A business shifting 20% of profit to more labor would

[cthulu2016]

not typically result in 20% less profit.

Whether the money was spent on higher pay or more job positions, it would be likely to result in some increased sales/business/whatever. So it would be 80% of a somewhat bigger pie.

I am not saying that profit would be bigger (though it might) but that the loss in profit from "excess" hiring or pay will tend to be be less than it appears to be.

It's like foodstamps. The federal government pays out one tax money for foodstamps. That money all goes into the economy and gets taxed, meaning there are somewhat more tax dollars. It doesn't make it a net profit for the government, and it is not meant to be profitable, but the loss is always somewhat smaller than it appears to be.

[TheFrenchRazor]

1. I don't think there's any benefit in hiring more people

than necessary, however there would definitely be a benefit in paying the lower paid workers more. i think businesses way underestimate the negative impact of high employee turnover and low morale.

[TexasTowelie]

2. Welcome to DU!

I've been in situations where employers have stretched their salaried employees to the breaking point. There is some benefit to hiring more people so that people don't have to donate an additional 30 or 40 hours of work each week (no overtime, comp time or any offset). The Department of Labor needs to crack down on the abuse (particularly in the IT field) of exploiting exempt employees. Hiring extra personnel has some benefits that may not show up on the quarterly profit/loss reports.

I'm hopeful that increasing wages at the bottom would also be beneficial, particularly the minimum wage for tipped employees.

[TheFrenchRazor]

4. thanks. my above comment was with the assumption that people were all working about 40hrs/wk.

i'm no fan of mega-overtime, and that's an indication that the company actually *needs* more workers (and could probably afford them). but if they don't need any more, then there's no point in hiring them.

[Abq_Sarah]

3. I'd love to pay my employees more

Or hire new people so I wouldn't have to work 80+ hours a week but a 20% reduction in profit in this shit economy would make it impossible for me to keep my doors open.

The customers are either there, or they're not. Hiring more people isn't going to bring them flocking to my doorstep.

[jmowreader]

5. Two things have to happen for this to make sense

First, sales have to increase.

And second, product lines have to expand.

One cardinal rule of business: you never, ever add workers without a good reason for it. It sounds nice to say "all companies should add 20 percent more workers," but if the workers you have now are enough for your business, adding employees is a waste of money. Sad but true.

To make sales increase, you've first got to have a long soul-searching session. Are your sales low because you don't have enough people out there selling, because you sell things people don't like or because there are things people want to buy from you that you don't make? (This last one breaks two ways: if you can sell X number of items but don't have the production capacity to make that many, or if you could sell certain objects if you made them at all.)

If you've got a shortage of sales staff, then the cure is easy: hire more of them. Sales staff work on commission so they pay for themselves.

If you sell unpopular items, introduce popular ones to take their place.

And if you aren't making things people want to buy, start.

When I worked retail a day didn't go by that someone told me they'd buy huge piles of (insert name of item) if only we sold it. At the same time, we had shelves full of (insert name of item) we had 400 days of supply worth because a store on the other side of the country sold this thing faster than they could get it, and "let's send them all of this shit and get something people will buy in its place because snow shovels and arctic faucets don't sell in the deep south!" falls on deaf ears.

[cthulu2016]

6. I might not have been clear enough

I was just making a small point about nominal costs.

Say a company has an annual profit of 100,000.

If 20,000 of that were diverted from distribution to shareholders to labor costs the net future effect would be to cost the shareholders some amount less than 20,000.

I might be 18,000. It might be 5,000. But it wouldn't be 20,000 because every business has something to be done that would be beneficial, but is not worth hiring someone to do it.

That's all I meant. What got me thinking about it was contemplating how the cost of full employment (across society) is smaller than the cost of hiring all unemployed people since they would presumably be doing something that made their net cost some fraction of the nominal cost.

[jmowreader]

7. Your point makes sense in theory

In reality it'll never happen because companies are not interested in anything but incremental profit increases.

Real-world example: Both Lowe's and Home Depot (where I worked for a long time) have lumber customers who need things done to wood that can't be done with the carpentry tools most people have - a circular saw and maybe a chisel. So naturally I wrote a suggestion and sent it up: add a wood shop to every Home Depot. Build a 20x20 building with two double doors. In it put a Delta Unisaw, an air handler, a planer and a compound mitersaw. Also put a small copier. Staff it with an experienced woodworker. It would cost $20,000, payoff would be six months or less for two reasons - the people walking out because they can't get what they need would be buyers, and people who don't come in now would start doing so. Their response: we believe people who give wrong measurements would return wood and we would have to sell it at a deep discount, so we don't want to do that. (HD has always cut wood and it's always been nonreturnable, so this makes no sense.)

Think back: when was the last time a corporation introduced a new product? By this I don't mean "introducing our new women's shirt with a flower on the shoulder!" or "introducing our new car that's three inches longer than last year's models" but a truly new and groundbreaking idiom? The only three things that come to mind are the Newton, the iPod and the 120mm optical disc. Everything else is kind of a business version of a "120 uses for sugar cookie dough" cookbook: lots of great ideas but at their base they're traveling the same road...maybe they're walking backwards, on their hands, wearing stilettos, riding a unicycle or whatever.

And that's why people aren't buying anymore. We've already got that stuff. I have 42 different ways to listen to Stairway to Heaven, I don't need another. I have a car that gets 30mpg, I don't need one that gets 32. I don't need a wrench that replaces fifteen other wrenches if I already have all fifteen. I would buy a Blu-ray player with a little brush that came up to clean the disc when I put it in, a shower with a little lever that dropped the temp 20 degrees so I could wash my hair without pulling the color out of it, a soft-bottom sink so it'd be more comfortable for the cat to sleep in or a car with one seat and a place in the back for cargo because there's only one of me and three empty seats is a waste, but they don't make those.