It’s not like Apple is an outlier and non-richest companies are any better. Electronics manufacturing, as well as many other kinds of manufacturing (e.g., clothing which is even more notorious), operate on razor thin margins. Guess how much you can realistically pay workers when you make a grand total of <$5[1] on a $1k device? Not gonna come close to U.S. minimum wage, that’s for sure.
Anyway, this kind of exploitation is part of how Western companies accumulate wealth and it partially funds your first world salaries and lifestyles.
[1] The higher estimates I’ve seen are always <$10, and lower estimates are way under.
Manufacturing margins are razor thin. The brand names pocket all the profits, the people producing commodity parts and assembling them get nothing, which is my entire point.
And no, Apple is not an outlier in that regard, even though they pocket more than HP, Dell, etc.
Indeed, a decent company would split all its profits amongst its workers, commensurate with the value they created. Rather than handing it over to shareholders and investors who, by and large, have done no work to earn it.
How much risk is the average employee taking on, compared with the investors who are supplying capital so the business can operate and scale? This idea that it's only the employees who create value is simply bunk. By all means go and start your own company if you think labor is the only part of the equation, and scale it without taking on investment or paying out to investors.
>How much risk is the average employee taking on, compared with the investors who are supplying capital so the business can operate and scale?
I'd say it's a pretty big risk to become unemployed, especially where the welfare system can be unstable, and you have dependents to support. The investor, at worst, will have to take a "labour" job. The worker, at worst, will be food and shelter insecure.
>By all means go and start your own company if you think labor is the only part of the equation
That's not really a valid response to a criticism of the system which necessarily operates with the division of capital and labour. Obviously you need money; that's not what is in dispute here.
Capital and labour are integral parts of the equation, but the social function of an owner of capital who commands an army of labourers and sells the goods for profit is arguably not. Production can happen (and has happened) outside that social relationship.
You can work at a company for years and then job hop with no subsequent risk, whereas the founders and investors will get shafted if they don't continue to lead the company in the right direction. Shareholders and investors absolutely need to be rewarded for this.
The person I was responding to was acting as if there is NOT a division of capital and labor. I agree with you that we need both. You can't treat only capital well, and you can't treat only labor well. And the person I was responding to seems to have been suggesting that we treat only labor well. Production at our modern scale needs owners and investors and shareholders. That doesn't mean we can't and shouldn't improve things for the worker, though.
> Indeed, a decent company would split all its profits amongst its workers, commensurate with the value they created. Rather than handing it over to shareholders and investors who, by and large, have done no work to earn it.
But how do you calculate how much value they created? If a worker turns $10 in raw materials to a $100 widget by himself, then it's clear that he created $90 worth of value. However, what if he did so using the company's $500,000 equipment? What if he was using a design that someone else created?
The factors of production are land, labor and capital. To produce any good or any service, anything of actual value you need them all, and by providing one you are entitled to a share of the profits proportional to whatever it is you put in. Shareholders provide the capital, workers provide the work, landlords provide the place. Workers get wages, shareholders get dividends, landlords get rents.
ALL OF THEM ARE RESPONSABLE FOR THE OUTPUT, you cannot build anything with workers alone.
just because someone doesn’t screw screws doesn’t mean they did nothing to earn the rewards.
It is essentially the world we live in, save that the workers usually want their share of the profits before they are made, and so the determination of how much profitability there is to be and their commensurate value within is built on a best guess from incomplete information.
It is not always that way. Sometimes the workers are willing to wait to see how much profit is actually made before receiving their agreed upon share, but there is a good chance they will end up with nothing in the end, and so the aforementioned model, which carries far less risk for the worker, has become the most popular way.
It's not the world we live in though, workers are rarely paid from the profits in the same sort of way shareholders are.
Ideally, workers would be paid a wage for their time, and later have the profits of their work shared amongst them. After all, they are the ones responsible for generating this wealth.
