Higher Wage for Higher Age
In America, it is traditional that the longer you are with a company the higher salary that you will make. Therefore 50 and 60 year olds make more than 20 and 30 year olds. This tradition gives a surplus to society by allowing American salaries to keep pace with increasing living standards and to cover higher mid life expenses such as college tuition for children. There was a recent article in the New York Times about how Circuit City laid off 8% of its workforce because their workers were being paid too much. So they eliminated jobs and will replace the laid off employees with new employees who will accept lower salaries. Obviously, they laid off the older workers rather than the younger workers. This is not an employment law class so I won’t go into detail about age discrimination. Economically, we know that paying workers based on ‘time on the job’ isn’t the most productive way to have a salary base. Paying a salary based on performance or productivity makes more sense. Those with more experience would receive higher pay due to prior knowledge and learning curve that in turn would relate to a higher output. The move by Circuit City however, is a very aggressive move to cut costs. 3,400 people will now no longer be able to afford their product and the PR nightmare that will ensue is going to cost them in advertising and legal fees. So is this a good move? I am sure there are a lot of companies that will be watching Circuit City real close in the upcoming months to observe the fallout of this attack. If Circuit City escapes unscathed then more companies will follow suit and start eliminating higher paying positions and then rehiring those same positions at a lower wage. I seriously doubt that the overall benefit to society is going to be positive. Less pay to Americans leads to a lower living standard. We are so worried as a county about increasing every other country’s standard of living, maybe we need to look in our own backyard first. When did increasing the dollar to the shareholder become more important than the dollar to the worker who produces the product? How is the shareholder going to get that dollar if no one can afford to buy the product?