We need to champion honest pay. Too often, employees are given wages that don’t reflect their true value to the company. This is contributing to the growing wealth gap that is not only immoral, but destabilizing for society as a whole.
We need to pay workers a good wage so that it helps all of society, not just the top 1%.
By championing honest pay, we can help close the wealth gap and create a more stable and just society for everyone.
The Middle Class Doesn’t Make Enough
Inequality has been in the news daily since at least the Occupy Wall Street movement but in reality much earlier.
Politicians, talking heads, media, go on and on about inequality going up and what that means to society, if it makes sense to somehow redistribute that wealth, and if so by what mechanism. But they just talk, nothing really changes. As along, the middle class gets less and less.
As a good development for employees, Covid and the ensuing labor shortage did increase pay for many hourly and lower pay positions.
Unfortunately everything else went up too. Remember inflation didn’t cause this, inflation just measures the changes in price.
The cost of living is too high. If we want to improve America, we need things to cost less, and we need to make more. Employees need higher wages. Whith that comes more access to upward mobility.
Long term, if we want to reduce inequality, lower the cost of living, and generally just give a better chance to that pursuit of happiness, we need to pay more people more money.
We can’t just keep giving more and more to the top and less and less to the bottom.
Honest pay would go a long way toward making life more equitable.
Isn’t “Honest” a Fuzzy Word?
Yes it is.
Granted, “honest” is a loaded term. It’s the best word I can come up with. I also toyed with equitable, decent, reasonable, ethical, conscientious… But none of them are the right word. It’s one of the shortcomings of the English language. I’m open to ideas.
Whatever you call it, most of us are open to it:
“polling shows the public wants a more evolved form of capitalism that works better for them. What does that mean? Simple. It means running businesses that create good jobs; empower workers; provide for upward economic mobility and equality of opportunity; treat customers with dignity and respect; build healthy, prosperous communities; safeguard our planet; lead with integrity; and generate profits and returns for investors.”
So Who Gets To Decide What “Honest” Means
I mean I’m not, nobody really. I think we leave it up to the corporation to make the argument that they pay employees fairly.
It goes back to the importance of transparency. I don’t think we want the government defining what honest pay is.
We need to push companies to be more responsible.
How Do We Promote Honest Pay?
Its easy to say we want workers to enjoy more of the fruits of their labor. That upper management makes too much and those at the lower end don’t make enough. But it’s much harder to make it a reality. After all the free market gave us the current status quo. Today’s situation basically the result of supply and demand, both inn terms of goods and services, but also in terms of employment.
When we think about ways to champion honest pay, we can think about reaching that goals in terms of government and non-government actions.
Government Actions To Promote More Equitable Pay
There has been some action on behalf of the government to increase pay for employees earning the least.
Investors want to better understand one of the most critical assets of a company: its people.
I’ve asked staff to propose recommendations for the Commission’s consideration on human capital disclosure.
— Gary Gensler (@GaryGensler) August 18, 2021
Is this a good thing or a bad thing? You tell me.
Anyway the government is getting more and more involved in how companies pay their employees.
Pay Ratio Disclosure
Starting in 2017, as required by the Dodd-Frank Act, the SEC began requiring public companies to publish their “Pay Ratio” in their annual fillings. So now once a year companies need to disclose the pay ratio, basically what the CEO makes compared to what the average worker at that company makes.
The Pay Ratio has a lot of problems. For one its not really fair to compare a company like say Facebook, which employs mostly computer programs, to Walmart, that employs low-skill hourly workers at hundreds of stores across the country. It also is only the wages, not stock holdings, which is how a lot of CEOs get paid. That’s part of why Jeff Bezos or Warren Buffet can pay less in taxes than their secretaries.
So it’ not perfect by any means, but hey it’s something.
It is does allow you to compare companies with a similar business model or in the same sector.
But the Media is Kind of Ignoring It
What’s frustrating is that companies have been disclosing this number for years now, but the corporately controlled media hasn’t really been talking about it. As far as I can tell the only publication doing ANYTHING with it is Bloomberg on this page. You can see the companies but it’s for investors. And you need to pay for a subscription to see it.
In this woke climate where inequality is such a problem, where is the consumer facing portal? How can normal citizens easily and clearly see the pay ratio?
I’ll save you some trouble, it doesn’t exist.
Tax Excessive Pay
One way the government could reduce the pay gap, in theory increasing pay for lower earners, is by using tax law. In march of 2021, Bernie Sanders, Elizabeth Warren and a few other politicians introduced the Excessive CEO Pay Act, which would tax companies that pay CEOs at least 50 times more than their workers. I get the idea but if there’s one thing rich guys are good at is not paying taxes, so I don’t know how much of an impact this would really have.
Portland Increased taxes on companies paying CEO’s more than 100 times median pay
One city taking matters into their own hands to decrease the pay gap is Portland. The city instituted a tax penalty on companies whose chief executives earn more than 100 times the median pay of average employee. Steve Novick, a city commissioner who championed the proposal, was quoted by the NY Times as saying it’s “the closest thing I’d seen to a tax on inequality itself.”
Increase the Minimum wage
This is the knee-jerk reaction of people on the left. There are valid arguments for it, the most compelling is that the Federal minimum wage hasn’t increased in like a decade or something (states can and do set their own).
I mean, increasing the minimum wage is fine. As a stop gap it would give employees at the lowest runs a raise. But in general I’d like to see Impact Consumerism and the Humanity Index do the work of pushing companies to pay their employees better.
