Social Question

ETpro's avatar

Do top hedge fund managers work 2,000 times harder than those earning minimum wage?

Asked by ETpro (34594points) April 6th, 2013

In 2012, the US average pay for a fast food worker was $18,720. Hedge fund managers averaged $1,037,151 or about 55 times what a fast food worker earned, and this is before bonuses which can run into the millions or, at top funds, the billions. The top hedge fund manager made $4 billion in 2012, or 2,136.75 times the earnings of a burger flipper.

We often hear right-wing appologists for the wealthy say that poor people just need to work harder. Can we assume from the numbers that the top earning hedge fund manager really works 2,136.75 harder than the people who serve up our burgers and fries in fast food joints? How about how hard janitors, sewer workers, garbage collectors and maids work? Ever tried picking tomatoes all day in the scorching sun?

How much good do hedge funds do for society? Would we be way better off converting all our food servers, farm workers, janitors, sewer workers, garbage collectors and maids into hedge fund managers?

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30 Answers

bookish1's avatar

We used to explain the difference in wealth and status with the merit of inborn superiority. Now it’s the merit of “hard work,” but it’s still the same process of accumulating wealth within elite families, and manipulating the government to keep the wealth there.

whitenoise's avatar

Don’t worry, this will trickle down and everyone will benefit.

Just wait.

and wait.

and…

zenvelo's avatar

My answer will seem contrary to my liberal beliefs.

The basic assumption in the question is wrong. Wages to work level are not a linear progression.

But there are hundreds of thousands of fast food workers. There is only one hedge fund manager that earned 4 billion.

Back in his last full year at Drexel Burnahm Lambert, Michael Milken earned $550 million dollars. He earned just a bit more than all of McDonalds Corp for the same year.

Yes, it is an obscene amount of money, but people are willing to pay the hedge fund manager, just as they were willing to pay Milken. These people earn based on what they are able to earn on the accounts they manage. And so they definitely earn their pay.

I would prefer a discussion based on the ratio of CEO pay to skilled worker wages at most corporations. Those are much more disproportionate, because the Compensation Committees of the hand picked boards pay the CEOs a fantasy figure that has nothing to do with how well they run the company. CEOs drive a company into the ground and still earn millions. That I consider absolutely sinful.

phaedryx's avatar

Smart work and skilled work trumps hard work

But yeah, pretty unbalanced

elbanditoroso's avatar

It doesn’t matter – your question is spurious.

Pricing on items that you buy is not based on what it costs to manufacture – it is based on the perceived value of the item. Which is why you can buy an IPhone for $700 and Nokia for $100 – the perceived value of an iPhone is much higher.

Same principle for salaries. People get salaries not based on the difficulty of the work they do, or the amount that they work. It is based on the value that they bring to company that they work for (and their cleverness at negotiation of a contract).

So to ask if they work 2000 times harder is really a false issue. It’s cute and populistic, but it is irrelevant. The fact is that management of that company felt that employee X at a hudge fund was valuable and was worth paying that amount of money. How that (or even if that) compares to Joe Blow working at Home Depot – is totally irrelevant.

This is the capitalist system. Like it or not.

flutherother's avatar

The management of our banks thought they were doing such a good job that they paid themselves millions of pounds in bonuses on top of already inflated salaries. They did such a good job that they went bust and had to be bailed out by the taxpayer to the tune of £500 billion.

This is the capitalist system. Like it or not.

bookish1's avatar

@elbanditoroso: Even if the question was posed in a specious manner, it still points to fundamental problems. To me it seems like the basic question is indeed about value, as you discussed. What does it mean that as a society we value the work of a hedge fund manager 2000 times more than we value the work of the illegal immigrant who picks the food he eats, cuts his lawn, or takes care of his children?

Linda_Owl's avatar

Hedge Fund Managers have had a good education (possibly paid for with their Father’s money or their Mother’s money). Too many people who only earn minimum wage, have not had the opportunity to secure an education like the one received by the Hedge Fund Manager. The Swiss have regulated the amount that the ‘Hedge Fund Managers’ can make & they pay their minimum wage employees much better than we pay them in the United States. And I think that they invest in the infrastructure of their country. None of this is done in the United States. Instead, we continue to fund the Military Budget for fighter jets that cost $1.5 TRILLION DOLLARS & now the US is going to start cutting Social Security. The US is cutting the things that America needs, in order to give America things it does NOT need (such as Corporate Welfare). America’s approach to Capitalism is (at best) unrealistic, & it is definitely skewed toward the wealthiest Americans.

zenvelo's avatar

But @bookish1 , “we” are not paying them! Their clients are. And since Hedge Fund managers take clients of high net worth, those who are paying them pay them well for making them much more money!

It’s hamburger and french fries customers who pay the fast food worker, and they don’t want to pay more for their junk food.

elbanditoroso's avatar

@bookish1 – I’m not defending US society, don’t get me wrong. I think that things are way off kilter, largely due to the excesses of capitalism and greed.

