[Kalium]

> I wonder if you could apply this to the rest of American society...

At very large-scale companies, it doesn't always work as well as coud be hoped. A company ten times the size of this company may not have ten times as many extremely-highly-paid executives, but it probably has ten times as many people further down the pyramid.

For example, the CEO of United Airlines is compensated $18 million-ish. There are 88,000 employees of United. That's $200 dollars per employee per year. You'd have to find a lot more money than that before you started seeing benefits to average employees on the same scale as here. Even if you assume all the highly-compensated execs can account for 5x-10x that, you're still well short of $14k/yr.

[mercer]

What if you were to add up the income of not just the CEO, but all high level management or, say, those who make more than 500.000 a year? Honest question that I'm not sure how to answer myself, but I suspect the benefit to the lower ranks would be much more than the $200 a year.

[Kalium]

That's an excellent question! Let's see if we can address it with some math.

I'll start with this: http://ir.united.com/corporate-governance/company-leadership

This says there are 24 executives at United (I counted). If you assume literally every single one of them is paid as much as the CEO is and redistribute all that money across the whole of United, then that's 24 * $200 = $4800. $200 was rouding a bit ($207 is ungainly to work with), so it's actually closer to $5000.

Now, $5000 a year isn't nothing. It's undoubtedly and unquestionably a life-changing amount of money for a lot of people struggling to get by on manifestly unreasonable and unfair minimum wages.

That said, $5k is also far short of the $14k number above. And we had to make several unreasonable assumptions to get here.

Realistically, the policy proposed here is freezing salaries and re-directing raises among executives. Most compensation would be unaffected. Further, not every executive will be paid as well as the CEO. Assuming generous 10% yearly raises and that other executives are paid around half of what the CEO is, you get a result that looks like $5000 / 2 = 2500 * 0.1 = $250 / yr.

Which isn't far from the initial result. (And still includes some unreasonable assumptions)

[mercer]

Thanks for the calculation! I think limiting it to the 24 execs is still a bit on the conservative end of things (as far as equalizing pay goes), but it's interesting to think on.

I'm actually surprised how merely broadening the calculation a bit already results in a quite significant amount. 5k is quite a bit!

Anyways, thanks again :).

[Frondo]

What I'd like to see is what the numbers look like if you:

1) Pegged the CEO <-> lowest-paid worker (or contracted worker, so you can't just contract out the janitors) to no greater than 10 to 1.

2) Balance out the next few layers of management to reflect that cap.

3) And see what pay looks like for the lowest-paid workers.

If you don't like 10-to-1, maybe we do 20-to-1. Find a nice low ratio, though, and if people want to make more, they can run the business such that everyone makes more.

[Kalium]

Very minimally different, I rather strongly suspect. You'd probably get larger shareholder dividends, but not that much larger.

There's this idea we're dealing with here that there's massive, virtually untapped, make-everybody-well-paid amounts of money being wasted on management overhead. It's a very reasonable idea. Managers at the top get paid an amount of money that's clearly and obviously incredibly excessive and has absolutely no connection to anything!

Yet, it might be worth considering that this might not actually be true in the important broad sense. What if there isn't a vast pool of money locked up in management salaries that would dramatically improve the lives of workers? What if there isn't the "fix the car money" or "send a kid to college money" another poster was rhapsodizing about for every worker? Might it be worth considering that in most cases, managers aren't actually paid vastly more than their direct reports?

Besides, there are plenty of ways to structure businesses that would get around something as simplistic as a compensation ratio.

There will always be another "But what if we run the numbers differently?" scenario.

[Frondo]

I have no reason to believe that it's minimally different, and I'm curious what reason you do, aside from it's comforting.

When 10 people own as much as half of the population of the country, there's something there. Calling it not "a vast pool of money" might be semantics, because there's definitely something there.

[Kalium]

5k is definitely a lot!

You have to be wildly fantastical to get there, though. Meaning it's not a number that should be taken at all seriously as anything other than a work of numerical fiction. $250 is a number that's likely much closer to reality, though probably still too high unless you can find a much broader swath of people to freeze the salaries of.

[saalweachter]

Or, if you take a company like Google, give every engineer a 5% haircut, bring the chefs and cleaning staff and groundkeepers and building maintenance back into the company (rather than contracting out), and distribute the money and stock grants among the support staff.

[c0vfefe]

That'd cause a big morale hit & big incentive for engineers to leave. Support staff are great, but at the end of the day they're not what drives growth for the company.

[saalweachter]

Eh, you take it out of the stock grant refreshes and the noise of stock fluctuations will make it rather difficult to notice in your total compensation.

EDIT: Also, you're taking income off the top of the tax brackets and giving it to someone at the bottom of the bottom, so you get a tax multiplier where you take $1 from me and give $1.50 to someone else. Also, you probably don't need even a 2% or 3% haircut off the engineers' salaries to make every support position a $100k/year job with full benefits and 401k matching, unless your engineer : support ratio is crazy.