Workers are rarely paid that way because they don't want the risk. Most businesses will end up with negative profits. At best, no profits. Imagine being an employee for a year or two and then having to pay for the luxury at the end. It is no surprise that it is avoided, usually. It is definitely an option, though, for the workers who like the risk and think the chance of winning the lottery is there.
Instead, workers usually prefer to estimate what the profitability will be up front and determine what they want out of the pie based on that assumption. Then they lock in at that price regardless of what happens. If the business fails, they still get their agreed upon amount. If the business thrives, they might only end up with a small piece of the pie, but it was worth it given the risk of ending up with nothing. It's essentially a futures contract.
It seems a little much to get to have it both ways – to be guaranteed the estimated piece of the pie when the business fails, but also all the upside when the business succeeds beyond imagination. Why would anyone agree to that? Those rare moonshot wins are what pays the workers for the times that there are losses. If the workers got the proceeds from the moonshot wins and the proceeds from their futures contracts, the math would stop adding up and employment would grind to a halt.
> Instead, workers usually prefer to estimate what the profitability will be up front and determine what they want out of the pie based on that assumption.
I'm not certain what you mean here. When does this happen? This doesn't sound like the usual method or motivation for job seeking.
It happens all the time. It is why software developers in incredibly high margin tech companies will ask for incomes >$100,000/year, while servers at low margin restaurants are left to ask for minimum wage. Tech companies can end up never making a dime and restaurants can produce fortunes, but on a statistical probability basis, the profitability of a tech company is more likely to round out to that $100,000 per employee figure and a restaurant the minimum wage figure, on average. That makes those asks to be quite reasonable and the market settles there.
When the future is unknown, when the futures contracts are being established, one can only guess as to how much money that labour input is going to return. The value that is established for a given job, commensurable to its relation to producing that future income, is always done on a best guess basis, knowing that reality can swing widely in either direction. It's an average, of sorts.
If you think the prevailing best guess is wrong and that a restaurant will easily make enough to give you back $100,000 as a server, you can defer your payout until that quantity is known. This arrangement does happen, but is usually eschewed as the worker would usually rather have the guaranteed known quantity, based on the best guess of their contribution in the profitability, even if removed from the final earnings, for their work. It reduces their risk.
As an aside, servers at restaurants are an interesting example as they do commonly play both sides. They lock in some of their income on the future's market, but also capture a share of the profit when it is made. There is a lot of flexibility in your options. Typically, most workers prefer to stay within the futures market entirely, though, as they want the security of a known quantity for their income, rather than making millions one year and loosing millions the next.
Are you talking about employees being paid a wage?
If so, what you describe isn't what happens for the vast majority of people. We need income to pay for rent (or mortgage), food, utilities, and other essentials. With a bit saved over, where we can. There's no scope for estimating the profitability of the business or anything like that, we just need money to live. I'm sure it's the same for Apple's factory workers in the article.
Yes, although not specifically as the specific dispersal mechanism is immaterial. A wage is one of many ways payout of the futures contact can be structured.
I don't believe the workers at these huge factories are doing anything approaching "estimate the profitability and determine what they want out of that pie."
I think they're desperate for jobs in a way that precludes estimating profitability and negotiating for pie.
You're free to buy as big a stake in your employer's stock as you want, and reap the profits. The point I'm trying to make is: what is a fair % of Apple's profits for an individual worker, and how much would it cost that worker to buy in as a worker-owner? Back of the envelope: $2.13T market cap, 137k employees: $15.5 million buy-in cost per employee-owner (~123k shares each). Dividends per share 2020: $2.615, or $323k/yr per worker. Please check my math, but I think I have the orders of magnitude right.
Personally, if you have a spare $15.5 million, I'd recommend a more diversified portfolio of broad-market low-fee index funds and (IMO) early retirement.
