When I read business articles and studies I often look between the lines for the hidden truth. I need to do this to be a successful investor and a learned human. In my my world, there is never enough information that needs to be analyzed. In the article and video I reference about the cost of sick days to companies by industry, there is a clear argument about the worth of workers. If the data is correct and true then, clearly, the average worker is well underpaid.
In the article, the cost of a sick day to the corporations is $341/day. Working 2000 hours or 250 days a year at $341/day this works out to be $85,250 per annum. The average American workers pay is far less at roughly $96 per day or $24,000 per annum, according to recent statistics, working the same 250 days a year. It is this discrepancy that made me write this post. Interestingly enough, as an aside, $24,000 is also very close to the American poverty line. This correlation will be the subject of another post in the future.
Back to the subject, the free market of employment would rationally require the corporations to only keep the workers that could produce a profit higher than their annual pay. If the cost of a sick day to the corporation is $341/day then it would follow that the worker produces at least that much in profit daily in order to be employed. Clearly, they do based on the figures above.
While corporations think short term (by the quarter) and I think long term (a year or more depending on the metric), perhaps the executives of the corporations feel this cost can be absorbed by the diversification of risk by the number of employed workers during the quarter. Mathematically, it does work out that way, but this doesn't change my premise that the average American worker is grossly underpaid.
When you turn to an industry which is paid by commission, like the entertainment business, the cut a manager or publicist earns is often 10% of the gross pay of the client. Ten percent is considered fair. If you turn to the legal profession, the cut a law firm takes in a successful lawsuit is 33%. This is also considered fair. There are surely one off's but these two figures cover most of the range of commission paid industries. Even Apple charges around 30% to the content producers like recording companies and the movie industry. While I consider this to be too high a price for distribution, many others don't and have eagerly signed up. Since iTunes is doing incredibly well, it must also be considered fair for those using the traditional business model.
If we take a roughly median cost of employment at 20% and compare that to the gross margins of the most successful public companies, you will find them about the same at 20%. Logically, it would seem a worker should be paid 80% of the profit they earn per year to be fairly paid. After all, the corporations and investors deserve a return for the risk they take. Yet, in America, the typical worker is paid much less than the $272.80 per day or $68,200 per year that they deserve when using the same metric.