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Choices: Tax cuts or teachers

Written By: - Date published: 7:10 am, May 2nd, 2011 - 65 comments
Categories: education, jobs, national, tax - Tags: ,

You’re the ruling government. Which do you choose, tax cuts or teachers? Perhaps that’s a bit to vague, let’s put some numbers on it. Tax cuts for 47 millionaires or salaries for 121 new teachers? It’s not a hypothetical question. Here’s some background:

Pay rises for bosses surge ahead of ordinary Kiwis

The bosses of New Zealand’s biggest listed firms and state-owned enterprises received an average pay rise of 14 per cent in the 2010 financial year, the Business Herald’s executive pay survey shows.

For all New Zealanders, the average wage increase was just 1.7 per cent in the year to the December 2010 quarter, according to Statistics New Zealand figures. The Business Herald survey shows the mean remuneration of the 47 chief executives investigated was $1.6 million in the 2010 financial year, up from $1.4 million in 2009.

We can argue about whether or not any individual is truly “worth” such a salary some other time. For now let’s consider tax. On the average salary (for these 47 chiefs) of $1.6 million, tax used to be $613,810. Following National’s tax cuts it has fallen to $518,920, a tax cut of $94,890. For 47 chiefs times $94,890 = almost $4.5 million total, a fair chunk of lost income for the government.

How many teachers could the government have had for $4.5 million? On the average new teacher’s salary of $37,000 I make it 121 teachers.

How can this possibly be good for New Zealand? I don’t know what the return on investment for tax cuts to 47 millionaires is (my guess is they book another holiday and spend it overseas). But I do know that every study shows that the return on investment in education is massive. For the taxes lost on 47 individuals alone, NZ could have had 121 new teachers. Or 82 practice nurses. Or…

National are making the wrong choices for New Zealand.

65 comments on “Choices: Tax cuts or teachers ”

  1. Herodotus 1

    A wee oversight Rob re your numbers- with the tax rebalancing some of this extra money will be repaid to the govt in the form of increased GST. Not sure how much but there will be “some” !!
    So the picture is not quite as bad as your portray it to be !! ;-).
    It may reduce the no of additional teachers to less than current sitting MP’s !!

    • Eddie 1.1


      You’re assuming the millionaires spend the money in NZ. No GST if they don’t.

      And the teacher would pay GST on their salaries too. So the two situations are neutral as far as I can see.

    • Colonial Viper 1.2

      Herod. poor people have to spend most of their incomes on GST affected goods and services.

      Rich people do not. Their multi million dollar mansion in Devonport they just bought didn’t give the Government a cent of GST.

  2. Craig Glen Eden 2

    Only if the money is spent on goods and services apparently according to Key and English Kiwis are re paying debt so if they are right not much if any GST.

  3. lprent 3

    A wee oversight Rob re your numbers- with the tax rebalancing some of this extra money will be repaid to the govt in the form of increased GST.

    That depends on where they spend it. R0b suggested holidays. If like Key they holiday in the US, then the GST is only on the airfares.

    Of course they could do the unthinkable and invest their money in NZ. No GST on investments. And if they invest in rental property there is effectively no tax because it will be leveraged to ensure that there isn’t and separate into trusts.

    Of course they could be spending their tax gains. Pity that doesn’t show in the economic stats anywhere.

    The point that r0b didn’t make is that there is only one case where the tax cuts showered on the wealthy help NZ. That is where they invest it in productive enterprises in NZ. Strangely, I cannot see any evidence of that happening either anedoctably or in the stats.

    Basically I think that putting it into teachers would have been a better investment. The only one that I think could have been better would have been getting our transport infrastructure prepped for higher fuel costs.

    • Lanthanide 3.1

      “If like Key they holiday in the US”

      One little comment by Key I found illuminating. Over the whole Act party shenanigans, he said of course National could work with Act, and the chances of Act working with Labour were about the same as him “spending his next summer holiday on Mars instead of Hawaii”.

    • Draco T Bastard 3.2

      Strangely, I cannot see any evidence of that happening either anedoctably or in the stats.

      Apparently there aren’t enough state assets on the chopping block NSX to encourage them to “invest”.

  4. Bingo 4

    It’s worse than that.

    Assuming those 121 teachers don’t leave the country, they will most likely take jobs that could otherwise have gone to less qualified people. Net result will be about 121 more people on the dole, which the government also has to pay for. Savings to the government on not hiring those 121 teachers is therefore quite a bit less than the amount given in tax cuts to 47 millionaires.

