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Innovation in France
May 11, 2012 3:45 PM Subscribe

"Nicolas Sarkozy did very little about fostering innovation — he didn’t have a clue. As for François Hollande, the strongest part of its electorate (largely composed of teachers and other public servants) opposes any rapprochement between private sector and public higher education. And let’s not mention the underlying “ideology” of venture capital, carried interest, IPO’s, flexible employment rules, etc. Hollande’s supporters will also oppose any removal of cobwebs from the 102-year-old labor code that greatly complicates the management of companies employing 50 or more people. As a result, France has 2.4 times more companies with 49 employees than with 50..." - Francois Hollande’s Start-down Nation
posted by beisny (79 comments total) 8 users marked this as a favorite

This is neoliberal anti-Hollande nonsense barely based in fact. Thank you but when your main concern is "innovation", you are usually concerned with ways to innovate more work out of lesser paid employees. France is one of the few places that has strong rights for workers left in this world and I'm happy to see that they got fed up with their right wing privatizing Bush-clone and remembered the left.
posted by dis_integration at 3:57 PM on May 11, 2012 [68 favorites]

While I understand how larger companies can help generate more wealth (which is not a bad thing), on the other hand I live in a city where the median size of a tech sector company is about 30 employees.

The tech companies here grow organically - they depend on revenues to fund growth, rather than infusions of venture capital. So, while they are called "mom and pops" by a faction of people in British Columbia who are all about fostering growth companies, technology companies here tend to last a lot longer. Many of the larger and more profitable companies are the ones that survived (and learned from) the dot com meltdown of 2000.

A great contrast with my town is nearby Vancouver, which is often awash money from, if not VCs, M&A plays. As a result, although Vancouver has developed into a gaming powerhouse, it is not an IP powerhouse. Companies develop a game, are successful, get bought by Disney Interactive or whatever, and then become service centers, dependent on decisions and money from out of market.

So I don't think it's as simple as changing the labour code. It's more about fully understanding what fosters a healthy knowledge/creative economy. And, in my experience, governments no matter what their ideology, just don't get it.
posted by KokuRyu at 3:58 PM on May 11, 2012 [3 favorites]

The point of a country isn't to make life easy for nebulous internet social coupon advertising cloud businesses.
posted by Damienmce at 4:00 PM on May 11, 2012 [51 favorites]

...2.4 times more companies with 49 employees than with 50

So...small businesses, then? The things we're constantly being told are the backbone of our economy? Nice to see France is so friendly to small business!

Meanwhile...One of the largest employers in my little part of Indiana is a French glass company. One of the largest (if not the largest) in the world.

I think France will do just fine by eschewing the US model of screwing your workforce and calling it "innovation".
posted by Thorzdad at 4:11 PM on May 11, 2012 [19 favorites]

The point of a country isn't to make life easy for nebulous internet social coupon advertising cloud businesses.

To be fair, Silicon Valley social-mobile start-up crap is not the end all and be all of American innovation. Think of all the innovative financial products we came up with when government finally had the sense to get the regulators out of the way.
posted by snofoam at 4:12 PM on May 11, 2012 [7 favorites]

Thorzdad, the statistic isn't about small businesses. The point is that that 49 is not the "ideal" size of these companies, rather companies don't grow beyond that number because the regulations change dramatically at 50. Per the article:

Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones. “I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies,” Thierry Breton, chief executive officer of consulting firm Atos and Minister of Finance from 2005 to 2007, said at a Paris conference on April 4. “I’d ask, ‘Why companies?’ He’d say, ‘Oh, I have several so that I can keep [the workforce] under 50.’ We have to review our labor code.”
posted by beisny at 4:15 PM on May 11, 2012 [3 favorites]

I was in Paris when the election results were called in favor of Hollande. I found it telling that almost every single chant I heard on the march to the rally at the Bastille (and all the enthusiastic ones) were anti-Sarkozy, not pro-Hollande. Hollande was barely mentioned.
posted by Vhanudux at 4:16 PM on May 11, 2012

Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

That sounds awesome.
posted by jsturgill at 4:21 PM on May 11, 2012 [28 favorites]

Probably more reasonable to say France and the US are at opposite
extremes when it comes to labor market regulation, and like many things the optimal solution is somewhere between the two.

My GP said I have throat cancer, but my astrologer said it's just Mercury's ascendance. The truth is somewhere in the middle. One mechanic said my transmission is blown, another said I need new brakes. The truth must be somewhere in the middle. I can't remember if the capital of Nebraska is Lincoln or Omaha, but the truth is, as always, somewhere in the middle.

It is not a reliable principle that median points are inherently more correct or valid, not at all. There's no evidence of this and none that can be produced.

It's a commonly-promulgated principle because it gives the impression of considered impartiality while requiring no actual critical thought. Frankly, it's a very dumb and fallacious idea, and the fact that so many people lazily pass it off as wisdom reflects an inability or unwillingness on their part to engage meaningfully whatsoever with the subject. It's substantially more embarrassing than saying nothing at all about a subject one knows nothing about.
posted by clockzero at 4:23 PM on May 11, 2012 [127 favorites]

“David Allen and others like him make money by companies hiring them to get more out of their employees. The advice is not in the interest of the common person,” he says. “Productivity should increase the number of bliss-filled moments you have in your life.”
posted by KokuRyu at 4:23 PM on May 11, 2012 [1 favorite]

What a balanced and interesting analysis of France's economy! Now excuse me while I eat this hamburger.
posted by mek at 4:23 PM on May 11, 2012 [5 favorites]

Thorzdad, the statistic isn't about small businesses. The point is that that 49 is not the "ideal" size of these companies, rather companies don't grow beyond that number because the regulations change dramatically at 50.

