Paying a generous wage

Written By: - Date published: 10:12 am, November 1st, 2015 - 116 comments
Categories: business, employment, wages - Tags: , ,

The story of an enlightened employer (in the US):

Here’s What Really Happened at That Company That Set a $70,000 Minimum Wage
…
An entrepreneur since he was a teen, Price prided himself on treating employees well at Gravity, which he co-founded in 2004 with his brother Lucas Price. Three years before, as a 16-year-old high school kid, Dan Price saw bar owners being gouged by big financial firms every time they swiped a patron’s credit card. By first outsourcing technology, and then building its own systems, Gravity offered lower prices and better service, and grew rapidly for four years — until the Great Recession nearly wiped it out. Traumatized, Price kept a lid on wages even after the economy recovered — to save the company, of course! Why can’t employees see that? Yet the more people tried to cheer him up about his wage policy, the worse Price felt.
…
“I was so scarred by the recession that I was proactively, and proudly, hurting my staff,” he says. Thus began Price’s transformation from classic entrepreneur to crusader against income inequality, set on fundamentally changing the way America does business. For three years after his face-off with Haley, Price handed out 20 percent annual raises. Profit growth continued to substantially outpace wage growth. This spring, he spent two weeks running the numbers and battling insomnia before making a dramatic announcement to his 120-member staff on April 13, inviting NBC News and The New York Times to cover it: Over the next three years, he will phase in a minimum wage of $70,000 at Gravity and immediately cut his own salary from $1.1 million to $70,000 to help fund it.

The reaction was tsunamic, with 500 million interactions on social media and NBC’s video becoming the most shared in network history. Gravity was flooded with stories from ecstatic workers elsewhere who suddenly got raises from converted bosses who tossed them out like Scrooge after his epiphany — even, in one case, at an apparel factory in Vietnam.
…
Then the inevitable backlash came. Price has been pilloried on Fox News and trashed by the multimillionaire Limbaugh (“I hope this company is a case study in MBA programs on how socialism does not work, because it’s gonna fail”). A Times story in July was so laden with quotes from disgruntled customers and staff that Price’s worried friends called to say he always has a place to stay if things don’t work out.
…
Six months after Price’s announcement, Gravity has defied doubters. Revenue is growing at double the previous rate. Profits have also doubled. Gravity did lose a few customers: Some objected to what seemed like a political statement that put pressure on them to raise their own wages; others feared price hikes or service cutbacks. But media reports suggesting that panicked customers were fleeing have proved false. In fact, Gravity’s customer retention rate rose from 91 to 95 percent in the second quarter. …

Well paid staff are happy, productive staff. Who’d have thought it! Something to think about, employers…

If only we could end the story there, but I should include this unfortunate footnote:

In fact, the biggest threat to Price’s company isn’t his strategy; it’s his brother. Lucas’s lawsuit, scheduled to be heard in May, could ruin Gravity. Price estimates legal fees will reach $1 million by then. The suit was filed on April 24, 11 days after the pay-raise announcement — perhaps to pressure Dan to sell when Gravity was in the limelight, thus maximizing the value of Lucas’s share. Dan says Lucas has refused his offer to buy him out for $4 to $5 million. (Lucas’s attorney says the suit is unrelated to the raises.)

Damnit.

116 comments on “Paying a generous wage ”

  • Comments are now closed

  1. Srylands 1
    1 November 2015 at 10:36 am

    It will be an interesting experiment to watch. You didn’t mention that as well as losing customers the company has also lost its best employees.

    http://www.inc.com/ilan-mochari/gravity-payments-minimum-salary.html

    • One Anonymous Bloke 1.1
      1 November 2015 at 10:46 am

      It couldn’t possibly fail as spectacularly as the policies you’ve constructed so many lies about.

    • Wainwright 1.2
      1 November 2015 at 10:49 am

      The article you linked to says “TWO valuable employees quit”. There’s no information about their roles or performance. And they can’t be the best employees if the company’s performance has dramatically improved since they flounced.

      The article also says other Seattle businesses though it made them look “stingy”. Welcome to the other side of the market, cheapskates.

      • infused 1.2.1
        1 November 2015 at 11:23 am

        There’s tons of information on this company. Once you start digging, you will find this whole thing was a stunt.

        • Wainwright 1.2.1.1
          1 November 2015 at 2:20 pm

          Why don’t you rightwingers understand how money works? For an ordinary worker, getting a decent payrise is way more than “a stunt”.

      • The Chairman 1.2.2
        1 November 2015 at 11:35 am

        It seems Srylands was attempting to paint a darker picture.

  2. Et Tu Brute 2
    1 November 2015 at 11:12 am

    In two companies I’ve managed I raised wages and improved working conditions. In both cases staff started taking it for granted and pushed the limits again. Generous sick leave was abused and people started taking advantage of my ‘better nature’. I’ll never forget the staff member who needed two weeks off for her mother dying of cancer. Turned out later no, her mother was not dying of cancer. She just wanted time off and didn’t want to use her annual leave. I’m sorry – I think we should treat our staff better but in my experience it doesn’t make them better employees. What can make a difference though is you can attract better employees to work with you when the old ones leave or you expand – though that is a can of worms.

