Owner vs. Workers

Monday, December 12, 2005
Jennifer made a comment on my last blog about how McDonalds depends on needing to have access to its workers 24/7 or else face bankruptcy. This came on the heels of a discussion I had with someone else about the importance of executive compensation so I might as well touch on the subject.

I'm not sure exactly how McDonalds and access to their workers even got into the conversation, but the argument that McDonalds would go bankrupt without their workers is specious at best. Are workers at the lowest levels important to the success of any company? Absolutely. No company can succeed without the people doing the work that makes a company run. But, are they more important than executives and company owners? No. I feel I do very important work at my company, am I more important than the CEO or the shareholders? Hardly.

Now, where would the McDonalds' workers be without McDonalds? They wouldn't have a job. Now if the counter argument is that they could easily find another job somewhere else, the logical next question is why don't they? If working at McDonalds is so miserable, and other jobs are so plentiful and easy to come by, wouldn't all the McDonalds' workers leave en masse?

It is much easier for a company to find low-skilled labor in this country than it is for a low-skilled worker to find a willing employer (I believe the opposite is true for high-skilled workers). Further, it is much more difficult to start, finance, and maintain an new enterprise than it is to provide low skill labor. So the employer is faced with the more difficult job and easier replacement than the low skilled employee. Now who is dependent on whom?

I am not trying to diminish the importance of working Americans. I'm a working American. But the idea that employees are somehow more important than executives and owners gets a lot of traction in this country and it is a notion that is simply untrue. Is it true in some circumstances? Are some executives and owners idiots? Absolutely. But idiot executives do eventually get replaced. And owners? Well its their money to lose, if they want to take a big pile and money and burn it for heat, its perfectly within their right.

Providing capital and executive and strategic direction is hard. If it were easy, everybody would be doing it. Can a company function without either this or its low-skilled labor? No. They are both important. But one should never make the argument that the worker plays a more important role or is somehow more crucial than his employer.

26 comments:

susan said...

Hmm. I took Jen's comment to mean McDonald's needs poorer/working class people to have access to TV in order to get enticed into going to MickeyD's for food.
P.S. Arghhh - having way too much difficulty posting this. If it ends up being posted 20 times please delete the extras T.
Susan

Ryan said...

Jen's comment was not, in fact, that McD would be in trouble without access to it's workers. She pointed out that McD would be in trouble if it didn't have access to the poorer working class. Your entire post seems irrelevant to her actual statement.

What does it matter if burger flippers couldn't find a better job? That doesn't change the fact that McD would go under if they couldn't constantly depend on tens of thousands of minimum wage workers. If, (in a tremendously unlikely hypothetical situation) all unskilled workers in this country were to organize and refuse to work for McDonalds, the company would halt all income instantaneously and permanently. If every executive in the country refused to work for McDonalds they would be in trouble, but in the end managers and supervisors would step up to fill gaps, learn the ropes, and keep things working however bumpy the path might be. They would surely see an era of no growth, failed ad campaigns, debt, finance mistakes, unhappy shareholders, etc. (actually, that describes them right now.) Maybe they would even go under. But, it's possible they could succeed if the top executives all left. This is a strong contrast to the utter impossibility of succeeding without unskilled massses willing to work for an amount far below living wage. I think that was Jen's point and she's entirely right.

T said...

Ryan,

You are making an argument with a tremendously implausible argument without considering another equally implausible argument.

There is 0 chance of all workers uniting to not take jobs from McDonalds. But somehow you believe even if all executives refused, some other workers would step up to the plate?

My point is this. Which is more implausible? That of the 200,000 or so people who are probably qualified to be a top executive at a Fortune 500 company (including those who have not currently top executives) McDonalds would have a problem hiring one of them or of the 100 million people who can flip a burger Mcdonald would have a problem finding enough of them?

It is MUCH harder to replace a top executive than it is to replace a low-skilled worker. You are simply drawing from a much smaller pool.

