Economics #101: Losing Jobs vs. Higher Profits, Why?

People ask: “Why are we losing jobs when corporate profits are at an all time high?”

It’s a good question. The answer is: Because the people on top are on compensation plans based on ever increasing profits. I will explain:

There are two ways for a company to increase profits: Sell more stuff, or cut costs. It is very difficult to sell more stuff; so they cut costs.

There are two ways for a company to cut costs: Get more productive, or cut expenses out of the business. It is very difficult to get more productive; so they cut expenses out of the business.

There are two ways for a company to take expenses out of the business: Reduce spending on everything from parts to perks, or get rid of people. It is very difficult to reduce spending on everything from parts to perks; so they get rid of people.

There are two ways for a company to get rid of people:  Take out a few highly compensated people, or a lot of middle and lower level employees. It is very difficult to take out a few highly compensated people (they have contracts and connections and are often involved in the decision making process themselves; remember: The Queen of Hearts never cried, ‘Off with my head!’); so they cut lots of middle and lower level employees out of the business – and freeze hiring, just to be sure.

This results in higher profits (which is a good thing), but it also results in higher goals for next year (which is a bad thing). So, the process endlessly repeats itself until the company is fully automated, except for the contract assembly work done offshore, and there are no employees at all; except for the CEO and a compensation clerk.

The compensation clerk is a Temp.

And then they are acquired.

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