    • infused 2.1
      1 November 2015 at 11:22 am

      When I first started my business, I based it off Valve (software company).

      Same thing happened. It was abused. In smaller companies, it seems people tend to take the piss, and it costs you a fortune.

      Most of that is gone now…

      • BM 2.1.1
        1 November 2015 at 11:28 am

        Seems to be the kiwi way, what ever you can get away with.

        Seen it quite a few times, business owners trying to look after their staff and the staff are screwing them silly behind their backs.

      • Et Tu Brute 2.1.2
        1 November 2015 at 11:38 am

        I’ve lost so much money from bad employees I just have to sometimes remember there are good ones as well. But the bad are so bad I’ve had to take medication before to cope with the stress of having (or not having) them. And everyone then assumes you are made of money. A personal grievance even if you win can cost you $10,000+. Work and Income try and encourage these and they can give financial incentives. Then there are groups like Community Law who give free legal advice and try and notch up their wins. I’d love to take them down. When it goes to custard they use the Nuremberg defense of “I was only following instructions”.

        From now on if I take on new staff I will put them on the strictest conditions possible and only when they have proved themselves will I give them more. Who is to blame for this? Not me. Blame those bad employees, Community Law, dodgy lawyers and a messed up system that allows employers to be screwed to the wall.

        • Colonial Viper 2.1.2.1
          1 November 2015 at 11:43 am

          there are definitely shite employees out there, but being in business is a risk and you need to know how to properly recruit and screen people out.

          Your railing against Community Law centres is fucking disgusting by the way. Not everyone can afford to access partners at the local big shot legal practice.

          • Et Tu Brute 2.1.2.1.1
            1 November 2015 at 11:47 am

            You do realize the success rates of the best recruitment processes vs no process at all? People lie. Former employers can be bound by confidential settlements. Former employers can simply be polite and not want to rock the boat. Privacy act means you can’t do much of your own digging.

            And I’ll say what I like about Community Law. I fucking hate them. A lot of what they do is simply extortion. Throwing out unsubstantiated allegations and then saying ‘pay up or else’ and then, as I said, they use the Nuremberg defense of ‘I was just following instructions’.

            • Colonial Viper 2.1.2.1.1.1
              1 November 2015 at 11:51 am

              Not my problem if you dont know how to recruit and sustain a solid team. Being in business is a risk.

              BTW you need to get some advice on how the Privacy Act actually works.

              • Et Tu Brute …
                1 November 2015 at 12:38 pm

                As I said before the number of good employees far out number the number of bad employees. It is just the bad ones cause way more damage and are noticed more. I have employed 100+ people and only had serious problems with a few of them. But those few have been a nightmare.

                Regarding the Privacy Act main problem there is without candidates agreement you can’t solicit information from former employers. If they don’t give you permission, or if they omit employers, you can’t contact them.

                Being in business IS a risk, but it doesn’t mean you don’t get angry when idiots try and take you down.

                • Colonial Viper …
                  1 November 2015 at 12:44 pm

                  “Regarding the Privacy Act main problem there is without candidates agreement you can’t solicit information from former employers. If they don’t give you permission, or if they omit employers, you can’t contact them.”

                  and there is enough there to point out who is telling you the truth and who has something to hide. But it takes work and due diligence.

                  • Et Tu Brute …
                    1 November 2015 at 12:50 pm

                    Yeah and maybe that is my fault. I have tended to give jobs to people who deserve/need them. Single mothers, unemployed… you know people who need work. Paid them well and most of them are good. Now in the future I’ll be a lot more careful and yeah – gaps in employment will be treated with suspicion. But I hardly think people on The Standard want employers to crack down on giving people second chances in life. And yes – in a Capitalist way I sinned by not putting my self interest first.

                • McFlock …
                  1 November 2015 at 2:18 pm

                  Funnily enough, the last time I went for a job (my current employer) I had to sign releases for the prospective employer to contact referees, former employers, and the police prior to the job offer.

                  A pretty simple little clause in the application form, next to the declaration about convictions. There’s one tip for you right there.

                  Technically, your employee with the non-dying grandmother committed fraud – that’s always a nice wee compromise in the agreement to part ways. Not to mention that sometimes it’s cheaper to pay out more than generously upon dismissal in exchange for a signed waiver of further action.

                  As for Community Law, I owe them a lot from when I was poor and they helped me out with incompetents and fuckwits in various fields. Just to know the ground I stood on, and to find out that yes the other person was full of bluster rather than power.

                  • RedLogix …
                    1 November 2015 at 2:37 pm

                    My approach to bringing on staff is:

                    1. Leave the vetting and reference checking to our HR professionals

                    2. Or bring them on via a contracting company whom we regularly use

                    3. Get them to turn up during and walk them through the job. Show them the good bits, the bad bits and the challenges.

                    4. Then when we’re down to a final choice take them out to lunch or coffee and get them to talk about themselves. If possible I’ll bring along other team members as well.