So please tell me how you believe it is more plausible that somehow 100 Million people would strike and 200,000 or so people wouldn't?

T said...

Susan,

You may be right about Jennifer. That's why I said I was confused about how the subject got on to McDonalds.

T said...

And my point is NOT that the workers are not important. It is like saying which is more important, your arm or your leg. They are BOTH important. You wouldn't want to be without one or the other. The point is that is is just silly to argue that a low-skilled worker is somehow more important than anybody else.

Kat said...

without labor, a company cannot turn profit. without executives, companies can turn profits. companies are directly benefitting from the exploitation of low-skilled labor, not from the 6 figure golf-playing "decision-makers." it's called capitalism. oh, and read fast food nation and then we'll talk about mcdonald's.

T said...

"without executives, companies can turn profits"

Are you serious? Please. If it is so unimportant to have executives than why don't all these companies just fire the executives and replace them with low skilled labor. You think corporations are in business to just throw money at people who do no work and don't contribute to the bottom line?

If it is so easy to start a business and make tons of money, why don't all these people who are being exploited start a business and make all the money? Don't tell me its because they don't have the resources. My father came to this country with nothing. Zip, zilch, nada. And he was able to run a successful business for some time.

Putting capital at risk and making the decisions to run a company are crucial to the running of our society. That is not to say that labor is unimportant. But the very notion that Executives and owners are unimportant to the creation of wealth in this society is just plain stupid.

Kat said...

how many executives did your father need to make his business successful?

Ryan said...

There is 0 chance of all workers uniting to not take jobs from McDonalds.

It's most certainly not a zero percent chance. During the hayday of union power there were a couple semi-successful nationwide strikes that covered the majority of workers across an entire industry, despite heavy government opposition. Certainly a total strike today of the magnitude needed to affect McDonalds is tremendously unlikely (which is exactly what I said in my last comment). But, anyone with a passing knowledge of labor history knows better than to call it impossible.

Regardless, my argument has nothing whatsoever to do with whether it is impossible or just unlikely. Even if mass organization was impossible, Jen's comment still stands in total accuracy. Regardless of whether workers actually would bring down McDonalds, McDonalds still depends on them 100%. Think of it this way: if a plague wiped out every person in this country willing to work for less than a living wage, McDonalds would close its doors forever. That's the argument. Plain and simple. And it's still correct despite your irrelevant rant about Fortune 500 CEO qualifications.

It is MUCH harder to replace a top executive than it is to replace a low-skilled worker. You are simply drawing from a much smaller pool.

As I've pointed out, the validity of your claim here is totally irrelevant to Jen's original statement or any arguments I've made about it since (because it's not about likelihood). However, you are still wrong. But, as I've said, this is a separate debate and I don't want to conflate the two.

The point you fail to realize is that ease of filling a position is not solely dependent on size of the candidate pool. You have to multiply candidate pool by the percentage of candidates willing to do the job given the benefits (mostly financial, such as salary). If you are a Fortune 500 company and the CEO position pays seven figures you'd better damn well believe that most of the 200,000 qualified candidates are willing to take the position. However, of the 100 million who are able to flip burgers, how many are willing to flip them for $5.75? Enough to staff McDonalds around the country, but a far cry from "most" of the candidates. In fact, probably a small minority of the total pool.

You have to realize that a top executive position is a highly competitive position. Qualified candidates for executive positions are constantly trying to make a name for themselves, make connections, get their resume out and win the covetetd position. There are likely dozens of candidates who would love any one particular executive opening.

When is the last time you heard of dozens of candidates scrambling over one another to operate the deep fryer at McDonalds? When did people ever compete to convince McDonalds that they would make a better grill scrubber than the other kids? Never. In fact, McDonalds typically has a 'HELP WANTED' sign in the window because they are barely paying enough to attract the most desperate of workers.

In contrast, a CEO position pays amply well enough to attract a number of qualified candidates. (Note that I'm not arguing about correctness of CEO pay scale policies, just pointing out that it is more than enough to fill the position.) Anyway, whether or not you agree I'm not going to continue with the "difficulty of finding a CEO" debate since it is totally tangential to the original topic of McDonalds's dependency on the low-income class.

