Where do you think profits come from? Profit is the difference between what you pay your workers and the value of their work.
It think this point is explained really well in the article: why should someone who lives in a city with a high cost of living be paid more than someone who lives in a low cost of living one? Effectively, what you are doing is giving the person in, say, SF, more money to be able to afford a better lifestyle than the person in rural Ohio (to use the same example of the article). Why is that fair? And also, if that is fair, then is me moving to live on a yacht in Montecarlo a reason for the company to pay me 500k a year to afford that lifestyle?
Workers should be paid fairly. And to do that you have to pay everybody the highest salary you are paying for that position. I think Stackoverflow does that now, I remember reading an article on their blog about it.
> You are worth exactly the minimum that you're willing to accept in payment based on your individual circumstances
This is what I would like to change. There's an asymmetry of power in employment (if you lose an employee it's just a nuisance, if a person loses employment it can destroy their life) that is exploited by business and it can lead to terrible situations, such as people that are generating value for a company that posts heavy benefits but in return they don't even get a living wage.
Attempting to quantify this is exactly why we're in the situation that we are. If it was easy to quantify a person's "value" to the company relative to other workers, perhaps we would live in a different world. But it's not as simple as "salesman X received Y sales this month, 20% of that is Z". Who determines the hidden value of the marketing effort? How much of that should be allocated to the engineers who build and maintain the product? What about the people who find the talent to hire? Who would want to clean the toilets if the janitor wasn't here?
After that kind of thought experiment it becomes abundantly clear that there's no meaningfully objective way to quantify a worker's value as a percentage of company profit. Each person's perspective will color their estimation of a particular worker's value. An objectively bad solution.
The present way of doing things is not a result of any attempt at fairness or idealogical belief in the equality of man, it's really just the simplest working solution to the problem that anyone has been able to demonstrate.
> it's really just the simplest working solution to the problem that anyone has been able to demonstrate.
'Working solution' is a stretch. There is a lot of people working below a living wage in companies that still post significant profits, where top executives receive salaries several orders of magnitude higher than those employees. That does not seem adjusted to me.
And don't get me wrong, solutions to this problem are hard and I know it, the system is complex. But situations like paying less to remote workers when they do the same work are incredibly clear and easy to solve, and they show that it's not only that it's difficult, it is that those business do not care at all about making things fair for their employees.
In an ideal world, you would because you would care for people. If not everybody, at least the people around you. As an employer, you are hiring people who will spend the majority of their waking hours working for you, with you, at your company. In theory, you would care if they are happy or not, motivated or not, paid fairly or not. You would care if they can afford that visit to the doctor they need, if they are taking enough breaks, enough time off. Ideally, you would keep an eye on your employees to make sure nobody is overdoing, to watch out for for employees whose performance is going down and figure out if they are getting burnt out or what's actually going on. All those things would pay back in the end. Happy employees do better works. Burnt out employees don't. Recovering from that is hard, and even though you can say "who cares, I'll fire them and hire someone else", there's still the fact that the hiring process is expensive.
In an idea world though. But I guess I do understand that for many people the only thing that matters is squeezing as much money for their business out of society as they can get away with. Though, this becomes a somewhat philosophical discussion at this point, and I think that's beside the point.
In my case honestness would have made several firms more profitable. I'm a high school drop out but lifelong programmer from a early age. As such I've had to work for well below market rates on my way up. Generally I do better than most of my college educated peers but since I lack the education I have been compensated much less. As a result I leave jobs every year or two, often around the time I'm really hitting my stride and providing significant value to the organization. As I tend to be above the median I end up on the projects that are critical to the company so what you end up with is someone building a quarter of your infrastructure and then leaving because "its corporate policy to max raises out at 5%" or some other nonsense. At that point you have to go back to the market (counter offers when you told me raises are warranted but impossible are an insult and I refuse to accept them) and likely pay at least market rate for a new employee then get him or her up to speed all as deadlines slip.
When I explain this to whomever I'm giving my notice to I am frequently asked "why would I pay you more than I need to" as a retort. I just shrug my shoulders and move on to the next job.
It kind of illuminates the whole system.
The fact that business shouldn't need to pay a fair, or even a living wage (in fact, they're kind of obligated not to, if possible, because, competition).
