A few more Sunday sermonettes

Happy Sunday. No, I won’t be preaching this morning, but I will be trying my best to speak a few truths.

It easy to blame someone else or some other entity for your troubles. The European Union is not perfect, but has helped many countries through hard times. When they are helpful, country leaders pat themselves on the back. When times are tough, it is nice to have a scapegoat. Relationships are hard work, but countries need to think hard if they want a divorce from the EU before they have the “what do we do now moment?”

Speaking of relationships, the man in the White House tends to have transactional ones. A pundit said he counts few friends saying he touts a “me against the world” mindset. If he keeps on ticking off our allies, this description will be very apt. Unfortunately he will drag the US down with him.

Two of the worst terms in America are RINO and DINO. They mean Republican (or Democrat) in Name Only. They are used by tribal party members as an insult to someone who is not towing the party line. As an unaffiliated voter who has been a member of both parties, I find these labels offensive. We pledge allegiance to the country, not some party. If someone uses this term, do yourself a favor and pay attention to what the target of their labeling is saying. It likely has more veracity than the claimant’s argument.

The United Nations came out with a report Friday defining how Trump’s policies are detrimental to the poor in America. America has a poverty problem that predates Trump. Too many are living paycheck to paycheck and some are even beneath that. This President and Congress’ solution is to give a huge tax break to wealthy people and companies. And, if the repeal of the Affordable Care Act went through, it would have been even worse. America has fallen in the global ranks on upward socio-economic mobility. It matters more to whom you were born than merit in getting ahead.

On a positive note, Costco raised its minimum wage from $13 to $14 an hour and Walmart increased theirs from $9 to $11 an hour. And more states and cities are making planned and new increases. These are steps in the right direction. It would have been nice for Congress to have increased the minimum wage along with the tax decrease which impacts corporations annually. It would have helped pay for some of the lost tax revenue if companies had to increase pay for those in greatest need, plus this money would be spent as they need it more than the 1% group.

Thanks for letting me preach. Any Amens or rebuttals? Other truisms?

US CEO Pay has reached epic differential

As reported in The Guardian today, US CEOs now make in pay 339 times the pay of the average worker according to a Bloomberg study of 225 companies. In retail companies, the ratio is 977 to 1 on average. Let that sink in a little.

A quote from the article entitled “‘CEOs don’t want this released’: US study lays bare extreme pay-ratio problem” by Edward Helmore is very revealing:

“According to a recent Bloomberg analysis of 22 major world economies, the average CEO-worker pay gap in the US far outpaces that of other industrialized nations. The average US CEO makes more than four times his or her counterpart in the other countries analyzed.”

Some people may push back and opine that US CEOs may be worth 4X that of their non-US industrialized nation counterparts. If that were true, it would mean US company performance is 4X that of non-US companies and there would be a huge flight of capital to the US.

In my years as a consultant, I have seen CEO pay ratchet up over time, rewarding CEOs with stock grants and options. What happens is a competitive totem pole exercise, where the competitive pay analyses are upward elastic and downward inelastic (they go up more easily than they go down) over time.

I have also observed the 80/20 rule applies to CEOs as well, with 20% of the CEOs earning their keep. I have worked with egalitarian CEOs, benevolent dictator CEOs and some of the greediest SOBs you will ever meet. Seeing CEOs who realize the teamwork involved in the company making money is admirable. On the converse, seeing CEOs who are imperialistic is off putting. As I write this, I am thinking of the handfuls I worked with and some who were notorious over the years for their greed.

On the bottom end of this exercise are efforts to flatten pay for the average worker. Over time companies will use a variety of rationales and tactics to put lids on pay increases. The salary increase budget may be limited because of the uncertainty in the economy, the company is having some hardship or the company expects to have hardship. Sometimes concurrent with the salary budget, groups of people are laid off. Why is the timing an issue? By moving on lower performers, people whose salary increases would have kept the average percentage increase down are removed from the equation meaning better performers will now get lesser increases.

Coupling this with pressure on not increasing the minimum wage and to diminish the power of labor unions (that is another story), these ratios result. I respect greatly the need for incentives to help reward successful CEOs, but we must not forget who helped them earn those numbers.

We have a poverty problem in this country. We have a middle class where too many are living paycheck to paycheck. Yet, our leaders passed a tax law that benefits CEOs, their companies and the wealthy by a large margin. It would have been nice to have at least obligated the pass through of salary increases or an increase in the minimum wage to a living wage. So, do not expect this ratio to measurably decrease any time soon.

While we were distracted, look what oozed in through the keyhole

On December 5, 2017, the Department of Labor under the guidance of the self-proclaimed populist President offered proposed regulations that would affect tipped employees. The 60 day comment period just expired, so unless the push back was convincing this proposal may become regulation. The proposal unwinds an Obama regulation which prohibits an employer from garnishing tips from workers who make at least the $7.25 minimum wage.

It should be noted that restaurant workers have a lesser minimum wage of only $2.13 which has been in place for twenty plus years. They can be paid an hourly wage this low, provided their tip income brings their total hourly pay to $7.25. As of May, 2017, the average combined wage and tip income for restaurant workers was $11.82 per hour.

In essence, the proposed regulation would allow an employer to garnish the extra tips above a total wage rate of $7.25. Now, the employer could be altruistic and reallocate this tip income to all workers, such as the cooks and buspeople (those that clean off the tables). This could also include the tipped worker who would receive a reallocated portion, but less than the direct tips garnished.

Yet, a very troubling part of the proposal is the employer could keep the tips and not reallocate them to workers. It is noted therein that the tips could be made for structural improvements or to reduce menu prices. Note, this is a low margin business, so it would not be a leap to see more than a few employers not reallocate all or any of the money. This is especially concerning within an industry where some managers exploit all and harass female workers (note read “Nickeled and Dimed in America” by Barbara Ehrenreich on working in minimum wage jobs that perpetuate poverty).

Per an article in The Washington Post (see link below), “‘There is no way to do a good face estimate and maintain the fiction that this rule isn’t terrible for workers,’ said Heidi Shierholz, who previously served as chief economist for the Labor Department, in a conference call on Thursday arranged by EPI.”

Many things concern me about this. If the employer were made to reallocate the garnished tips to other workers including the affected worker, then it would be more understandable as an employment term. A worker could then decide to work elsewhere if they felt they could make more there. It should be noted that in some cities that are phasing up to a $15.00 per hour minimum, some restaurants are going without any tipping, but that is understood beforehand and communicated to patrons.

The troubling part is the employer being able to choose to keep some or all of the money, provided the below market minimum wage is used. Help me understand how this helps those masses of people who voted for a man to make their lot in life better. Coming on the heels of other changes that have been made to favor Wall Street, such as the Tax Bill, this President does not look very much like a Main Street man.

What are your thoughts? Have you ever worked in a restaurant?

https://www.washingtonpost.com/news/posteverything/wp/2017/12/21/the-trump-administration-wants-to-let-employers-control-workers-tips-an-interview-with-heidi-shierholz/?utm_term=.ce1e8158cb54