Re:Capitalism Has Gone Off the Rails
by Cthulhu_ on Monday November 03, 2014 @07:16AM
(#8550410)
It would also mean that all of the employees have a lot more money to spend, a part of which they'd spend at Walmart. Wasn't it Ford who back in the early 1900 gave his employees a lot higher wages than other companies so they could spend more and thus raise his own profits?
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That's a nice example! I always thought that it didn't make economic sense to pay people more money just so they could buy stuff from you. But just now I realized that it's actually possible.
Let's say you're selling cars for 100 dollars, and make 10 dollars in profit from each car sold. There's a lot of folks who have only 99 dollars and can't afford a car. If you give such a person one dollar, they will buy your car and you'll be 9 dollars richer.
Now, of course that's just a market segmentation scheme in disguise. If you could identify the folks who have 99 dollars and give them a 1 dollar discount instead, you'd profit even more, because they wouldn't be able to spend it on anything except buying a car from you. That's how companies do it today, they use employee discounts to get all the benefit of raised wages without actually raising wages.