What can we learn from Tim Gurner’s foot in the mouth moment?

 

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 1/37^th 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.