False economies that leave the business books unbalanced

The flipside to the question I covered in ‘Where’s the benefit’ must be the harm caused by company bosses who have taken, I believe, pay rises amounting to 700 per cent over the past 20 years.

That mean they are now taking home seven times as much money from the business where they work as they would have in 1992.

Compare this with the average workers, who have received rises amounting to only 27 per cent. This means that, in 1992, they were taking home a little less than four-fifths of what they get today.

That’s a huge difference. I think we all know that bosses’ pay rises do not have any relationship with their companies’ performance, so workers are right – in my opinion – to feel resentful.

It seems to me that many employees are finding life extremely difficult now, because the amount they are paid does not cover all their outgoings and they are having to work out what they can do without. The cost of living has risen more sharply than their pay, so they are out of pocket.

This creates stress, which can create illness, which could take them out of work and turn them into a liability to the economy – as they would then be claiming benefits.

That’s bad – not only for the country but also for their company, because demoralised employees produce poor work and the company’s turnover will decrease; having to bring in and train up new workers to replace those who are leaving through ill health is time-consuming and unproductive.

Therefore, in taking the money for themselves, rather than sharing it with employees, bosses are clearly harming their own companies and the economy.

In fact, it seems to me that this is a microcosm of the larger, national economy. In order to keep more money, bosses (and the government) pay less (in the government’s case, to pay off the national deficit). This means less work gets done, and is of poorer quality (in both cases). So orders fall off and firms have to make more cutbacks (or, revenue decreases so the government makes more cutbacks in order to keep up its debt payments).

The message to bosses – and the government – is clear: Cutting back investment in people to keep money for yourselves will cripple your earning ability. Cutting even more to make up for what you lose will put you into a death spiral. You are trying to dig your way out of your own graves.

But there is an alternative.

A reasonable pay increase to employees would ensure they can pay their bills, and would also keep them happy.

Happy workers produce better results.

Better results keep businesses afloat and earn extra work for them.

That in turn creates more revenue, making it possible for bosses not only to increase their own pay but employ more people as well.

Wouldn’t that be better for everybody?

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2 thoughts on “False economies that leave the business books unbalanced

  1. Roger T

    While you are 100% right in condemning (that word again!) elite bosses who have taken huge pay increases/bonuses in times of hardship for the rest of us, I think you are falling into the trap of tarring all with the same brush.
    If I may make a comparison between the very bosses this apples to and Premiership footballers, whose pay is also beyond the pale, 90% of business bosses and indeed professional footballers have to make do on far far more modest remuneration.
    Speaking as a small business owner myself I can assure you that most of us are seeing our profits and therefore our pay shrinking in much the same way as the employees.
    The moral is – It is easy to be blinded by headlines and one’s own political prejudices, and I’ll freely admit to being as guilty of that as the next person!

  2. Pingback: Employee ownership: Has the government actually done something right? | Vox Political

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