The problem for the world is that other ways of governance and economic planning don’t work. Communism is/was a bust. Socialism as currently practiced around the world is a slowway to commit national suicide. Planned economies fail. Dictatorships take the worst of all combinations and are ultimately doomed.

So capitalism is what we have left, imperfect as it is. (I personally am a fan of regulated capitalism). But we also, at least in the US (and it seems in the UK) have this view of capitalism as totally free anything-goes markets, and that’s not good either. It just takes longer to fail.

So what does it say about our values? Why not ask the “prosperity churches” that say that religion makes you rich? Why not ask the Catholics who control billions of dollars in assets? Or the Mormons who are superb business people, and the Mormon Church that also owns vast amounts of real estate?

If I were a cynic (who me?) I would say that religion exists to impart values that makes its members wealthy…

SavoirFaire's avatar

“If wealth was the inevitable result of hard work and enterprise, every woman in Africa would be a millionaire.”
George Monbiot

linguaphile's avatar

A while ago, I went to Waffle House and while waiting for my food, I watched one cook manage a few waffle irons, two full griddles of eggs, pancakes and meat, an egg poaching contraption and a cooker for grits—she alone cooked all of the food that was ordered and every seat in the restaurant was full, with a line waiting out the front door. She was able to crack 3 eggs at a time while watching everything cooking and did this in a fast, fluid motion for the hour that I was there, nonstop. I watched her with admiration since I knew her dexterity, focus and efficiency would never be rewarded beyond her Waffle House wages.

Hedge fund managers? Pffth.

ETpro's avatar

@bookish1 Thanks. That’s a pretty definitive answer to the current false argument that farm workers just need to work harder.

@whitenoise Yeah, well it’s only been 30 years. I think the trickle may finally start with those at the top get so full of money they explode.

@zenvelo & @elbanditoroso I have no illusion about pay scales being tied to hard work. Pointing out what nonsense that is was the whole point of this question. I’m just echoing the current right-wing rhetoric that claims that the only reason poverty is increasing in America is because 80% of the population has suddenly gotten lazy, and that migrant farm workers are takers while hedge fund managers are makers.

@phaedryx Definitely.

@flutherother The question was meant to look at the right-wing lie that hard work is the key to riches. But the bonuses Wall Street banksters took for collapsing the world economy is a pretty clear rebuttal of the other lie that they are compensated based on the worth they produce. Actually, hedge fund managers are the exception that proves the rule there. They are a special subset that does get paid for their ability to rip off one group of über rich people and transfer their wealth to other über rich people. The produce little or no value to the society in general, but are compensated better than royalty.

@Linda_Owl Education is clearly the key to the kingdom. That’s why it’s so important we privatize, voucherize and segregate it so only those at the top already get a decent education while the unwashed masses get taught how to wash the bosses clothes, and little more.

@elbanditoroso There are models out there that avoid the pitfalls of laissez-faire capitalism and the ills of government managed economies.

@SavoirFaire Great saying. I will add that to my quotations database.

@linguaphile Realistically, would you rather eat a nice hot plate full of eggs and grits, or a hedge?

bookish1's avatar

@ETpro : Oh man, I could start a rant about education. But I’m kind of drunk, so I’d better not…

Dr_Lawrence's avatar

Capitalism has its merits but when it is a system run amok, it destroys all the benefits of democracy and leads to an exploiting class system as bad as the caste system of India.

ETpro's avatar

@bookish1 It’s Satruday night. I’m right there with you.

@Dr_Lawrence So true.

woodcutter's avatar

They will be soon

ETpro's avatar

@woodcutter Sadly for society, you may be right about that. There should be a more rational way.

woodcutter's avatar

Oh I think we are far past that…don’t you think….really?

ETpro's avatar

@woodcutter I’m the eternal optimist, but in this case, I must sadly agree.

Jaxk's avatar

I’m not sure how to respond to this question. We can use the services of a hedge fund or not, the same way we can use the services of a maid or gardener. We can choose to use a very highly paid maid, gardener, or fund manager or we can choose to use a very cheap one. If you think anyone of these people are overpaid, don’t use them. Get your financial advice from the lady at the Waffle House instead of Warren Buffet. I’m sure Buffet will be devastated by your loss.

As always, liberals don’t understand the argument so they create a strawman and then make fun of it. The work you do has worth and you are paid according to the worth of that job. If you think all jobs have equal worth, then you should be getting you financial advice from the Burger King. Let us know how that works for you.

linguaphile's avatar

@ETpro, I’d much prefer the Hedge’s income over the Waffle House income, along with that plate of eggs and grits!!

But after watching Undercover Boss, seeing people around me work fast, hard and long for very little money, reading Nickle and Dimed by Barbara Ehrenreich and myself putting in 80+ hours of work a week for $29K a year… I know for a pure, indisputable fact that hard work does not equate more income.

