Friday, May 04, 2007

Shareholders versus a living wage

You likely read the story that broke a few weeks ago.

The headline in The Washington Post read "Circuit City Cuts 3,400 'Overpaid' Workers" (March 29, 2007, by Ylan Q. Mui, D01).

The electronics and entertainment retailer fired 3,400 employees across the country, or about 9% of the company's workforce. Circuit City said their reason was simple: all were "making too much money." The company reported that the terminated workers would be replaced by others who were willing to work for less. The company admitted that the firings were not related to performance, but were part of a strategy to "improve the bottom line."

"Retail is very competitive and store operations just have to contain their costs," said Jim Babb, a Circuit City spokesman. "We deeply regret the negative impact that was had on these folks. It was no fault of theirs."

Workers were provided severance pay. After ten weeks, if they are willing to work for less, all will be free to apply for any openings with the company. The terminations occurred on the same day as the announcement of the decision and all were told to leave the stores immediately.

Again, according to The Washington Post story, the firings, along with several other moves, are expected to reduce expenses for the electronics retailer by $110 million in fiscal year 2008 and $140 million a year starting in fiscal 2009.

Steven Rash, 24, said he was one of 11 workers fired at a Circuit City in Asheville, N.C. Rash said he has worked for the retailer for seven years where he reported that he earned $11.59 an hour and worked from 15 to 20 hours a week. Though he has a full-time job at a bank, he said he needs to find part-time work to help pay his student loans.

"It's not just a part-time job," he said. "It's about paying the bills."

According to the U.S. Bureau of Labor Statistics, the average hourly wage for retail salespeople was $11.14 in May 2005, the latest data available.

Following the round of firings, Wall Street responded favorably for Circuit City as shares closed at $19.23, up 31 cents, or 2 percent.

The on-going competition among Circuit City, Best Buy and Wal-Mart for customers drove this action by the big retailer.

How should I react to this story? I understand that businesses have to compete and make adjustments to turn a profit based on market forces and realities.

But, what about the workers? What about the families?

This incident parallels what we observe on a daily basis in the city. Hard working people find it more and more difficult to make a living, to earn enough to make life work for themselves and their families.

Who is to blame?

Ironically, most all of us are implicated.

We want cheap goods and services. As a matter of fact, for most of us, if we are honest, price is the number one consideration when it comes to making a purchase. We go to the stores where we can get the best deal without a thought about the means of production, delivery to market or the labor back of the product.

Further, most of us own a stake in the stock market. Our 401 k plans, our IRAs, our 403 b programs, all put us squarely in the game of bottom line watching and analyzing corporate strategy with little thought about labor.

I am wondering these days just how responsible such an approach, such a worldview really is?

I am also facing the fact that even though my faith has much to say about this, I find it fairly easy to ignore faith's directives in this culture of creature comforts and discount luxury.

Surely, there must be a better way. After all, what's more important to me, saving $15- $20 on a new flat screen or knowing that parents can do a better job of caring for their children?

31 comments:

Brady said...

Thanks for the post. I sincerely doubt that Circuit City deeply regrets the negative impact their action has had on their fired employees.

Companies like CC expect their employees to be honest, helpful and full of integrity. Why don't they "act" the same way?

Anonymous said...

Circuit City's plan to "improve the bottom line" appears to have backfired. Their sales of big-ticket items plunged in April. Analysts point to the firing of all their experienced and knowledgeable sales staff.

mundiejc said...

I would say that's not a good business strategy. Firing all the people that know what they are doing? Psh. Its why Circuit City has struggled to compete with Best Buy and other places.

I understand that its frustrating for those people to lose jobs. I need a part time job right now, and I'm having trouble fitting one to my schedule of another part time job and trying to sell real estate.

My fiancee is a nanny and her boss treats her like crap. She hasn't asked off since Christmas (when she took two days) and when she asked off to go to my brother's graduation, even when she offered to work a half day, she was refused.

My point is this... it sucks when you lose your job. It sucks even more when you are treated unfairly, whether it be because of a large workforce willing to take your job for less money, or because your company thought they'd be nice and pay you wages where they can't stay competitive, and then they can't afford to have you on payroll.

We don't like in a perfect system. Capitalism isn't perfect. Its just the best system we have to feed and clothe and help the most amount of people possible. Do folks fall through the cracks? Yep. Daily. And our job as christians is to help those people. But I don't see what else we could do about this.

As long as we live in a free country (which I imagine most of you prefer to live in) the government can't be the savior of everyone and come in to protect people when bad things happen. Sometimes, its the bad things happening that cause us to get that burning fire in our gut to push ourselves to do better.

