Bill Moyers has a problem with this:
The average fast food worker makes $8.69/hr. McDonald’s CEO makes $13.8mil/year.This is a very popular comparison that Progressives like to make. It shows a complete lack of understanding as to how the marketplace works.
The amount you get paid in the marketplace is determined by the amount of value that you bring. I once had a progressive ask me "How is it right to value people like that?"
She completely misunderstood me. It's not the people themselves that are being valued, but their skills!
You can be an extremely valuable father, mother, uncle, or brother. You can be a valuable friend, or husband. That's all wonderful stuff, and very important to well-rounded life. However, those qualities are not what is being valued in the marketplace. An employer pays you for the skills that you're able to offer. The more valuable the skills, the more money you'll be paid.
Progressives can't seem to wrap their heads around this...nor do they seem to want to.
The skills necessary to be a fast-food worker cannot be compared to the CEO of the company. I can speak from first-hand experience on this one too.
My very first job as a teenager was working for McDonald's. I had the skills to do the job as a young teen. There were a lot of people that had the same exact skills to replace me when I left. McDonald's did not go into a panic when I quit the job. They were probably able to hire someone before I stepped out the door!
Now, if you were to take me at that skill level and asked me: "Would you like to do the CEO's job for a day?" I would have thought you were insane. I didn't have any management skills. I couldn't oversee many thousands of stores located all over the world, and countless numbers of employees to boot. I didn't have the ability to deal with every possible crooked politician that could be thrown at me.
But guess what? The McDonald's CEO does have those skills. He has mastered disciplines and accumulated skills that really can't be comprehended by the average person.
Such skills are very rare! If the McDonald's CEO quits, the board may in fact shed many tears. Now they have to replace a person with a skill set that is extremely valuable. They may have to pay more than $13.8mil/year for the next guy.
Comparing fast-food worker pay to CEO pay only displays a person's ignorance of how the marketplace works.
Unfortunately, it's a much too common error.
This can't be stressed enough: It's the skills, not the person that is being valued in the marketplace. The skills!
For some reason, government textbooks leave that part out. I can't imagine why.
Chris Rossini is author of Set Money Free: What Every American Needs To Know About The Federal Reserve. Follow @chrisrossini on Twitter.
Very important point. But if you tell progressives that it's the market that values skills a certain way, they will say it's unfair and to make it fair we have to use politics (violence) to correct the unfairness.
ReplyDeleteIt's hard to teach them about crony capitalism, barriers to entry, regulatory capture because they only operate on emotions, not logic nor reason.
So what do ya think Moyers was making back in the day?
ReplyDeleteAnd he was COMPLETELY useless!
The obsession with McDonalds is particularly ridiculous, because the entire time this has been going on, McDonalds has been doing worse and worse, with no end in sight:
ReplyDeletehttp://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/MCD%20Sept.jpg
If McDonalds went non-profit today and never expanded again, the existing profit margin might not cover much of an increase in wages. But given the trend, it may soon be a non-profit of a different sort!
It's very similar to the case with Walmart, where Peter Schiff showed that if they did pay $15/hr, they'd have to stop paying dividends to shareholders.
...and then corporate raiders would put the wages right back after buying a controlling stake when the stock crashes!
But McDonalds is pretty much a creature of the state at this point, having turned the entire menu into derivatives of USDA subsidies, wheeling and dealing with Obamacare, etc. Despite the "help," it's still not working.
With all the intervention, "progressive" types probably get the idea that the entire business operation is up to vote.
I find it strange how, in certain cases, such as CEO vs. low level worker pay, it is assumed that the mythical "free market" is responsible for outcomes while in other cases, such as bank bailouts, it is assumed outcomes are due to our "crony capitalist" or fascistic economy. Government interventions at every stage of business and the extreme distortions caused by fiat money and financialization of the economy create the absurdity of a CEO making around 13 million times that of a low level worker, not just some "masters of the universe" style skill set. The most valuable "skill" these days is, to paraphrase David Stockman, surfing the waves of fiat that flow from the Fed money spigot. That's what the average person just can't comprehend.
DeleteMcDonald's chases price point by decontenting their food. This shows up in the taste of the food, the experience of eating it.
DeleteHow can McDonald's stop its decline and go up? Start serving food that tastes good. Go back and do it like they did in the 1950s. Real beef, freshly cut potatoes, etc. Real food that tastes good served fast. Not frozen cheapest possible grade.
Look at the upstart burger chains. What are they trying to do? Offer better food, fast enough.
Great post. I agree this cannot be emphasized enough. Not only do most college level texts ignore this issue, many professors believe it can't be resolved objectively. They often suggest it is best left to politics meaning democracy or mob rule. Thanks for offering a clear and helpful observation.
ReplyDeleteBeing a well-connected crony is a very valuable skill, apparently.
ReplyDeletePay is based on the perception of the value of what one does, of his skills, and perceived ease of replacement, not the actual value.
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