A few days ago I followed a link from somewhere or other to this story about the CEO of Caterpillar. Caterpillar is a big company, with approximately 121,000 employees. In 2012 it had about $5.6 billion in profits. A very hasty search informs me the company was doing worse throughout 2013, and profits are significantly lower, probably down below $4 billion for the year, although I didn't see any fourth-quarter figures.
The yearly pay of the CEO, Doug Oberhelman, was raised earlier this year from $16 million to $22 million, despite the fact that it was clear that profits were headed down. One immediately thinks "That raise should have gone to the workers," and probably it should have--but distributing that money to the workers comes out to only about $50 per employee. Even distributing the CEO's entire salary to the workers would give each one only about $180, which would no doubt be welcomed but is not enough to make a real difference in the way one lives.
Multi-million-dollar CEO salaries are often a scandal in many ways, but they aren't the main reason for stagnant or declining wages. But use $4.5 billion, a very rough midpoint between the past two years' profits, instead of $22 million, and the picture is rather different: roughly $33,000 per employee. Even half, even a third, even a sixth of that, would make a difference.
The fundamental problem here is that the profit made by the company is assumed to be meant for everyone except the people who actually built the product. The workers are considered no more than a cost of doing business, their wages no different from the price of steel. And the company feels justified, in fact obligated, to keep those costs as low as possible.
Who is the money for? Shareholders, directly--which is fine--and the stock market, indirectly, because high profit generally means higher stock price. In my limited experience in the corporate world, it seemed that the desire to keep the stock price up and climbing was one of the major, maybe the major, drivers of the practice of many companies. Granted, that was high-tech, where people were expecting a greater than average chance of investment windfalls. But I imagine it's operative throughout the corporate world.
It's almost funny that the CEO justifies his own salary by saying that the company has to be competitive. But it's not funny, because he uses the same reason to justify reducing the wages of his employees. Clearly he thinks that he would be difficult to replace, but his workers would not; therefore he can reduce their wages, or at least keep them from rising; therefore he will do so.
I get very impatient with people who say this sort of thing is a result of an immutable law, like the law of physics that says that if you push something hard enough, it will fall over.[1] What's being described here is as much a matter of culture and ethics. There is nothing in the nature of the universe that says it should be acceptable to exclude workers from sharing in the success of the company. There is in fact a lot of common sense justification for doing otherwise, entirely from the free enterprise point of view.
The great engine and virtue of the system is supposed to be incentive: if you work hard and produce something of value to others, you'll be rewarded financially. This CEO and others like him apparently don't believe in applying that logic to workers. This one isn't even willing to offer the traditional incentive to wage-earners: the assurance that if the company does well your wages will rise. But the company was doing very well at the time of this interview, and he was in the process of trying to freeze or reduce wages, offering only the vaguest lip service to the possibility that they would ever be increased. The only incentive offered is negative: work hard and maybe if things go well you'll keep your job. But no guarantees, of course. And if you don't like it, there are many others willing to take your place.
What would be the logical end point of this? To bring the cost of labor as near as possible to zero by paying the workers just barely enough to keep them alive and able to work? No doubt Mr. Oberhelman would take exception to that, but how far from the truth is it? I wonder if he's a Christian.
[1] Fudd's First Law of Opposition; see Firesign Theatre, I Think We're All Bozos On This Bus