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I really want people to be paid well for the work they do, regardless of the profession, and I believe one of the best ways to reward employees is to have them share in success through stock options, profit-sharing bonuses, or whatever. However, with the ongoing labor shortage and insane inflation, when labor disputes have arisen, I’m hearing less about just-compensation and more about taking “excess profits” from companies. For example, in the recent auto strike, UAW President Shawn Fain has worn shirts such as “Eat the Rich” during CNBC interviews while constantly rejecting increased-pay offers due to all the profits that weren’t shared enough. It’s a common argument among leftists. High profits are evil! They must be seized and redistributed in an equitable manner. While some companies make insane amounts of money, especially in Big Tech, before you condemn corporate profits, here are a few things to consider:
* A particularly good year may show decent profits, but what about past years? What about recessions, plandemics, and financial crises? Auto companies may have went out of business in the 2007 housing crisis if not for government bailouts. Energy companies lost billions due to Covid government shutdowns. Plus, nearly every company loses money during startup as it builds a customer base and develops their product or service. Also, they must set aside cash for the unknown challenges that may hit them in the future. When you take all those factors into consideration, a few successful years of profit may not seem so excessive.
* The fruits of a strong economy are increased national wealth, new technology deveopment, ample Research & Development budgets, greater productivity, and so much more. However, to get there you need capital investment. It does no good for our national savings to sit idle when it could be invested in all these things. Right now, you can easily earn over 5 percent in a CD or short-term government security with virtually no risk. There has to be incentive to give up that guaranteed return. In other words, if an investor or corporation can’t earn at least 6 percent, why bother? In fact, the potention return has to be much higher than that since you risk losing money, possibly all of it. If government or unions develop a confiscatory mindset anytime a company is successful, investment will eventually dry up completely.
* Labor costs are always going to make their way into prices for everyone. Higher wages are nice, but if they buy the same or less, what good are the raises? Do you think the recent strikes of auto, airline, driver, and medical workers won’t hit hard in some of our essential expenses?
* Taxes, regulations, union-shop wages, and every other cost shackled to business just makes it tougher for an American company to compete with foreign ones that don’t have such constraints.
* Profits are not only the result of risky capital investment dollars, they often are a reward for hard work. Do you think Elon Musk, Warren Buffett, Sam Walton, Henry Ford, etc. built their fortunes by working 8-hour days?
* Every American, yes every single person, has a stake directly or indirectly in corporate profits. Where do you think earnings in your 401k’s come from? Do you own car, health, or life insurance? It may surprise you that insurance companies make almost nothing off selling policies, often actually losing money on them. They make their money by investing the funds while they wait to pay out the benefits. If they didn’t invest that money, the amount we pay for these items would be massively higher. Pensions, mutual funds, 529 college savings, and virtually every other financial instrument relies on these investment earnings. Oh, and about all those government “freebies,” if there are less earnings to tax, what money will be there to steal & redistribute?
Capitalist countries always enjoy the highest standard of living. Spend some time in any one of the ass-backwards, third-world countries if you don’t believe me. Maybe “excess profits” aren’t always such a bad thing.
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