If a company's business model doesn't work, then it shouldn't really stay open/continue to exist.
Companies do close down all the time because expenses are higher than revenues. Restaurants are a very well-known industry where that is super common (and it's not because restaurants tend to pay exhorbitant wages). It's literally a meme to accountants that having a restaurant as a client is a good way to never get paid (they may close down in the 30 days after delivery they are typically given to pay you).
Also, in a way, we already "shut down" companies that pay too little: you just can't even offer to pay someone 2$/hour. The question I'd ask is "who would take that job if it were allowed?"
In essence, having low wage jobs should never be an issue: if you're of the opinion that these companies shouldn't exist in the first place, you're essentially saying that those workers have better options already available. Do we really need to fire them to get them to go for those?
The solution is of course something like a basic income to liberate people and break the power of companies.
If you're following the fable of capitalism, those people should start their own, more efficient businesses if none are available.
It's no fable. Some of us don't have what it takes to start their own company, that's true.
Probably there is no hope for some. I don't know how you'd show that there is a system that doesn't suffer from this problem. I mean, you'd have to show that even with less incentive to produce and more demand for products (since everyone is owed "decent living" or whatever it's called nowadays), there is no possibility for demand to exceed production.
Every week I see job ads with "${INDUSTRY_CERTIFICATION} essential". Companies are lazy and spendthrift and have some illusion of a vast labour market just itching to retrain themselves in MIG welding or whatever.
The last ad I remember that said "full training will be given " was for a bakery!
To be fair, it's corporate America that burned that bridge in the 80s with layoff culture, citing "economic efficiency".
Allow me to learn on the job and I will be reluctant to leave for company that don't.
* We train you for six months and pay you full salary.
* You have to work for us for two years past the end of your training period.
* If you leave before that, you owe us 50% of salary from the training period. (or whatever)
In a competitive market, you might even see other companies willing to buy employees out of their contracts.
In California, for example, you can't even dock someone's final paycheck if they fail to return a uniform - if someone worked the time to earn a wage and you don't pay them in full, you're going to find yourself in court.
It's kind of mental accounting for the employee, though. The law firm is basically giving you an extra $100 or whatever per paycheck. However, this $100 is earmarked to pay off your law school debt, so in effect the company is helping to pay for your training.
The nice part for the company is that they do not take on any risk paying for the training: the employee already shouldered all the risk for paying for law school. The company buys a little bit of loyalty by helping the employee pay off the debt over time. It probably makes the employee think twice before quitting or looking for other employment; it is similar to the health insurance benefit in that respect.
Then it's not "clawing back" pay, it's just a fine for breach of contract.
I do think laws should prevent low-wage employers from screwing over their employees for piddling stuff like uniforms, but I think that's different than something like a professional apprenticeship.
Do you think the employees would prefer being unemployed or being underpaid? The business closing doesn't magically create new, better-paying jobs for them. If better-paying jobs existed that they were capable of doing, they'd already be doing those instead.
Depends on how underpaid doesn't it? There's a line for everyone where all that work just isn't worth still not being able to afford a decent standard of living.
Then shouldn't this be up to the workers in question to decide? Closing their low-paying workplaces just cuts down their options, it doesn't create new jobs for them.
That's a much weaker form of decide. A vote only means at least 50% of voters wanted it, so you can only say with certainty that there's a 50%+ chance that any given voter wants it. Whereas if a worker has chosen to work for a particular salary, there's a 100% chance he's chosen that as nobody else can make that decision for him.
I'd recommend you read the Power of Habit. The author talks about the training program Starbucks puts its employees through to build willpower.
The real question is if a worker and an employer agree to a pay rate, why do you get to call it "underpaying"? Are they not adults, ostensibly free to live their lives how they see fit?
If your business model relies entirely on not paying your employees reasonable wages, maybe your business model is a failure.
Many types of business can't be bootstrapped. That is not unusual. Bootstrapping is primarily a popular approach now due to easy computer automation that makes a small subset of companies viable with the very small staff and no expensive hardware. It certainly isn't a default across all industries.
The labour pool is a market. You are not entitled to cheap labour just because you want it. If you can't find someone willing to do your work at the rate you want to pay it's because someone else is paying more for the same work, so you need to pay more to attract the labour.
