Re:Let People Move to Jobs
by WalterBright on Sunday January 19, 2020 @01:14AM
(#22089762)
> It objectively the case that salaries vary with profits.
Salaries are a function of the perceived value of the particular employee to the company. If the salary is too low, he'll be poached by another company. If it's too high, he's likely to be laid off or otherwise pushed out.
For example, if an employee contributes $100 in value to the company, his ideal compensation would be $100 minus the opportunity cost of the money, which is about $15.
This has nothing to do with the profit of the company as a whole.
It is true that companies often have a lot of difficulty computing what the actual dollar value of a particular employee is, but there is no doubt that the company will do badly if it gets it too far wrong too many times.
Companies falling on hard times that try to cut salaries across the board (or limit raises, same thing) do so at great peril - the underpaid (relative to their contribution) employees leave and the overpaid stay. I.e. this can result in a vicious death spiral. A much harder, but far more effective strategy is to identify the overpaid ones and get rid of them.
Salaries are a function of the perceived value of the particular employee to the company. If the salary is too low, he'll be poached by another company. If it's too high, he's likely to be laid off or otherwise pushed out.
For example, if an employee contributes $100 in value to the company, his ideal compensation would be $100 minus the opportunity cost of the money, which is about $15.
This has nothing to do with the profit of the company as a whole.
It is true that companies often have a lot of difficulty computing what the actual dollar value of a particular employee is, but there is no doubt that the company will do badly if it gets it too far wrong too many times.
Companies falling on hard times that try to cut salaries across the board (or limit raises, same thing) do so at great peril - the underpaid (relative to their contribution) employees leave and the overpaid stay. I.e. this can result in a vicious death spiral. A much harder, but far more effective strategy is to identify the overpaid ones and get rid of them.