                    If they won’t talk much – then they are hiding something – or they are not good communicators. If they talk too much, prattle on mindlessly and don’t ask intelligent questions about the work and how they imagine they can contribute – then I don’t want them on my team.

                    If they demonstrate an intelligent passion, if they show a genuine fondness for past roles and pride in their achievements, if they communicate clearly .. then I’ll give them a go. Given a chance I’ve always found my instincts pretty good.

                    That doesn’t mean I ignore the HR guys advice either. And even then I usually recommend a six or twelve month contract that gives us time to really evaluate them.

                    • Et Tu Brute …
                      1 November 2015 at 2:45 pm

                      As a small employer I don’t have an HR department but in general I’d do the same as you – and have had fairly high success. As I’ve said most employees have been fine. But things got worse when we got really generous (original point of post).

                      Then again as you said sometimes it takes six to twelve months to really evaluate them. Also, as I said before, we have sometimes gone for people who deserve a second chance when really I suppose in a rational sense we should have put our interests first.

                      There is some shocking statistic that 1/3rd of businesses are being stolen from and even if half that it is way too many. Good recruitment policies help – but they are not perfect. And yes. Bad things happen to good employers.

                    • RedLogix …
                      1 November 2015 at 3:36 pm

                      My suggestion is that if you don’t have your own full-time HR people, is that you look to some outside entity that can fulfill the crucial vetting process.

                      In my case I’m employing technical specialists so we often use one of the bigger employment agencies to provide this function for us. It costs us more, but the risk is reduced to almost zero.

                      Protecting yourself from rogue employees is vital – but they are only a small minority. Once you have good people then you make them great by demonstrating trust in them, while at the same time you have the systems in place to avoid putting undue temptation in their path.

                      The organisation I work for at present has a very hands-on owner whom most people would crawl over broken glass for. (And no he’s not a saint either). If anyone were to discover a fellow employee stealing, or damaging the company – they wouldn’t last ten minutes.

                      That’s your ultimate protection.

                      Oh and watch out for middle-aged women in admin who are tragically prone to becoming addicted to the pokies.

                    • Ergo Robertina …
                      1 November 2015 at 4:13 pm

                      Redlogix – Is your claim about middle aged women and pokies based solely on your personal experience?
                      If so, how many cases have you been aware of?
                      Are you suggesting women problem gamblers are more likely to steal from work to fund their addiction than male problem gamblers?
                      Or are females more likely to be problem gamblers?
                      Not according to the Ministry of Health, which had this to say about risk profile for gambling problems:
                      ”The risk factors of gender, work status, household size, employment status and urban/rural status were not statistically significant in the analysis.”
                      Deprivation, age (35-44), and ethnicity were risk factors.

                      a-focus-on-problem-gambling-results-200607-nz-health-survey

                    • Draco T Bastard …
                      1 November 2015 at 4:13 pm

                      If they won’t talk much – then they are hiding something – or they are not good communicators.

                      Or they could be autistic and just not do well in social situations but would be great at the job.

                    • RedLogix …
                      1 November 2015 at 4:40 pm

                      @ DTB

                      No – I need people who can communicate what is going on. We do complex, challenging work that involves constantly moving schedules and problem solving. Everything is team-work; no-one achieves much in isolation anymore.

                      Because of this I need to know clearly what is happening and I don’t have the time to sit over them and micro-manage. Either I get accurate answers or they are not invited back.

                      @ ER

                      Gambling used to be a primarily male domain; sports, TAB, poker and the like. The advent of slot machines – especially targeted at women – means that problem gambling is nowadays an equal opportunity disaster. As your MoH reference suggests.

                      And given that women do tend to dominate administrative roles in many businesses, then connecting the dots is not a difficult or controversial matter.

                    • Draco T Bastard …
                      1 November 2015 at 4:51 pm

                      I need people who can communicate what is going on.

                      They can do that. They don’t do well in the social setting that you’re putting them through as part of the job interview. This means that you will get a false answer and thus pass over someone who may have been good, or even great, at the job.

                      I don’t have the time to sit over them and micro-manage.

                      They don’t need micro-managing. In fact, if you do they’ll get really pissed off. Remember, chances are they’re more intelligent than you (Many have genius level IQ).

                    • Ergo Robertina …
                      1 November 2015 at 4:59 pm

                      @Redlogix – So all else tending to be equal in the organisations in which you’ve worked, you’re suggesting the determining factor is that women are more likely to work in administrative roles.
                      – Given men outnumber women in senior ranks in most organisations, surely their capacity for fraud is greater, or at least equal, to the women who you say dominate the lower-level admin roles?
                      – The MOH paper quotes a 1999 study that revealed being Catholic was a risk factor for problem gambling. Would discrimination on that basis be OK?

