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Comment by CM30 | Hacker News Reader

Isn't the answer then that said businesses simply shouldn't be trying to hire too many new employees yet, or should shut down? Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet.

If a company's business model doesn't work, then it shouldn't really stay open/continue to exist.

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I think the question you should be asking is why are people taking these "too low" wage jobs?

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?

>you're essentially saying that those workers have better options already available

If you're following the fable of capitalism, those people should start their own, more efficient businesses if none are available.

Yes? Or just get hired by one? Or change field? Or move?

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.

Because capitalism forces them between a job that does not pay enough and no money to buy food and housing and clothing and such.

The solution is of course something like a basic income to liberate people and break the power of companies.

Or they could invest in training instead of expecting perfectly-qualified staff to walk in the door.

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!

Training requires loyalty to work - if companies can't expect trained personnel to stay then the investment is pure overhead.

To be fair, it's corporate America that burned that bridge in the 80s with layoff culture, citing "economic efficiency".

You could build some measure of "loyalty" into a contract:

* 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.

This would be illegal in some (most?) places - labor laws ban employers from clawing back pay for almost any reasons.

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.

I'm not familiar with CA labor laws, but money is fungible so it could be just be structured as "This is a three year contract, and if you quit early, you're in breach and owe us $X".

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.

That wouldn't be an enforceable contract. Contacts require some consideration on both sides to be legally valid. However if the training is provided by a third party then the employer may be able to pay for it as a forgivable loan with the balance being written off if the employee stays for a couple years.

That would be deception against the court of law. Very bad if caught.

I'm still not clear why people are claiming this would run afoul of labor laws. IANAL, but sibling comment claims that a contract needs "consideration" on both sides, but surely the value of the training, and the value of a guaranteed term of employment are both considerations?

Depending on the industry, if the training is somewhat universal (like in the mig welding example) it's possible employers could offer 0% interest loans for training, with forgiveness after some payback period as part an offer.

Repayable bonuses are legal in basically every state

There are different ways of doing this, though. E.g. some law firms will pay off student loan debt as long as you're working for them: https://www.usnews.com/education/best-graduate-schools/payin...

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.

Companies can still reverse that trend. I work for one where many of my coworkers measure their employment there in decades. You can imagine what I thought recently when I interviewed somewhere where the interviewers had a collective 3 years under their belt.

On the job training within work hours is damm large perk. I don't get why you all talk about it as if people would run away from such companies.

Allow me to learn on the job and I will be reluctant to leave for company that don't.

>Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet.

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.

> Do you think the employees would prefer being unemployed or being underpaid?

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.

>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.

Workers do decide on things such as the minimum wage, through voting. If a business wants to offer more pay to attract more employees, that's their call and their right.

>Workers do decide on things such as the minimum wage, through voting.

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.

And rely of corporate welfare or working tax credits as its known in the UK - I don't mid my taxes paying for nurse doctor or teacher training subsidising Starbucks baristas not so much

Should punctuation training come from welfare money?

Welfare, no. Education budget, definitely.

> subsidising Starbucks baristas not so much

I'd recommend you read the Power of Habit. The author talks about the training program Starbucks puts its employees through to build willpower.

You perfectly make the point that the true minimum wage is $0/hour. Raising minimum wage has often reduced the number of jobs, often creating black markets of cash workers who often compete directly against people not allowed to legally work in US, further depressing wages.

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?

This has always been the argument against companies who claim they can't survive without using undocumented immigrant labor.

If your business model relies entirely on not paying your employees reasonable wages, maybe your business model is a failure.

There will always be a need to employee low IQ individuals, developmentally disabled, etc. Would you prefer those types not have a viable option for employment?

Maybe. From an overall perspective of entrepreneurship and job creation no. The reason being that many companies are bootstrapped on the backs of cheap labor until they reach a point where they can sustain jobs. You are basically saying that bootstrapping should never happen and you should always have investors to create companies... unless maybe if the founder can make a company based around a very small team work somehow who are working for next to nothing for equity.

You’re welcome to set up a company and pay yourself as little as you want - that doesn’t mean you can compel others to accept mediocre wages too.

Not a native speaker, but doesn't mediocre mean average? Surely most people are working for a mediocre salary or less?

Normally yes, but it is also used as a degenerate term, though in this case other words might have been a better choice.

In modern American usage, mediocre is a pejorative word. To Horace, aurea mediocritas was a good thing, but we translate that as "golden mean" because mediocrity is, by definition, bad. The sense of "middle" has been lost.

It goes deeper than that. Average is viewed as negative in American culture. When people say mediocre they are thinking "eww average" in the back of their mind.

Didn't you get the memo? Our goal is to pay everyone above-average wages! Anything else is a terrible injustice!