Congrats on entirely missing the point, which is that the workers created that wealth in the first place and should not have to “buy in” (read: purchase equity from capitalist owners) to receive the reward that is rightfully theirs
I might be missing the point still. When did workers create the wealth, exactly? If you're talking about Apple's first five employees, sure, they could have bought in for not very much money in 1980 or whatever (they probably were part-owners and/or paid in equity!). But there weren't any profits in 1980, either, nor for a long time. And most employees have probably moved on in that 40-year window.
Someone joining Apple today did not create any of that wealth.
Not sure why a random hire today "rightfully" deserves some huge transfer of wealth from the "capitalist owners" (read: owners) on their start date. Can you elaborate on that step?
> Someone joining Apple today did not create any of that wealth.
Everyone working for Apple, including indirectly, i.e. all the way down its supply chains, are collectively generating wealth for the company.
Just imagine how much fairer it would be towards all these people who did the actual work, if the profits generated from every iPhone, every iPad, every MacBook sold (and so on) ended up in their pockets instead.
Even if we accept that, what I find the most unjust is that (at least in my country) a shareholder will pay less tax than a worker for the same money - the money from dividends doesn't count as a regular income.
Consider that on ~40 billion revenue, Costco makes ~1 billion profit. Compare that to Apple making ~60 billion income and ~11 billion profit. Apple brings in only 1.5X more money than costco but makes 11X more profit. Sure Costco makes a lot of money, but Apple makes way more money by employing these sorts of practices. There’s rich, and then there’s apple rich.
Haha when you put it like that, it helps Apple's case. They're only making less than 10x more than Costco for all the serious technical innovation vs large-scale reselling.
very different business models and markets.. apple could be gigantic without this kind of manufacturing model, though. it's probably the rat race of management looking for carreer progression based on metrics and/or bonus. disgusting
Costco has a different business model from Walmart. Their revenue per employee is over twice that of Walmart. They keep labor costs low by employing as few people as possible. As such, they need to hire the best workers and pay them competitive wages and benefits. When Walmart wants the best workers, they also treat their workers well like with truckers and researchers at Walmartlabs.
This is why the meme about Walmart is subsidized by the government is completely preposterous. With Walmart was forced to, they could restructure their company to support the Costco model and lay off a million people.
> With Walmart was forced to, they could restructure their company to support the Costco model and lay off a million people.
I'm not so sure it's that simple. Costco has higher revenue per employee because the price per item is much higher. The customers who can afford to shop like this are comparatively much wealthier than those who shop at Walmart. That being said, Walmart does exactly this with their Sams Club locations. It's certainly a profitable business model, but the market is smaller than the customer base that Walmart serves.
Granted, I haven't been to a Costco in several years, but I thought the primary appeal of Costco was their low prices. I doubt that people want to drive to a store in the middle nowhere where everything is sold in bulk, on pallets, unless if they were getting a good deal off of it.
Costco has low prices per unit of product. But they are sold in large quantities so price per SKU is high. This is why Costco has low labor costs. A cashier scanning one average item at Costco is something like $20 in revenue, but at Walmart it is something like $5 revenue -- for the same human labor. (I remember seeing real numbers for this at one point but I can't find them.)
While a middle income person might be able to buy a month's worth of groceries at one time, and fill their freezer and pantry, lower income people often do not have the cash flow to afford making grocery trips that large. Even if the unit price is slightly higher at Walmart, they have no other option, because they can't afford to buy $50 of beef at one time if their entire shopping budget $50.
This is a dangerous oversimplification. Yes, you can increase the chances of getting rich faster by being dishonest, and in the cases it works, you can get spectacular results (like early Microsoft) or you can get caught and finish in jail. But many businesspeople get good results by a combination of already having some initial capital, the right idea in the right time, some talent and willingness to work and take some risks to make things happen. Many of these don't ever consider anything unethical. But of course only the worst cases get publicized.
I call this idea dangerous, because it stigmatizes all successful people, not just the bad ones. Accepting this kind of collective responsibility is as repulsive as racist statements.