                    • RedLogix …
                      1 November 2015 at 5:01 pm

                      @ DTB

                      Our work IS a social setting. That’s the point. We interact with other teams and customers all the time.

                      Look I know what you are getting at. I grew up pretty shite at social settings myself and I’ll never be really good at it. I’m naturally an introvert.

                      I’m not asking they be the life and soul of the party – just be able to communicate accurately and work effectively with others. There is no point in trying to bring people into a team – who don’t want to belong to one.

                      Genius are a bloody liability – unless they can communicate their ideas and bring others along with them. Otherwise I just finish up working longer hours fixing up non-standard, non-compliant, non-documented code.

                      @ ER

                      OK you win. All women are saints above reproach and there have never been any instances of them stealing from their employers. Happy?

                  • Et Tu Brute …
                    1 November 2015 at 2:38 pm

                    It is a shame because they also – as you say – do a lot of good. I’m not against the idea of the services they provide. I am totally against the way they behave at times regarding employment.

        • Bill 2.1.2.2
          1 November 2015 at 11:50 am

          Work and Income try and encourage these and they can give financial incentives.

          You’re talking crap.

          A personal grievance even if you win can cost you $10,000+.

          Aw boo-hoo. Mediation was, at least for a few years, a relatively lawyer free zone. It was employers who changed all that and so pushed costs up.

          Hmm. Is it worth mentioning the obvious fact that, by and large, only idiot employers find themselves beating a well worn path to mediation?

        • Wainwright 2.1.2.3
          1 November 2015 at 2:23 pm

          When a leftwing government gets in and reintroduces compulsory unions, who will be to blame? Not the left. Blame the bully bosses like you who kidded yourselves that YOU make the money, not the people who do the actual work for you.

          • Et Tu Brute 2.1.2.3.1
            1 November 2015 at 2:36 pm

            Where have I said that?

            • Wainwright 2.1.2.3.1.1
              1 November 2015 at 3:06 pm

              Written all over your face, mate. Go cry some more about how stressful it is making money off other people’s backs.

              • Et Tu Brute …
                1 November 2015 at 3:09 pm

                FFS grow up. I said it was stressful when bad employees cause huge amounts of damage. Not to make money off the work of other people. I also said I agree with paying higher wages, I just don’t think it raises productivity. Grow up and stop seeing the world as so black and white, us vs them.

                • One Anonymous Bloke …
                  1 November 2015 at 5:13 pm

                  You can hardly expect to paint a picture of shabby employee behaviour at a company where you were in a managerial position (ie: not the owner) as some sort of exemplar anecdata and not get a negative response on a left wing blog.

                  I don’t know that Wainwright’s aim is that good but…hey, the scattershot missed.

      • Lanthanide 2.1.3
        1 November 2015 at 11:49 am

        I guess the difference, is that being an American company, valve can fire people with little process to follow.

        I wonder if in NZ it is possible to create that sort of work environment through employment contracts? Say that it is gross misconduct to take advantage of the unlimited sick leave? I suspect not.

      • RedLogix 2.1.4
        1 November 2015 at 12:53 pm

        Given what I have come to understand of your character here infused – let me just say – I’m not terribly surprised.

        • Et Tu Brute 2.1.4.1
          2 November 2015 at 9:20 am

          In what way? Of the 100+ people I have employed over the years at max 5 have given issues. Most of those were in one go and I lay the blame squarely on them. The other was the one who needed time off for relative dying of cancer. But no one had cancer. I think on the whole our recruitment process is robust. We mostly need unskilled workers so hey – they can hardly be saints. And 4/5 of those cases were charity cases so yes I am to blame for giving people a second chance. Silly me. I should have hardened myself to act only in my interest.

          • flynn 2.1.4.1.1
            4 November 2015 at 8:27 pm

            If it’s only 5% and 4 you could see coming, what exactly is the problem? You’re acting like it’s most employees and causing a massive problem.

    • Draco T Bastard 2.2
      1 November 2015 at 1:02 pm

      You obviously did it wrong and, really, who’s surprised in a society that only has screwing others down to get ahead. Bad employees aren’t the result of good employment practices but the result of a bad system and that system is called capitalism.

      You should have tried turning the business into a cooperative* and shown the employees the books. And, yes, that includes showing everyone how much each is paid and why. That way people would have been able to see the effects their actions had upon the business.

      As per usual RWNJ you probably go on about people taking personal responsibility and then deny them the necessary information for them to do that.

      * I have different views about how a cooperative business should be run. IMO, it shouldn’t be owned by the employees. Instead it should be a stand alone entity that’s governed/directed by the employees.

      • Et Tu Brute 2.2.1
        1 November 2015 at 1:08 pm

        To an extent that is now how I operate now. In the past I’ve managed other people’s businesses so I can’t just ‘give the company away’. Now I have a small business and those who work with me have almost equal shares.

        • One Anonymous Bloke 2.2.1.1
          1 November 2015 at 1:13 pm

          Owner-operators have much greater chance to influence workplace culture than managers do. That said, society doesn’t stop at the company’s front door any more than it stops at the school gate: levels of trust in society are inversely proportional to the GINI.

