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A Single Change That Would Fix The Economy

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From my perspective, there is a single change that would repair the economy.

That would allow debts to fall. For growth. For people to innovate again.

Salary distribution to return to its 1950-1969 levels where managers and executives received a salary of a single digit multiple of their entry level staff.

That is, redistribute earnings across employees within companies. More economically active agents in society.

What do you guys think would happen? If lending was still restricted while this happened, I would hope people would pay back debts and people would feel like starting businesses.

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If implemented in one country, high earners would be tempted to work elsewhere. Are the executives who earn millions better than the ones prepared to earn a few hundred thousand? If yes, we'd be worse off if they left. If not, we wouldn't.

I don't know if there has ever been an enormous impact. There used to be a lot of talk of the brain drain didn't there? And some people go to live in tax havens, but not all rich people do.

I'm not sure if people would be more likely to start businesses though. If incomes are restricted to lowish multiples of low paid staff, wouldn't there also be restrictions on wealth? Would it be consistent to say the CEOs of large firms earn £250,000 per year, but if you start the next Facebook you can keep your billions? And if not, I think the incentive to start businesses would be somewhat less (people are only motivated by the prospect of vast riches, but it is a factor for some).

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According to Real Incomes in the English Speaking World 1879-1913 labourer wages in Britain were behind America and Australia in the Victorian era. (page 33)

According to this page on Victorian Life, bankers could earning over £1000 per year while shop keepers, clerks and middle class would be earning between £50 and £150. That is a differential between 20 and 6.7 the lower and the highest ends of society. We were booming back then, why is it any different today?

We were a global superpower before the world wars and the above was presumably still true. I do not buy the argument that lowering the multiples to the historical average would harm us. I would argue the opposite. What is happening today is unprecedented and IMHO responsible for our economic problems.

Even if China races us to the bottom in terms of wages at the bottom, the wages at the top should at least be distributed to those in the middle until they get squeezed. Surely stagnating growth proves this?

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That should say page 13, not 33, in the section on Britain (also repeated at the end of the section).

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Not everyone that is paid the most is worth the most......not everyone is motivated by money....money motivation is not always a good trait to have.....nobody is indispensable.

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There appears to be a lot of evidence for that winkie. Do you think maybe we should expect some employers to try to motivate people in other ways, and further expect these employers to be more successful? (I realise this may be stifled by entrenched views and practices - remuneration committees and so on, but is it happening anywhere?)

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There appears to be a lot of evidence for that winkie. Do you think maybe we should expect some employers to try to motivate people in other ways, and further expect these employers to be more successful? (I realise this may be stifled by entrenched views and practices - remuneration committees and so on, but is it happening anywhere?)

I can say that people would like to feel valued for the job they do...they would like training and be recognised and encouraged to make the best use of their talents and skills....we are all different but sometimes time is worth more than money.....they like to feel trusted, interested and listen to their ideas and how things can be improved, one of my best managers...said you can go home any time you want as long as target is reached...people work well for people that treat them well......

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I thought what you were implying winkie was organisations aren't getting good results by offering large salaries and bonuses. So say one of the banks has a different culture, doesn't pay anyone millions and then starts being more profitable.

I realise there are perhaps several possibilities here:

1) Top people (CEOs earning millions) are desperately motivated by money. But this doesn't lead to good performance. It just motivates them to do what is necessary to maintain their positions.

2) Top people actually aren't motivated by money.

3) You could find alternative top people to do the job just as well without paying them as much, but we don't know how to select them. Perhaps we don't know how to motivate them either. Or perhaps the status quo is just very good at perpetuating itself.

What is happening? Are the institutions which pay attention to other motivations doing better? If it isn't already happening could it be helped along?

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In the top biggest companies performance is no longer linked to renumeration.... They all sign off each others awards...back scratching because they can, easy, take as much as you can while you can....they don't seem to have to answer to anyone not even shareholders who mostly stick with the status quo.....

There must be good people out there who would be excellent at their job and a agree to be paid a fair wage no more than so many times more than the lowest paid employee in the company.

All rewarded for both staff and customer satisfaction......partnership.

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Ch rist these people who believe that Socialism is the answer. It's the fg ptoblem ffs! @CapitalistsUK

#banHTB

#banbankbailouts

#bringbackcapitalism

Edited by Killer Bunny

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Yes, enourage innovation by redistributing wealth. That's sure to work.

"We're going to encourage you to come up with great ideas by promising to give all the proceeds to everyone else!!!"

:lol::lol::lol:

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Ch rist these people who believe that Socialism is the answer. It's the fg ptoblem ffs! @CapitalistsUK

TD7SQUk.gif

Source: ILO reports rebound in CEO pay and widening income inequality

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Source: IMF warns on worst global growth since financial crisis

KB, what are you talking about? We're not talking about socialism in this thread. We are talking about capitalism and growth. Labour markets are capitalism. Unfortunately, the price of one category of labour has been pushed up but another has been pushed down. This produces a ratio of pay between different sorts of labour.

