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The Labor-Company Tug Of War

09/29/2022

How the hell did we get this thing so screwed up? Maybe some history will help.

Why does it seem there is so much antagonism between companies and workers? We need to take a look at how we got to where we are today by looking at the history of work, or the division of labor. For the sake of brevity, we'll limit this discussion to Homo sapiens, who emerged a little more than 100,000 years ago, although hominids have been around for some 2 million years.

Early in human history, it would make sense that we were small tribes of people, perhaps several families with four or five members in each family. We were nomadic hunters and gatherers with walking our only mode of transportation. That meant we had to go where the food went by following the animals as they migrated. In some areas, we likely followed based on the weather if we could, moving when winter was coming to warmer climates where food was more abundant.

It is likely that the first divisions of labor were based on size, strength, and sex of the individual. Small children were of little use in hunting; Some of them might have been trained in gathering but they were mostly under foot. Men, generally being larger and stronger would be hunting, fighting when needed, and if in camp, performing some of the hard labor. Women would be gatherers, fire tenders, cooks, and of course looking after the small children.

Right there you begin to see a hierarchy, a mental image in the mind of who has the most value to the tribe. The hunters and warriros, the men, were probably the most prized among the group, followed by adolescent boys, probably age ten to about sixteen. Next would be the mature women who did a great deal of work both raising children and keeping the camp running. Finally came the children, the young girls and small children. If you put that on an organization chart, you would have men at the top, in charge. Under them would be the young men about to move into manhood. The mature women were also up in the chart, followed by the young women learning to keep camp, and finally the small children who were generally not much help but were in the minor leagues waiting to move up in the organization.

We now have a power structure and by inference, a declared value of the people in the tribe. We move on several thousands of years. Over time, it's likely that smaller tribes joined up with others to form larger tribes. As these tribes moved, some of them found an area that was plentiful in game and crops and settled down to form small villages. This probably happened most often with tribes moving close to sources of water, either lakes or the oceans where food was readily abundant and, in the cases of lakes, plenty of fresh water. Even today, a majority of the world's population is located along water resources.

The challenge now, as we came together on the banks of rivers and ocean beaches was to merge the tribes, each having its unique hierarchy. You didn't need multiple chiefs in these larger tribal units and there were undoubtedly chiefs who didn't want to give up their position of power and prestige. I imagine it got messy and probably violent as they sorted out the org chart for the larger tribe. This isn't that much different than merging companies in modern time where you have to solve all the duplicity of two companies with two CEOs, two COOs, etc. But, our ancestors muddled through and we became city dwellers.

Our newly formed city, or more likely village, stretching over a relatively large area required many services. You needed some sort of street or path maintenance, empty out the latrines, hauling in fire wood, etc.; you needed people to do hard labor in the city. The locals didn't want to do this; the men were busing out hunting or fighting as warriors and the women were busy at home with the children. The answer was to raid a nearby tribe or village and take some captives to work as slaves. These were people you didn't necessarily know or like, they were merely there to do your bidding. They were given the basics for survival. A little food, and perhaps somewhere to sleep, but certainly, no pay. And, if they complained, they could be punished, or worse by their owner from the "upper class".

We now have the model, the mental image of a slave or peasant worker. Poor, miserable, unpaid or under-paid, a virtual lowlife that has to be tolerated in order to run your city, and later, your company. As urban living evolved, and we had all these slaves doing manual labor, we needed someone to ride herd on them to make sure they did the job right and didn't bolt into the bushes the first chance they got. Boom! We created slave masters, the precursor to managers and cops. As cities grew, businesses developed to provide products and services, creating a merchant class. So, now, you had several distinct classes, the ruling or royal class, the merchant class, and the servant or slave class, and never the twain shall meet.

This is somewhat condensed and perhaps exaggerated, but not that much. Look at slavery in the U.S. and around the world, going back at least as far as ancient Egypt. The Egyptians hauled slaves up from Africa to build their pyramids and to perform other works of antiquity. Slave labor has been the hallmark of successful dynasties for centuries.