  3. infused 3
    1 November 2015 at 11:21 am

    You’ve only told have the story. That company was in the shitter.

  4. Bill 4
    1 November 2015 at 11:40 am

    I think it was Rosemary McDonald who, a few weeks back posted a video on one of the threads where, as part of a presentation, the $ per hour value of various industries was run through. From memory, some of the figures were quite astonishing…sometimes thousands of dollars produced off the back of every hour worked.

    Welcome then to the world of the exploitative market economy where the worker generating (say) $1000 per hour gets paid $15.

    Tell me again why we put up with this? I mean, I’ve heard often enough in the past that having a job is all about self esteem and personal worth and so on. But then, I guess the same encouraging myths around ‘work’ activities were perpetuated a few centuries back in places like sugar plantations. Is the only difference these days that a seeming majority of people have been inculcated with this nonsense to such a degree that they don’t so much ‘buy it’ as find it impossible to question?

    • Colonial Viper 4.1
      1 November 2015 at 11:45 am

      paid employment is utterly passé. In the near future there is going to be less and less of it.

      • Bill 4.1.1
        1 November 2015 at 12:02 pm

        Nice thought, but what are the repercussions of that scenario if the market economy persists? Widespread misery for those excluded from the systems and processes that dominate our ways of production and distribution?

        In a nice world there might be no resistance to a UBI as part of a transition away from a world of profit/exploitation. The world isn’t nice though. And I can’t quite see ordinary people just ‘taking’ the world against the wishes of, or in spite of protestations from entrenched economic power.

        • Nic the NZer 4.1.1.1
          1 November 2015 at 12:43 pm

          I don’t think you and Colonial are painting a single coherent story around the UBI. The idea of paying a UBI is that there is an output gap in the economy, by paying a UBI its possible to take advantage of this gap by providing an income without work, and the UBI argues this is equitable as everybody gets a basic income level regardless of their stature in the economy.
          But you are still saying that by providing people income they are entitled to spend it (or save it) so that spending will have impacts on the economy. So you are saying that the paid employment will increase still as a result of this turnover.

          This indicates that the underlying problem is still the lack of paid employment, not that paid employment can’t actually increase despite extra aggregate demand, or that we should want less paid employment as a society.

          On the other hand if your saying that you can’t increase employment with additional spending then a UBI can’t be justified anyway, it will just cause inflation trying to implement it anyway with no positive consequences. I don’t believe that and its not an argument for a UBI.

  5. Tory 5
    1 November 2015 at 3:01 pm

    I manage a company with NZ$30m assets. Lowest paid staff member (unskilled) is on $19 hour. I pay out a dividend of NZ$2m per year to the shareholders, they carry the responsibility for NZ$7.5m debt. I do not agree that higher wages increases productivity, but what I do agree with is paying people for the job they do and loyalty.

    • Nic the NZer 5.1
      1 November 2015 at 3:12 pm

      Do you believe in paying higher wages when your employees productivity increases though?

      • Et Tu Brute 5.1.1
        1 November 2015 at 3:15 pm

        Do you believe in cutting wages when normal market fluctuations bring that productivity down again?

        • McFlock 5.1.1.1
          1 November 2015 at 3:30 pm

          What do market fluctuations have to do with the productivity of your employees?

          Staffing levels, sure, but the productivity of each employee?

          • Et Tu Brute 5.1.1.1.1
            1 November 2015 at 3:36 pm

            Tory said he is in tourism. Random numbers here but if you had 100 staff during boom times serving 30,000 people they would be more productive than 100 staff during slower times serving 20,000. So tourist numbers go up and tourist numbers go down. Average spend goes up. Average spend goes down. All market fluctuations.

            If you were in a factory and x employee could produce x units that is easy to get your head around – but then work may increase or decrease or market rate of those units rise or fall making over all productivity change.

            • Draco T Bastard 5.1.1.1.1.1
              1 November 2015 at 3:58 pm

              None of what you said changed the productivity at all.

              • Nic the NZer …
                1 November 2015 at 4:11 pm

                “None of what you said changed the productivity at all.”

                Completely untrue. Wage rates do effect productivity, which is effectively measured as what you sell output for over what it costs to produce that (including wage costs). This depends on turnover.

                • One Anonymous Bloke …
                  1 November 2015 at 4:37 pm

                  So why haven’t wage increases matched productivity gains? Other than the fact that right wing people tell lies about free markets?

                  • Nic the NZer …
                    1 November 2015 at 4:44 pm

                    I put it down to a few factors, but they are inter-related and probably cause each other to some degree. They are,
                    1) De-unionisation of employment.
                    2) Persistent levels of high unemployment (caused by government not supporting full employment levels of spending).
                    3) Changes in employment legislation.

                    Right wing people telling lies about free-markets doesn’t cause any of this of course. It can deflect from the fact its been intentionally engineered into the economy over several decades.