Janet Morrison-Lane said...

I'm not as understanding as you, Larry. I will get closer to understanding when the CEO takes a cut to benefit the company.

Though I can't find the source on this, I read that "CEO Philip J. Schoonover made just over $1.5 million in salary, bonus, and "other" last year, not counting another $3 million ($2,997,000) in stock for a total compensation of $4,513,701." I also read that CC changed their rules to allow a departing CFO to exercise stock options after he left the company...around $250,000 worth.

I don't think it's about a company profiting. If they weren't profiting, they wouldn't be able to pay their executives million dollar salaries. I wonder if they actually know (and are friends with) people who make the salary they want to offer them. My guess is they don't. It's easy not to care when the only people you're around are just like you.

Larry James said...

Thanks to all for the comments.

Justin, your version of capitalism is unfettered, and that is its problem.

What if labor unions could be reborn in this nation? What if collective action could be achieved, as an example of how to regulate capitalism? Most believe the labor union movement is dead and gone forever. I don't think history will agree. . .we are moving toward a time where workers will have to unite out of their own capitalistic self-interest.

Anonymous said...

The CEOs in Korea can make no matter than six times what his lowest paid worker makes. That might make things more equitable here. In my ignorance, I've embraced capitalism. Not any longer. Study the meaning behind the word "communism." It's been perverted but has a sound base. There is way too much distance between the haves and the have nots in this country.

Anonymous said...

Larry, Walter Taylor here....I think your idea of collective bargaining is interesting and as you point out not new. The whole notion of collective bargaining is a nod to the fact that most of the time power concedes only in the face of an equal or greater power. In this country we have a democracy and yet the framers understood it wasn't perfect, mainly because people aren't perfect. They built in "checks and balances" because they believed that human behavior, be it an individual, business, or a government entity, must be checked and interests must be balanced for democracy to stand. When you have a company that fires the bottom rung of its work-force ($11/hour job sounds about entry-level to me) and then offers to hire them back for less pay this is the raw exercise of power for the sake of profit. It seems that some like Justin might feel this is sad or wrong, but resigned to this as a part of democracy. I would differ in that I don't beleive that the framers ever intended for democracy to enshrine injustice. That's why they put mechanisms in place to remedy injustice. Laize- faire economics have always been defended by those who benefit from them or those who are not hurt by them. I don't think I would have the casual attitude toward being laid off and then rehired at a lower wage that some seem to have. I beleive it always wise and right to check the abuse of power. Unions have historically played a significant role in this regard. It was a fight to keep them in place at times. Their legitimacy was often questioned (see Taft-Hartley Act).Government has also acted on behalf of workers. A whole host of laws have been enacted to not only protect the employer but the employee as well (i.e., minimum wage increases, eight hour work days, OSHA regulations, Family Leave Act, etc.). These instances of the government acting were not as a savior for people, but rather instances of the government working to protect everyone's right to life, liberty, and the pursuit of happiness. True, government can't do it all and neither should it. However, Democracy works best when it seeks to work for all the people not just some.

Anonymous said...

bpb,

If you really want to see distance in the haves and have nots then go to a communist country. I know because my brother married a person from the former Soviet Union, one of the haves.

mundiejc said...

I don't think labor unions would solve the problem though. Look at the situation Detroit is in now. Can you tell me that the reason the big three are atrophying money isn't because unions have demanded salary's, benefits packages, and workers rights that have completely taken away the competitive edge of the company? Michigan is on the brink of financial collapse, and there's really no other economic reason besides the fact that the state spends way more money than it has and the labor unions have run the show far too long. Its to the point where it doesn't matter that there's a labor union because the company is going to cease existing. Its hard to negotiate for wages if your company goes belly up.

As for CEO salaries, I understand that many of you can't fathom their making the amount of money that they do. Its hard for me to wrap my mind around it as well. Would I turn down a job with that pay? I don't know. I do know that for the most part, the reasons CEO's make a lot of money are because they do something very valuable and profitable for a company, and the competition between corporations inflates their salaries to these numbers. You can have some bad workers in lower levels of infrastructure and still survive as a company. If you have a bad CEO, its a bad day for everyone because the company goes bankrupt.

I don't believe my view of capitalism is unfettered Larry. I agree that there are flaws. I just believe that left to their own devices, free people will mostly make good decisions. They don't need big brother coming in to tell them how to be fair or live their life. The government exists to uphold the law, not to determine whether or not something is fair, because, as I grew up hearing from my parents, "life's not fair". You just have to do your best and move on.

Larry James said...