So those are some things the government can do to increase wages. Whether it’s a good idea is a different discussion.
Increasing Worker Pay Without The Government
But we shouldn’t rely on the government. We live in a capitalist, free market system. The free market have much more power to shape corporate behavior than the government does. At least it should.
Another way to increase worker pay without the government is through consumer pressure. This is already happening to some extent, with people becoming more aware of where their food comes from and how it’s produced.
Impact Consumerism is an important tool to pressure companies to pay their employees more. As consumers become more conscious of these issues, they will start to demand better treatment of workers throughout the supply chain.
There are a number of ways to pressure companies to improve working conditions and pay.
One is to simply not buy their products. This is the most straightforward method, but it’s also the least effective, since most people don’t have the time or inclination to research every company they do business with. Additionally, many people are reluctant to give up the convenience of buying from big companies, even if they know that those companies are exploiting workers.
A more effective method might be to call out companies publicly for their bad behavior. This can be done through social media, online petitions, or even organizing protests. When done effectively, this can put pressure on companies to change their ways, lest they suffer reputational damage.
To help push the power of Impact Consumerism along, we need to do a few things.
Requires the most from regular folk, who don’t have the time. But journalists (including citizen journalists and alternative news) can help.
The power of transparency.
I could go on and on about the power of transparency, and I do in Demand Transparency page, or you can just read the very short post The Quintessential Example of the Power of Transparency.
The Humanity Index
The Humanity Index is a project that hopes to rate companies on their treatment of workers. It takes into account things like working hours, benefits, pay, and job security. It’s still in development but the idea is that by creating this ranking, consumers will be able to make more informed choices about where they spend their money.
Developing a Pay Scale
Ideally we’ll get to a place where The Humanity Index can graph honest pay in a transparent and meaningful way.
The main thrust is to look at overall profits and compensation and ensure that everyone is getting a share.
Known by many names, including ESG Investing, stakeholder capitalism, Impact Investing, Socially Responsible Investing (SRI), Ethical Investing and Sustainable Investing, to name a few, the concept is so hot these days. The idea is that rich guys, money managers who create things like mutual funds and Exchange Traded Funds (ETFs), pension funds, university endowments and even your 401k managers can use their investing dollars to invest in companies that are “socially responsible.” There’s a very good chance your 401k offers at least one socially responsible fund.
I like the theory but i have my issues with it. I’m not the only one. I hope to get a post up soon on why Impact Investing isn’t good enough, and you can learn a bit more about the concept on the Leveraging What Already Exists strategy post. But anyway if you have a 401k or invest, investing in companies that
Instead of hoping the rich guys will fix it, what I think is a more powerful way to change business behavior is by average people using the power in their wallets to demand change. You can read more about Impact Consumerism here, but you probably get the idea, consumers supporting companies that align with what they think is important. Hashtag #DemandMoreforYourDollar.
Its a nice idea but in today’s environment of fake news, cynicism, and people having enough shit to worry about, its asking a lot.
Impact investing and consuming can both happen in parallel, and ideally they should be mutually re-enforcing.
Unions are a powerful tool for increasing worker pay. By negotiating contracts with employers, unions can secure better pay and working conditions for their members. This helps to keep wages competitive, and prevents employers from undercutting union workers with lower pay rates.
Union membership has been declining in recent years, but recently they’ve been making a comeback, in part as a reaction to growing inequality. The Fight for $15 movement has been successful in securing higher wages for low-wage workers, and has even managed to convince some companies to increase pay without unionizing.
One idea that’s been around and is actually used by many smaller businesses is the Employee Stock Ownership Plan (ESOP). Basically, employees are given stock in the company they work for, and as the company grows in value, so does their ownership stake. This gives employees a personal incentive to help make the company successful, and also ensures that they share in the profits.
There are some drawbacks to this system, namely that it can create tension between workers and management, but overall it seems like a good way to align the interests of workers and owners. They are attractive because it helps put everyone on the same page, working toward the same goal.
Spearheaded by Isabelle Ferreras, Dominique Méda, and Julie Battilana , followers of the #DemocratizeWork movement believe that by “treating workers as citizens, treating work as something other than an asset, and treating the planet as something to be cared for, a better way is attainable. Building on cross-disciplinary research, Democratize Work is both a rallying cry and an architecture for a sustainable economy that fits the democratic project of our societies… Democratize firms; decommodify work; stop treating human beings as resources so that we can focus together on sustaining life on this planet.”
Ferreras and Battilana published Democratize Work: The Case for Reorganizing the Economy ad in May of 2022 and the group organizes events around the planet via several chapters and has gained some notoriety in academia.
Toward A More Equitable Future
In recent years, there has been a growing recognition that corporations need to pay their employees a bigger share of the profits.
While profits for the biggest corporations soared, wages for workers have remained relatively stagnant. An ever-growing inequality gap between the executives and shareholders who benefit from the profits and the workers who help generate them will not end well.
By paying employees a larger share of the profits, companies can help reduce this inequality and create a more fair and just economy.
In addition, paying employees a fair share of profits can lead to greater job satisfaction and productivity, which can ultimately benefit the company’s bottom line.
Corporations have a responsibility to ensure that their workers are fairly compensated for the contributions they make to the company’s success.
Championing honest pay is a powerful startegy for making the world better.