Yes, I know. But, so what? Laws are always arbitrary, or end up seemingly so. Be honest, though...It's not the silly-seeming 49/50 cut-off, is it? It's that there are legal workers rights at all, right?
posted by Thorzdad at 4:24 PM on May 11, 2012 [1 favorite]

My GP said I have throat cancer, but my astrologer said it's just Mercury's ascendance. The truth is somewhere in the middle. One mechanic said my transmission is blown, another said I need new brakes. The truth must be somewhere in the middle. I can't remember if the capital of Nebraska is Lincoln or Omaha, but the truth is, as always, somewhere in the middle.

It is not a reliable principle that median points are inherently more correct or valid, not at all. There's no evidence of this and none that can be produced.

It's a commonly-promulgated principle because it gives the impression of considered impartiality while requiring no actual critical thought. Frankly, it's a very dumb and fallacious idea, and the fact that so many people lazily pass it off as wisdom reflects an inability or unwillingness on their part to engage meaningfully whatsoever with the subject. It's substantially more embarrassing than saying nothing at all about a subject one knows nothing about.

If I had magic powers I would tattoo this on the sky.
posted by threeants at 4:25 PM on May 11, 2012 [16 favorites]

Thorzdad, the statistic isn't about small businesses. The point is that that 49 is not the "ideal" size of these companies, rather companies don't grow beyond that number because the regulations change dramatically at 50.

All companies, everywhere that has real regulation, do things like this to avoid hitting various arbitrary limits beyond which they have to do things they don't want to do. It's not unique to France.
posted by clockzero at 4:26 PM on May 11, 2012 [3 favorites]

Well clock zero thanks for the kind words. Why don't you now declaim on the absolute superiority of either the us model or the French model. With data.
posted by JPD at 4:27 PM on May 11, 2012 [6 favorites]

The US has like 10x the number of employers with less than 50 employees than bigger firms. As we know America is a socialist paradise compared to deep red France.
posted by humanfont at 4:27 PM on May 11, 2012

I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies

Which is to say he has no data to support his allegation.

There are now 2.9 million people out of work in France, almost 10 percent of the workforce and the most in 12 years.

US unemployment is 9.1%, but that excludes workers who have given up, including those people makes it about 14.5%.

By the statistical tests set out in this article the US would be better off under French labor laws.
posted by humanfont at 4:36 PM on May 11, 2012 [4 favorites]

High GDP per capita, high Human Development score, relatively low inequality, and 10% unemployment. Not to mention a fairly good welfare state. Some of the labor laws might need shifting or tweaking, but the model is hardly that bad. There are many flaws with the Anglo-Saxon model, so we've no place to throw stones. Maybe France will liberalize their labor code when the US make "at will" unemployment unlawful? What do you prefer, workers' councils or Walmart?

I would like to see a happy medium, but if we have to pick sides, I know where I would rather live.
posted by Jehan at 4:36 PM on May 11, 2012 [2 favorites]

Yes but in this case the argument that middle ground between heavy state intervention in the labor market and laissez-faire labor markets actually is optimal.

Even if you accept this extremely reductive metaphor which seeks a golden median on a linear gradient, where on the curve between Soviet Russia and Objectivist Dystopia is France? How do you quantify and map "state intervention"? And by doing so, aren't you assuming that the sheer quantity of state intervention is the important factor? Isn't what that intervention is doing, and whether or not it achieves its outcomes, more important than sheer quantity?
posted by mek at 4:37 PM on May 11, 2012 [9 favorites]

I wonder if having an effective limit on the size of a company is in some ways, a good thing which fosters variety and competition rather than rapid domination of one market niche by a single entity.
posted by Zalzidrax at 4:41 PM on May 11, 2012 [2 favorites]

Hollande’s supporters will also oppose any removal of cobwebs from the 102-year-old labor code that greatly complicates the management of companies employing 50 or more people. As a result, France has 2.4 times more companies with 49 employees than with 50..."

Here's the thing - 10 companies of 49 people should theoretically be able to do the work of one company with 490 employees. They can sell services to eachother - one company has payroll and HR management software, another does design, you have a programming company, hardware design company, manufacturing outsourcing management, etc.

Obviously for "Big, industrial" stuff, you need a large workforce. But for intellectual work, you don't gain much in terms of economies of scale. And it's not like those companies don't exist.

Would it be inefficient, sure. But the "efficiencies" in huge corporations simply means more in salaries for the top people and more dividends and stock buybacks for wallstreet. An employee doesn't benefit working for a 490 person company over a 49 person company - and the 'inefficiencies' actually mean more jobs for people. Certainly not in a country where you have to worry about how good your employers healthcare coverage is.

There's no real reason to arrange society in order to benefit billionaires, who are really the only people who benefit from huge mega corps.
posted by delmoi at 4:43 PM on May 11, 2012 [15 favorites]

almost every single chant I heard on the march to the rally at the Bastille (and all the enthusiastic ones) were anti-Sarkozy, not pro-Hollande. Hollande was barely mentioned.

Perhaps it's just that "Sarkozy" rhymes so well with "finis"?
posted by emjaybee at 4:45 PM on May 11, 2012 [1 favorite]

I wonder if having an effective limit on the size of a company is in some ways, a good thing which fosters variety and competition rather than rapid domination of one market niche by a single entity.

As delmoi points out, there is some good that can come from more small businesses and fewer big ones. However, if owners have a slew of small businesses to get around labor laws, there might be much less competition than expected. It all hinges on how and how well lots of small businesses can be organized by their owner to work together, and whether not they are really a "single entity" for most intents and purposes. I don't know the answer to this, however.
posted by Jehan at 4:51 PM on May 11, 2012

An employee doesn't benefit working for a 490 person company over a 49 person company....