Justin, thanks for your post.

Just a couple of reactions.

First, Detroit and American auto makers aren't in trouble because of unions. Lot more complicated than that. One of the main reasons Japanese and European auto makers are burying US firms is because of the cost of US health care to companies. Toyota workers and the company receive the benefit of national health care. The per unit cost to GM the last time I heard for health coverage for its workers was about $2,500. Competitive advantage is partially explained in this one fact.

Your "life is not fair" bromide is not too useful for people way down the economic ladder who, when they just "move on," find more of the same at every turn.

The current amazing growth in the gap between rich and poor is absolutely the result of unfettered capitalism in this country and in the new world trade reality we are facing.

Anonymous said...

Congressman Barney Frank thinks the outgoing CEO of Home Depot makes too much money.

How comforting to know that a man who once had a gay brothel run out of his house by his male lover in now the moral authority on how much money people should receive in their severance packages.

Liberals like Barney Frank embrace the concept of the redistribution of wealth. Although many of them like Ted Kennedy and Frank are themselves rich, fat cat Democrats, they love preaching the sermon of punishing the wealthy by taxing them to death and distributing the money to the lower class. There is an undercurrent of class envy and petty jealousy over corporate excutives who make lots of money and liberals like to exploit that emotion.

Anonymous said...

Chris, you are an offensive, closed-minded person who presents only one side of every issue and that to the extreme. I tend toward the conservative side of issues, but as I've visited here across many months, you have made me think that maybe I've been wrong on a number of matters. I find myself feeling sorry for you.

Anonymous said...

However....everything I said was true.

Anonymous said...

No, Chris, unfortunately, everything you said was mean-spirited, about half off the subject and some untrue. For example, Frank and Kennedy have never said anything about punishing the rich. Your tone and your extreme views taint whatever small truth may be found in what you say.

Anonymous said...

anonymous,

So you think Ted and Barney want to cut taxes?

Anonymous said...

Chris, not at all the same subject as "punishing the rich."

Do you think George H. W. Bush (Bush 41) wanted to punish the rich when he raised taxes? How about Richard Nixon?

Anonymous said...

Chris, one more thing: do you think George W. Bush (Bush 43) wants to "punish the poor" via his program cuts?

Anonymous said...

Justin, Walter Taylor here. In your last post you said, “I just believe that left to their own devices, free people will mostly make good decisions. They don't need big brother coming in to tell them how to be fair or live their life. The government exists to uphold the law, not to determine whether or not something is fair….” Well brother, I wish my reading of history and my understanding of human nature would allow me to share your optimism, but they don’t. When I reflect on your optimism of people being “left to their own devices,” I am reminded of a quote by one of my favorite theologians, Reinhold Niebuhr-- “Democracy is possible because of the good in man, but it is necessary because of the evil in man.” Implicit in the latter part of this quote is a truth I subscribe to--democracy has the notion of justice or fairness as its basis. Our government is founded on the principle of justice. Our “pledge of allegiance” ends with the words “and justice for all.” This whole business about leaving people to their own devices is adequately refuted by the fact that we have laws and it is further refuted by the fact that not all of our laws have been just or fair. This whole business about the government being about upholding laws and not determining what is fair is really puzzling when we consider that one of the three branches of our of government is solely in existence for determining what is fair (i.e., the justice department).

Justin, when people were left to their devices: Native Americans were massacred, Africans were enslaved, women were denied the right the vote, children were worked very hard, employers defrauded their employees, blacks were not allowed to vote, blacks were restricted by Jim Crow laws, blacks were lynched and subjected to some of the most dehumanizing forms of treatment imaginable, etc. All of these practices were legal at some point in time. These were all instances wherein certain free people had been left to their own devices. However, people who could see the injustice or unfairness protested in most of these instances and compelled the government to step in protect the freedoms and the rights of ALL its citizens. This whole business about keeping “big brother” out and allowing people to simply make the good choices that they are prone to make just doesn’t stand up to close scrutiny and a close reading of our very own and not-so-distant history.

mundiejc said...

First- Chris, why do you need to bring up Frank's sexuality? Is that relevant to this conversation at all? You aren't helping your cause.

Second, Walter- all those things you mentioned happened with government approval, because a democracy is run by the people. So if people are bad, the democracy will be bad.

Our country was founded on the belief that people could live without a tyrannical government over taxing them and telling them how to live. they believed in the wisdom of crowds, and the ability for the people to end up making the right decision. No one ever said that democracy was the kingdom of God and that injustice would disappear. But its the best system we have. And we've got to realize that we can't just force our opinion of how to live on everyone through legislation. If that happened, we'd have to change laws every administration ot keep up with new moral codes.

