So more precisely, the reasonable choices would be wages, profit sharing in upside and downside, or lower wages + profit sharing in upside only.

Profit sharing works great when employees have the ability to significantly affect profits. Traders/hedge fund managers are a great example of this. For manufacturing employees, a piece rate (rather than hourly rate) would be a similar way to create such incentives.

In another comment, someone asked about the executives who get paid and then "only have upside", as if that somehow proved that employees should also get an upside. Not so: executives are the last option: lower wages + profit sharing in upside only. Employees are—literally—taking the first option. If they want the last option, they can become executives. We don't have a legally-mandated cast system in this country, anyone who is competent can become an executive and take option three.

And the wages really are lower for executives who only have upside potential. If you are an executive (not a manager, an executive) you can either run your own company, or run someone else's company. If you run your own company, you've got upside and downside risk. If you run someone else's company, you have (much) smaller upside potential, but that's compensated by: (a) lower, but guaranteed, wages + (b) no downside potential.

It's a reasonable trade for a lot of executives to make.

Employees, at least those earning income from real labor, always share the downside of business income volatility. In fact, it's arguably an outsized share. One simply needs to observe the various employment metrics, and their rate of change. Particularly those tracking layoffs, discharges, and other involuntary separations initiated by employers.

What's perhaps even more illustrative are the comparisons of job requirements and starting salaries for positions with similar responsibilities; found in employment advertisements before, during, and after a "business cycle".

In fact I've read several studies showing that people who happen to graduate and enter the workforce during the nadir of financial crises earn, over the course of their entire career, substantially lower wages as compared to people who simply happen to enter the workforce at any other point of the business cycle.

Let me put this another way: no one is really entitled to a job; not in the way their entitled to their properties, which have a _title to their name_. Capital, on the other hand, risks its very entitlement. Employees don't have any assets seized during a downturn. If they wanted to share in the risk and return, they could have bought stock.

http://en.wikipedia.org/wiki/Sophistry#Modern_usage