An article from MSNBC:

http://www.msnbc.msn.com/id/14251360/

The economy has been booming but wages have lagged the cost of living. Consumers are in huge debt, 126% debt to income ratio. And really the economy is floating on consumer debt, i.e. the boom is due to people spending money they don't have.

The gains in the economy seem to be going to CEOs and corporations while workers see no increase in wages.

Prices and cost of living continue to be high so debt continues to rise.

My question

Should companies step up and give workers wage increases rather than pass the profits to CEOs and stockholders?

Or should the gov't step in, increase the min wage and take steps to force companies to act appropriately.

I just now read this article and I was shocked by it.



(Bold added for emphasis)

This can't be good.

So what's going on? Are people just spending money they don't have foolishly? No doubt some are, but that may not be the only explanation.



Putting your home on the line in order to pay for medical bills or college tuition is a very scary thing.

We have often debated here at about whether the current American economy is "good" or "bad." I doubt whether either word really applies. Perhaps a more fitting word would be "perverted."



The best thing that could happen, of course, would be for mega-corporations to stop cutting their own throats for the sake of quick money, and to treat their employees with a little more respect. Not of of the goodness of their hearts, but out of intelligent self-interest.

Government intervention in the world of business is a very dangerous thing. Unfortunately, sometimes it is necessary. The horrors of absolutely unregulated business practices in the Nineteenth Century are proof of that. There have to be some kind of labor laws in order to prevent a future in which Wal*Mart will look like a worker's paradise.

(If nothing else, goverments should stop giving special tax breaks to giant corporations which do not treat employees decently.)

On an individual basis, it would be a good idea for all of us to try to become a little more financially literate. Here's a quiz which may reveal areas in which we could learn more.

Link

I admit that I am a financial idiot. I scored a pathetic 56% on this multiple-choice quiz.

As the article states "because prices have risen in the face of a very weak labor market." What would cause companies to increase wages in a weak labor market? That wouldn't make financial sense, and companies that don't make financial sense don't make money for long, and therefore don't stick around to even provide jobs. It would be similar to companies raising prices in the face of weak product demand to prop up profits (or wages). This inevitably leads to a downward spiral, which helps no one.

Note: I am in agreement, as I have stated on the other, similar threads, that companies should indeed value their workers. Wage increases create various issues. Mainly...what should the companies then do when profits decrease? Profit sharing seems the best answer, and I strongly support that. Those companies that do indeed value their employees, I feel, will be rewarded with better results...and eventually we won't need to be having these discussions. Until then, though, I'd prefer profit sharing.

Should companies step up and give workers wage increases rather than pass the profits to CEOs and stockholders?

No. Wages are determined by supply and demand. In a weak labor market, there isn't much reason to raise wages. Further, wage increases then become a burden when, as is usually the case, profits fall. This ends up costing both shareholders and workers as the inevitable layoffs occur. Further, most profits don't go to shareholders...they go back to the company, and are invested to make the company stay profitable and increase those profits.

Or should the gov't step in, increase the min wage and take steps to force companies to act appropriately. First, the question assumes the answer, which isn't very conducive to constructive debate. I've stated my position on the minimum wage on the various threads on that topic, which is I'm against it philosophically, but haven't found that the purported ill effects of raising it to have happened in reality. As for acting 'appropriately', it is quite appropriate for the owners of a business to determine how they should spend its profits. It is, after all, their business. Suppose the government were to step in and force higher wages. Who is then going to cover the shortfalls when profits fall? Would the wages increases only apply to certain companies? If not, what about those that aren't currently making profits, or who wouldn't were they to have wage increases? What about those workers that would then lose their jobs completely as companies sought lower wages elsewhere to return to their previous profit levels? What would be the 'appropriate' thing for the government to do during the next recession? Who's going to pay for those enforced wage increases then? Clearly, government intevervention, even if forced wage raises were appropriate, is fraught with issues.