T said...

Kat, thank you for making my point.

He needed himself. He was infinitely more important than any waitress, bus boy, or kitchen staff. He could have replaced any one of them but they depended on people like him to create jobs.

Starting a new business, and thus creating jobs, is a very difficult proposition. It involves tremendous risk to the owners of the company. It isn't so simple as putting a sign out in the window that says "Open for Business".

My father took tremendous personal risk, and eventually failed, when he opened his own business. His failure put my family in a horrible financial situation for many years afterwards. While we got to reap all the benefits when he was successful, we also had to be responsible for all the problems when it failed. The workers who lost their jobs, they went on to find other jobs.

My family struggled for many years afterwards. To say that any one of his workers is more important than my father is a disservice to my father an my family. To say they deserve the benefits of my fathers business when they did not have to reap any of the hardships my family had to face because of bankruptcy is just ignoring the contributions of my father and my family.

Jen said...

I can't believe I'm about to do this: I'm going to stand up for Terrence.

Let's adjust the language we're using here.

Kat and Terrence AGREE that worker bees and queen bees (hamburgerarily speaking) are of equitable worth. No one man is intrinsically worth more than another. To suggest otherwise makes you a nazi or a republican.

I think what Terrence was trying to say is that McDonald's has stratified their labor force according to knowledge assets and replacability.

McDonald's places less value on a minimum wage worker than on an upper level executive because the former is interchangable with any other minimum wage worker. The knowledge required to complete one's job successfully at that level is low, and easily taught to another should the employee choose to go elsewhere.

Executives bring to the tabl a wealth of experience that is not an interchangable cog in a wheel. The skill set is incredibly specific, and Fortune 500 companies work hard to ensure that the knowledge assets they have on their executive boards is in tune with their mission statement and profitability goals.

Now kids, you are free to disagree about McDonald's choice to stratify their employee ranks this way, but you agree more than you disagree, I think.

The problem (and resultant hissing) came from both of you using the terms "important" and "worth".

Now kiss and make up.

T said...

Ryan, you are ignoring my qualification.

I said workers were important. I said McDonalds, or any company for that matter, could not survive without its labor.

The point is, to argue that they are MORE important is just foolish. To argue that McDonalds would fall into bankruptcy without labor but would do just fine without management is just a specious argument.

Jen said...

Oh, by the way, Terrence, you totally misinterpreted my original comment, but wow, what a misinterpretation!

Anything worth doing is worth doing well, I guess.

T said...

Jennifer,

Yeah, I realized that I misinterpretted your statement. But like you said, if you are going to screw up you might as well screw up big.

But what exactly were you trying to say?

T said...

Ryan,

Just one other point. I don't want to belabor the point because I really do think we are arguing two seperate things.

If somehow all workers were able to unite and refuse to work at McDonalds, I do believe that McDonalds would be forced to offer a better wage. This would in turn cause some of the "united" workers to break rank and take a job at McDondalds, thus making it very unlikely such a strike could persist. I'm jut not so certain you could unite 100 million people to refuse to work there, and I definitely don't think it works if McDonalds agrees to raise their wage rates.

Of course markets aren't stagnant either. If all these workers somehow did strike, they still need to work. They would flood the labor market and thus depress wages. They might actually make there situation worse as the Supply of jobs contracts (there being no McDonalds anymore) but the Supply of Labor has increased dramatically.

So in the end, they would just shoot themselves in the foot.

Ryan said...

I said workers were important. I said McDonalds, or any company for that matter, could not survive without its labor.

I seem to remember that's what Jen said and you disagreed with her.

The point is, to argue that they are MORE important is just foolish.

Obviously a statement like "more important" is a subjective value judgement that will depend on one's view of 'important'. But, I didn't see anyone except you bring up the word "important" in regards to workers so I'm not sure who you are arguing against here.