Anonymous said...

Justin, Walter here. I appreciate your response to my post. I agree democracy isn't perfect. I agree one cannot simply force his opinions on his fellows through legislation. However, since we both agree democracy isn't perfect, can we also agree that the work of democracy is never done, it must continue forward. We must always seek social and political progress. I reiterate my point, had majority of the people thought during the 50's and 60's that "well, the system isn't perfect, so we should kinda go along with the status quo or take a passive stance in the face of injustice" what kind of society would we have today. Justin, what went on during those days was nothing short of a social revolution that challenged and changed the way we do democracy at many different levels from the very heights of our political institutions to where one uses the restroom. Most would agree that these were good changes. I am willing to bet you would agree. Yet, I can't fathom those changes or any broad social changes coming about with the kinda minimalist (minimal government involvement) approach you seem to take. Your point is well taken, government can't do everything, but its job is to protect the "inalienable rights" of all its citizens. Often, that means it must check the actions of the majority over against the minority, the strong over against the weak, the haves over against the have nots. Read the Biblical prophets and the Gospels and you will find this is always a concern to God. Rom. 13 teaches us that Government is an instrument of God and ultimately accountable to God for the just treatment of the governed. Blessings, Walter.

Larry James said...

Thanks for the conversation! Walter, I find your words especially helpful and balanced.

Justin, just one more thing. To compare the taxation policy of King George on the American colonies in the late 18th century to modern day U. S. tax policy is beyond a stretch. The King's policy benefited no one but the King and England. Modern U. S. tax policy, regressive as it is in most cases, provides public benefit to everyone--education, health care, public safety, housing, highways, national defense, etc.

mundiejc said...

Larry, thanks for responding.

I don't think we should abolish taxes, and I don't think the government should stop standing up for individual rights. I don't agree with segregation or slavery. I don't know why people want to equate minimalist government with hating black/hispanic/poor people. Its not the same thing. I can, from a small government standpoint, argue for things that change injustice in the social structure. Segregation and Jim Crow laws were wrong from a moral standpoint, a kingdom standpoint, AND an American constitutional standpoint.

We can work toward justice as Christians, but the constitution does not call for the same kind of justice that we as Christians should promote. I believe it says "life, liberty, and the pursuit of happiness". The first two you are guaranteed by the federal government, the ability to live and be free (as long as your freedom doesn't infringe on the freedom of others) but the last isn't a guarantee to have everything in your life paid for and taken care of. Its not the guarantee that sometimes things in life aren't fair. Its the guarantee that you can pursue happiness... you can go for it. It may well be hard. You may well struggle, and you may never completely get where you want, but you have the chance to pursue it. That is what the constitution says, and since you are so intent in working with the government, I feel that you should stick to the constitution of the United States. Our founding fathers would roll over in their graves if they knew that we had instituted an progressive income tax to redistribute wealth. This Robin Hood rob from the rich give to the poor mentality is no more christian than anything else. The believers held everything in common and shared with one another. They didn't march on washington and demand their "fair share". Why do we feel the government owes everyone a perfect life?

Larry James said...

Justin, thanks for your post.

I don't know anyone who believes the government owes anyone a "perfect life." From where I sit, nothing like that is happening, especially for the poor in this country.

Your argument assumes that poverty is the result of personal failure on the part of the poor. The Constitution also says something about "providing for the general welfare."

The fact is, when we as a society/nation act in a collective fashion to insure maximum opportunity for as many as possible, we are improving the overall or general welfare.

And, we don't currently have a "progressive" tax policy in this nation. Here in Texas, we have one of the most regressive tax policies in the nation.

Daniel Gray said...

I think if you're going to espouse the view that taxation is robbery, you can't use it arbitrarily for programs that are primarily designed to help those in poverty. Either all taxation is robbery, or all of it is not -- I tend to think that none of it is, since we live in a democracy where our laws/fiscal policies are clear to and benefit the public. Like Larry said, we don't have a King George whose pocketing our money -- taxation is not robbery, unless all of it is.

If we're going to bring up the "pursuit" of happiness, we have to discuss the reality of pursuit. I hate to bring up your typical single-mother stereotype, but does the typical person in poverty have the ability to even pursue happiness? I have a college degree and can get a good paying job -- but that's not happiness -- I can pursue it, though. However, I don't think most people in poverty can pursue happiness, short of winning the lottery. I think our definition of the ability to pursue happiness must come into play.