    • Craig Glen Eden 4.1

      “Assuming those 121 teachers don’t leave the country, they will most likely take jobs that could otherwise have gone to less qualified people.”

      If they are less qualified they arn’t teachers!So one is not taking the others jobs.

      You assume wrongly and obviously have no idea of how a school is run.

      • fermionic_interference 4.1.1

        I believe the inference by Bingo was that the 121 possible teachers would then take other jobs within NZ, Thus disadvantaging 121 others probably leaving them on the dole.

        note also the income tax and GST that would be paid by these teachers and 121 or more other employed people would add to Govt revenues.

  5. Herodotus 5

    I comented yesterday re the GST removal re Mana, how this would place many people in a worse state of affairs as it would reduce the price of housing, directly new housing and then as it works its way thru the system existing housing would go down in value.
    The real rich are becomming more and more untouchable. If we legislate there are many wizards out there who will be paid to protect the money of the rich.
    And Eddie yes there is a churn with these teachers also contribing to govt tax take I agree. Just mentioning that the new Ferarri, 1st growth wine from France, resturants and whatever else rich people spend their mony on a wee portion does come back. But these consumer goods have also increased from GST – the rich have sufferred !!!

    • Draco T Bastard 5.1

      and then as it works its way thru the system existing housing would go down in value.

      And that would be the market at work (not that it’s likely to happen – house prices are presumably set by demand and not the cost to build them).

      The real rich are becomming more and more untouchable. If we legislate there are many wizards out there who will be paid to protect the money of the rich.

      Which just means that the legislation needs to be watertight.

      But these consumer goods have also increased from GST – the rich have sufferred !!!

      Depends on where and how they buy. It is possible, after all, to buy stuff overseas and have it delivered without any GST on it (which really just goes to show how stupid GST is).

      • Pete 5.1.1

        Which just means that the legislation needs to be watertight.

        Best of luck with that…..it’s like playing whack-a-mole. The bigger the incentive, the more moles you’ll have, and the faster they’ll move.

        house prices are presumably set by demand

        And supply. We existing landlords thank you for your RMA, excessive building regulations, and smart growth planning.

        It’s hard not to vote Labour if you’re a property owner in Wellington. Really, really hard. They have given us so much. Just ask Bob Jones….

      • Herodotus 5.1.2

        “..house prices are presumably set by demand and not the cost to build them..”
        Currently is costs more to build than what people are willing to pay = result a shortage of housing stock. Yet if builders were able to sell there properties at a price greater than cost we cannot afford to buy.
        So by your basis if we terminate GST, the entire 13% savings will go to the profit of Fletchers, Universial Homes(Foregin owned) and the Todd family (Who own the largest residential land development in Ak). So thanks to Mana instead of the 15% GST going to the govt it will go to these shareholders !! Magic I just love the logic, A party for those dispossesed, results in the rich getting richer !!! Why dont we all face up to it: the real rich are untouchable, and all the fiddling achieves is over-taxing those above mentioned teachers and the like
        When you do your supply/demand stuff what is your basis for the starting price point on the graph? Is it (as should be for farms) based on an economic/rental return? This is where almost everyone gets the price of housing wrong. They have no concept of what a section and standard house is worth,and why. Everyone basis it on what “next door sold for” without understanding WHY next door achieved the price.
        A basic concept within the development industry ios that you can control demand or price but not both.

  6. Hilary 6

    Don’t forget teachers’ aides. Rodney Hide’s brief stint as a special ed teacher aide on TV last night showed just how important but difficult that job is, and they only get about $14 an hour, and most are casual employees with no job security. Our priorities in NZ are just so skewed. Nothing about children is valued.

    • joe90 6.1

      Nothing about children is valued

      Hilary, I was sitting in the doctors waiting room a few weeks ago watching the procession of oldies, all with their own helpers and minders, and there were just as many young women coming through the door wrangling one, two and sometimes three little ones and not one had anybody with them to help them and their kids.

      Sure, some looked to be the capable, assured and well off balls of supermum energy that the glossies portray and they looked to be doing it on their ear but I was struck by how tired and harassed some of the other young women looked.

      They were carting obviously unwell youngsters around and herding one or two toddlers and although the staff were marvellous it made me bloody angry that there wasn’t a helper in sight and that life appeared to be so very tough for some of those young women.

