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Large corporations paradoxically need to pay their workers only what the market requires but also enough they have discretionary money to go out and buy the products they are manufacturing.

This fails the test of basic arithmetic.

Suppose you increase your workers pay by $X and they spend the entire $X on your products. Suppose your profit margin is Y. Then for every $(1+Y) your workers spent, you earned $Y. I.e., you get back $XY/(1+Y) < $X.

So no, it's always better for the bottom line (holding all else equal) to pay your workers less. You might be able to attract better quality workers by paying more, or perhaps you can cook up incentive plans to get workers to work harder (both of these are what Henry Ford did, for example). But that has nothing whatsoever to do with workers buying your products.




But the point is that if everyone pays workers less there is no market for anything non-essential you can make. This works if you are making plastic stuff to export to the US and you are in China. It doesn't work so well if you are in the US.

In essence corporations individually do better if they pay their workers less, but collectively they die.


But the point is that if everyone pays workers less there is no market for anything non-essential you can make.

Why not?




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