Why Don't Big Businesses Reduce Profits Instead of Increasing Prices When Forced to Raise Wages?

Never in the history of generating income for oneself has anyone ever said, 'Gee… I think I earned too much money. I should give some of it back.' The answers to this question essentially echo this sentiment. Companies like Walmart have long been notorious for underpaying their employees through tactics like union-busting and denying full-time status, which forces them to qualify for additional benefits. As a result, when employees rely on government benefits, taxpayers indirectly subsidize their operations.

The Status Quo and Its Challenges

There is no easy solution within the current system. As automation and AI technologies continue to mature, the pressure on labor costs will only increase. Companies like the Walton family and Amazon's Jeff Bezos have shown little concern for their employees' well-being. The tragic deaths in their facilities are seen as collateral damage. Providing a nominal effort to address such issues is deemed a small price to pay for meeting scheduling demands and maintaining a ruthless appraisal system.

The Dynamics of Pricing and Product Demand

The price of products is not solely determined by wages. Instead, it is dictated by market demand, and prices are set to maximize revenue. The more demand there is for a product, the more justified its increased cost becomes from a business perspective. By raising prices, companies can increase margins, grow annual revenue, and make themselves more appealing to investors. This, in turn, leads to increased stock values and improved market perception.

The Role of Cost Reduction

Wages are considered one of the largest recurring costs for businesses, and therefore, are always targeted for reduction. In contrast, capital costs can be written off as tax deductions, making them a more attractive option financially. When businesses claim that increased wages will lead to higher product costs, they are often lying to create a public perception that price increases are necessary. This was evident during the COVID lockdown, where companies took advantage of public sentiment to engage in price-gouging strategies.

Proposed Solutions

1. Eliminating Wage Pressure: One method to address the downward pressure on wages is to eliminate the leverage that employers have over employees. If an employment candidate doesn't like the pay scale, they can turn it down without the fear of homelessness, starvation, or premature death. Implementing a Universal Basic Income (UBI) could help achieve this. By providing a basic income, candidates will have more freedom to reject insufficient wages, putting employers in a competitive position to offer better terms.

2. Corporate Structures and Worker Co-ops: Modern corporate structures are inherently outdated, functioning like mini-autocracies within a democratic society. Worker cooperatives (co-ops) offer a more equitable alternative. These structures empower employees, putting control over the business in the hands of those who work there. Richard D. Wolff, an economist and professor emeritus at the University of Massachusetts, provides compelling arguments in favor of worker co-ops.

3. Global Wealth Cap: To address the greed that threatens society, a global cap on personal net worth could be implemented. This would be a significant challenge but one that may become more feasible with international cooperation. The growing recognition of the corrupting influence of power may drive more individuals, like Trump and Musk, to support such an initiative. A wealth cap would allow the working class to participate more in a democratic economy, reducing their vulnerability to the whims of powerful individuals.

As we approach a point of no return in terms of global environmental threats, we must prioritize solutions that can mitigate these risks. By addressing the underlying issues of wage pressure, corporate structures, and wealth distribution, we can create a more sustainable and equitable society.