Depends on which 490 person company and which 49 person company.
posted by IndigoJones at 5:00 PM on May 11, 2012

Metafilter: nebulous internet social coupon advertising cloud businesses
posted by symbioid at 5:00 PM on May 11, 2012

Wow, the author has some pretty strong feelings about this Hollande character, for all the negative adjectives he tosses around about the guy for a few paragraphs before getting to the data. At which point, the underlying point seems to be throughout "labor keeps holding business back."

You know what? I can live with business having some reins on it. I get a little tired of hearing management acting like a glutton who visits the buffet every day, discovers one morning that there's now a 10 plate limit, and throws a fit. Hollande, the supposed socialist Anti-Merkel, is proposing such radical ideas as putting a cap on the salaries of managers of public companies ... to be no more than 20 times the salary of the lowest paid employee. That's still a pretty damn good salary.

But no, Hollande is standing in the way of "innovation" or, as it is also known, an ever-accelerating pace of consumption on a managerial level.
posted by Marisa Stole the Precious Thing at 5:10 PM on May 11, 2012 [12 favorites]

I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies

Joe le Plombier, for example.
posted by George_Spiggott at 5:20 PM on May 11, 2012 [3 favorites]

Yes but in this case the argument that middle ground between heavy state intervention in the labor market and laissez-faire labor markets actually is optimal. You do realize sometimes the median is actually the message right?

JPD

False dichotomy. It could be the answer is a different sort of state intervention. Your premise is flawed.

My GP said I have throat cancer, but my astrologer said it's just Mercury's ascendance.

To be safe I've decided to irradiate Mercury.
posted by Sangermaine at 5:28 PM on May 11, 2012 [2 favorites]

Here's the thing - 10 companies of 49 people should theoretically be able to do the work of one company with 490 employees.

You know the difference between theory and practice, right?
posted by Etrigan at 5:30 PM on May 11, 2012

An employee doesn't benefit working for a 490 person company over a 49 person company - and the 'inefficiencies' actually mean more jobs for people. Certainly not in a country where you have to worry about how good your employers healthcare coverage is.

The employee benefits greatly from being in a 49 person company. They are much much closer to upper management. It is also better for society as a whole, because there are that many more people making top management decisions, and that many more people ready to take on CEO jobs. That should, among many other positive effects, help reduce CEO salary.
posted by Chuckles at 5:41 PM on May 11, 2012 [6 favorites]

Realistically there are tasks which collectively require more than 49 people to achieve. Heck, there are video games with larger design teams.
posted by mek at 5:43 PM on May 11, 2012

Is it just me, or does anyoe else suffer from the problem where seeing any figure without a citation in a mainstream publication causes a little blinking bullshit light to go off, and that I can't rest until I independently verify it?

In any case, did you know that they fear regulation so much in France that there are almost twice the number of companies with 0 employees than there are companies with 1 or more employees? Just imagine the regulatory savings you can make with the elimination of all employees!

Meanwhile, in comparison to the US (a country which sadly has not developed the entreprenurial skills to have collect data on the 0-employee company), the distribution of company size looks almost the exact same: about 80 per cent of companies have 1-9 employees, about 20 per cent of companies have 10-49 employees, and a couple of per cent of companies have 50+ employees.

Disregarding the weirdness of France's love of 0 person companies (which have apparently made up 95 per cent of increase in companies since 2003, really would love anyone who knows French statistics to help me understand what is going on there), France and the US don't show significantly different results in company employee size.
posted by kithrater at 5:45 PM on May 11, 2012 [10 favorites]

Right, and there are regulations for protecting the employees of those larger companies. And, that's a Good Thing^TM
posted by Chuckles at 5:46 PM on May 11, 2012

The statistic for France isn't about companies with 10-49 employees companies with 50+, it's about companies with exactly 49 employees versus exactly 50. At least, that is what the article implies. They don't cite their data so we can't be certain. There should be a significant difference between those two because, all things being equal, a 49 employee company and a 50 employee company are about the same thing.

I doubt that anyone could find similar data for the U.S. though, it strikes me as weird that the data exists for France but I'd love to see a source for either one.
posted by VTX at 5:52 PM on May 11, 2012 [2 favorites]

Once a business grows beyond a certain size, I think it's fair to require the owners' needs to be balanced with society's needs. After all, it is society that enforced the rule of law that stopped the owners' gains from being stolen by some more powerful group; it is society (or the government, or the rule of law—call it what you will) that cultivated and protected the marketplace that allowed the owners to outcompete their rivals; it is society that produced the workers who are willing to work for less than the profits they generate. Good, strong businesses can only exist in good, strong societies. Harming society to benefit a business is eating your seed corn. The slight benefit realized today is more than offset by the inevitable disaster soon to come.

You can quibble about the details—maybe 50 is too high a number, for example, and the conditions should kick in sooner—but the basic premise seems 100% sound.
posted by jsturgill at 5:57 PM on May 11, 2012 [5 favorites]

Would it be inefficient, sure. But the "efficiencies" in huge corporations simply means more in salaries for the top people and more dividends and stock buybacks for wallstreet. An employee doesn't benefit working for a 490 person company over a 49 person company - and the 'inefficiencies' actually mean more jobs for people. Certainly not in a country where you have to worry about how good your employers healthcare coverage is.

Those "efficiencies" rightfully go to the owners of the company, be they shareholders (dividends to people's pension plans, retirement savings, investments) or the owners of private companies. This money also generates "more jobs" when it is spent by these shareholders or owners.

How can you expect any country to be able to compete in a global market if it needs, as you suggest, "more inefficiencies [in order to create] more jobs"? We should all dream of a more perfect world, but do you really think this dream makes sense?
posted by esprit de l'escalier at 5:58 PM on May 11, 2012

The statistic for France isn't about companies with 10-49 employees companies with 50+, it's about companies with exactly 49 employees versus exactly 50.