EDIT EDIT: Yeah, pushing everyone to $100k/year is probably overselling the idea. You could still free up a life-changing amount of money for people making minimum or near-minimum wage.

[Kalium]

Google's published numbers put their engineering headcount at below half their overall headcount.

I'm not sure a 3% haircut on engineers at Google would give them enough funds to make every support position $100k while also doing what you suggested and bringing all the contracted services in-house.

If we assume a 3% haircut on an average engineering compensation of $250k, and 45% of the organization, you have $6k and change per support headcount. And this is without bringing TVCs in-house.

Unless the support staff are all making right about 95k, this seems like it might not quite work out.

[saalweachter]

I actually don't have enough numbers available myself to support this, so this conversation is doomed to a lot of hand-waving.

However, one point of definitions, I am not using "support staff" to refer to "non-engineers", I am using it to refer to "workers who perform services that are not part of the company's operations, such as building maintenance, cleaning, and cooking". Most of the non-engineering staff at Google are not support staff, they are non-engineering employees doing non-engineering work equally related to the core operations of the business. Sales, partner relations, data center management.

I also don't know how much these individuals are payed, although I hope to god it is "well above minimum wage".

In any case, sure, you're probably right and you can't actually bring everyone up to SWE-minimum-wage (100k$+benefits) with a small haircut off the engineering staff, but a small haircut off engineering, distributed to the 10-20% of employees and contractors being paid the least is a life-changing amount of money. +$15k / employee / year to the bottom 20% of earners is "quit your second job" money, it's "get the car fixed" money, it's "have money to put aside for a rainy day" money, it's "send the kid to college" money, while $7.5k less per year is "retire three months later" money for an engineer.

[skinnymuch]

A lot of the non engineering staff would still be other white collar jobs, no? Sales, admin, HR, etc. $100K is a high number OP reached for, but I’d think a vast majority of Google’s job total comp is in the 6 figures. Or close to it with some junior employees not in certain cities.

[c0vfefe]

What you're saying makes rational sense, but people's egos are not rational. It's the principle of the thing: why tolerate a pay cut when there's a long line of companies in the valley itching for your skills?

[thelock85]

At least for Google, IMO I don’t think it would generate long term consequences if engineers with this mindset who also aren’t in love with their work left the company.

[asdff]

Let the sociopaths leave then, they aren't emotionally valuable for a company. Plenty of people in the world outside of engineering take large pay cuts to work on something they believe in vs. taking a job that gives them the most wealth.

[asdff]

That's a terrible mentality. Exponential growth is not sustainable. The worst thing about technology companies these days is that putting out a polished product and covering overhead + emergency funding is seen as a failure. Products must be modified to extract money from the consumer at every turn, and the market cap must rise and rise. If engineers would leave a company because its no longer growth driven, then our universites have failed to teach empathy in their engineering curriculum.

[c0vfefe]

That focus on increasing shareholder value above all else is definitely a regrettable inevitability of publicly-traded companies.

I know my engineering curriculum hasn't focused on empathy, or ethics much at all. Unfortunately you can't educate the selfishness out of humanity.

[Kalium]

Last time someone tried to teach me empathy, all I learned is that they had a poor understanding of how emotions connect to actions. They assumed that if I had a real, true, genuine emotional experience of empathy then I would be compelled to take some specific action. Generally the action assumed is either something directly to alleviate the perceived pain or the one prescribed by the person evoking the empathy.

I find these notions curious, and rather at odds with how I expect thinking humans to interact with the world around them.

Perhaps there's something else you think our universities might be failing to teach?

[bluGill]

Still not much. I didn't bother to look it up (it probably isn't public), but doubt more than 10 people at United make more than $500,000/year, so the amount isn't significant. Now if you said $200,000/year I would expect a significant amount of people make that. However now you are getting into the middle class where lifestyles have expanded to spend most of that money, and they would feel the pinch.

[saalweachter]

The latest SEC filing does not include executive compensation, having disclosed it at the latest shareholder meeting.

The 2015 SEC filing includes 8 named individuals in its executive compensation program. In 2015, they received between $500,000 and $1.25M in base salary, and between $1 million and $10.7M in long-term incentives. In addition, they received between 110% and 150% of their base salary in annual incentives (bonuses). Two of them received additional monthly cash payments of $100,000 and $40,000 for temporary duties in addition to their normal post.

Granted, that's only the top 8 individuals at the company, but if the lowest-compensated individual among those 8 is taking home >$2M I'm fairly certain that there are a lot more than 10 making more than $500k.

It's also still the case that that pile of money is not much divided among 88,000 people, but you could still raise the income of the lowest-compensated 10k employees by several thousand dollars, or fund employee daycare, or something other than give it to a small group of people.