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Comment by throwaway5752 | Hacker News Reader

1. Using revenue comparison is incorrect. Profit is more complicated because you have to add back in compensation (and if necessary be able to know when r&d comp is capitalized and be able to break out r&d versus sg&a if you only talking about comp for particular groups of employees) but it is the correct per-employee stat to compare.

2. Median employee salary is wrong, you should look at average salary if you are comparing it to an average (revenue) figure.

3. You should correct for benefits and taxes. I don't know what they are, but salary is only part of the cost of an employee.

I know you are trying to make a quick point, but FB has margins ~40% and all-in employee costs can be 50% higher than salary. Assuming the median comp is close to average, then it's possible FB is making appr. $700K or so per employee in profit and paying out appr. $300K which doesn't sound quite as bad.

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All in employee costs don’t rise nearly as fast as wages when wages go up.

Which is why I used 25% / $60K towards the end of my example but you are correct to point that out.

That sounds insanely bad.

Why should they get 40% margins? Form a union, demand more money.

50-100% margins are normal for many growing businesses. Once a company / industry matures it can get away with lower margins.

If you have too much money leaving the business through employees (CEO included) you slow growth.

If you don't have high enough margins you also slow growth.

It's a balancing act and free and fair competition usually provides the correct answer.

For a market to be both free and fair workers must have symmetric power and information with ownership and the customer. Otherwise the system is inherently unfair (in an economic sense) toward workers.

Every power dynamic is inherently unbalanced and unfair to at least some degree, but I agree you want it to be as fair as possible as often as possible.

I'd much rather see greater employee ownership in companies though rather than unions. Union and management negotiations are often a zero sum game. A win for one side is a loss for the other. And in between you can have damaging strikes or a breakdown in relationships. It's an us vs. them mentality, which isn't great for teamwork.

Employee ownership however aligns everyone's interests in the growth and profitability of the company. It puts everyone in the company on the same team and creates and us vs. them mentality with the competition instead which seems like healthy capitalism.

I guess I agree in theory, but if ownership doesn't want to deal with a union, what makes you believe that your idea would be an easier sell? Unions are basically the compromise.

> I'd much rather see greater employee ownership in companies though rather than unions. Union and management negotiations are often a zero sum game. A win for one side is a loss for the other. And in between you can have damaging strikes or a breakdown in relationships. It's an us vs. them mentality, which isn't great for teamwork.

While this is generally true in the US system, it's not inherently true. It's like any other relationship - if there is trust and mutual understanding, then a good union can make a company better than it would have otherwise been. If the union exists as a response to abusive ownership, then it should hardly be surprising that the parties go to war, but it's ownership that drives that divide.

Good points. I suppose employee ownership is better institutional policy from the outset. I'm not sure it would be an easy transition later in the life of the business.

I have actually seen that a few times, but it's mostly small local businesses. Modern Times Brewery recently implemented that kind of program. At the end of the day, the owners have all the power to make that decision.

>> Why should they get 40% margins? Form a union, demand more money.

Why should they pay you more? Form the next FB and pay your employees 3x what they currently pay.

Pretty ridiculous response, right?

Because if they don't then the union has the capability to severely harm the company.

This is why we need unions.

I think you radically underestimate how over staffed these firms are. The only sorry of strike that could harm Facebook is if the SREs actually shut down all the servers. But you can get DevOps people anywhere and management there is technical do could easily run the firm themselves for a while. All the strikers would do is get themselves fired

Which is basically blackmail. Unions tend to make things worse in the long run.

If you don't like the company find a job that gives you a better deal.

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