woensdag 22 augustus 2012

Fairness of high earners

So we have been angry about the bonuses and pay of bankers. Well mainly because something big has gone wrong, because if our economy still would have been strong, we wouldn't be complaining. That is how lazy we are when it comes to our principles!
So now we speak of unfairness of their millions and demand these bonuses to be slashed! Well, there are more cases where people clearly earn tot much for the added value to society they create. Let's have a look at football players. There a lot of players earning £10,000 or more a day! http://www.paywizard.co.uk/main/pay/vip-celebrity-salary/football-players-salary These are the wages that are starting to get comparable with those of bankers. These employees are just kicking a ball and provide Saturday afternoon entertainment...... You might think that as long as the clubs can pay it, it is fine, well it is not.
- Big part of their salary is paid by companies who use them to persuade you in buying their products. Eventually, you pay for it. Can you imagine what the price of these products would be without marketing and these ridiculous salaries?
- It sends the wrong message to people about your pay needing to be equivalent to what you have added to society. It stimulates the grabbing of money no matter what costs for others.

http://www.dailymail.co.uk/sport/football/article-2055140/Premier-League-wages-FIVE-times-Championship.html

The reason for this, mainly the first bullet, is we people like to follow other popular people. We have a tendency to create pyramids of followers and in the process blowing the hype up. Money only translates the process into numbers. If clubs can pay for the salary, it doesn't make it worth it for society in the long run. We have a strong habit of assessing if something is good or not by looking at the economic viability, but we forget that the economy is based on people and big groups of people can make bad decisions. We made a decision to blow up our lending capacity....until we lost trust in that and now we have a major credit crunch.

Maybe there comes a point in time we start to see that marketing is similar. We eventually pay for it, because it is part of the normal costs to run a big company and these costs are part of the price you pay when buying a product. This means you are actually paying to be persuaded to buy the product you buy. This would be ok, if it means that the product can be manufactured in bigger amounts and reducing costs in the process, but a lot of products have long passed that point and a lot of products actually use their popularity achieved by their marketing to raise profits. So they do a lot of clever marketing, you pay for the marketing, but because the product is so popular because of it, they not only add the costs of marketing, but also raise profit margins. They have changed the price elasticity and create a hype or trend.


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