In contrast, Jen did make a specific statement about the effect of the absense of a working class, and you took issue with it.

To argue that McDonalds would fall into bankruptcy without labor but would do just fine without management is just a specious argument.

Again, who said anything about "do just fine"? As I pointed out, a company without a CEO would do very poorly. You seem to be fighting a strawman that no one is supporting.

A company without a CEO would clearly do poorly. Many companies with CEOs also do very poorly. I've never doubted this or argued against it so I don't understand why you repeat it in response to my posts.

T said...

Again, who said anything about "do just fine"? As I pointed out, a company without a CEO would do very poorly. You seem to be fighting a strawman that no one is supporting.

Kat did. I was responding to that.

without labor, a company cannot turn profit. without executives, companies can turn profits.

Did not mean to make her argument yours.

Kat said...

jen says,

Kat and Terrence AGREE that worker bees and queen bees (hamburgerarily speaking) are of equitable worth. No one man is intrinsically worth more than another. To suggest otherwise makes you a nazi or a republican.

but it's not altogether true. while as humans they are "of equitable worth," their labor is not. and it is upon that point that i make my argument.

also: terrence, i do not believe that you can compare tiny businesses to mega-conglomerates. it's just not an accurate analogy.

T said...

So Kat, at what profit level does the analogy become inaccurate?

Maybe we should just limit the size of corporations?

We should just have a rule that you can be successful, just not too successful. As soon as you become too successful, your business and livelihood become forefit to the interest of the masses.

Kat said...

you cannot make an accurate analogy between small businesses and mega-conglomerates for many reasons. being an economist, you should understand that (for example) market share is very different where these two entities are concerned... business decisions are alos different. apparently megaconglomerates require serveral people to make decisions, whereas small businesses may only require one person. # of employees required is also different, as is profit, control of resources, ability to offer benefits to workers, ubiquity of stores, etc.

not comparable at all.

i woudn't compare a neighborhood watch with the fbi or national guard. wouldn't compare a bible thumper on the corner with the mormon church. size matters when comparing organizations. the greater the disparity, the less accurate the analogy.

T said...

Kat. I understand your point and agree to some degree. I'm asking you, where is the line? Who gets to draw the line?

Should government decide where the line is? If you allow that, you allow the likes of George Bush, who I know you hate, the draw the line in favor of Big Business.

Kat said...

i don't see why the government should draw the line between the two when you're the one making the analogy. i am merely suggesting that the analogy is flawed.

i see your point (even if i don't agree with it), i just think your method of getting there could be more fine-tuned if you compared organizations of similar size and economic scope.

T said...

Kat,

Let me rephrase then. You obviously think that workers are mistreated by McDonalds. What is your suggestion to fix the problem? Would you like government to step in and make sure that these corporations don't somehow "take advantage" of the little guy?

If you suggest such a thing, which I know you do since you believe in socialism, than aren't you afraid of the pendulum swinging the other way?

Kat said...

the government has already stepped in the ensure that these workers ARE treated that way. did you know that mcdonald's gets a $2400 tax credit for the first 400 hours a low-income worker is on the job? they tend to fire them after that. i am sure it is done in a very respectful and loving way though.

T said...

Kat,

Exactly. You seem to think I'm very pro big business which I am most definitely not. But I am most definitely not pro worker either.

I think government shouldn't protect EITEHR business or the worker. I think it is dangerous to let government pick a winner, because in the end someone is going to lose and in all likelihood it is going to be the person with the least amount of resources. The very people you are trying to protect.

You want government to step in and protect the worker. I'm saying its a bad idea and we should pass laws the prohibit government from taking the side of either business or worker. You give government an inch, and they will take a mile. This has been clearly shown time and time again. And I assure you that mile will be made on the backs of the very people you are concerned with.

Kat said...

my concern is that the government is paying businesses to exploit people. the exploitation happens anyway, but now large companies are being rewarded for it. it's like cheering on a bar fight.