Wednesday, November 4, 2009

Fun With Numbers

I heard on TV (and dang if I can recall what show) this guy making the case that Wal-Mart could pay their employees a better wage. The guy based this on the profit that Wal-Mart made. When the TV host posed this question to Wal-Mart, the answer was no, if they raised wages they would have to raise prices and the consumer would not go for that.

Mmmmm I thought, the Wal-Mart guy did not address his question, that is, with the profit Wal-Mart makes, why can't some of this go back to the employees?

Now before y'all start brandishing me a socialist-profit hating-share the wealth guy, here me out.

Profit - The positive gain from an investment or business operation after subtracting for all expenses. opposite of loss.

Net Income - In business, what remains after subtracting all the costs (namely, business, depreciation, interest, and taxes) from a company's revenues. Also called earnings or net profit.

So if I have my understanding correct, there is profit and then there is net income which is profit less all these other costs. So net income is truly what is left over after all expenses have been taken out.

Now lets see what will happen if Wal-Mart were to give every one of their 2.1 million employees a bonus of $1000.00 each. OMG! That totals to $2.1 Billion Dollars, there is no way they could afford to do that without raising prices for me the shopper.

What was their net income? $13.59 billion

Which means that if you took $2.1 billion away from this (15%) they would still have over $11 million to do with what they want.

So the way I look at is not spread the wealth but spread the benefit. They could improve 2.1 million peoples life or day and all it would cost is 15% of their net income.

There is something wrong with how we share success. Why so few reap the rewards is upsetting, but then when you realize that this net income often comes at a real price from those they use to obtain it, it makes you wonder why we support this model so unequivocally.

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