Hacker News Reader

Comment by deelowe | Hacker News Reader

The CEO and the workers are not in competition with each other for similar jobs. Their pay is not at all connected in any way what so ever. Each person's pay is determined by what the market rate is.

The politicians in Washington have convinced everyone that we should blame CEOs for the fact that our representatives have done a terrible job of maintaining a stable competitive market for low wage earners. The problem isn't that there are too many CEOs. There are too few. The problem with John Deere isn't it's success, but more specifically it's success at forcing others out of the market.

When there are only 2 big employers in your town, guess what? You're going to make whatever they hell they want to pay you.

But yeah, let's blame the CEOs.

View on HN

> Each person's pay is determined by what the market rate is.

As long as people are effectively forced to work under even the most exploitative conditions, the market rate is going to be depressed by desperation. The labor market without a decent social security net (aka unemployment insurance that actually works and is accessible, or outright UBI) is not a free market by definition!

That is why the COVID relief packages were able to overturn the market - they allowed people to leave their old jobs (if they still existed, that is) and search for new, better employment without the pressure of starving as somewhat around 60-70% of Americans, under normal conditions, would not have saved enough money to cover even a single week of unemployment.

>The labor market without a decent social security net (aka unemployment insurance that actually works and is accessible, or outright UBI) is not a free market by definition!

That safety net is called your savings account. I could live off my savings alone for years before I find another job.

> let's blame the CEOs.

I don't blame the CEOs, or their pay for that matter, I blame a system in which if a CEO goes home, s/he can spend one year golfing and the following one choosing among the offers from his/hers golfing friends, while if a worker becomes unemployed, s/he could starve within one month while having no way to find a new job.

>When there are only 2 big employers in your town, guess what? You're going to make whatever they hell they want to pay you.

>But yeah, let's blame the CEOs.

hmmm, who should we blame for destroying the job market in their town? or who should be blamed for trying to sabotage organized labor?

poor CEOs getting all the blame for the stuff that is being done by this unknown force...

No, let's not blame the CEOs. Let's negotiate better contracts so they earn less and the little guy earns more.

If you set the CEO pay to zero and gave it to all the workers it would amount to a microscopic raise, and presumably wouldn't make the company any better run.

CEO salary / number of workers / number of working hours in a year = 14.75 million / 70k / 2080 = $0.10

Yes, that would be a stupid way to raise wages. I guess I assumed I didn't need to explain that I'm not suggesting a contract that literally says to only divvy up the CEO's salary. This is the most pedantic response to anything I think I've ever read.

The point is the amount of compensation you could give to workers from reducing CEO pay is insignificant when you divide it by the number of workers, even if you imagine an unrealistically extreme reduction in CEO pay.

While true, it is no reason for not doing so.

On the other hand if you cut the entire c-suite, other board members and top management in half there is a significant amount. Usually with companies this size there are many mini CEOs in divisions and it starts to add up.

I think you'll get a better discussion (if that's what you're after) if you tell us exactly what you're suggesting instead of what you're not suggesting. The idea of negotiating better contacts for workers is not a novel one, you're not breaking any ground there. So how, exactly, does that happen?

No ground is being broken in this comment section whatsoever, and I'm not in a position to break any ground either even if I sit for a while and think really hard (...fuck).

But to contribute what I suggest (again, without breaking ground): capitalists take 30% of all income generated, for themselves. I haven't looked up the financials for John Deere, but I mean that's the ratio when you take the U.S. as a whole. That 30% is a wayyyy bigger piece of the pie than divying up a CEO's income, which is probably a tiny part of that (on average) 30%.

Let's run the numbers again for a thought experiment:

- $15600000 CEO compensation [0]

- 69600 workers [1]

- 1760 hours average per US worker per year [2]

- $20.12 hourly wage for the lowest paid John Deere employees

$0.13/hour, 0.6%, or a bit over a dollar a day increase for the lowest paid group. That would be the increase if the JD CEO would work for $1, with all his previous pay evenly distributed to all employees. Not insignificant.

Now let's have a slightly different thought experiment. What if the CEO pay is cut by 50%, and evenly distributed only to the bottom 10%? A $0.64/hour, 3.2% or $5.09/day increase. That would be a very significant number to all involved.

I'm not saying this is what should happen or not. Just saying the number is significant.

[0] https://eu.desmoinesregister.com/story/money/business/2021/1...

[1] https://www.statista.com/statistics/278010/john-deere-number...

[2] https://en.wikipedia.org/wiki/List_of_countries_by_average_a...

Usually the lowest paid workers make up a significant percentage, not 10%, so raising pay for only 10% of workers doesn’t make sense. Of course you can run another experiment that distributes CEO salary to the lowest 0.1% and see an even more significant raise; that doesn’t mean anything.

To add on your point, the people I know on low pay really care about what seems like a small pay rise e.g. $20 to $20.50. This makes sense because after living expenses a worker is left with say $40 discretionary money to spend, yet a $0.50 pay rise increases the worker’s discretionary spending by 50% (for this example).

When you are financially struggling, a 10¢ raise (extra $4 for the week) can make a big difference.

One of my friends worked 40 hours and had $20 to spend on herself after her bills (which were frugal, since she didn’t earn much). Low pay sucks when you earn a discretionary $0.50 for every hour of work.