I’m not sure how one person gets into a lucrative career and another ends up at Merry Maids, but I think already having the money that opens the doors to certain careers is a huge factor.

ragingloli's avatar

More like 1 / 2000

ETpro's avatar

@Jaxk As always, liberals don’t understand the argument so they create a strawman and then make fun of it. There you go again. I understand growing wealth inequity just fine, and so do you. So you launch off on some false course, then falsely claim it’s a straw man I created. You never fail.

You know very well this is not about whom to hire. This is about the future of a nation. Will we continue to have a middle class, or will we destroy it completely in order to further enrich a few plutocrats.

@linguaphile I feel your pain.

@ragingloli Yep, I think a day or two doing migrant farm work would land a top hedge fund manager in the ER or the morgue.

whitenoise's avatar

The problem is that we do not just reward merit with money, we also reward money and power with money. And money and power are to a big extent the same.

So while we would all like to think that a free market comes close to a meritocracy, in reality that is not the case. Even when people start off being rewarded for their merits, once they have gained enough money from that, the link with their merits is gone and their accumulated wealth will continue to grow in a self sustaining cycle..

If a meritocracy is your strive, the only way I see, is to stop rewarding capital, the way we do now. However… I wouldn’t know how to implement such an alternative in a fair way, either.

Maybe a regulated free market in a democratic setting is best. The democracy then needs firm and reliable protection, though.

Should we consider to take away property rights to land? Stop or limit inheritance? I don’t know, those systems come with misery as well. The law of the commons says that anything not owned by someone runs a high risk of neglect… Besides we all feel it is right to leave something to your children.

Maybe we need to realize we need to work on this continuously. One thing is for sure… as we are going now, we will run into a wall some day. Focus on the excesses, for now?

Jaxk's avatar

@ETpro

As usual you see a few guys making lot’s of money and immediately scream “THIS IS WRONG”. The truth is, setting up a hedge fund is fairly cheap and easy. It doesn’t take a rich guy to do it and rewards can be huge or non-existant. The difference between the two is not how hard you work but rather your performance. If your fund performs well, clients will beat a path to your door. If not, you will go broke. According to this guy you can start your fund for less than $500. Of course that doesn’t include getting the customers.

I would think this is the American dream. Start with nothing and if successful make a fortune. If not successful go broke. Of course if you screw it up, you can also go to jail. Hedge Fund managers that are successful not only make a lot of money for themselves but also for thier customers, Everybody wins.

Hedge funds aren’t much different than any other business. The better you perform, the more customers you get. The more customers you get the more money you make. The only real difference is that with hedge funds, the number of customers is virtually unlimited. And like any business, it’s not how hard you work but rather how well you perform. I’m not saying there’s no connection between them but working hard doesn’t neccessarily bring prosperity. What you seem to be advocating is equal outcomes rather than equal opportunity.

ragingloli's avatar

As a wise man said, “The world is your oyster, if you are a Con Man.”.

ETpro's avatar

@Jaxk How can you be so far right and so far wrong? This is not about a few guys doing well. We are deconstructing the middle class that it took us 60 years to build, the middle class that drove our economy. In its place, we are building an ever more wealthy 1%, a top quintile that’s getting ahead, and funding that with money extracted mostly from the bottom 3 quintiles. My concern has nothing to do with a few guys doing extraordinarily well. It is all about the fate of our nation and whether we really want to make it the banana republic it’s on track to become.

Jaxk's avatar

@ETpro

I doubt that we will ever agree on what the problems really are or how to correct them. It seems that every thing you want entails reducing the earnings of those that make more than you think appropriate. Somehow this will bring things back into balance. You also seem to believe that if I make a million bucks, I have taken it from the poor. You complain about Hedge Fund Managers and say they taken their income from the Bottom 3 quintiles. How the hell does that work?

There is one place where we might agree. I’ll give it a try. Corporations have grown incredibly large. Our tsunami of regulations hurts the small businesses much more than large corporation so they get bought up or merge. This reduces competition, reduces jobs, and incentivizes the corporations to pay higher and higher CEO salaries. It pretty simple, the CEO of a billion dollar company will make more than the CEO of a million dollar company. And of course, the FTC approves all these mergers and acquisitions. I would certainly like to see some modification to the rate of mergers and acquisitions. I would also like to see some reduction to the cost of entry for new companies. More competition and more new ideas would give us a better and broader business base for our economy. The details to doing this become fairly complex and once again, I doubt we would agree on how to do it.

ETpro's avatar

@Jaxk I most definitely do agree that we;re facing a growth of corporatocracy, and that is harming small business (the real engine of job growth) and society in general. As to how we can fix that, I am not entirely sure. It’s a trend affecting the entire globe. Not easily tackled from any one perspective.

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