Yes, post
his infamous statement that workers need to feel pain and know they work for
the employer, Mr. Gurner has made some contrite statements, but let’s be honest
he meant it.
I looked
up his business and apparently it is in high end real estate. This can be an
industry with serious ups and downs so maybe he is feeling a pinch. I did not
look up the company’s financials.
I did
decide to look at this here in the United States because are workers better off
nowadays, are billionaires better off nowadays or what gives. I am not making
any comparisons, but am going to lay out one of the bigger problems facing the
middle class and why Tim Gurner’s comments are even worse than you think.
I am going
to use one company’s financial information to spell out a very simplistic
example of how things could be a bit better for the average Joe if we quit buying
into the large corporation’s hyperbole about their needs. Now with any major
endeavor details are important. This is a 30,000 foot view of the problem using
one company, but I honestly feel it shows that workers aren’t the financial problem
executives want you to think. I am not going to identify the company, but based
on the information I gleaned from internet searches, articles and financials
published you might be able to guess. One hint I am giving you for fun is this
is one of the liberal tax the billionaires bugaboos.
And I do
believe in capitalism, but what we have nowadays isn’t necessarily constructive
or productive capitalism. With the wealth gap expanding we are moving away from
a society that offers opportunity to many, a strong middle class and is
encouraging an elitist class that is doing more harm than good by hoarding
wealth. That is another post and one I touched on recently, yet there is much
more to this.
For now
though, let’s look at this overview example of one company.
First the
median household income in the United States is $98,487 according to Nasdaq.com.
Now it did not say if this was for a family of four or the family size, but it
did compare it to the poverty level of a family of four being $29,960.00. And $98,000
may not sound too bad if this is where half the people make more and half the
people make less, yet make note it does say median household income or
another words there are many families with multiple earners to achieve this
$98,000 figure which is borne out by the fact that the average yearly income of
a single earner is $56,940.00 ($1,095/week) as per the Bureau of Labor
Statistics.
The
company I am using is for my example has a net worth of 433 billion dollars so
this isn’t the average size company, but is one of the leaders in increasing
the wealth gap. It derives income from various endeavors. One endeavor has 4700
locations where you can find employees that are paid at hourly rates. It was difficult
finding a headcount for employees for each location. I found one statistic from
2015 for an average of 6.5. I have to think that has changed since then and so
I am just about doubling that number to use in my example.
I did find
that there are around four job descriptions that had hourly rates and the
average nationally was a bit over $18, yet I am going to use $20 for my
calculations. So, as you can see I am expanding the headcount and increasing
the beginning number so you can see that these numbers will be generous to the
company’s viewpoint when expenses are calculated.
At this
point we have 4,700 locations times 12 staff members and not all maybe hourly,
but am using this headcount since any salary employees are entry level salary
so they are just as impacted as the hourly wage earners in some regards.
So 4,700
times 12 = 56,400 potential hourly workers in a front line role. And with each
person making $20 hour that equates to $1,128,000 just to pay all these people
for one hour. And on top of that there are other expenses in having employees
such as payroll employees, human resources employees, benefits, employer social
security tax costs, so to get to this one million plus you have to realize this
expense example is not the full picture, yet if these individuals were given a
direct raise the social security taxes and the benefits would probably be what
is directly impacted along with the actual raise. Payroll and human resource
costs aren’t directly affected by hourly raises except all these employees may
want a raise too.
Where does
this lead? You have $1,128,000 hourly rate times 40 hours = $45,120,000.00 now
times 52 weeks = $2,346,240,000. Yes,
you are reading that correctly. For this company to have 4700 locations the direct
labor cost is over 2 billion dollars and that is for $20 per hour. So how can
we help these $20 workers? That is quite a bit of money to pay the employees. I
say give them at least a five dollar per hour raise. And not only that we are
going to calculate the increase at $8 hour to account for the other expenses
the raise creates.
Now plug
into the equation above a $8 increase so 56,400 times 8 =$451,200.00 times 40
hours + $18,048,000.00 times 52 weeks = $938,496,000. That is almost another
billion dollars. And let’s go back in and add the $3 cost I included for the
raise to the original numbers and you have 56,400 times 3=4169,200.00 times 40
= $6,768,000.00 times 52 = $351,936,000.00.
So a rough
labor estimate for our 4700 locations to give our workers a five dollar raise
is $2,346,240,000 plus $938,496,000 plus $351,936,000 equals $3,636,672,000.00.
How can any company afford to give their employees a raise? And this raise only
brings the hourly workers to $25 times 40 times 52 equals $52,000 per year, yet
isn’t that less than the average income? Yep it is.
What gives
you might ask. That extra almost 1 billion dollars (the original labor amount
was already calculated in the previous year’s budget) to bring their employees
to almost the average income affects the company how? The company’s new worth
is over 400 billion, last year’s net income was 37.49 billion so this incredibly
expensive $5 hour raise cost the company 1/37th of their net income.
This is
just one company and a very large public one at that, but when you hear someone
say employees need to feel the pain, it is time to start asking when do they
feel the relief?
A pretax
income of $52,000 divided by 12 = $4,333.33 with average rent of $1702, average
food cost $470, transportation costs range from $400 to a $1,000 a month, and
remember the 4,333 is before taxes and probably healthcare insurance is deducted
from their paycheck so exactly how are workers making ends meet, yet the CEO
for this company enjoyed over $34 million in compensation last year and is
worth 1.7 billion.
Yes, Mr.
Gurner some people need to feel some pain, but workers? They have felt theirs
for decades.