The argument the article make from the statistic is "France is terribly inefficient because of the laws governing a company with 50+ employees". But, when compared to the US, you have a very similar distribution of companies with 1-49 employees to companies with 50+ employees: 97.2 per cent in France, 95.1 per cent in the US. So while France still may be terribly inefficient because of these laws, the result of this inefficiency is not going to manifest itself in company employee data, because the US gets almost the same results there despite not having these laws.
posted by kithrater at 6:00 PM on May 11, 2012 [2 favorites]

Once a business grows beyond a certain size, I think it's fair to require the owners' needs to be balanced with society's needs.

That's a fine philosophy. But, if you go too far with redistribution, you reduce the incentive to expand one's company. If you have a business with forty people, why should you work night and day to grow it to maybe double the size only to have to give up a share of the profits to your employees? You're the one taking all the risk, and with the reward diminished, maybe you should spend more time sliding down the slopes of Chamonix. This is one way that redistribution makes the whole pie smaller, so that while some people might get a bigger share of it, that's no guarantee that their piece is any bigger.
posted by esprit de l'escalier at 6:04 PM on May 11, 2012

That's a fine philosophy. But, if you go too far with redistribution,

He didn't say redistribution, he said balanced with society's needs. He was referring to regulation, not redistribution.
posted by -harlequin- at 6:13 PM on May 11, 2012 [1 favorite]

That's a fine philosophy. But, if you go too far with redistribution, you reduce the incentive to expand one's company. If you have a business with forty people, why should you work night and day to grow it to maybe double the size only to have to give up a share of the profits to your employees? You're the one taking all the risk, and with the reward diminished, maybe you should spend more time sliding down the slopes of Chamonix. This is one way that redistribution makes the whole pie smaller, so that while some people might get a bigger share of it, that's no guarantee that their piece is any bigger.

Is bigger automatically better? Is the ideal end goal of every company to be WalMart? If your company can accomplish what you want it to (which presumably is the reason you started it) at 49 employees or what have you, then what is the problem? There are many companies that can thrive for decades at that size or smaller, creating excellent products for happy customers.

And what's this griping about "give up a share of the profits to the employees?" You mean, the people who are doing as much or more of the work than you are? Those employees? And you're the one taking all the risk, really? Not the people making less than you, who probably had less than you to start with, who will be out on their asses if the company fails, also?

My god, when did "captains of industry" all become such whiny-ass titty babies?
posted by emjaybee at 6:13 PM on May 11, 2012 [10 favorites]

That's a fine philosophy. But, if you go too far with redistribution,

He didn't say redistribution, he said balanced with society's needs. He was referring to regulation, not redistribution.

Regulations that impose upon a company that it should "create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons" are necessarily redistributive from the company to the worker.
posted by esprit de l'escalier at 6:16 PM on May 11, 2012

You're the one taking all the risk, and with the reward diminished, maybe you should spend more time sliding down the slopes of Chamonix. This is one way that redistribution makes the whole pie smaller, so that while some people might get a bigger share of it, that's no guarantee that their piece is any bigger.

If the business owner stays small and hits the ski slopes instead, s/he's leaving the money on the table for a competitor.

A common refrain when defending participating in activities that harm society is "If I didn't do it, someone else would have". Well, give that the right framework and it works for good instead of ill.
posted by -harlequin- at 6:19 PM on May 11, 2012

Is bigger automatically better? Is the ideal end goal of every company to be WalMart? If your company can accomplish what you want it to (which presumably is the reason you started it) at 49 employees or what have you, then what is the problem? There are many companies that can thrive for decades at that size or smaller, creating excellent products for happy customers.

Sure, that's fine. But, for many business owners who have worked for years on a business, have a dream of growth.

And what's this griping about "give up a share of the profits to the employees?" You mean, the people who are doing as much or more of the work than you are? Those employees? And you're the one taking all the risk, really? Not the people making less than you, who probably had less than you to start with, who will be out on their asses if the company fails, also?

But the owner isn't just out of a job, he's out of his investment of time and money too — including the lost income while he was building the company from scratch. It would be another thing if the employees were taking on that risk too, and they usually can if they can buy shares of the company at the fair market price. I think that's a fairer way to do profit sharing because then the owner is repaid for his initial investment.

My god, when did "captains of industry" all become such whiny-ass titty babies?

This is a childish way to participate in a discussion.
posted by esprit de l'escalier at 6:21 PM on May 11, 2012 [2 favorites]

are necessarily redistributive from the company to the worker.

You have decided that the company and its workers are separate entities. You can choose to think that way, but you should recognize that you are doing it, and that your assumption is not axiomatic.
posted by -harlequin- at 6:21 PM on May 11, 2012 [4 favorites]

But the owner isn't just out of a job, he's out of his investment of time and money too

As is everyone working for the company. The time of the owner is not intrinsically worth more than anyone else's, though it does generally seem to be compensated better.
posted by Orange Pamplemousse at 6:27 PM on May 11, 2012 [2 favorites]

That's a fine philosophy. But, if you go too far with redistribution, you reduce the incentive to expand one's company. If you have a business with forty people, why should you work night and day to grow it to maybe double the size only to have to give up a share of the profits to your employees?

Why do we want you to? As one walks down 1000 year old streets lined with organic, personalized shops owned by individual families, one does not generally think "France needs more Wal*Mart's". The whole world is not Texan

It's not just Walmart; it's also Google and Facebook. And anyway, it's not really relevant whether you think the world needs these companies or not — clearly, their customers like having them around.