Importing people from abroad is something that only exists as a solution because of the imbalance of development levels around the world right now. I expect that this is an anomaly that we are going to see correct itself in time once all countries reach a similer level of development. Where will you import your cheap labour from then?
In the UK we used to employ children to work in the mines and the mills. This was eventually realised to be exploitative and made illegal. I'd bet that all the business owners at the time complained how would they ever be profitable without the cheap child labour. But they either adjust or die, and I'm happy with that tradeoff. If a business is only viable with child labour I would prefer it didn't exist at all.
This has never been the case in the past; there is no reason to expect it in the future.
It’s all a matter of degree. Degree of progress, degree of wage difference, etc.
Not in terms of travel distance or the speed of human movement (remember when "around the world in 80 days" was an actual accomplishment, worthy of fantasizing about?)
Also the improvement of economic conditions in some parts of the world will mean competition for labour globally.
That said some African countries are actually doing rather well. Botswana has seen real economic growth ranking in the top in terms of GDP PPP, just ahead of China, and that's without oil.
PS: Africa's population density is also much lower due to war and corruption. Overall, it's 1.216 billion over 11.73 million mi² vs say 1.339 billion in India in 1.269 million mi² so about 10x the population density. China at 1.386 billion over 3.705 million mi² is again 5x Africa
Job creation comes after the business has become self-sustaining.
I always think that you should account a startup as though you are going to be paying everyone properly even when you cannot, and then start to pay out based on a combination of need and who has the oldest outstanding credit, when money starts to appear.
If you do this, then your company accounts are actually useful documents that you can project costs off going forward and actually attract investment, rather than living in some optimistic dreamland where the numbers you have do not represent anything like the actual costs of running the business properly.
The only way this payment structure can be morally sound is by treating every unpaid employee as a founder and giving them an equal share of the company.
So they are saying you should do slave-labor? I hope they expected to give you plenty of equity (which is cheap as the company is worthless as there is no money being made yet), otherwise it would be idiotic to expect people to work without compensation.
Historically, there were slaves.
For instance, you could make a version of AirBnB that was supported by ads alone, if instead of paying homeowners for the use of their homes, you simply compelled them to let you rent them out for nothing.
And it's a beneficial process, as it moves these people from business where their labor is less valuable (as evidenced by the fact that it's not profitable to employ them at a slightly higher wage) to businesses where their labor is more useful. The least efficient businesses being forced to close is a good thing that allows the labor, facilities, land, materials, capital, etc to stop being used poorly so that they can be used better in the economy.
The other balancing loop is that higher wages in some field is motivation for people to get the skills needed for that field, either through choice of education for younger people or by transferring from another type of job. This balances the supply side in a beneficial way, but as it's much slower than the balancing loop above, the largest immediate impact comes from the demand-side balance.
Companies will try to only pay staff more when they can justify that to the shareholders as being a way to make more money for the shareholders. A public company exists solely for the benefit of the shareholders and all actions stem from that.
Not sure about this.
First off, there's the principal/agent problem that causes many public companies to be run for the benefit of their upper management.
Second, this idea of the shareholder above all other stakeholders is a new phenomenon (since the 1980s). It's also primarily an Anglo Saxon idea (USA, Britain). Other countries include other stakeholders more explicitly. And the USA could as well, of the political will was there.
I agree with you that this is how American capitalism is structured now, but it didn't spring from the mind of God, it's a human institution that can be changed.
Upper Management, The employees, the board members, the shareholders, the customers.
Business decisions are almost always made looking at the perspective of perhaps 2 or three of these stakeholders. The employees are basically never considered in the US, often only the biggest one or two customer's desires are considered if any consideration is given at all, etc.
And way too much attention is payed to certain Wall Street types who get all upset when earnings exceed the company's own projections, but fall short of wildly optimistic estimates by third parties.
Here in Denmark we don't have greeters, we bag our own stuff and most of the time we have to put a coin in to get the shopping cart out, which will be returned when we return it.
Of course there will be businesses that can't adapt. These will die out and those employees will then, slightly, decrease salaries.