I was reading a series of complaints by some pretty small offshoot organizations that are getting their dose of publicity. For one, I heard about it’s parent- NARAL- the National Association for Repeal of the Abortion Laws. The other claims to be a group of unions (Working Families Party) that has electoral power- results for which I can see no evidence. And, in this case, neither seems particularly powerful- unless you count 8 protesters as a major event.
About what were they complaining? Netflix‘ new policies. The policies that provide 1 year paid maternity to its higher paid employees. Because Netflix is not providing those same series of benefits to its line workers, to its lower paid staff. (These other folks are able to collect unpaid leave- for a much shorter time period.) The issue is that some people think this Netflix situation is a new example of the inequality that exists in the workplace. (It’s easy for me to say that Netflix should offer at least some pay- either 1/2 for 12 weeks or full pay for 4 or so of the 12 mandated weeks. The Netflix division in question is profitable- even if it is not “sexy” in today’s vernacular.)
I am not saying that it isn’t inequality or potentially unfair. I’m certainly not saying that it would be nice if Netflix were to offer these grand benefits to all their employees. But, I am saying this concept- of offering different benefits to different employee classes- has been the policy forever.
At my first professional job, long before there was an “inequality” issue- not the one at Arlee Cleaners- but the one where there were engineers, scientists, administrators, executives, and hourly workers. For those folks who were paid hourly, they were provided vacations of one to three weeks, dependent upon their length of service. And, they had to wait 90 days to be covered by the health care plan.
For folks like me, the vacation policy provided two weeks the first year, which was extended to five years over time. Our health care benefits cut in almost immediately- the first day of the month after we were hired- as along as there was sufficient time to process our paperwork. For the executives, their benefits were better still. They had longer vacations, better health care benefits- and of course, better salaries.
My own manufacturing company wasn’t much different in its policies. We paid our staff way more than the minimum wage, but the hourly folks got two weeks of vacation after 18 months- and that increased by 1 day per year of service up to a maximum of three weeks. Their health care was also provided- but they had to contribute $ 50 a month toward the cost of coverage. The salaried staff received the same health care plan (with the same required $50 premium co-pay)- but we were also willing to provide insurance for their families- with a higher copay. (I really can’t recall if we offered family coverage for all our employees.) The salaried staff’s vacation benefits were also the same for everyone. And, everyone was allowed to participate in our 401(k) plan and receive profit sharing. Of course, profit sharing was pro-rata based, upon the ratio of their annual pay to the total compensation of the firm. So, they received smaller portions.
Were we being unfair? Should someone like our COO who had a master’s degree in chemical engineering with 20 years of professional experience obtain a better benefit package than someone who graduated from high school? I certainly thought so- and none of our directors thought otherwise.
But, the ratio of pay of our executives (including me) was pretty tight. For our professional services firm, it was set at 2.9 compared to the lowest paid full-time employee. For the manufacturing firms, the ratio was 7.8. (Please note these were not average page- but compared to the lowest paid individual. We never considered using an “average pay ratio”.) In my case, I put in 50, 60, or 70 hours a week for those firms- the hourly lowest paid hourly employee worked 40 hours. So, there was plenty of parity involved.
Even though The Family and Medical Leave Act of 1993 is a Federal law, it only applies to the larger firms in practice. Which is why less than 20% of U.S. employers offer paid maternity leave (2012 DOL data). Most of the rest of the firms (72.6%, which includes larger and smaller company sizes) offer no such benefit to any of their employees. That leaves the rest- 7.5% of all employers- that offer the benefit to only some of their staff. (Note that Netflix offers the mandated benefit- unpaid leave to its hourly employees- but more generous benefits to the higher paid salaried employees)
And, in Netflix’ case, there are plenty of people available who can be hired to stuff DVD’s into envelopes. Or work in their warehouse. But, there probably are very few who can conceive, write, act, or direct in the “House of Cards”. (Yes, I know these folks are not really Netflix employees!) Or, program systems that can let folks view their desired videos on various devices across the globe. So, those sort of folks need benefits that would keep them attached to the Netflix universe. That’s what sets the benefit disparity.
But, not every company thinks like Netflix. After all, Hilton Hotels just decided that EVERY mother is entitled to 10 weeks paid leave. (I am guessing the other two weeks mandated by law would be unpaid.) And, 2 weeks for every father. And, 3/4 of Hilton’s 40,000 member staff are hourly folks- performing tasks like housekeeping, catering, and customer service. And, yes, those folks are easily replaced- but Hilton would much prefer to stop training new folks all the time- and they further hope this new policy will make their staff far more enthusiastic in meeting the desires of their hotel visitors.
This benefits disparity still leaves the bigger issue- the real inequality issue in our economies. There is a big problem with corporate executives making more than 20X the compensation of their lowest ranked or paid employees. Given that many companies feel “generous” paying those folks $ 8 an hour (“more” than the minimum wage, of course)- why should their executives be paid more than $ 160 an hour? That’s $ 320K a year. A 50X upper limit in pay would provide a top pay of about $ 1 KK- unless they raised the pay of their lower paid workers. (Notice that I am using executive to lowest paid employee ratios; the vernacular is executive pay to average pay, which means the lower limit has been blended to a much higher value.)
If these corporate executives think they need more pay- they should pay those folks who produce the things they sell more than they do. No executive contributes 100, 500, or 1000 times that of the efforts of their staff members. It’s that simple.
And, that’s the real inequality issue that needs correction.
Happy Labor Day, y’all!