Imagine if, despite having a new family, you left a very lucrative career to do your own startup. Initially, you're making nothing, and maybe after a year, you convince someone to invest you, and now you have a very modest salary (compared with your lucrative career). You're working all the time, and then there's still only a slim chance you'll make it big. If your work finally pays off, how much do you and your family deserve?
posted by esprit de l'escalier at 6:28 PM on May 11, 2012 [1 favorite]

But the owner isn't just out of a job, he's out of his investment of time and money too

As is everyone working for the company. The time of the owner is not intrinsically worth more than anyone else's, though it does generally seem to be compensated better.

I'm referring to the time and investment that came before the company was profitable.
posted by esprit de l'escalier at 6:30 PM on May 11, 2012 [1 favorite]

But the owner isn't just out of a job, he's out of his investment of time and money too

This sounds like rubbish to me. By expanding the business, he made the pie larger (as you like to point out) therefore a diminished slice can still be a larger slice. It's rare to find a system so punitive that it punishes success at a rate greater than that success. It's common to hear people whine about success being punished, but when you look at the numbers, we are in fact rewarded by more success compared to if we did not have that success, despite the increase in [whatever tax].

If someone dreams of growth, then they should grow. If regulation that ensures they do so in a responsible manner is enough that they lose interest, maybe they weren't serious enough about growth and responsibility to have been entrusted with it anyway.
posted by -harlequin- at 6:31 PM on May 11, 2012 [4 favorites]

You're working all the time, and then there's still only a slim chance you'll make it big. If your work finally pays off, how much do you and your family deserve?

More importantly, does it matter at all if you make $10 million, $100 million, or $10 billion. Because if $10 million is a sufficiently incentivizing reward, the rest is wasted.
posted by mek at 6:31 PM on May 11, 2012 [2 favorites]

It would be another thing if the employees were taking on that risk too, and they usually can if they can buy shares of the company at the fair market price. I think that's a fairer way to do profit sharing because then the owner is repaid for his initial investment.

This doesn't make much sense. The employer is most certainly "repaid" in introducing profit sharing in-house; the shared risk adds an incentive to the work force. Telling employees "You want profit sharing? Go buy shares in my company with the wage you get" is in many cases out of the question for entry level employees.
posted by Marisa Stole the Precious Thing at 6:33 PM on May 11, 2012

Also, frustration at regulation should be directed at the assholes whose abuses forced everyone else to regulate that activity by law instead of leaving it to common decency.

Anyone who says "the business of business is business" is effectively demanding regulation by demonstrating an intention to routinely ignore (and thus likely eventually abuse) open-ended freedoms society is offering.
posted by -harlequin- at 6:39 PM on May 11, 2012 [3 favorites]

Or at least, needlessly clumsy. Why do the employees need to pay back their boss for the time and effort he or she put into the company? His employees helped make that happen.
posted by Marisa Stole the Precious Thing at 6:39 PM on May 11, 2012

clockzero: "It's a commonly-promulgated principle because it gives the impression of considered impartiality while requiring no actual critical thought."

If you mix cold water with hot, you get something in the middle.

If you mix red paint with blue, you get something in the middle.

If you go up, then down, you end up somewhere in the middle.

If you create a society, it will have an economy. Though some people will advocate one pure, utopian economic ideology and others will advocate another, what you inevitably end up with is a mixture, somewhere in the middle.

Some principles that are often inapplicable are also often applicable.
posted by klanawa at 7:06 PM on May 11, 2012 [1 favorite]

It is kind of interesting to discover that the distribution of employees across firms has little to do with the regulatory and political environment. There must be some deeper social phenomena that dictates employee distribution across enterprises. I wonder of it is a byproduct of an advanced industrial country? I propose a hypothesis that it is driven by this. As an industrial economy emerges we would expect to see a few large businesses supporting a long tail of local shopkeepers and service providers. Eventually some of these service prospers might turn into large Employeers such as Walmart or Safeway. Yet there always remains a market for secondary services do long as the factory or industry remains. This market would be relative to population as people will have needs for housing, trades and food services. These portions of the economy have low barriers to entry driven by individual skill and access to modest amounts of capital eg opening a Subway sandwitch franchise.
posted by humanfont at 7:11 PM on May 11, 2012

Those "efficiencies" rightfully go to the owners of the company, be they shareholders (dividends to people's pension plans, retirement savings, investments) or the owners of private companies. This money also generates "more jobs" when it is spent by these shareholders or owners.

Yes, but they don't personally get that money. So why should they support it?

That's the thing. If there is an inefficiency in a system, that means someone is making money doing something that doesn't technically need to be done. Removing them from the system doesn't help them out at all. In theory it might help other people - but the person it most benefits is the owners/shareholders. maybe they'll spend the money and create new jobs, but maybe not. Not all spending has the same multiplier effect, and not everyone spends the same proportion of income.

How can you expect any country to be able to compete in a global market if it needs, as you suggest, "more inefficiencies [in order to create] more jobs"? We should all dream of a more perfect world, but do you really think this dream makes sense?

If I own a company in France, and I cut costs by 10%, then I take that money and invest it in a factory in China, how does that benefit France's global competitiveness?

Money is not constrained by borders, only people are. It's certainly true that cost savings can create jobs, but there is no guarantee that those jobs will stay in the country. Look at the number of jobs that Apple has created in the U.S, compared to the number created in China – jobs created by closing down 'inefficient' US plants and replacing them with 'efficient' ones in China.

If you have a business with forty people, why should you work night and day to grow it to maybe double the size only to have to give up a share of the profits to your employees?

Here's the thing: the only person who benefits from you growing by taking market share from competitors is you. The fact that you might work "night and day" (*rolls eyes*) doesn't actually benefit anyone, and we don't really care if you do it or not.

