Risk and the employer-employee relationship

In my post about how the employer-employee relationship is unfair to the employee, Ogre wrote in a comment:

Did you ever wonder why it is "stacked" in favor of the employer? It is because the employer is the one putting EVERYTHING at risk. … More risk = more reward.

Who has more risk? The employer or the employee?

The risk of the employer is vastly exaggerated. A business, once it’s established, continues to make profits year after year based on its accumulated capital, and becomes a relatively risk-free proposition.

Furthermore, the ownership of businesses is distributed. Take for example the large public corporation. Most of the shares are owned by institutional investors who have a diversified portfolio of many different investments. So if a business goes completely under, none of the owners of the business are hurt very badly unless they were stupid enough to put all of their assets into a single company. When a business is wiped out, the workers are the ones who lose their only source of income. The situation is, in reality, a lot riskier for the employee than it is for the employer.

Republicans think that business ownership is so safe that they want to create “private accounts” for Social Security and force everyone to become partial owners of large businesses. They consider this safer than the current setup.

The only time a business is really risky is in its brief startup phase, and even then, the venture capitalists who own the business have probably not put all of their investment money into a single business, but have spread the money around so a single business failure doesn’t wipe them out. In fact, the venture capitalist expects that some of the businesses he invests in will fail.

The sure result when a startup business fails is that all the employees of the startup business are out of jobs, while the owners, if they are wise, have hedged their bets and are not hurt too badly. Once again, we see that business is riskier for the workers than for the owners.

So Ogre’s argument doesn’t hold up to scrutiny.

Comments

[Sigmund, Carl and Alfred]

This post is even dumber than the one below.

To simply dismiss the hard work it takes to establish a business indicates to me a complete and utter lack of understanding of even the most basic concepts of business, economics or common sense.

You are the reason there ought to be movement to have a means test for bloggers. It is rare to see an idiot such as yourself in full bloom.

Most institutional investors are pension plans. Unless you plan on taking in your neighbors granny for a few years, shut the hell up and let them pay their dividends in peace.

Your social studies teacher, besides being an idiot like yourself, lied to you.

[Chloe]

I've always wondered why people think a big boss in a company is at more risk than an employee on the bottom rung. Owners and higher ups get paid more for their harder work. So that's not something that I would think should be included in the equation. If anything, it means they have more cushion if they do lose their job (having been paid more in the first place).
Of course a small, family business owner... balancing on a shoe-string, probably has a lot more at risk than the employee of a national company. But I didn't get the sense that's the scenario being discussed here.

[Ben]

Thank goodness for name calling, which can effectively prove anything! (Feel free to stop by my uneducated blog and make fun of me too, Sigmund. It'll be fun for the whole family .)

Seriously, though, a distinction needs to be made, all ya'll, between private start-up businesses, which put their owners at considerable risk (what are you going to put up for collateral?), and public start-up businesses, where much more of that risk is dispersed, although it still exists. They are two very different beasts.

I can assure you that my (funded by private equity investment) business was 'risky' when it started and will remain 'risky' for many years, because of the industry in which it operates.

But falling into thinking that the Republicans have all the answers is, frankly, lunacy. (See how I set up that straw man and knocked it down? Ooh!) And like Chloe wrote, that's not the issue being discussed here.

[Sigmund Carl and Alfred]

The vast majority of business and employers are small businesses.

This isn't rocket science, folks.

Just popped in on your blog, Ben. I'll have to look closer but you don/t seem like an idiot at all. Unlike you know who.

[Mango]

Jesus Siggy, you just brought a tear to my eye.

Abigail...

I don't even know where to begin.

I read this article a few times, in the hopes that I could somehow understand where you are coming from.

I don't have the words.

Do you REALLY believe that business has no risk? That all a business has to do is establish itself, and they will then magically turn a profit?

You intentionally make it sound as if an employee has no marketable skill other than performing the current job they have. If a business vanishes, the employee can SURELY get a job somewhere else.

The employee/employer relationship is not as one-sided as you claim that it is. Take for instance Boeing. Due to the incompetance, unlawful and unethical behavior by a few employees, three entire business units were suspended from government contracts for over a year. In addition, they will potentially lose billions of dollars in future dealings with the government.

There is risk. You shouldn't dismiss their risks, just because you don't see them.

I don't even UNDERSTAND the point you were trying to make with Social Security.

If businesses are SAFE once they are ESTABLISHED, then putting Social Security money into these SAFE, ESTABLISHED companies, by your logic, would be safe investments.

[Sigmund Carl and Alfred]

There is no point. She is an idiot.

[gilda]

Young lady, what's all this I hear about tacks on fossil fuels? How will this help our economy? Is there something special in the tacks? Are they made of some special metals? Who is making these? Aren't most tacks made in China or Mexico or Honduras? How is this going to save gas? Oh. You support taxes on fossil fuels? In that case, that's crazy. I'm an old lady and I can't afford any more tax. Bitch.

[Ogre]

I think at this point it would be worthless to point to such "low-risk" companies such as Enron, Winn-Dixie, and US Airways. I guess filing for bankruptcy means they are continuing to make unlimited profits at the expense of the employees. Why is this argument starting to sound like Karl Marx?

[Kender]

As a business owner I can tell you that you have no clue what you are talking about. My employees can get another job in a heartbeat, and only because thy are freinds of mine and I treat them as such and not as mindless employees do they stay, (they get at least one other job offer a week), but if I go under as a business owner I must go back to work for someone else, and then I am no longer my own boss deciding my fate by my choices,but must rely on someone else to make wise decisions that keep me employed.

Get a grip lass.

[TJ]

Wow, Abigail - I didn't know it was possible to be literate and yet so ignorant of how the world actually works, as you show in this post and many others. Although it does possibly explain why you are someone "who could never afford to buy any kind of house" (your words) ... perhaps you should spend more time learning a valuable trade, instead of professing your special brand of ignorance on your blog?
(That's what I did, including working my way through college, and look at that - I *can* afford a house and a family (and my wife stays home with our beautiful baby), in a very expensive part of the country no less)

Please note that when I say you are ignorant I do not mean it as an insult per se; as calling you an idiot would be. It simply an observation of your lack of understanding ... and more importantly, it can be fixed! There might be hope for you yet ... all you need to do is admit the problem and seek help.

Good Luck!
/TJ
NIF