      So I’d go further than saying nothing about children is valued and say that it seems there’s nothing about young mothers that’s valued either.

  7. spam 7

    How can you compare the tax at the new rate on the new salary, with the tax on the new rate on the old salary? Surely a fairer comparison would be tax on new salary and new rate, and tax on old salary at old rate?

    Secondly, the salary costs for new teachers are not the only cost, so that’s not a fair comparison either. You have overhead costs as well (training, kiwisaver, insurance, resources etc etc).

    • So there may only be money for 60 new teachers? Does that change your opinion on the issue? It certainly does not change mine. Hell if there were only 5 new teachers for the money I would still support the change.

      • spam 7.1.1

        So what is your motivation? More teachers as an absolute?

        I mean, with around 45,000 teachers in New Zealand (excluding early childhood education), if you “only” want 6 extra teachers, and they “only” cost $37,000 / annum, then you could simply pay teachers 0.25 of a cent an hour less, and there’s your money.

        • Draco T Bastard

          So, putting critical people even further into poverty is your solution to improving our society and it’s culture.

          • spam

            And you think that 0.25 cents / hour ($5.20 / annum) puts people into poverty?

            • terryg

              interesting idea spam. Lets assume for a moment you work for a large company, and management decide they need another 6 workers. By your argument, it is OK for management to force YOU and your workmates to pay their salary.

              I suspect you would not like that approach, and nor would your co-workers. And rightly so.

              Yet that is what you JUST SAID teachers should do.

              And lets not forget little things like employment contracts…..

            • Colonial Viper

              Hey spam, taxing those earning over $90,000 p.a. an extra 0.5 cents on the dollar also gets the money (and probably more). Good deal huh.

  8. PeteG 8

    Why just that comparison? Why not compare the cost of Americs Cup or RWC to teachers? Or funding by-elections, or funding party’s ineffectice “communications” staff – our own money is taken off us to pay for being bullshitted to, FFS.

    And why teachers? What about pensioners hip operations, paying more social workers more to try and address the child abuse and dysfunctional familes problems, or saving cute wee puppies at SPCA?

    • PeteG seems to be saying that we should be comparing everything with everything. We could do that but it would be rather confusing.

      Crown expenditure is an easily measured thing and shows what the Government’s priorities are.

      One of my favourite was the cutting of teacher professional training in literacy and numeracy which was showing outstanding results at the same time that $35m extra was awarded to private schools. A very clear decision and it showed exactly what the motivation was, help for kids who are struggling is bad, extra money for rich families was good.

    • Blighty 8.2

      considering you write about 30 comments a day here, you should realise that there have been a series of these ‘choices, choices’ posts making such comparisons.

      • r0b 8.2.1

        PeteG does write a lot here it’s true, but I’m not at all sure that he reads anything.

        • PeteG

          Selective comparisons of unrelated expenses mean little, it is just dog whistling. You could compare the value of heart operations for babies versus the cost of the Leader of the Opposition’s office, but that doesn’t mean the Leader of the Opposition shouldn’t be funded. What about spending $16m annually on Creative New Zealand versus more cancer drugs?

          Budget decisions involve many choices, and every budget by every government could be nit picked to kingdom come.

          • r0b

            Indeed, and the choice highlighted in this post is the choice to give tax cuts to millionaires. Care to defend it?

            • PeteG

              No, I won’t defend it, I think too many people get pay a disproportionate amount, private company executives get away with greater self rewards than politicians.

              But regarding return on investment you are arguing facts and figures against a wild assumption:

              “I don’t know what the return on investment for tax cuts to 47 millionaires is (my guess is they book another holiday and spend it overseas). “

              I bet most of the increased income in the hand is not spent on overseas holidays.

              Some will be paid on increased taxes, some on local consumption, some may be given as donations to organisations that will be very grateful for anothing they can get, some may be spent on local investment that creates new jobs, some might even be spent on private education that reduces the pressure on state teacher numbers.

              If you want to make return on investment comparisons you should have all the facts.

              • r0b

                I get to make the odd wild assumption on my own blog thanks PeteG. Doesn’t affect the underlying argument either way. Tax cuts for millionaires are not value for money.

  9. ianmac 9

    A few weeks ago Tony Ryall was claiming that they had increased teacher numbers by 1500. (Not 1489 or 15013?) Nowhere was he challenged and nowhere were there details published, and it takes 2 years+ to train a teacher. Water into wine?
    121 teachers would not have been trained/employed under Tax for the Rich.