                    • One Anonymous Bloke …
                      1 November 2015 at 4:47 pm

                      1, 2 & 3 are connected, and are usually accompanied by right wingers telling us that these things will make everyone better off: ie: lying.

                      So not a cause per se, just that the changes are harder to accomplish without the lying.

            • McFlock 5.1.1.1.1.2
              1 November 2015 at 4:04 pm

              So why would you cut pay rather than cutting staff?

              Seasonal staff are a practical requirement in any sector. So are, to a limited degree, casual staff (e.g. for events management, where you might be employing 50 people one night and none the next). I doubt many people would argue that staffing levels shouldn’t reflect the requirements of the job at hand (it’s more how some employers tend to abuse that principle).

              There might be another case of monetary productivity (rather than output quantity), say when the widgets you sell for a hundred dollars suddenly plumment in price to $10. Each worker producing 30 widgets a day goes from productivity of $3000 to $300. If it looks like a long term deal that you can’t weather, then your only option is to work with the union – including showing them the books. Your workers might no a way to up the output, or maybe how to diversify cheaply, but in the worst case scenario where it’s “downsize or die” then you need to have the union onside as soon as possible to salvage whatever jobs are possible. That might include a combination of wage cuts and staffing cuts, and maybe reduced benefits like having a pokey little tearoom onsite because you rented out the larger one to a complementary business.

        • Nic the NZer 5.1.1.2
          1 November 2015 at 4:22 pm

          Sure, if your tracking productivity (which means pay rises faster than the CPI on average) to begin with that would be reasonable. A majority of businesses in NZ however have been quietly pocketing the difference between the CPI and productivity increases which is why income inequality has been increasing.

          As a practical matter I think cutting wages is a pretty effective way to piss your employees off, but your the owner operator so its your call.

          • Et Tu Brute 5.1.1.2.1
            1 November 2015 at 4:36 pm

            Nic my question wasn’t really serious. It was more challenging the assumption that wages should follow productivity. We seem to agree they should follow it up, but err and umm a bit more when the natural conclusion was then wages should follow it down.

            Most increases in productivity, restructuring aside, come from market forces. Employers benefit from the good times and suffer through the low times. That is fine. It is part of the risk of being an employer.

            • Draco T Bastard 5.1.1.2.1.1
              1 November 2015 at 4:44 pm

              Most increases in productivity, restructuring aside, come from market forces.

              LOL

              No they don’t. Most productivity increases come from technological advances.

              Employers benefit from the good times and suffer through the low times.

              Except that’s a load of bollocks as the GFC just proved. Employers benefit from the good times and make out like bandits in the bad times.

              • Et Tu Brute …
                1 November 2015 at 5:18 pm

                In the larger economy yes you are right most productivity comes from technological advances. In a small company though that technology will generally be introduced by restructuring and reorganizing the way we do things. I economized on words and put it under restructuring (three people now do the job of four) as in business that tends to be how it happens.

                • Draco T Bastard …
                  1 November 2015 at 5:40 pm

                  (three people now do the job of four)

                  • Et Tu Brute …
                    1 November 2015 at 5:48 pm

                    FFS. You brought up technology. I agreed with you. Technology gets brought into companies and they restructure because it makes people more productive. Now to try and score another point you’re twisting the conversation again.

                    • Draco T Bastard …
                      1 November 2015 at 6:25 pm

                      A miscommunication. Three people doing the job of four just increases stress and, eventually, results in lower productivity.

                      Introducing new technology so that what once took four people now takes three is an actual increase in productivity and probably less stress. This is different from three people doing the work of four.

                      Now, taking that into account you’ll probably understand why I say that increased productivity must result in lower wages. An increase in productivity into the same market must reduce demand for workers.

                      It is development of the economy that increases wages but, of course, that development can only happen because increased productivity has freed up people to something other than they were.

                    • Et Tu Brute …
                      1 November 2015 at 6:30 pm

                      On that point I agree.

            • Nic the NZer 5.1.1.2.1.2
              1 November 2015 at 4:54 pm

              ” It was more challenging the assumption that wages should follow productivity.”

              Its not an assumption, its based on an understanding that when wages don’t follow productivity then at some later stage all the output can’t be purchased by the economy. This causes the economy to collapse into recession.

              If your not paying productivity increases out to the workforce then your contributing to this de-stabilizing factor in capitalism (which is measured by statistics like rising inequality). Unsurprisingly people want to go back to having institutions (like unions) which put pressure on employers to pay these increases out, this is because the economy worked better over-all when this occurred.

    • Draco T Bastard 5.2
      1 November 2015 at 3:56 pm

      I pay out a dividend of NZ$2m per year to the shareholders, they carry the responsibility for NZ$7.5m debt.

      When the company goes under who will be worse off? The shareholders or the workers?

      I can pretty much guarantee that it will be the workers and that will tell you who truly carries the risk. The shareholders are just bludgers getting money for doing nothing.