It should come as no surprise that so many companies, and management in those companies consider the workforce a an unruly but necessary evil to doing business. There may be exceptions to this statement, but to my knowledge, people, the workers, are considered a liability when it comes to keeping the books in business. You will find such things as vehicles, buildings, equipment of all kinds, and even office furniture listed as an asset in the ledgers of companies because they represent "value" in the minds of the company. And the people? You will find them in the liabilities column. Here, from www.accountingtools.com is a list of short-term liabilities:

Current Liability Accounts (due in less than one year):

  • Accounts payable. Invoiced liabilities payable to suppliers.

  • Accrued liabilities. Liabilities that have not yet been invoiced by a supplier, but which are owed as of the balance sheet date.

  • Accrued wages. Compensation earned but not yet paid to employees as of the balance sheet date.

  • Customer deposits. Payments made by customers in advance of the seller completing services or shipping goods to them. If the goods or services are not provided, the company has an obligation to return the funds.

  • Current portion of debt payable. Any portion of long-term debt that is due for payment within one year.

  • Deferred revenue. A payment by a customer that has not yet been earned by the company.

  • Income taxes payable. Income taxes payable to the government.

  • Interest payable. Interest accrued on debt that has not yet been invoiced by the lender.

  • Payroll taxes payable. Taxes payable that result from the completion of a recent payroll transaction.

  • Salaries payable. Compensation owed to employees, typically to be paid out in the next payroll cycle.

  • Sales taxes payable. Sales taxes charged to customers, which the company must remit to the applicable taxing authority.

  • Use taxes payable. Use taxes are essentially sales taxes that are remitted directly to the government having jurisdiction, rather than through a supplier who would otherwise remit the tax.

  • Warranty liability. A reserve for any warranty liability associated with sales, for which warranty claims have not yet been received.

I should probably apologize for the wonkiness of this post, but I won't. I've bolded (yeah, I know that is not a verb - pipe down and follow the story), I've bolded the salaries payable in the above list. In that regard, I'll only make one more point before moving on; when companies buy a major or capital asset, they consider that an investment in the future. They typically conduct a Return On Investment or ROI study before buying the equipment or property as a way to justify the purchase and they prove it will pay for itself.

Why the hell aren't people considered an investment in the future? Whether you are hiring a trainee who will return your investment as they develop their skills or you hire a super performer type with all the requisite skills who will begin producing from day one, you are making an investment in your company that you expect will contribute to productivity, innovation, and sales and profits of your enterprise. How the hell can they be considered a liability?

If you read about how finance is structured, and liabilities and limited liabilities, concepts that came into business primarily in the 1800s, you find the definition of a liability as a debt to be paid. Thus, since an employees salary is a debt to be paid in the future, that makes them a liability. But... I always have one of those, companies make investments in land, buildings, and equipment that will be paid for over time. Few companies operate on a total cash basis. And while the remaining debt owed on land or equipment is shown as a liability, it is also shown on the asset side of the ledger as, well, an asset.

You will find statements like this as found on the PECB website, "A human being or a person cannot be considered an asset like tangible fixed assets such as equipment, because people cannot be owned, controlled or measured for future economic benefits in money terms, unlike physical assets." That is true, and we can probably understand that in the 1800s, owning assets was easier to understand and with all the fuss over slavery, we had to be careful not to claim we owned people in business.

Another statement on that same site states, "Something valuable can be an item, thing or entity, which condition and performance has an impact to our organization objectives and service delivery process. The value again can be diverse and vary between different organizations, type of business, stakeholders, etc." Again, understandable.

But I would argue that we need a new asset class that would recognize people as a critical asset to any operation. All those physical items that you paid millions and perhaps more to acquire can only sit and collect dust until skilled employees interact with those physical assets to produce whatever the company is going to sell to their customers.

If we are to make our democratic - capitalistic amalgamation work properly, business has to change its attitude toward and about employees and employees have to stop seeing the company as the slave owner and enemy. Labor unions should become more like an agent for a celebrity or athlete by negotiating the best deal for their client based on their education and skills, and not simply be a cheerleader for anti-business rhetoric.

Who has to make the first move? I think it's on the companies to "free the slaves" and let it be known they are now equal partners in the success of the enterprise by treating them as contributing partners, including a livable wage and benefits, and bonuses for delivering on planned profits, and if bonuses for exceeding reasonable projections in the form of profit sharing.