Belive it or not, the world will get along just fine if the rich decide to spend their days on ski slopes instead of the office. We don't need your work, because there is a nearly unlimited number of people who can do it. The average wall street banker doesn't actually have any more education then the average high school math teacher, for example.

Sure, that's fine. But, for many business owners who have worked for years on a business, have a dream of growth.

Again, so what? It's not societies job to indulge rich people in their dreams. And anyway they can grow larger if they're willing to put up with more stringent regulation.

It's not just Walmart; it's also Google and Facebook. And anyway, it's not really relevant whether you think the world needs these companies or not — clearly, their customers like having them around.

People have their issues with both. In Google's case, a lot of people are unhappy with the new privacy policy, but what can they do about it? If you've been using it for years, changing could be a pain in the ass. With Facebook, everyone pretty much has to be on it because everyone else is on it.

And in facebook's case, most of the main product was done with just a few dozen programmers. They could easily exist as they did in 2006 with 49 people, and I think most users probably liked it more when it was just starting then today.

---

Anyway, the point is -- there is no reason for typical employees to really care whether or not the CEOs get mega-rich or just make millions of dollars. There's no reason to care if your company has 490 or 49 people or 49,000 if there is a strong social saftey net.
posted by delmoi at 7:11 PM on May 11, 2012 [5 favorites]

Some principles that are often inapplicable are also often applicable.

Or the truth is somewhere in the middle and they are always semiapplicable!
posted by George_Spiggott at 7:45 PM on May 11, 2012 [9 favorites]

It's not just Walmart; it's also Google and Facebook.

Imagine if, despite having a new family, you left a very lucrative career to do your own startup. Initially, you're making nothing, and maybe after a year, you convince someone to invest you, and now you have a very modest salary (compared with your lucrative career). You're working all the time, and then there's still only a slim chance you'll make it big. If your work finally pays off, how much do you and your family deserve?

Or, if you're Facebook, "hacked into Harvard’s security network and copied the student ID images used by dormitories and used them to populate his Facemash website. or as somebody mentioned upthread, and to quote Zuckerberg himself, "But one thing is certain, and it’s that I’m a jerk for making this site. Oh well. Someone had to do it eventually..."[7].

Google? They built their search on the back of Stanfords network and infrastructure. Their only risk was deciding when to take a leave from their graduate programs.

Amazon? Started with a $300,000 investment from his parents.

Microsoft? His Mom was a VP at IBM, where he managed to license PC-DOS, built by Seattle Computer Products (SCP).

The "Garage Entrepreneur" is a great romantic American myth, as critical to our continued international dominance in entrepreneurship as it is false.

That's not to say Zuckerberg, Bezos, Gates and all the rest don't work their asses off and aren't incredibly smart and ruthless in business. They are, and they deserve some profit for their dedication and work.

But the risk is vastly over-stated.

In any case, did you know that they fear regulation so much in France that there are almost twice the number of companies with 0 employees than there are companies with 1 or more employees? Just imagine the regulatory savings you can make with the elimination of all employees!

To argue the other side for a bit, actually the regulatory savings between a company with zero employees and with one employees are HUGE.

When you're starting a sole-proprietorship, LLC, or C/S-Corp, you have the option of delcaring yourself an employee of the company, or just being the sole-proprietor, Member/Manager or board/shareholder, aka the Owner. In most states and cities, declaring yourself the first employee introduces a TON of paperwork and costs. In Seattle alone, you've got registering with the New Hire Reporting program, getting workers comp insurance, unemployment insurance tax registration, workplace notices and posters, OSHA rules, employee benefits requirements.

It's a mess, and if it's just you starting the business, it doesn't make sense.
posted by formless at 9:19 PM on May 11, 2012 [4 favorites]

Microsoft? His Mom was a VP at IBM ...

Just a nitpick, but Mary Gates never worked for IBM. Mary Gates and the CEO of IBM served on the board of the charity United Way of America at the same time.
posted by JackFlash at 9:59 PM on May 11, 2012 [1 favorite]

the regulatory savings between a company with zero employees and with one employees are HUGE.

Very true. However, I imagine that most cases of "zero-employee" companies are "contractors" for building and sales companies, and that there are relatively few genuine sole traders in both France and the US. I'm just really intrigued by the absolutely massive growth in zero-employee enterprises in France over since 2003: maybe it represents France catching up to the US with this kind of employment arrangement.
posted by kithrater at 10:06 PM on May 11, 2012

Imagine if, despite having a new family, you left a very lucrative career to do your own startup. Initially, you're making nothing, and maybe after a year, you convince someone to invest you, and now you have a very modest salary (compared with your lucrative career). You're working all the time, and then there's still only a slim chance you'll make it big. If your work finally pays off, how much do you and your family deserve?

I am imagining that someone is taking a risk because they believe that the potential reward is worth the risk. I am also imagining that the person taking the risk has also thought it through enough to understand the obligations they will have as an employer. Risk taking does not absolve them from their obligations as an employer, and if they feel those obligations will make it too hard to get an adequate reward compared to the risk they are taking they should just stay in their lucrative career.

I agree with you. However, if the regulations become too draconian in some country, then everyone stays in their careers; no one innovates there; no jobs are created. So, it's trite, but there's a middle ground. Personally, I think the way to find that middle ground is not in idealism, but pragmatism. That is, based on human needs, which include economic benefits.

Or at least, needlessly clumsy. Why do the employees need to pay back their boss for the time and effort he or she put into the company? His employees helped make that happen.

Suppose two lab technicians end up working at different companies and one company makes it big. Why should the lab technician at that company "win the lottery"? What about the other poor woman? What about the people who built the buildings that the companies did business in? The people who built the roads, etc. etc. I think everyone in society should get a piece of the pie. And this is why I agree with having corporate taxes. I don't understand the argument for profit sharing, but I'm open to being convinced.