  10. Jared 10

    Where on earth did my comments go????

    [lprent: The thread got booted to OpenMike (which is where this comment will also go shortly). Your ‘topic’ looked like diversion trolling to me because it was a level one comment that was only marginally related to the topic of the post. You picked up a ban. ]

  11. randal 11

    the thing is he is still going to sell off state assets to payoff his mates who want those steady income streams for their PORTFOLIOS.

  12. Pete 12

    We could pay teachers more if we targeted WFF at those who really need it, as opposed to those who want a new television.

    • Draco T Bastard 12.1

      And we could get rid of WfF if employers paid enough in the first place.

      • Pete 12.1.1

        How can an employer pay more than a job is worth?

        If a job produces say $14 p/h worth of value, and the employer is forced to pay $15 p/h, then the job disappears.

        • Lanthanide

          Funnily enough, productivity has increased massively since the 80’s. The the minimum wage has not.
          Because all the profits from that productivity increase was funnelled towards the top of the pyramid.

        • Draco T Bastard

          Well, I reckon that if a job produces $14/hour then the person doing it should be paid $14/hour rather than the $6/hour that they’re likely to get ATM.

          Capitalism: Legalised theft

          • Vicky32

            Well, I reckon that if a job produces $14/hour then the person doing it should be paid $14/hour rather than the $6/hour that they’re likely to get ATM.

            Seconded, DtB! 🙂

          • Pete

            But if it costs more to provide the job than the job returns, then the job disappears.

            You should start a business for the benefit of the workers. If they cost more than they return, you’ll need to cut your own salary to balance the books. If it keeps up for any length of time, you lose your business. That doesn’t do the workers much good either.

            • Colonial Viper


              This is capitalism, where the only worthwhile job is one which generates a ROI on capital for the wealth holders.

              Forget about caring for others, emotional labour, looking after the environment. No return on financial capital so those jobs should not exist, and if they do they should be paid at shit pay rates – according to the economic system which is capitalism.

              But yeah, worker owned enterprises are the way to go, then they can cut out the leaching major shareholders and directors who know shit about the business but who usually end up taking the most benefit from it.

              • Pete

                But the capital is at risk. That is a cost.

                Do you own a home? Banks typically secure against this asset for business loans. If you put this at risk, you’re saying you deserve nothing for doing so? In which case, why would you do it?

                Secondly, there is no guarantee of return. A worker will get paid, week on week, whether the company has been able to collect that week, or not. Many workers like that security and regularity, but an owner does not enjoy same. There may be down years when the company is losing money yet still paying the workforce. The capital gets eroded. That is a cost.

                If there is no compensation for this turbulence, why would anyone do it?

                As I’ve said, I think shared ownership in the form of worker shareholding is a good idea, however many workers don’t like it. They want the cash in hand, rather than the up-n-down nature of ownership, and the lack of capital guarantee.

                There is absolutely nothing to stop worker collectives pooling their capital and starting businesses, and competing with other forms of business. But they seldom do.

                Why is that?

                Why don’t you?

                What stops you?

                • Colonial Viper

                  Working on it mate, thanks for your concern 🙂

                  A worker will get paid, week on week, whether the company has been able to collect that week, or not.

                  Hey NZ is littered with organisations trashed by incompetent managers and owners, its time to let workers own more of the system.

    • Zaphod Beeblebrox 12.2

      Correct, the reason why we got WfF in the first place was that wages in NZ for the middle classes have stagnated over the last 20 years.

      Now if we could get employers to pay proper wages or get Bill to redistribute his tax cuts downwards you could have your wish!

      • Pete 12.2.1

        The implication is that employers sit on massive profits and they just decide to pay workers little.

        Most employers in New Zealand are small/medium business. They do not sit on massive profits, as is demonstrated by the tax take. In order to pay a worker more, the worker needs to be doing a job that results in productivity gains.

        If you could just raise workers wages by decree, why not make the minimum wage $100 p/h? What happens next?

        • KJT

          Pretty hard for small business to do well when your customers are not paid enough to buy your products.
          Big business, banking and other white collar crime is doing well though.

          Not only that, but most small businesses are competing with big businesses for the same customers.

          • Pete

            But where does this money come from? Should we just pay everyone $100 p/h? What will this do to prices?

            How do we really increase purchasing power?

        • joe90

          What happens next?

