Comment 52292

By A Smith (anonymous) | Posted November 27, 2010 at 01:08:02

Brandon, if I paid you $20/hr to do a job that returned $10/hour output, I would lose $10 for every hour you worked. If I did that long enough and for every employee, I would eventually run out of money and have to close the business.

Alternatively, if I paid a wage that made you happy as possible, while also providing a profit margin to expand the business, we both win. You keep your job, and I can invest in new ways of making money.

In the third scenario, I pay my workers peanuts and try to make as much profit as possible. Because my workers are unhappy, they quit and I have to waste money retraining workers.

What these three scenarios tell us is that the best business model is the one that makes business owners the highest profits. However, because we know that means striking a balance between owners self interest and workers self interest, the best companies will do just that. If a company gets too greedy, their labour costs (including retraining) will exceed the higher wage business and they will lose market share due to higher costs. The market will force business owners to do the right thing.

If you don't believe how important it is to have wages reflect reality, rather than government fiat, read the first article about the Great Depression...

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