How Much Is Enough Profit?
First of all, let me just say that there is a lot I don't understand about the economy. I've never taken a class in economics. I've just been having some ideas lately about the economy and I'm curious about what y'all think about them.
When a company is doing well, it is common for the union (if the employees have a union) to negotiate for higher wages and better benefits. After all, a company's success is due in large part to the skill and ethic of its workers. If the union is successful, a greater portion of the company's profits go to the workers. After that, the company usually tries to find ways to make up for that lost profit. The management might decide to raise the price of its product. They also might decide to spend less on materials to make their product. There are other ways to make up for that greater share of profit given to the workers, but usually the product is made a little less attractive to the consumer, either because the product costs more or the product isn't quite up to the standard that it was before.
When sales of the product decline, the employees are often the first to blame. Management will say that the workers became greedy and that the company had to make up for the lost profits given to the workers by raising the price or making an inferior product. But why doesn't anyone ever question how much profit is required by the company's investors? The idea that made the union negotiate for higher wages/benefits was that the workers were doing a good job for the company and therefore deserved a greater share of the profits. Why did the company not accept a little less in profits rather than make a product that was less appealing to the consumer? Doesn't the management know that they're hurting the company by making up for the lost profit by decreasing the market share for its product?
It seems that our economy is in a downward spiral. Companies are continuously looking for cheaper labor and making more inferior products so that they can increase their profits. Our system isn't healthy; capitalism is supposed to encourage competition and in so doing, make better products for the consumer. But because corporations can't accept a little less in profit so that they can make a good product and pay their workers fair wages, the consumer is getting screwed. If the economy isn't benefiting the consumer, then we should put something better in place.
The Affordable Care Act mandates that health insurance companies spend a certain percentage of their dollars (I think 80%) on health care and allows for a certain amount for profit. That amount of profit is probably too low for most businesses, but I wonder if it would benefit us all if companies were required to spend a certain amount on wages and a certain amount on their products. Do you think it would help the workers and consumers to put such regulations in place?
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