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We are the 99 percent


What Should Occupy Wall Street Concentrate On
- Why A Maximum Wage?
Occupy Wall Street needs to have a central issue that it can coalesce around, otherwise all of this energy will just be abated into a thousand little battles and the war will be lost.
I am writing this to encourage people to think about what I believe is THE fundamental problem with western society right now. This does not mean there are no holes in how I am presenting this argument. However, at its very core it rings true. That is a maximum wage would do far more good than harm and in my opinion this wage discrepancy is at the heart of why western capitalism is failing for the 99%.
Why do we have a minimum wage? The answer often given is that employers have more power than employees. Without some regulated bottom (minimum wage) wages would never go up for the most vulnerable people in our society and they would be continually pushed down.
Few would dispute that a minimum wage is helpful. Those that would, would have a difficult time explaining where the fruits of that cut in pay to workers would go other than senior management (mostly) and to a lesser extent shareholders. Some might argue with no minimum wage that we might employ more people as burger flippers (no disrespect). I doubt that anybody sees the future of their country being a country of burger flippers. When we passed minimum wage laws we said as a society that there is a power imbalance that causes problems for a class of society and we decided to rectify it by creating a minimum wage.
Let’s see what problems are being created by NOT having a maximum wage for the most senior people in PUBLIC companies. I say public companies because at the end of the day these people are not entrepreneurs (at least 99% of them are not). These people came up thru the ranks and became CEOs of the most powerful companies in the world. They just played their cards (very often excellent cards that were not dealt to the other 99%) better than the rest. They did not create jobs and entire industries like Steve Jobs, Henry Ford, Thomas Edison, etc. did.
If you look at the behavior of many people who started a company, took it public, and became fabulously wealthy they do not pay themselves the exorbitant salaries that Wall Street does. A case in point is Bill Gates. For years he made $240,000/year. Meanwhile the boys on Wall Street are making $100,000,000/year. Who created more wealth, jobs, and value? Bill Gates or Wall Street? Guess what Bill does now? He is the world’s largest most active philanthropist. Who do you want to be handing the fruits of western democracies to, future Bill Gates’, or Wall Street?
First of all let’s make no mistake, executive pay has sky rocketed over the last 30 years. For example, the President of the Royal Bank of Canada used to make $330,000/year in the 1970s. He now makes $10,000,000/year. Why is that? Did our executives get 30 times smarter? Did they go thru a massive productivity increase and get 30 times better than the average worker?
The answer is that the capitalist system (supply and demand) does not work at the highest regions of corporate pay. If the price of something went up 30 times, don’t you think there would be coincident rise in the supply of the commodity (executive talent). The answer is something does not work here. We can list what some of the barriers to entry are into this elite club.
1. Parents
2. Education
3. Work Experience
4. Where You Grew Up
5. Money
6. Who You Know
Notice that I did not put smarter, quicker, funnier, better, creative, etc. in this list. The market for senior people does not work the same way that it does for everybody else. At the same time these people demand capitalist treatment at every turn, except when it comes to the market for their pay.
Let me make this clear. We would all behave the same way. We would all demand the capitalist system work in our favour and be very quiet where it does not when it is to our advantage. Would any of us refuse to manipulate the share price of our company if we could exercise options and make $100,000,000 in one year? Shame on you if you don’t admit that the other 99% given the same opportunity as the 1% would behave in exactly the same way, except for the very rare exceptions.
Everybody around you would be telling you the same thing. The Wall Street boys would be repeating the mantra, shareholder value. You would do the right thing for you and your shareholders and by the way make an extra $100,000,000 that year. We have seen the enemy the enemy is us.
So, the question is why is that a problem? Well how about this list.
1. Did you know there is a long term inverse relationship between the value of a corporation and how much their senior executives get paid? We are paying people exorbitant amounts of money to risk the companies they work for so that they can get paid massive amounts of money now and who cares about next year. Does this make any sense?