It works as long as there are people desperate enough to take any offer at all - which will always be the case because people need to eat, so they can't opt out because wages are too low. So not really a "free market" at all.
I don't think the OP is refuting that. Paying someone 50% of the value they generate is fine. That's how businesses work. Paying someone 2% of the value they generate because they live in <place with a low cost of living> is much less easy to justify.
Also, plenty of people in my responses are denying that this is what profit is.
Examples include directly hiring trade unions, cooperatives, associations...
This does not seem like any kind of justification for continual reward, not to mention it doesn't apply at all in situations where the workers themselves take on a lot of risk day to day (e.g. construction). Furthermore, this would only work as a justification for when the owner really did take a risk, and companies where the current owner is the same as the person who started the business (i.e it's not clear that future CEOs shoulder the same risk). And of course, all of this is based on the idea that risk is an inherent good and worthy of reward and praise - I can see many cases where it's not, especially in very exploitative businesses.
>he can always ask for more
He can ask for it, but with the weakened power of collective bargaining it's unlikely he'll get it. It also depends on how replaceable the worker is. Did you see the article on HN today about how Kickstarter fired two union organizers?
>change employer
From the point of view of the worker this doesn't help much at all, since there would be no reason they'd necessarily get a better wage at other places.
>or start his own business
With what capital? Even if he had capital, why would a worker who is so disillusioned with the nature of wage work feel compelled to start a business? Unless he doesn't care for the plight of others against what he experienced while he was himself a wage worker.
This is really so vague as to be meaningless. A McDonalds can't operate without someone at the drive through. So isn't the value of the drive through worker incredibly high since they are essential to the operation of the business?
No. Labor Economics tells us that an employee will be paid at the market rate. They are paid based on how many other people are willing and capable of doing the job and what rate they will accept.
Also, Labor Economics tells us what happens, and I do not argue with that. I am saying that we should take more into account actual value and avoid extreme profit-driven views, such as reducing someone's salary for the exact same job just because they live in X country instead of Y.
In an efficient market your theoretical business would be driven into bankruptcy or bought out by the competition that is properly allocating capital.
Also the ceo answers to the shareholders who hired him with the job of maximizing returns. Unless this is a coop there is no reason for it to operate the way you are talking about.
> In an efficient market your theoretical business would be driven into bankruptcy or bought out by the competition that is properly allocating capital.
And as a good theoretical exercise it's pretty useless. In reality most of the markets are not efficient, changing salaries is not 'free' (i.e., employees work differently depending on how you treat them, and replacing unhappy employees has a cost), and there's more to companies and employees than pure economics.
> Also the ceo answers to the shareholders who hired him with the job of maximizing returns
This is what I am criticising, the 'maximize returns over everything' philosophy. Any company already has a lot of power over any employee, and they abuse that position to the point of cheating people out of their fair share of what they produce just because they live in a different place. And in this case we're talking about a relatively benign situation, but the same philosophy pushes companies to lower wages below a living level, condemning people to poverty so that the company "maximizes profits".
if i live in a country where the average cost-of-living is low, i find that it's because of a generally poorer living standard and i have to spend a lot more compared to the local average to get the same standard that i'd have elsewhere.
A good backend python developer working for a London company here can get 80-100k GBP, if company X wont pay this, then company Y will. The developer goes to company Y.
If the job can be done remotely, and everyone is happy, then who the hell cares that this developer lives in an area with low cost of living? He's fulfilling the contract (quality work in exchange for money) and where they are physically located is irrelevant in determining their compensation.
Why would I pay remote worker the same as for local developer, if I can find remote developers willing to work for much less?
Seems like you solved your mistery after all! As abusiness you want to spend as little as possible.
That’s the end goal of large corporations, yes. Why are we so eager to help them? Developers already undermine their own value by crowing to everyone who will listen “anyone can be a developer and do what we do”.
What do you think your boss thinks when he or she hears you say all these things?
(Not you in particular, devs in general)
> their own value by crowing to everyone who will listen “anyone can be a developer and do what we do
I sincerely doubt developers believe that, or at least not experienced developers. Software is cutthroat: anything that can be automated is already automated. People who can't work beyond that are useless.