UnderCover Waitress: Executive Pay, Trickle Down Theory, and Waitress Tips

Monday, July 11, 2011

Executive Pay, Trickle Down Theory, and Waitress Tips

Next time you run yourself ragged all night long and then, at the end of the evening, discover that you have brought in ten to fifteen percent before tipping out, read this article:

Executive Pay at Big Companies Rose 23 Percent.

Ain't capitalism great? If this isn't proof that "trickle down economics" is a crock, then there is no hope.

Despite the soft economy, weak home prices and persistently high unemployment, some top executives are already making more than they were before the economy soured.


Most ordinary Americans aren’t getting raises anywhere close to those of these chief executives. Many aren’t getting raises at all — or even regular paychecks. Unemployment is still stuck at more than 9 percent.

Trickle down economics is the theory that rich people create jobs when they are flush. Any business owner knows this is a fallacy. Business owners create jobs when there is a demand for their business products or services. They create jobs to meet this demand. When there is little demand, they have to lay people off because without customers spending money, business owners cannot afford to pay employees. Think about it. Who pays employees to sit around picking lint out of their navels just because, "Well, I'm rich enough to afford paying people to do nothing, so that is what I'll do." Yeah, right.

If companies like Mobil and other big companies spread their profits to their employees, then more people would have money to buy goods and services. For example, the employees might be able to not only afford a house payment, but a new roof. Suddenly, roofers have work. You see, the employees are not just paying roofers to do nothing because, after all, the employees are flush. They are paying roofers to give them a new roof.

This is not "trickle down." In trickle down, the company gives the profits to the top people and assumes everyone else will get rich while the top few spend money; it does not work this way because the very rich are too few to fund the entire economy. Let's continue with the story that Mobil spread its profits among the workers via decent salaries:

So, the roofing company hires a couple of new people to meet the demand for new roofs. And they all go out to dinner to celebrate a job well done. The waitress is thrilled to get a table that is spending money;  she gives them great service and earns a twenty percent tip. The restaurant has to hire another waitress to meet the demand.

DogWalkBlog posted a great explanation of this just this past weekend. In addition to being intelligently written, Rufus is always an entertaining read. I do hope Eric Cantor is a dog lover and, therefore, reads Rufus' blog. The best is the last paragraph which I won't quote; hit the link and read the whole thing, it's worth it!

Or, we can do what we are currently doing: let the top men keep all the profits while the rest of us simply scrape by.


  1. I think you said this better than I did! You used that voice in my head...

    Now I have to know if Eric Cantor is a dog lover. 2:1 odds he owns a cat :-)

  2. True confessions: I am a cat lover. I hope we can still be friends. ;-)


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