If there is an inefficiency in a system, that means someone is making money doing something that doesn't technically need to be done. Removing them from the system doesn't help them out at all. In theory it might help other people - but the person it most benefits is the owners/shareholders. maybe they'll spend the money and create new jobs, but maybe not. Not all spending has the same multiplier effect, and not everyone spends the same proportion of income.

Would you be willing to make this argument when it's your money being spent on hiring someone you don't need? (E.g., a dentist that tries to push x-rays on you every six months — you know she needs it to pay back his education/investment, but do you really indulge her?)

Also, everyone spends all of their income eventually: The idea that money is just locked up in a bank account doesn't make sense. The banks lend it out, etc.

Money is not constrained by borders, only people are. It's certainly true that cost savings can create jobs, but there is no guarantee that those jobs will stay in the country. Look at the number of jobs that Apple has created in the U.S, compared to the number created in China – jobs created by closing down 'inefficient' US plants and replacing them with 'efficient' ones in China.

But, it's the other way around. You're arguing for the kinds of inefficiencies that force companies to offshore labour. I'm suggesting that domestic investment is made more attractive with laws that reward innovation.

The average wall street banker doesn't actually have any more education then the average high school math teacher, for example.

If you really believe that anyone can become entrepreneurs and wall street traders, then why don't the underpaid math teachers do it? I have a friend who did energy trading for many years and recently quit to start his own company. Do you think that he should be worried about his high school math teachers competing with him?

Anyway, the point is -- there is no reason for typical employees to really care whether or not the CEOs get mega-rich or just make millions of dollars. There's no reason to care if your company has 490 or 49 people or 49,000 if there is a strong social saftey net.

I agree.
posted by esprit de l'escalier at 12:04 AM on May 12, 2012

If you really believe that anyone can become entrepreneurs and wall street traders, then why don't the underpaid math teachers do it?

I think it's fair to suggest that for every entrepreneur, there are a thousand people who would be equally or more talented at that role who either can't get it (eg trapped because their family needs health insurance in the USA) or simply prefer to do other things, like teach kids math. Entrepreneurs aren't magical people with talents others lack.

And when you go to the really well paying jobs, the kind where you as CEO get only a paltry $1M bonus if you fuck up the year so badly a chimpanzee in your shoes would have done better, well society just doesn't have very many of those slots available - heading up a 50,000 employee company necessarily means that regardless of how many thousands could do the job just fine, the opportunity is not there for 99.999% them because there is only one slot per 50k people, and a proven-incompetent incumbent still gets chosen over an unknown with no resume. Of course, just looking at the frequent abysmal (lack of) ability on display in that sector makes it pretty clear that it's not a case of the best positions going to the best people, or that a guy who will never get the chance to do a job, wouldn't be greater at it than the guy who does get the chance to do that job.
posted by -harlequin- at 12:50 AM on May 12, 2012 [2 favorites]

there are a thousand people

Ok, I have to drastically reduce that number, because of the people I know, there's generally an entrepreneur per fifty (rough guess) when I include people who have at some time in the past worked for themselves, even though they may not still do it.
posted by -harlequin- at 12:55 AM on May 12, 2012

aaand reduce it still further if I count people likely to work for themselves at some point in the future...
posted by -harlequin- at 12:58 AM on May 12, 2012

If you pay your employees badly, they will not be able to spend money with other companies. If they pay badly, their employees will not be able to spend money with you. This is the primary economic problem of the USA - hands around each others' necks, squeezing, desperate to breathe.
posted by aeschenkarnos at 3:02 AM on May 12, 2012

Those "efficiencies" rightfully go to the owners of the company, be they shareholders (dividends to people's pension plans, retirement savings, investments) or the owners of private companies. This money also generates "more jobs" when it is spent by these shareholders or owners.

[citation needed]

Seriously though, why? Why not to the people who actually do the work? It's become axiomatic in western capitalist nations that company owners and the people at the top - shareholders and CEOs - get all the benefits of productivity increases, while workers get nothing but more work per head, less holiday, less protection from losing their job, and stagnant salaries. This happens because companies CAN, not because they SHOULD.

It has demonstrably lead to companies that are 'too big to fail' - so the vaunted risks that company owners are taking are not risks at all, as the government ends up bailing out failed businesses because the shock of their failure is considered to be too big for the economy as a whole; e.g. the banks.

It has been shown over and over and over - by Henry Ford onwards - that happy workers who work reasonable hours are more productive than those who are pushed to their physical limits. Not just in productivity/hour, but actual total productivity/worker - workers working too long (greater than about 40-45 hours a week) for anything other than very short periods make more mistakes that require correction such that excess hours are actually counter-productive.

So from an individual company perspective, 'inefficiency' - i.e. not driving your workers into the ground with overwork, but instead hiring more people and spreading the load - is actually more efficient. But bulk firings show short term profit increases, as you have a nice big cut in payroll to show off - the long term damage doesn't show up until later.

From a societal point of view, it's also better that profits go to workers, not CEOs. Again, workers will spend most or all of their income, including on the companies own products, thus increasing demand for products and services, and creating jobs. CEOs and shareholders and companies put it offshore bank accounts and sock it away for their own later use. It's largely not being spent, it's not being invested except in schemes that generate more money by market and financial manipulation; again, e.g. banks and CDOs etc.

