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midnight

(26,624 posts)
Tue Apr 7, 2015, 11:31 PM Apr 2015

Workers and Wages Aren’t a ‘Cost,’ We’re an Investment

"Reading today’s Politico Morning Shift column, this sentence stood out in a short piece on Wisconsin Republicans’ efforts to repeal the state’s prevailing wage law: “That’s an 80-year law requiring that workers on construction jobs for local and state governments be paid a wage that the state determines to represent the prevailing norm—a calculation that tends to raise labor costs.” The bias in that construction is pretty simple, and it's one that is often repeated by journalists despite it being a very clear anti-worker frame: Workers are a “cost” and not an investment and not the part of a business that does the work that creates the company’s profits. In other words, this common construction says workers are a pesky obstacle instead of the source of revenue a company needs to survive and grow.


When was the last time you heard a reporter refer to CEO pay as a “labor cost,” despite the fact that for many companies these massive payouts are much bigger than the amount any prevailing wage law might increase worker pay? When was the last time you heard other common costs such as buying machines to build products or raising investment capital, as a similar type of burden? When was the last time we talked about worker compensation as an investment that grows a business? When was the last time you heard about how hiring workers and compensating them well increased profits for a company, when the evidence is pretty clear that such a thing happens all the time?

Those questions are rhetorical, but this one isn’t: Why is there an insistence on repeating extreme right-wing anti-worker talking points as if they were facts? Reporters, who represent objectivity and balance, have a responsibility to not favor business interests over those of workers.

This insistence on focusing on workers as secondary to the interests of business owners shows that there is a need to pivot the debate in America. Reporters aren’t making up this language; they’re reporting what anti-worker politicians, pundits and business owners are saying. But the conversation is starting to change, and working families are the ones forcing the change. They expect us to stay silent and allow them to get away with whatever they want, but we’d rather talk about raising wages, expanding the middle class and making the American dream more real for more working families. When the national conversation only includes one side of the story, it not only leaves most Americans out of the conversation, it helps keep wages stagnant and creates an obstacle to giving people a raise."
http://www.aflcio.org/Blog/Economy/Workers-and-Wages-Aren-t-a-Cost-We-re-an-Investment

8 replies = new reply since forum marked as read
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Workers and Wages Aren’t a ‘Cost,’ We’re an Investment (Original Post) midnight Apr 2015 OP
Capitalism. F4lconF16 Apr 2015 #1
But doesn't it make you wonder why the big salary of the CEO is not labor costs? midnight Apr 2015 #2
They are of the elite, though. F4lconF16 Apr 2015 #3
The working class are creating the profits and so labor is an investment with returns that midnight Apr 2015 #4
Yes, but they are still an investment. F4lconF16 Apr 2015 #5
It buys loyalty over morality. nt mother earth Apr 2015 #8
It is not surprising that corporations have evolved as they have. Our constitution is missing newthinking Apr 2015 #6
basic accounting really whatthehey Apr 2015 #7

F4lconF16

(3,747 posts)
1. Capitalism.
Tue Apr 7, 2015, 11:33 PM
Apr 2015

When everything is subordinate to growth and profit, we will always be labor costs. That's it--just a calculation in the machine.

F4lconF16

(3,747 posts)
3. They are of the elite, though.
Wed Apr 8, 2015, 12:38 AM
Apr 2015

They are the employing class, not the working class--they are not labor.

midnight

(26,624 posts)
4. The working class are creating the profits and so labor is an investment with returns that
Wed Apr 8, 2015, 08:49 AM
Apr 2015

allow the elite to survive.

F4lconF16

(3,747 posts)
5. Yes, but they are still an investment.
Wed Apr 8, 2015, 10:00 AM
Apr 2015

Not human beings. There was a good article floating around here recently declaring "I am not a labor cost--I am an investment". I strongly disagree with that. I am not something that generates a return for someone else. I am a person.

newthinking

(3,982 posts)
6. It is not surprising that corporations have evolved as they have. Our constitution is missing
Wed Apr 8, 2015, 12:06 PM
Apr 2015

very critical human rights (such as family rights, which is what has led to the awful immigration system we have that places the nuclear family unit at the back of the line and can even arbitrarily leave a citizen's family separated and with no recourse.

You're rights are primarily around the right to work with a little extra included.

Newer constitutions are far more comprehensive in calling out specifically the priority of citizens over business.

whatthehey

(3,660 posts)
7. basic accounting really
Thu Apr 9, 2015, 03:42 PM
Apr 2015

labor costs are direct inputs toi the cost of goods, used to derive "top line" gross margin.

So you take $1 worth of steel and pay a machinist $30/hr to make 100 pieces per hour that means your finished widget costs $1.30 snd if you sell it for $2 you get a 70c contribution to gross profit each or 35% gross margin

(yes it's more complicated as you have to add benefits etc, but I'm simplifying)

The CEO, the engineer who designed the widget, the buyers who buy the steel, yadda yadda are overhead, and are part of what reduces gross margin down to net margin and gross profit down to net "bottom line" profit.

Simplifying again let's pretend the company sells 10 million widgets for $20M revenue and $7M gross profit, and all their overhead from CEO to paperclips to hedge trimming costs them $5M a year. Their net profit is $2M a year or 10%.

Changing labor costs impacts gross margin as they are direct costs. Changing CEO pay, or buying more or fewer paper clips, changes indirect expenses and impacts net margin not gross.

In short labor is a cost management is an expense hitting different profit metrics. Both are important, but approached differently both by Wall St and manaagement accounting. One isn't more or less important overall, just that they have different solutions and different problems.

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