          The owner of the Cherry Cleaning Company admits that his staff are worse off than they’ve ever been and laments that if he were to raise his workers minimum wage larger companies would force him out of business.

          What happens next is the work has to be done so it’s likely that his ex-employees would move to the larger company earning the higher minimum wage and the only loss would be his and his profit margin..

          • Pete

            Economies of scale, then.

            I am surprised to see The Standard advocating for big business.

            [lprent: Read the policy. I suggest you read it now. Because next time I see you suggesting in any way that the site can think or hold an opinion, you’ll be deprived of the opportunity to leave comments. It is just symptom of a lazy mind. ]

            • joe90

              Congratulations, you’re an idiot who thinks blogs think. But I suppose you think that the shrinking of peoples real wages to prop up someone’s business is okay too.
              And why do you think competition is a bad thing?.

              • Pete

                It really is like a school yard in here. “You’re an idiot. No, you’re an idiot”.

                Do you really think I meant that a website could think? Really? Or was that just an excuse?

                The worker can go elsewhere, in which case the business fails. As it should. However, I’ve yet to hear anyone in the minimum wage “movement” articulate how a business can pay a worker at a higher rate than is possible given the economics of that business?

                An employer forced to pay $20 p/h when she can only charge $15 for the work has no option but to eliminate that job.

                I realise that people need a certain amount on which to live. I’m not advocating people live in working poverty. But surely the answer lies in looking at how businesses can be made more profitable, and how this profit can be shared with the workers? How can we grow businesses, so that they can employ more workers?

                [lprent: I suspect that Joe was being generous and was warning you. One of the main troll symptoms I look for is the stupidity of ascribing a opinion to an abstraction rather than the individuals who hold them.

                I don’t tolerate that style of argument style as it is just avoidance and typically is just done to avoid consequences. I will usually give a warning to read the policy that we follow. After that I demonstrate exactly how a humiliating personal attack should be performed. ]

                • joe90

                  Well if you didn’t think that the standard could think you would’ve said I am surprised to see The Standard joe90 advocating for big business.

                  And why should I care about a small business owner who maintains his margins by paying a wage that year by year gets eaten up by inflation when a bigger business could pay more by shrinking it’s margins. .

                  • Pete

                    One cannot survive and prosper on low wages, however one can *start* there. I did. Many of us did.

                    There’s a cost to gaining experience, and that is met by the employer. Once an employee demonstrates value, then they should be paid more, *in line with the value created*.

                    What happens when not much value is created? Is this just up to the employer to increase, or can the employee play a role here, too? Should an employee also ask “how can I create more value”?

                    PS: I quite like profit sharing schemes, although often surprised at how few employees wish to entertain the idea.

                • Draco T Bastard

                  One of the ways that businesses can be made more profitable is by getting them to invest in more and better capital. This can be done by forcing wages up.

                • fermionic_interference

                  “I realise that people need a certain amount on which to live. I’m not advocating people live in working poverty. But surely the answer lies in looking at how businesses can be made more profitable, and how this profit can be shared with the workers? How can we grow businesses, so that they can employ more workers?

                  Well said Pete, especially the part I’ve chucked in bold.

                  I don’t have the answers but I do have some more questions.

                  You have asked how do we get the profits shared among the workers at a better rate?

                  With regard to the anecdote below:
                  There was a story in the Nelson evening mail?? (print edition) last year about a man who repairs phone cable, many moons ago he was employed by Telecom and paid a decent wage somewhere in the 40K range if my memory serves, now he is contracted to a company, that is contracted to a company, that is contracted to a company**, that is contracted to Telecom and now he is paid somewhere in the low 30K range.
                  **hope I got the right number of contracted to’s in there might have been one more or one less though at least one of those companies is based overseas.

                  How is this situation good for NZ wages?
                  How do we protect NZ incomes if such occurrences are accepted?
                  Do such actions not perform the task of bringing down all NZ wages?

