8 ways to shape a more sustainable workforce
From misaligned tax bonuses to outdated pay structures, a snapshot of tangible strategies to make employee compensation more financially sustainable.
I’ve spent most of my life, since age19, starting and running four businesses. I’ve never paid any employee who’s worked for me the minimum wage.
While I support an increase of the minimum wage to $15 an hour, I’ve always set what’s known as a “living wage” as the minimum amount I’d pay any employee.
That's depsite the fact that as a whole, we in the U.S. have institutionalized poverty by setting the minimum wage at a level so low that no one who earns it can live a life not subsidized by the government. Those government subsidies, in turn, are paid for with money from other individuals who have managed to escape poverty.
When Walmart or McDonald's pays its employees even $9 an hour, we subsidize the company’s profits by helping their employees make ends meet with food stamps and unpaid visits to the emergency room.
Several years ago, the state of California calculated that Walmart employees without health care cost the state hundreds of millions of dollars resulting from unpaid emergency room visits — hundreds of millions paid for by California taxpayers who subsidize Walmarts profits.
While it should be illegal for any company to take government funds to support the income it fails to pay its employees, it certainly is morally reprehensible. This transfer of individual tax payments to subsidize for low-wage businesses, who in turn reward their shareholders, is also one of the many ways our economy ensures the concentration of wealth into fewer and fewer hands.
Earlier this spring, Harold Meyerson, writing in the publication the Prospect, outlined several excellent strategies to help rectify this injustice. With the following list, I have taken great liberties with his ideas in an attempt to present eight clear and succinct ways to make the American workforce more financially sustainable:
1. Pass minimum wage increases in states and cities
Today, 26 of the nation’s 30 largest cities have Democratic mayors — the most lopsided partisan alignment since the 19th century.
That makes cities the most propitious terrain for legislation that would raise not just minimum wages, but also wages for workers higher up the economic ladder.
2. Link corporate tax rates to worker productivity increases
Later this year, the Securities and Exchange Commission, complying with a mandate in the Dodd-Frank financial reform act, will require corporations to publish the ratio between the pay of their CEOs and the median pay of their employees, which is a great step toward greater transparency.
Based on these disclosures, Congress could create a lower tax rate for those corporations that increased the median wage of their employees at the same rate that those same employees have contributed toward annual productivity increases.
3. Link corporate tax rates to CEO-employee pay ratios
A related idea is to link corporate tax rates to the progressive or regressive ratio between CEO pay and the firm’s median pay: the lower the ratio, the lower the tax.
In 1978, CEOs on average made 28 times the pay of their median-paid employee; by 2012, CEO pay had increased by almost 1,000 percent, to 273 times the median. In contrast, in 1977, management guru Peter Drucker wrote in the Wall Street Journal that a ratio of 15 to 1 seemed right for a small or midsize business, and 25 to 1 for a large business.
4. Stop the outsourcing of jobs to independent contractors
Many companies such as Microsoft, which was so famously punished for it, have eliminated full-time employees in favor of hiring contractors, subcontractors or temporary job agencies — all workers who are considered “independent contractors.”
These contractors receive no benefits at all, often leaving them in an unstable situation that clearly favors employer over employee.
5. Support benefit corporations with reduced corporate tax rates
A new model that shifts the balance of power within the corporation away from shareholders and more toward workers is a “benefit corporation.”
Under its charter, the directors and management are legally required to weigh the interests of employees, the community, the environmental and other stakeholders in impact of their decisions. To support this shift in priorities, B Corps could be rewarded with reduced tax bills.
6. Help workers claim their share of capital income
Last year, the share value of S&P 500 companies rose by 30 percent. Americans’ real disposable income, meanwhile, grew by just 0.7 percent. Too bad more people just didn’t own stock in those companies, right?
Instead of relying solely on financial markets to create wealth, we need to create aggressive opportunities for more American workers to participate in both profit sharing and stock options, or to create more jobs at employee-owned companies.
7. Raise taxes on capital income — then redistribute that money to workers
Capital income — or income stemming from qualified dividends and capital gains — can be taxed at a rate no higher than 20 percent, while income from wages and salaries is subjected to a progressive tax that tops out at 39.6 percent.
As Warren Buffett frequently notes, too many middle-class Americans pay more taxes on their wages and salaries than billionaires pay on their investments. Tax rates on capital gains should be raised and the rates on labor income for those earning less than $100,000 should be reduced.
8. Change the governance of corporations
But most important, we must boost workers’ power within the corporate framework by altering the company’s charter to compel all companies to elect employees to fill no less than one seat on corporate boards.
At the same time we must insist, as Norway has, that 40 percent of all board members are women.