On a side note, I had a business professor at ACU for personal finance -- he definitely fit the political ideology of a fiscal conservative. And he was a wealthy banker - still is (lots of incentive for lower taxes). But we had a discussion in class about taxes and "welfare" -- he said that the government safety net was okay with him. He felt it was his duty (both Christian AND American) to pay those taxes and be a part of providing that safety net. (Needless to say, my respect for him went through the roof.)

That example is just to say that not every business person is against paying taxes that don't provide themselves significant benefit. And a person like him shows that there is definitely a Christian perspective for allowing the government to play a role in protecting its own citizens.

mundiejc said...

I'm not saying all taxation is robbery Daniel. I'm saying punitive income taxation is. What top marginal rate would be ok with you? The president cut it to like 34% or so... there was a time when it was 96%. I just don't see how that is fair. I am ok with enough taxation to cover some things for society (roads, infrastructure, etc) and I'm even ok with some social programs. But the biggest kicker in this argument is, that cutting taxes brings in more revenue to the federal government, because it is an incentive to growth in the economy. The only debate about this is at what point is a tax cut so steep that it does decrease revenue. We haven't had one yet, so I figure we should quit deficeit spending (which causes inflation, which is basically a tax on the poor) and cut taxes as much as possible, which grows the economy, providing more jobs and better opportunity for all.

But all I hear from the Left is that we need to raise taxes. If raising taxes slows economic growth and ends up lowering revenue to the government (the richest of the rich can find loopholes... and they are not just republicans) why would we want to raise taxes? If we've determined that it decreases what comes into the government, is it safe to say that its just a measure to punish the rich?

Daniel Gray said...

Justin -- It feels like you have a chip on your shoulder when you talk with me. Frankly, no one said a thing about raising taxes on this blog. I don't know what kind of news you listen to, but I don't even hear the "raise taxes" line in the media about "the left".

You're taking this argument all over the place, and it's impossible to discuss it when you don't even address the points made.

Please re-read my post, because I don't feel like anything you said was an actual response to what I wrote.
Thanks.

Anonymous said...

"chris said...bpb, If you really want to see distance in the haves and have nots then go to a communist country. I know because my brother married a person from the former Soviet Union, one of the haves. 4:16 PM"

FYI: I am also married to a person that lived in Russia (Moscow) from 1951 to 1999. I have learned that we were told lots of propaganda. He teases me everytime we're in Wal-Mart about those folks standing in line for food. He reminds me of the lies I was taught. Hey, I went to a private church of Christ school, and I had a class on communism. I never would've believed I'd be married to a "real big communist" (quoting from Elaine on Seinfeld).

mundiejc said...

daniel,

you disagreed with my point that taxation is robbery, and I argued why I believe that.

I don't know why you feel the need to be the police of what's on topic and what isn't. You're post had its own aside as well.

And as for the left raising taxes, would you like a list of links?

Here's just one.

http://www.nytimes.com/2007/04/21/us/politics/21tax.html?ex=1334894400&en=32ea852edb0f5c4e&ei=5124&partner=permalink&exprod=permalink

Daniel Gray said...

"We can work toward justice as Christians, but the constitution does not call for the same kind of justice that we as Christians should promote...This Robin Hood rob from the rich give to the poor mentality is no more christian than anything else."

Just because someone uses the phrase "on a side note" doesn't mean what they say is off topic from a response. Reading you're quoted material, I think my "side" was "on topic" -- but it was not the primary theme I was addressing. "On a side note" was merely prompting a shift away from my main point.

King Bush (George) III is not cheating people out of their money for his own coffers -- hence, no robbery. When a majority of society decides something is best for the whole, that's not robbery. Yes, government (the people) have made mistakes in the past, but that's hardly robbery.

mundiejc said...

So, according to that logic, if you and I are walking down the street, and we see a man who obviously has a lot of money, its ok for us to take his wallet, because we decided it would be better for us to have that money than him?

There's an old adage that says "A Democracy can only survive until it votes itself the treasury"... which in laymans terms means, when the people with less money realize they are more in number and can tax the bejezus out of the few people with most money, the society is about to collapse.

I fear we're getting close.

Mike said...

Voltaire said that every great fortune is founded on a great crime. While overstated, he makes a good counterpoint to Justin's anxiety that the rich will necessarily be unfairly treated in a democracy. If you have a system (ours) in which 1% of the population owns almost 80% of all the wealth (up from about 30% fifty years ago), could it even be the democracy that Justin seems to fear. Following Justin's argument, if ours were a real democracy, wealth would be more evenly distributed. If it is not a real democracy, but a plutocracy masquerading as a democracy what then?