For my entire adult life, there has been an adversarial game played between employers and employees. The employees try to get paid the most for the least amount of work, while the employers try to pay the least for the most amount of work. In this situation, employers and employees are unhappy, less care goes into their products, and we all lose.
The popular solution is to increase the minimum wage, thus forcing employers to pay employees what we hope would be a livable wage for their work. While on the surface this seems logical, arbitrarily raising the minimum wage creates several issues: it puts tremendous pressure on small and micro businesses, creating the possibility that some employees will lose hours or their job entirely, and many businesses will deal with the increased cost of labor by raising their prices, thus creating inflation. For me, the real issue is it does nothing to address the underlying problem of the antagonistic game of trying to take advantage of each other.
Instead of raising the minimum wage, what if we were to regulate large corporations with an employee profit sharing rule? I would define a large corporation as one that has over one million dollars in net profit per year, but I’m open to other reasonable definitions. A regulation could be instituted that requires these companies to pay their least paid employee a percentage of their highest paid employee or consultant. (The definition of employee/consultant in this case would include board members.) Wages would include both cash and stocks, along with any bonuses. For mid-level employees companies would then set their own pay scales, which would obviously fall in between the lowest and highest paid members of the company. The exact percentage would need to be determined by a mathematician and economist. Of course, companies could choose to pay higher than the minimum percentage. To enforce the regulation, it could be verified by the already required independent accounting audit that publicly traded companies are subject to. Privately owned companies could have a line on their tax forms that verifies their compliance, which would make it subject to IRS auditing.
This is not a new idea. Ben & Jerry’s Ice Cream started out by linking the pay of their CEO and their employees. Although the company abandoned their ratio based pay structure after Ben Cohen retired, they proved not only can it be done, it can help lead a company to huge success both financially and in terms of social benefit.
Through a regulated employee profit sharing rule, employers are prevented from engaging in the workplace abuse of more work for less pay that has become standard practice for many companies. Employees also gain a sense of direct benefit whenever their company excels, which will create better workers because when the CEO gets a raise or a bonus, so do they. This practice will help instill a feeling of pride in the work we do as employees, improving the quality of the products produced, and thus creating a secondary benefit to consumers.
A company run by employees who understand their work has a direct impact on both the company’s and their own bottom line ends the antagonistic game that plagues the American workforce. This results in happier, more fulfilled, and more productive people who are better equipped to compete at a global level of consumer trade.
What do you think? Would you trade a raise in the minimum wage for a minimum percentage employee profit sharing plan?
*I’m stepping off my little Soapbox now; however if you or someone you know is in a position to influence these types of policies, please feel free to use these ideas.
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