Bootstrapped usually means cheap labour of the founders, as part of the risk they took founding the business. Not paying unreasonably low wages to all around.

Job creation comes after the business has become self-sustaining.

Recently got told by some founders doing a farming technology startup that nobody gets paid because "We don't even pay ourselves!", but if I would like to volunteer my time doing automation and robotics R&D, then that would be great.

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.

> Recently got told by some founders doing a farming technology startup that nobody gets paid because "We don't even pay ourselves!", but if I would like to volunteer my time doing automation and robotics R&D, then that would be great.

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.

Those founders are getting paid by having 100% ownership in the business. If in 5 years the business becomes profitable then the original unpaid employees won't see any of that money.

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.

This is called "working for venture". I have seen it (once) explicitly stated as the terms of employment.

Businesses aren't bootstrapped on the back of cheap labor. They're bootstrapped on the back of high cost variance labor. They're paid in equity that may be worth nothing or may be worth a lot. You convince people based on the merit of your idea. They evaluate whether or not your idea has a sufficiently high probability of success to be worth their time. The labor isn't cheap, it's just not paid for with cash.

I think historically a lot of businesses were bootstrapped on cheap labor.

Not meaning to be facaetious, but this sounds like something an 18th Century sugar plantation owner might say.

Historically, there were slaves.

That's exactly my point. A lot of the big companies today have at some point in their past exploited workers. Basically every manufacturing company started before WW2 or so.

Sorry, do you mean your comment could be a candidate for the `/s` tag?

Early factory workers where not exploited in terms of pay, they made more money than the average worker of their time period. Safty is a different story.

If someone starting a business works many hours themselves for $2/hour, and asks their spouse/children to chip in, and calls in favors from family and friends to get things going - then that's bootstrapping on cheap labor, but nobody in their right mind would call that 'slavery'. When starting a business when you have nothing, you have to be frugal, yet you can't do everything alone - that doesn't mean all ways you can get work done at below-market rates are sleazy or immoral.

Usually you get that cheap labor with lower experienced and younger employees. You do get what you pay for in many ways, but you do find those talented young people who can be really good for the first 1 or 2 years, or do things that many big companies refuse to do, like hire remote or give things like flexible work arrangements in exchange for cheaper pay.

But where is the line? Can I import hundreds of people to manually have them dig coal out of the ground with their bare hands because I can't afford the machinery yet and claim I'm bootstrapping a mining business. We would typically call this exploitation.

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.

> 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.

This has never been the case in the past; there is no reason to expect it in the future.

Disagree. In the past, “abroad” was physically closer and in what is now the same country. Londoners can pay the Welsh less, but they can’t go on literal slave-gathering raids c. 999 AD.

It’s all a matter of degree. Degree of progress, degree of wage difference, etc.

The definition of "abroad" is of no interest. The world has always been the same size. There has never been a time when all countries / regions / whatever-you-like were at a similar level of development, and there is no reason to expect that such a thing will or could happen.

Less developed countries tend to have higher growth rate, so there is a reason to expect convergence.

But there are large - sometimes huge - steps back, e.g. Venezuela. Any reason to think they'll stop happening?

The world has always been the same size

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?)

There is every reason to expect it. Compare now with 20 years ago, 50 years ago, 100 years ago, 200 years ago. The graph is exponential.

If everywhere develops at the same exponential rate, you can easily see that the gaps in level of development constantly grow over time. Exponential growth is not meaningful for this question.

Having a few poor countries is not enough to balance things. The global economy is currently balanced on having billions of very low wage workers, but low wage workers push an economy forward so it’s not a stable equilibrium. Either workers send money home via remittances, or work in their own country kick starting the economy.

I think that rule of law and development of institutions (cf. Chinas progress vs Africa's progress) are the drivers of economic development.

Without the rule of law, you don't end up with large scale factories. Corruption is kind of a sliding scale, but factory workers take infrastructure in a way that oil does not.

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

Well - the sharp and unexpected decline of fertility levels globally reported in the news last week : https://www.bbc.com/news/health-46118103

Also the improvement of economic conditions in some parts of the world will mean competition for labour globally.

Businesses are bootstrapped on the backs of the founders who exchange high personal risk for potential reward. I have had a bootstrapped company and my employees always got paid first and correctly. I don’t hire people unless I can pay them what they fairly cost. Any shortfalls came from my pocket and savings and never on the backs of my team. Maybe I am an outlier. It seems to me that the Amazons and Ubers of the world are built upon “cheap” labor more so than bootstrapped companies. Those types of companies have a competitive advantage from their access to cheap labor that is magnified at scale. Your typical bootstrapped company isn’t at the scale where exploitive labor makes much sense.

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