      • Tory 5.2.1
        1 November 2015 at 4:02 pm

        If the company goes under the shareholders carry the loss, workers lose their jobs. Shareholders are owners of companies and therefore are entitled to a return; in NZ this will be between 8% and 13%. Sounds like you would prefer the socialist Utophia of all being equal which is a wet dream.

        • McFlock 5.2.1.1
          1 November 2015 at 4:13 pm

          You’re aware of the term “limited liability”?

          All the shareholder risks is the value of their investment, which is usually diversified. Their remaining capital can be freely transferred to other enterprises.

          Workers lose their jobs, their weekly income, and are frequently overspecialised because that’s their fulltime job.

          Subbies lose most of any debts owed by the company for work and materials the subbies do, and this can drive them into bankruptcy.

          Shareholders lose an asset, not their livelihoods.

          • Tory 5.2.1.1.1
            1 November 2015 at 4:24 pm

            Depends on the value of the company and share holdings. Many NZ companies started as partnerships or family businesses so the liability they carry is much more than say a Spark or Air NZ. Most banks require an equity ratio of not less than 55% so shareholders are required to have significant capital invested. Compare that to home owners who at one stage only needed 5% equity and you will see running a small to medium sized business is a lot riskier than perhaps is viewed by some.

            • McFlock 5.2.1.1.1.1
              1 November 2015 at 4:42 pm

              Can be, if you choose to expand too quickly or otherwise overcommit.

              But employees don’t have that choice: they normally have to take what work you offer. See the difference? A shareholder can get themselves into difficulty if they are unwary. An employee can either take it or leave it, there is no middle ground.

        • Draco T Bastard 5.2.1.2
          1 November 2015 at 4:21 pm

          If the company goes under the shareholders carry the loss, workers lose their jobs.

          They’ll lose some of the money invested whereas the workers will lose their livelihood and that can result in them losing their house and family, their health and even their life.

          Shareholders are owners of companies and therefore are entitled to a return

          I know that people like to believe that but it’s actually wrong. Just because you own something doesn’t entitle you to a return from it.

          Having money doesn’t entitle you to more money.

          Sounds like you would prefer the socialist Utophia of all being equal which is a wet dream.

          What I want is a workable and sustainable society. One which we cannot have under capitalism as it requires ever increasing growth – just like a cancer.

          • Tory 5.2.1.2.1
            1 November 2015 at 4:26 pm

            What’s wrong with an owner getting a return, that’s their income.

            • Draco T Bastard 5.2.1.2.1.1
              1 November 2015 at 4:37 pm

              It’s bludging on the work of others.

              I thought you Tories didn’t like bludgers? Or is it that some bludgers are more equal than other bludgers?

              • Et Tu Brute …
                1 November 2015 at 5:19 pm

                Or the workers are bludging on the owners ideas and capital?

                • McFlock …
                  1 November 2015 at 5:27 pm

                  Nah. The employers almost always have a level of power over the workers that the workers can’t match. Hence the bludging.

                • One Anonymous Bloke …
                  1 November 2015 at 5:27 pm

                  Capital flows into fewer and fewer hands over time. Inheritance, not innovation, is by far the principle source of great wealth.

                  Make of that what you will, it certainly casts an unfavourable light on right wing rhetoric about beneficiaries.

                • Draco T Bastard …
                  1 November 2015 at 5:34 pm

                  IME, it’s the capitalists taking the ideas of the workers and using them to line their own pockets. Hell, one job I turned down actually had that ability of the company to take the ideas of the employees written into the employment contract.

                  • Et Tu Brute …
                    1 November 2015 at 5:49 pm

                    I always put it into the employment contract. I give them the context and the time to think about things and I pay them for it. I expect to use the products of their time and effort.

                    • Draco T Bastard …
                      1 November 2015 at 6:08 pm

                      Two things:

                      1. You don’t give them anything or pay them a cent. In fact, they’re the ones paying you.
                      2. You haven’t paid for their entire life which is where most of their ideas are coming from.

                      This self-centred BS of I do this… and I do that… from capitalists is completely backwards.

                    • Et Tu Brute …
                      1 November 2015 at 6:11 pm

                      If they didn’t turn up to work tomorrow there would be other people who could slip into their position and with relative ease pick up where the previous person left off. If I didn’t come to work tomorrow, everything would collapse and they’d be out of a job. So yes, I pay them, the business is mine and they work at my pleasure.

                    • Draco T Bastard …
                      1 November 2015 at 8:00 pm

                      Ah, the cry of the capitalist: I can exploit them as I will thus they are mine.

                      They’re the ones creating the value and so it is they who are paying you. This is the reality and is contrary to what you believe.

                      Reality must always trump belief else things just don’t work.

              • RedLogix …
                1 November 2015 at 5:31 pm

                There is a balance here. Both the business owners and the people who work in it are mutually dependent on each other.

                The best arrangement I’ve experienced was a 20% profit share. One year (mid-80’s) I got a $14k cheque for Christmas. Best incentive ever.

                • Draco T Bastard …
                  1 November 2015 at 5:35 pm

                  Both the business owners and the people who work in it are mutually dependent on each other.