Killer Bunny, A ratio is objective; it has nothing to do with 'capitalism' or 'socialism'. The long term trend is that when the ratio is low, growth is high. When ratio is high, growth is low. One group of labour is being paid less for another group to be paid more.

People are not fighting for what they are actually worth. Basically, the price of labour is not priced properly otherwise we would actually have growth, wouldn't we?

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We're going to encourage you to create innovation and come up with great ideas and work hard, so we can capture all the proceeds of your labour and innovation...

???

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To clarify, I have absolutely no idea how to redistribute earnings within an organisation.

However it happens, all that matters is the ratio goes down and when it does growth would return if this happened and the ratio was low. Does anybody disagree with this statement?

Existing mechanisms are all state subsidised like tax credits, benefits and housing benefits which I despise and heavy taxation. Bring back capitalism indeed.

The people at the top, the central banks and the powers that be, including the executives have to all suddenly realise that by reducing the ratio within the organisation, they become more profitable and stable long term. Currently they are slowly suffocating the hand that buys from them, hence low or no growth.

Tragedy of the commons.

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We're going to encourage you to create innovation and come up with great ideas and work hard, so we can capture all the proceeds of your labour and innovation...

You are arguing against a particular kind of 'redistribution of earnings' within an organisation.

What you have said does not disprove the idea that when ratios are low, growth is high.

Do you have a proposal to reduce the ratio without forceful redistribution? Something that can naturally occur in economy where individuals are freely making decisions that benefit them?

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Another way of looking at the ratio is - you get what you pay for. Continue to depress wages at the lower end (lower 2/3rds it would seem at the moment) while living costs remain the same or increase, and you end up with a demoralised workforce. One that is likely to under-perform and stab you in the back at the first opportunity. The wealth imbalances it creates further segregates society and creates more ill will. A simplified view perhaps but all recognisable problems we are experiencing now.

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You are arguing against a particular kind of 'redistribution of earnings' within an organisation.

What you have said does not disprove the idea that when ratios are low, growth is high.

Do you have a proposal to reduce the ratio without forceful redistribution? Something that can naturally occur in economy where individuals are freely making decisions that benefit them?

My post wasn't meant to be a response to you...

The answer imo is CEOs playing that long game. Unfortunately they can't see past next weeks balance sheet or share holders AGM

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Another way of looking at the ratio is - you get what you pay for. Continue to depress wages at the lower end (lower 2/3rds it would seem at the moment) while living costs remain the same or increase, and you end up with a demoralised workforce. One that is likely to under-perform and stab you in the back at the first opportunity. The wealth imbalances it creates further segregates society and creates more ill will. A simplified view perhaps but all recognisable problems we are experiencing now.

+1

However some idiot rent a rand will be along soon to label you a slavering Bolshevik

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However it happens, all that matters is the ratio goes down and when it does growth would return if this happened and the ratio was low. Does anybody disagree with this statement?

I agree, otherwise what you are left with if no longer state top-ups are angry and resentful staff, that cost money, unhappy customers because more often than not it is the lowest paid staff that touch the customer....unhappy and undervalued staff = high staff turnover costing money....the good staff transferring to work for agency's, temping, costs firms money....poor treatment two a penny, like it or lump it attitude by employers will mean no respect poor customer service and a crap employer.....customers will walk.....people should vote with their money and refuse to buy from firms that take it all for themselves at the top and treat their staff without due respect and care.....this also goes for the public sector, who waste huge amounts of money on taking on staff then duely losing them and paying everyone else well but their front line staff...guaranteed to fail.

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Voice of Reason, if it does not work, how do you explain growth in the past?

I am waiting.

You encourage people to innovate by allowing them to enjoy the benefits of their innovation. Create something that people want, sell it to them, enjoy the wealth that results from that. To redistribute wealth i.e. to take from those that have earned it and distribute to those that haven't is anti-innovation.

However from your later posts I see you might be thinking not of redistribution but of removing the unfairness that exists which keeps people at the top, at the top and vice versa. You need to look at why people don't want to start businesses (government regulation) and why the rich get richer (government subsidy) and remove that. What you end up with is less rules, not one more.

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You encourage people to innovate by allowing them to enjoy the benefits of their innovation. Create something that people want, sell it to them, enjoy the wealth that results from that. To redistribute wealth i.e. to take from those that have earned it and distribute to those that haven't is anti-innovation.

That's true- but if the system as a whole fails to distribute enough wealth to the general population and instead that wealth is concentrated in too few hands those innovators will find there is no market for their ideas because their potential consumers are too poor to purchase their products or services.

So it's in the interests of the innovators to have a system where wealth is widely shared rather than an extreme scenario in which a handful of people take almost all of the money.

Is there actually any evidence that the people who innovate are in fact driven almost entirely by the desire to accumulate vast amounts of money? I don't think there is- America in the 1950's was the most innovative economy on the planet- yet the top rate of tax was 91%. Why didn't all those 1950's innovators simply collapse into a demoralized heap and stop innovating?

It's right that success should be rewarded but as in all things it's about the degree to which those rewards are excessive- in this case to the point where they cease to be a positive and instead become a negative.

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