"Their pay is not at all connected "

They work for the same company, with the same surpluses etc.

They are very 'connected'.

The big difference is that the CEO has no idea what to do with his money except invest it into a stagnant economy whose consumer market is failing to grow because every CEO pays their workers poorly. In other words, giving the CEO money is a sign of an inefficient market.

Some blame lies at the feet of CEO's. Some at the feet of the government.

When large corporations fail, they socialize their failures by getting bailouts from the government. There are never bailouts for individuals. Whenever a corporation has extra capital, they do things like buy back stock, rarely ever give it to employees, it simply isn't profitable for them to do so. These are choices a CEO makes in running their company.

The government allows for a bit much capitalism when it comes to health care, in my opinion. The added costs for health care are commonly thrust onto all employees, those at the bottom of the pay scale are impacted the most because they make the least. An out of pocket health care expense for a CEO is a rounding error but can be financially devastating to the lowest paid person that has coverage.

I get that they are different jobs. For example if there were a software error in a JD tractor that caused many deaths (i.e. some safety feature fails) its more likely a CEO/CxO would have to step down for mis-managing something than a bunch of factory workers.

In general, the pay differences are really out of whack though.

> Their pay is not at all connected in any way what so ever.

This is so false that I have trouble believing you are serious. All pay comes from a fixed source, "income", and the CEO/board is largely who determines how the CEO and workers split up the money.

When an employee is hired they get a contract. Everyone is paid based on that. Which is usually determined by a market rate. What are you talking about?

...and where does the market rate come from? Written by God on a stone tablet, never to be questioned by management?

Google is your friend.

Google tells me that unskilled delivery drivers and in some places even fast food workers are getting $20/hour right now.

At a company that size, it’s typically based on how well they are filling their pipeline of candidates. Difficulty finding people pressures pay to rise (this is the pressure UAW is exploiting.) They also conduct salary studies and survey employees to figure out if they’re satisfied by their pay. So while there may temporarily be a pay schedule, it’s constantly revised. In a large company there are many roles and schedules so at any point, many are somewhere in the process of changing.

The UAW situation is different. Unions negotiate contracts that affect all employees. These are set by the ability of the union and management to negotiate, with some pressure from market rates. These are closer to the “stone tablet” idea of yours, but only fixed until the next negotiation.

There is no ‘dividing up the income’ activity, like the other user suggested. Management just focuses on making more revenue than it’s paying for all expenses, and tries to employ as many people as it thinks it needs to acquire that revenue or grow future revenue.

This is a simple explanation that elides a lot of detail, but hopefully helps.

> survey employees to figure out if they’re satisfied by their pay.

If those are done they are likely ignored or used to figure out how much lower the pay can be. And a strike is a result of that.

The idea that employees cannot profit from a company doing well, not profit from their own labor and simply get a fixed low pay is insulting.

Yes, I tried to distinguish between market research and market pressure setting prices and the more negotiation-based process of a large unionized employer.

"There is no ‘dividing up the income"

Yes, that is effectively what is happening.

The value is 'divided' between customers, suppliers, employees, executives and investors and it will go to who has the most power.

If the power balance means they can charge higher prices (less surplus to customers), then that money will go to the remaining parties. If suppliers are commodity, then it's a 3 way fight between execs, employees and investors.

If the company sees increasing sales and is flush with cash, the execs and workers will try to negotiate for higher pay.

"Management just focuses on making more revenue than it’s paying for all expenses, and tries to employ as many people as it thinks it needs to acquire that revenue or grow future revenue."

That process boils down to dividing up surpluses.

It’s a useful mental model to picture the contributions of all these parties, and it can serve some indirect value as a framing in overt negotiations, but it’s not an actual process.

The process matters, but is not hugely important.

Whatever the process is, it's walking along a gradient towards finding somewhere close enough to the balance of power.

The same way all commodity pricing is determined - when you don’t get enough of what you want, you pay more, or go somewhere there’s more supply.

A “better” CEO would surely minimize labor expenses, by automating, moving to cheaper regions, etc. In most businesses, labor is the largest expenditure.

By the Gods of demand and supply adjusted by God of minimum wages. No matter how much mgmt question it they'll not be able to pay 10$/hr unless someone is ready to work at that rate and if allowed by the govt.

> if allowed by the govt.

... and if unchallenged by organized labor

Employers and government regulations determine pay. If the market gets too high in one region, they simply move to a lower one.

Right now the market has determined that pay is too low to fill job vacancies, but employers are not raising wages, not the market.

The market rate is determined by what employees are willing to accept vs what employers can get away with offering. The employees just demonstrated that they're no longer willing to accept what they are currently getting. The market rate just went up, I'd say.

Employers threaten employees with a loss of their livelihood. Employees threaten employers with a loss of business.

The decided upon rate is determined by the outcome of this struggle.

That's how the market rate sausage is made. It's not an impersonal objective arbiter of truth. It's a reflection of relative levels of power and relative levels of desperation.

One’s willingness to stick around determines the split. If workers in a given job will work for $x, there is no need to pay more.

You know this is true as you are watching a situation where workers will no longer work for $x play out.

The difficulty in keeping one job filled is not dependent on another job. The difficulty in hiring a janitor does not impact the difficulty of hiring a software developer.

Reply on news.ycombinator.com