In reference to Hani's "Raising the Minimum Wage" blog, with all due respect of course, the question I ask myself regarding our greedy corporations is will paying employees better wages increase the economy and boost productivity?
Who will be actually be courageous enough to start the ball rolling? The most obvious choice is our government. But the current Congress has been paralyzed.
Business leaders know what to do. But do they have the will to do it? Are they willing to control the excessive greed so prevalent in our culture today and divert resources to better education and the creation of more opportunity?
Business has the most to gain from a healthy America, and the most to lose by social unrest or punitive taxation. In my opinion, business can start the process in two steps. First, invest in the actual value creators which are the employees. Start compensating fairly, by which I mean a wage that enables employees to share amply in productivity, increases and creates innovations.
The fact that real wages have been flat for about four decades, while productivity has increased by 80 percent, shows that obviously has not been happening. Before the early 1970s, wages and productivity were both rising. Now most gains from productivity go to shareholders, not employees.
Second, businesses must invest aggressively in their own operations, directing profit into productivity and innovation to boost real business performance. According to The NY Times, today, too many corporations reduce investment in research and development and brand building. As a result, we see a general decline in the value of their brands and other assets. To make up for those declines and for anemic revenues, businesses buy back their stock (now at record levels) and thus artificially boost earnings per share.
Someone must break the ice; someone must lead. Companies including Home Depot, Costco Wholesale, Whole Foods, Publix, Qualcomm, Starbucks and Gravity Payments are taking small steps, and compensating employees more. These are the green shoots we need. Similar changes must be made by many more businesses in order to see an impact on the economy.
So while we celebrate those who do the right thing but how can we move more businesses and chief executives to act now? We really don’t want civil unrest or an 80 percent tax rate to jar us into action.
I believe there is a way to start. Government can provide tax incentives to business to pay more to employees making $80,000 or less. The program would exist for three to five years and then be evaluated for effectiveness.
The benefits would be huge. People would have more money to spend, and many would no longer need government help. That would mean a reduction in entitlements.
Finally, that other America, the one that hasn’t been able to climb out of debt, will know that help is coming — not as an increase in government support, but as a fairer way to share in the hard work and incremental value a business generates. As has been proved again and again, shareholders also win, because satisfied employees produce better results.
Senator Mark R. Warner, Democrat of Virginia, is working on a somewhat similar bipartisan plan to introduce in Congress. I don’t know yet what it would cost. But not acting would be far more costly. The urgency is clear. A fair and responsible free enterprise system is still the best engine ever invented to create opportunity and a higher standard of living.
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