                  Which is why, IMO, it’s better for a business to be a cooperative with no one owning it.

                  • Et Tu Brute …
                    1 November 2015 at 5:50 pm

                    If it is a cooperative there are just as many issues – raising capital, decision making, dispute resolution etc…

                    • Draco T Bastard …
                      1 November 2015 at 6:09 pm

                      It doesn’t get rid of the issues – it’s gets rid of the bludging capitalists.

  6. Tory 6
    1 November 2015 at 3:15 pm

    If you were manufacturing then possibly. I am in tourism so run a bonus system where at the end of the financial year staff generally get a CPI adjustment and if we have exceeded our targets a one off bonus starting at $800

  7. NZJester 7
    1 November 2015 at 3:57 pm

    You see all these claims of workers taking advantage of their bosses good nature and exploiting the system for their gain. You check out a lot of these claims and the majority turn out to be false. As for those who actually do exploit loopholes, those people doing the exploiting and are able to not get caught are normally the ruthless ones who climb over some of the more deserving workers to eventually get into the management rolls. They tend to be the ones who are good at claiming credit for other work. There are a lot of really good bosses out their but there are also a lot of toxic ones as well.

    • Et Tu Brute 7.1
      1 November 2015 at 4:00 pm

      “You check out a lot of these claims and the majority turn out to be false.”

      Umm okay? Is that an ideological statement or can you back that up?

      • One Anonymous Bloke 7.1.1
        1 November 2015 at 7:06 pm

        You’re the one extrapolating anecdata. You’ve no business calling for evidence from others.

  8. Tory 8
    1 November 2015 at 4:06 pm

    In a non unionised workplace, staff performance is measured, this is toxic to the union shit stirrers but ask any staff what they prefer and I guarantee a majority prefer reward for work on an individual basis. For over 15 years I have operated this system and have a long serving and loyal workforce.

    • One Anonymous Bloke 8.1
      1 November 2015 at 4:34 pm

      Unionised workplaces tend to pay higher wages. Oh, and Germany. That’s right, have a little cry while you reflect on the fact that the strongest economy in Europe has high level connections between unions, government, and businesses.

      Why do you hate freedom of speech and association anyway? Are you a sociopath or just a dupe?

      • Tory 8.1.1
        1 November 2015 at 5:09 pm

        So when the German Banks screw over Greece, in your world they are c**ts, when their economic statistics align with your argument they are worthy of praise. I see who the sociopath is or should that be schizophrenic

        • One Anonymous Bloke 8.1.1.1
          1 November 2015 at 5:19 pm

          That’s not my world, bud. Personally I think if their lenders have been reckless they should take a bath like any other reckless lender. That said, I expect Greek wingnuts and sociopaths are far more at fault.

          I realise you’re used to rote-learned rhetoric, but over here on the Left, diversity of opinion is encouraged.

    • Craig H 8.2
      1 November 2015 at 6:37 pm

      I work in a unionised workplace, and we are currently bargaining with our employer. One of the major sticking points is whether or not to retain a performance-based pay scale – we want to, and the employer doesn’t.

  9. Incognito 9
    1 November 2015 at 7:00 pm

    For one reason or another most debates about political and economic issues inevitably slide down to one-dimensional polarised ‘shouting’ or worse. It is obviously not always all about the money.

    As an employer paying your employees $XX you do expect XX effort/output (AKA productivity) in return. If you pay a little more, e.g. $XY, you do expect a little more from your staff. Not many will have a problem with this line of reasoning.

    Some employers, however, and this includes our own government, expect the ‘boost’ of a pay rise to last till infinity and beyond. They get very disgruntled when they pay $XY and after some time only (!) get XX or so they think.

    Work conditions, personal relationships and respect, prospects for promotion (which is not the same as “pay rise”) and a general feeling of being acknowledged and appreciated go, in the medium to long term, much further than just (!) a simple and often relatively small pay rise.

    It is a sad indictment of our society that neoliberalism and its underlying free market-capitalist value system [no pun] has pervaded our thinking & reasoning and discourse and that we tend to deal with highly complex and dynamic (and rewarding!) inter-human relationships in such highly limited and $$-focused way.

  10. Atiawa 10
    1 November 2015 at 7:33 pm

    All I know is the more I earn the more I spend. If I can afford a piece of fish with my usual scoop of chips lunch, then that’s good for the fish n chip shop, good for the fisherman.
    Not so good for the waistline.

  11. Michael 11
    1 November 2015 at 11:09 pm

    It’s the efficiency wage theory.

    When you pay employees *higher* than the market wage (or what they could get from collective bargaining), it attracts more productive employees and reduces turnover. If you are being paid more than other workers in the same job at other companies, then you are going to feel respected and wanted, and will then work harder, and not want to leave your job.

  12. Richard@Down South 12
    2 November 2015 at 1:28 pm

    “If you look after your staff, they’ll look after your customers. It’s that simple” – Richard Branson