Sunday, August 29, 2004

Corporate competitive wages, where's the competition?

Corporations use simple phrases and words to deceive us as any good propagandist would. They love to use a simple word to fool us and it works for the most part. One word they use is competition. They like to make us think that business is some kind of sport, with winners and losers in a competition. It sounds so simple, but it's not. For now I want to address one specific use of the word competition, actually a derivitive of the word, competitive.

Whenever a corporation decides to downsize the employee workforce, they usually claim that they are forced into this so that they can "remain competitive." We hear this all the time. Since we've seen this excuse so often we've decided not to question it. Since they've repeated it time after time, we take it as gospel. Who are they deciding is the competition that they must remain competitive with?

A corporation will tell you that it is other corporations. OK since they are firing workers then that must be where the competitive edge is between corporations, worker compensation. They've decided that the workers within their company are compensated at higher rates than their competitors. Yet, it never occurs to these corporations to study the entire worforce within their company. The workers at the top of the company, the CEO, the board of directors, and the upper level executives never get downsized or have their pay cut in order to be competitive. The spotlight on employee pay always highlights the mid-level workers on down and these are the workers who lose their jobs, have their benefits adjusted or are forced to take pay cuts.

At the top of the corporations compensation is not only ignored in the competitive equation, it actually is doing the opposite, going up. Instead of thinking that it might give them a competitive edge to seek the lower wage at the top, they voluntarily raise pay rates. That's not competitive, they are not seeking to beat out their competitors.

Statistics back this up. For instance take WalMart, top executives in the last three years made about $23 million per year. Several of the Walton family itself count in the top 20 richest people in the world. So WalMart which brags about the competitive prices of the goods they sells does not reflect this same competitiveness at the top of the company. The company could easily reduce the price of goods by reducing that top pay, but they don't, they raise it. They don't look around at the competition (other corporations) and try to beat the cost of labor at the top. The only competition at the top of WalMart is to see how rich they can get. Meanwhile they pay the lowest wages and benefits at the middle and bottom of the company in comparison to their competition, to be competitive they would tell us.

In 2003 the average CEO of a major company was $9.2 million in compensation. From 1992 to 2002, CEO pay has risen 279%, in contrast worker pay rose 46%.(1) When corporations tell you they are cutting jobs to be more competitive, they obviously are ignoring the top of the pay structure.

Further, American corporations are now claiming that in a global economy that their competition now includes foreign companies. American CEOs make 5 times that of those in Japan, 4 times more than in Spain, 3 times that of Great Britain and France, twice that of Germany.(2) Those are the major competitors in the world. Why are American companies not trying to beat those wages? Wouldn't they be more competitive in the global economy if the CEOs in Germany or Japan made 2 to 5 times more than American CEOs? Certainly downsizing and outsourcing could be reduced in the rest of corporations if the top was trying to beat the competition.

Competition is in the eye of the beholder. When we think a little harder about how corporations explain to us that they are trying to be competitive, we can now see hypocrisy. We can see that they don't believe in the expression, what's good for the goose is good for the gander. Of course they can't or won't see it in this new sense, because it is not competition that drives those at the top, it is just plain old greed.

(2) see


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