                  When I was younger, back in 2003, I was offered (through my parents as proxy) a role on a dairy farm contract and all.The contact offered 19K /annum. The contract stated that I had 52 days off plus 3 weeks leave every year and expected work hours would not exceed 98 hours of work outside expected everyday duties, which entailed 2 milkings + “bringing the cows in” + feeding out + break fencing (maybe) + taking care of young stock, count the hours here: milkings + bring the cows in say 5-8hrs daily depending on distances time of year etc, each time you feed out would take at least half an hour with at least two multiples of this with two herds.
                  Under this stock standard contract off the Fed Farmers website I could have been required to work 98hrs + 6-9+ hrs per day after the 98hrs had been hit
                  so for the hourly wage

                  19K / 4802hrs per annum
                  =$ 3.96/hr
                  hang on a minute mate less than $4 per hour you have to be joking minimum wages then were around $9 per hr
                  Now they’re $12.75 ? $13?
                  I have a friend who is currently in the dairy game she is paid at just short of $7 for a 72 hour week with salary of $500/wk

                  So how in this situation with high milk prices do we reconcile these two facts and should it be legal to under cut the minimum wage by having high possible hours of work then always having employees work them rather than only occasionally work that long?

                  Thoughts please?

                  • Pete

                    There’s a good book called “Maverick : The Success Story Behind the World’s Most Unusual Workplace”

                    I think you might like it. I did.

                    It’s about how you can generate more value if you give the workers more say, and a stake, in the business. They also share in the downside and risk. They are given decision making power and responsibility.

                    To me, it was an example of how left and right ideas can mix well. I do think the answer lies in there somewhere.

                    In your dairy example, I think if the dairy farm is making significant upside, they should be paying more. I’m not sure how the package is structured (i.e accommodation and other provision)

                    The Telecom example doesn’t sound good, but then Telecom have been under-performing. They do appear, to me, to have management issues.

                    [lprent: see my note above, before you collect a ban for stupidity. ]

                    • fermionic_interference

                      Accommodation if it is supplied by the farmer will be done at market rates for the area normally sometimes nominally discounted or for the one in a hundred or so they provide your accommodation free but that’s very uncommon.
                      and there wouldn’t be any provisions that can make up for a hourly rate of a max of $3.96 per hour or roughly $7/hr now, how can this be excused it’s not slave labour but it’s certainly not enough for the responsibility of not “tainting the product” with milk that has antibiotics etc in it (costs 10-20K if you supply milk with antibios in it).

                      Telecom is a mess and (on a separate note) if Joyce gives them the FttD contract NZ’s heading in a bad way infrastructure wise.

                      You said you run a software company, so how do you do it then?
                      how do you pay employees a good living wage and make a profit or do you cut ’em down as hard as you can at the bargaining table? (no offense meant)

                      Look at it this way you and your employees produce something of value and then, the value you and they contribute to the product comes back to you and your company.Now (hopefully) the value provided by the employees is valued by you so in turn they see a reward of some sort.

                      look at NZ currently the value all seems to follow the directors ? CEOs who may or may not be doing a god job of managing but the employee is not rewarded for value added ie wage increases at less than inflation (1.7%) for employees whilst managers (CEOs etc) see on average 14% pay rises.
                      How is this remotely equitable or reflective of the situation?
                      All members of a companies work force are involved it it’s productivity yet one person is singled out for their contribution to the profit being worth a 14%(avg) increase in pay when they don’t offer any production themselves.
                      Whilst I am not undermining the responsibility of the CEO their actual addition to production and profit currently seems hugely inflated. Not just here but Western world wide at the very least.

                    • Pete

                      What on earth was wrong with that?

                      Genuinely perplexed.

                • Vicky32

                  The worker can go elsewhere

                  The only answer to that Pete, is, as I am sure you know, “yeah right”

                  • Pete

                    There is *nothing* to stop workers collectives owning businesses.

                    Why don’t you do it? Do it tomorrow.

                    If there is no value being added by the capitalist overlords, then the workers collective will prosper, as they will have a lower cost structure.

  13. Pete 13

    You said you run a software company, so how do you do it then?
    how do you pay employees a good living wage and make a profit or do you cut ‘em down as hard as you can at the bargaining table? (no offense meant)

    I tell you about the software company *we* sold.

    I offered equity share. Workers are paid a base salary, and the rest in equity. This worked for me, in that it took pressure off cashflow, a significant problem for start-ups. This worked for staff, as they didn’t just want salary, they wanted a stake. They took a risk, of course, which is the opportunity cost of getting higher wages elsewhere. Other staff just wanted to be paid month by month, and didn’t want the risk of an equity stake. Everyone is happy.

    When we sold, some staff became wealthy, because of their equity stake. They took a risk. It paid off. As did I – I had my house up against it, and had we failed, I would have lost it. It took me ten years to get in a position to have saved that much, which I then risked.

    Should those who do not hold equity stakes be rewarded exactly the same as staff who do?

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