2. Money buys access to everything, including rules and regulations that enhance one’s ability to thrive and prosper. Why do we want a society where the rich get richer and the poor get poorer? Our Presidents, Prime Ministers, etc. only have 24 hours in a day. If they only ever hear from people that have money do you think that their ideas of what the problems and solutions are will be driven by people that have money? Hugo Chavez (Chile) is driving his economy into the ground. However, if you are in a village in Chile you have clean water. A water truck shows up every week. Hugo did not come from money. He knows that clean water is an absolute requirement. Did this ever happen with any other leader in Chile’s history? Is this a relatively cheap thing to do compared to Chile’s national budget? Absolutely. Why did Hugo Chavez do this and not his predecessors? The answer is that the rich and powerful did not set his agenda. His experience as a poor person in Chile did. We have the rich and powerful setting our agendas. We have too many of these people taking up way too much time in the halls of political power.
3. What do rich people buy versus poorer people? The answer is a lot. The average person in a G7 economy consumes 55 times more than the average person in a third world economy. That is the average. Imagine what the consumption is for the rich. The point being that increased consumption and environmental damage go hand in hand. Not that the rich person is doing it on purpose but one of the results of major money is vastly increased consumption.
4. Imagine if you get sued by somebody with a lot more money than you do? Is that fair? Who is going to win? Do we want a society where money buys the right to win in the courts? Will a maximum wage remove this inequality? No, but it will mitigate this quite a bit.
Minimum wage or maximum wage the issue is the same. There is a market failure that it is incumbent upon governments to regulate. I am proposing 100 times the minimum wage should be the maximum wage for a CEO of a public company. No gimmicks, no hidden consulting fees, no stock options, no cushy benefit plans, no payment in stock, etc., etc. Have an auditor audit the compensation package. The directors and the CEO go to jail if they pay the CEO more. I don’t care if the guy collects dividends from stock that he has paid for from savings. That does not count. We are talking about his wage from the corporation each year.
$10/hours X 40 hours/week X 50 weeks in the year X 100 = $2,000,000/year.
The big argument against this will be the best people will leave. People will say, “Why should I work for Goldman Sachs for $2,000,000 when I can go to London and make $100,000,000/year. You won’t be able to compete.” The answer I say is good riddance. Go to London and have them deal with the problems that this is causing.
Whoops you can’t go to London, they are having the same problems. How about Hong Kong, you can go there. Oh by the way do you speak Mandarin? Are you a member of the Chinese Communist Party? These people are pretty much stuck here. Most people would be quite happy to work for $2,000,000 a year. I doubt very much if there would be an abatement in quantity or talent. Come on $2,000,000/year versus $10/hour on minimum wage? Give me a break. You don’t really expect us to swallow that argument.
Still the best answer to this is if you want to make $100,000,000/year and you think you are worth it. Start your own PRIVATE company. Pay yourself as much as you want. However, the moment you decide to go public and take public money then you will be regulated by the maximum wage. One of the hidden beauties of tying these two income levels together (minimum and maximum) is you will have very bright motivated people trying to figure out how to get a raise and the only way to legally do that will be to raise the minimum wage. Now how is that for irony? They rise up, the people on the lower end rise up!
Maybe the worst that will happen is a lot of people will start businesses and create jobs because they feel that the PUBLIC companies are grossly under paying them. This would be a wonderful result. However, the skills necessary to start a company, grow a company, and create a large successful company are far rarer than the hordes of over paid executives that we have at the top of major public companies today. Entrepreneurs know from experience that hiring from large corporations for talent during the early stages of growth is often a bad idea. Most of them (corporate executives) do not have the right stuff to get it done in a small entrepreneurial environment where wealth and job creation really occurs. However, they are very good at wealth siphoning which is what we have going on in Wall Street today.
OK, it is your turn, pick holes in the argument. I won’t accept it would be hard to do. Getting to the moon was hard too, but we did it.

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