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My Turn: It’s time to reassess profit distribution

I was very disappointed to read that the New Hampshire Senate voted down a very modest increase in the minimum wage.

The argument for killing the bill was that it would, among other things, kill jobs in the hospitality industry. Hospitality industry is a broad category, ranging from small mom-and-pop-style restaurants, motels and amusement facilities to the much larger number of national chains, which surely are less vulnerable. So I found myself thinking: What is a fair profit?

New Hampshire is a state of rugged individualists, Yankee entrepreneurs in the best sense of the phrase.

I myself deal with a number of self-employed business people who take pride in their excellent work, charge what seem to be fair prices and have been generous in their care of me and my property. They seem to live well, not extravagantly.

I value the services they perform for me very highly, and I hope they pay their employees, some of whom are skilled workers, more than the minimum wage. But step back and consider minimum wage on the larger, corporate level, the hospitality industry, the medical industry, the food industry, electronics, giants like Walmart and Home Depot, Bernie & Phyl’s, Jordan’s, the myriad of chains that fill the malls along the sides of our roads. Who, really, in such giant businesses is going to be hurt by raising the minimum wage by $1 this year and 75 cents next? Will corporate profits suffer to the extent that top management must cut entry-level positions? And, here’s another thought: Instead of cutting entry-level positions, why not decrease – or at least slow the salary increases – of top management?

Figuring out fair distribution of profit is a tricky matter. There are a great many ways of looking at it. Our rugged national entrepreneurial spirit for capitalism has made us believe that hard work along with ability and opportunity give us the right to what we earn. But that can only work if a number of factors are taken into consideration.

Take ability for starters. People have different abilities, and those abilities, I agree, deserve different compensations. I understand that the highly skilled and trained hand surgeon who recently repaired a spiral fracture in the fifth metacarpal of my left hand deserves a higher level of compensation than the nurses who cared for me before and after the surgery. They perhaps didn’t have the surgeon’s natural ability or ambition to undertake the lengthy training required for specialized surgery.

I’m okay with that. But what about the next factor: opportunity? This is the real biggie for me. I know nothing about my hand surgeon except that he is a man and went (I can tell by the diplomas on the wall) to a good medical school. I know nothing about my nurses except that they were all women. Now, this isn’t a feminist rant – that’s a whole different topic. Many women seem to be drawn to nursing, doubtless often from societal conditioning, but how many might have liked to become doctors had they had the opportunity?

Opportunity means who your family is, where you grew up, what schools you were able to attend – all largely determined by your financial situation from the very outset of your life. Opportunity begets opportunity and, to a very great extent, wealth determines opportunity.

To me, financially enabled opportunity is the real unleveler of the playing field. It is what allows people to enter the work world at an advantageous position, regardless of their ability. They get a jumpstart over the people with fewer resources. They are the privileged ones. And what’s most important to remember: Many of these people don’t have a greater work ethic, don’t bring less desire to be successful for themselves and their families than those struggling along on impossibly low pay.

How do we determine what’s fair? It’s not just a question of raising taxes on the wealthiest, though I’m for that. It’s a question of what is a reasonable profit margin, a question of what people at the top honestly need to live reasonably, not extravagantly.

Please think about this: What would really happen if more of a company’s profit went into entry-level and lower level positions? How much could the profit realized by top management and shareholders actually be reduced before the business would have to close? Now, I’m not naive. I know one of the first responses to these questions would be: If profits fell shareholders would sell and move elsewhere. Well, those shareholders – many of whom probably aren’t working hard at all or with much ability to realize the earnings they receive from their stocks but rely entirely on their advantageous opportunity – need to do some fairness soul-searching as well.

(Katharine Gregg lives in Mason.)

Legacy Comments8

fairness is the newest Populism buzz word that the progressive liberal socialist democrats plan to push to win elections . considering they have been in power for so long - how is it they have done NOTHING to fix their perceived problem. HINT - how has the African American unemployment working out for ya?....democrats are just full of new buzz words but never a new idea.

Here is a better "My Turn" It is time for Progressives to go back to school and take courses in human nature, history, and economics. They may also want to check out the history of immigrants. How they thought about coming to America and what they achieved. Who decides what profit margin is fair? Should a guy who owns a garage and fixes cars make the same profit margin as someone who owns a bakery? Who makes that decision? I use to believe that Progressives just wanted everybody to have the opportunity to achieve, now I know that is a myth. Now any business is greedy, even if that business is a small business. Not fair that someone who has a hard work ethic, sacrifices and achieves should make more than someone that does not. Tell that to all the immigrants who came here with the belief they could achieve anything. When you take away incentive, you create dependency. I would think that generational poverty would be an indicator of what happens when you take away incentive. I would also think that manufacturing leaving the US would also be an indicator of what happens when you regulate. If business left because they did not make enough profit, what did you think will happen when business profits are regulated? We do not hear Progressives talk about what the folks in Hollywood make as compared to the crews that support them. Is it fair that George Clooney makes more than the makeup artist? If I go to college and take ten years to pay off my college loan, is it fair that I make more than someone who works at MC Dees?

If you dont like McDonalds ways then dont patronize them. If everyone is so upset about a business practice would simply vote with their feet those businesses who operate as you think appropriate would be the winners. We all know about Wal Mart and those who complain the most seem to be Wal Marts biggest customers.

McDonalds CEO got a compensation package worth $13.8 million in 2013, that’s up from the $4.1 million he received in 2011. McDonalds says they serve ~~70 Million customers a day, for the 4th quarter alone in 2013 they reported ~~$1.4 Billion in profits........ Business' no longer cares about its employees, they care only about paying out a higher dividend to shareholders at the expense of the employees. I wonder how many employees at McDonalds own stock (in any company).

They have an internal stock purchase program without broker fees and they have the following benefits: free or discounted meals, flexible hours, medical insurance, prescription drug coverage, 24-hour nurse line access, vision discount, available dental plan, short term disability, long term disability, 401K, term life insurance, educational assistance, paid holidays and vacation. Oh what a terrible company.

And just think, if they paid a decent wage (just a small portion of the ~~$5 Billion in profits each year) those employees could actually afford to utilize some of those benefits. Like Wal-Mart they teach the employees how to apply for government assistance. Nobody is asking for the workers to make $50K a year, but give them a fair check for a week’s work. It would be hard to believe that any more than a very small percentage of McDonald's kitchen employees have enough cash left over each week to be investing in a personal 401K, of course I’ll bet those at corporate are using every benefit you listed!!

"Katherine's World" went for a trial run in the USSR and failed. Does anyone seriously believe the US political/pundit class would do any better at deciding what to produce, how to price the product and the inputs, and how returns should be scaled and distributed?

The author has substituted romantic thinking for economic reality. She appears to start with the premise that profit is bad. Profit is the key indicator on whether an investment is worthwhile or not. It is the economic signal that informs "us" where resources should be allocated in a complex and changing environment. There isn't a Citizens Committee on Redistribution that could exist that could keep up with where an how money should be invested to produce new goods and services. What would it cost to destroy the concept of profit? It would cost everyone quality of life due to poor investments being sustained due to politics rather than profit. It would deny people the benefits of advancing technology. Imagine a world where we were all still using the black rotary phone instead of touch screen smart phones. That would be Katherine's World if there were enough people who emotionally acted to try to regulate an economy over the movement of capital and labor due to individual choice an action. Say hello to bread lines and embrace the grayness of mediocrity everywhere.

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