exists by moral law, it allows cheaters to punish themselves.

Greg

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1. Those employees who are are getting less than the free market salary will tend to leave and get more money elsewhere. If all top quality employees consistently get less than they should, the company will fold, as in a mini Atlas Shrugged.

2. Those employees who are getting more than the free market salary will tend to stay but the company will lose money on them.

This likely won't add to your credibility :wink: ... but what you said makes perfect sense to me, Jerry.

Companies only inflict self harm when they try to bugger the free market.

Because the free market exists by moral law, it allows cheaters to punish themselves.

Greg

I'm on board with your comments.

"Philosophical truths" are true because all men will aim or eventually gravitate a few general ways. It IS reality, the nature of man's consciousness. If this fact is not taken into account, empirical arguments or 'the market force' argument alone will fall short of a full explanation.

A volitionally striving individual will not for long accept being lumped together ('averaged-out') with others, for an 'average' reward. I'd reckon those better employees will have the self-worth to move on, while the "moochers" who stay behind, only meriting under-average pay, will likely bring down the company. Even sworn collectivist-Unionist-utopian-socialists grasp that men are unequal in terms of excellence, productivity and ability, which is why they can't function without some type of force to support them.

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