What would you do (as posed by Frank Lipsky)? “I own a small manufacturing business with 100 employees. My company makes a $1 000,000/year profit or $10,000 per employee.I have a proposal to automate my production line that when implemented will produce more product at less cost and eliminate 50 employees; i.e., my profit per employee will double to $20,000 per year.I will get richer, but 50 employees will lose their employment.”
My take on Frank Lipsky’s intriguing question (see below, with responses) is that it is possible to do both the ‘smart’ business thing and the ‘responsible’ thing.
A business owner would be a fool not to do the thing that reduces his costs and increases his productivity and profits. So, he must do the ‘smart’ thing.
In also doing the ‘responsible’ thing, he should raise the wages of the remaining workers so that they share in the increased productivity (which, with the help of unions, is what was done for a good fraction of the 20th century). He might pay for training some of the laid off workers to maintain the new equipment, thus rehiring them in new and necessary positions as skilled workers. He can further aid the remaining laid off workers by paying for some job retraining so they have skill-sets to sell to future employers.
Keep in mind that every single thing the business owner can do as listed above is also tax deductible as either a depreciable or straight-expensed tax write-off.
At the end of the day and after having done all these things, the business owner should make more money, while wages also rise and even laid-off workers are given a chance to continue making a decent living.
Thus, a “Virtuous Cycle” prevails.
COMMENTS [re-formatted and edited for clarity – Mike]:
Frank Lipsky, Lehigh University: Here is gigantic gift from me to for [sic] Bernie Sanders and Elizabeth Warren. Read and study closely and forward if you agree:
“I own a small manufacturing business with 100 employees My company
makes a $1 000,000/year profit or $10,000 per employee.I have a proposal to automate my production line that when implemented produce more product at less cost and eliminate 50 employees i.e my profit per employee will double to $20,000 per year.I will get richer but 50 employees will lose their employment”
By [virtue] of the free enterprise system as espoused by Republicans[,] I should proceed!!
Is their anyone out there that does not understand that the benefits/ (profits) of higher productivity/profits via automation(forget outsourcing[,] which is worse) should be shared by [individual] and general public services
Frank Lipsky Lehigh University
PS Why is our educational system so bad that this example is not an exam question for graduation from high school
David Sandler: This “example” is facile. It reflects basics economics, not political leanings. This is the process of increasing productivity per worker which any business would pursue. Doesn’t even rise to “trickle down”….
Joseph Anthony, Dublin, Ireland: What will the remaining 50 employees have to do? Will they now need to know how to run those machines? Repair them? Maintain them? Or will the remaining 50 employees be unskilled workers?