Let me emphasize that - it's not company owners that create jobs, its customer demand for their products that creates jobs to meet that demand. Constrain that demand by cutting worker jobs, cutting worker salaries, cutting worker free-time to actually want those products and you *kill* jobs in the rest of the economy, not create them. French workers are some of the most productive in the world, yet work far fewer hours than most. For example:

France has $36,500 GDP/Capita and works 1,453 hours per year. This equates to a GDP/Capita/Hour of $25.10. Americans, on the other hand, have $44,150 GDP/Capita but work 1,792 hours per year. Thus Americans only achieve $24.60 of GDP/Capita/Hour.

This puts the French Labor Alpha at about $0.50 GDP/Capita/Hour over the US. It may sound small at first, but add that up across millions of people, and a few decades. Now you've built a lesson for the rest of the world to learn.

So the french employ more people to work less hours, but GDP/capita/hour is *higher*. They enjoy far more benefits from the state - such as good early pensions, one of the best healthcare systems in the world despite being virtually free to end-users, extensive holiday time; in addition they have longer life expectancy and overall are happier people - despite earning relatively low level amounts of money on average. This combined makes their quality of life regularly the best or amongst the best in europe. reference. And of course, the income inequality is much lower; the people at the top earn a lot less than those in the middle or bottom, which is partly why the mean is much lower for income; it's not distorted by the 1% earning silly money; actual average salaries for the bottom 85% are not far from on par with those in the rest of Europe. Which is incidentally why quality of life indexes that excludes or weights per-capita income drastically penalise the USA and take it from the top to mid-table; because the super wealthy distort per-capita income levels substantially.

So again - why is the productivity increases of workers rightfully all that of the CEOs and shareholders? Why should it not go to the workers instead through shorter hours, higher salaries, more stable employment and better quality of life, and also via taxes to pay for necessary state functions? It creates more jobs by direct increased demand instead of some vague later trickle down, it benefits the quality of life, they vast majority get better healthcare, pensions and more affordable education. The french or nordic system seems a far better model for everyone bar the super-super-rich.
posted by ArkhanJG at 4:17 AM on May 12, 2012 [10 favorites]

I have recently started up a one person business in France. There is a cliché here about businesses doing well for many years —right up to the point where they decide to take on their first employee. Many of the small family shops or market stalls one comes across would love to take on extra staff but calculate that they are financially better off not doing so. The level to which charges and regulations ramp up at this point make it a much riskier transition than is faced at the 50 person mark. There are also much more sole trader and family businesses than there are large ones– so providing better management of this transition could yield better dividends than fixing the problem for larger companies.
posted by rongorongo at 8:55 AM on May 12, 2012 [1 favorite]

It is kind of interesting to discover that the distribution of employees across firms has little to do with the regulatory and political environment. There must be some deeper social phenomena that dictates employee distribution across enterprises.

Fuck yeah, power laws! aka Zipfian distributions. There's statistical evidence showing this social phenomena, in addition to experiments with agent-based models and simple generative models and explanations like preferential attachment. The basic idea being, "The rich get richer." It's sometimes referred to as wealth condensation in economic models.

I'm guessing the social phenomena has more to do with firm profit and size then with employee size, employee size is just a good proxy for those other two things.
posted by formless at 4:28 PM on May 12, 2012 [2 favorites]

I've heard that there's a country where you're expected to get more labor protections if you're a full-time employee. It isn't actually the law, but usually you get health insurance. As a result, in this country, companies will make sure that no matter how hard you work, how well you do your job, or how loyal you are to the company, that you can't work more than thirty hours a week, so that they don't have to pay you any benefits.

Who would want to live in a crazy socialist country like that?
posted by dhartung at 5:00 PM on May 12, 2012

From a societal point of view, it's also better that profits go to workers, not CEOs. Again, workers will spend most or all of their income, including on the companies own products, thus increasing demand for products and services, and creating jobs. CEOs and shareholders and companies put it offshore bank accounts and sock it away for their own later use. It's largely not being spent, it's not being invested except in schemes that generate more money by market and financial manipulation; again, e.g. banks and CDOs etc.

Shareholders are not necessarily any richer than the "people doing the work". Shares are just everyone's investments, retirement savings etc. The idea that people can "lock their money up in offshore bank accounts" is economic nonsense. How do you think the offshore bank accounts offer so much interest? They loan that money out to other businesses.

So from an individual company perspective, 'inefficiency' … is actually more efficient. But bulk firings show short term profit increases, as you have a nice big cut in payroll to show off - the long term damage doesn't show up until later.

Surely the investors would vote in a board that would not make such poor long term decisions.
posted by esprit de l'escalier at 5:05 PM on May 12, 2012

There is a cliché here about businesses doing well for many years —right up to the point where they decide to take on their first employee.

Are you aware of anything that has changed about the regulatory environment for 0 to 1 employees in the past 10 or so years that could help explaining the large increase of 0-employee companies? Or have those laws more or less been the same for a long time?
posted by kithrater at 5:56 PM on May 12, 2012

Shares are just everyone's investments, retirement savings etc.

CEOs and shareholders are completely different things; a shareholder isn't putting their stock in their retirement savings, it's the other way around... they are putting their savings in stocks. CEOs, meanwhile, are taking a cut of profits from the company and putting them elsewhere as they see fit. Historically this could also be stocks as well, yes, but more and more now hedge funds, bonds, commodities, real estate, or even simply holding large amounts of currency (a very viable strategy in a deflationary economy). This is economically much, much less active than paying higher salaries to workers, because workers spend almost every dollar they earn in the local economy, while CEOs certainly do nothing of the sort.
posted by mek at 5:58 PM on May 12, 2012

esprit de l'escalier writes "If you have a business with forty people, why should you work night and day to grow it to maybe double the size only to have to give up a share of the profits to your employees? You're the one taking all the risk, and with the reward diminished, maybe you should spend more time sliding down the slopes of Chamonix. "

Because your workers aren't interchangeable cogs. I've seen many businesses implode when the CEOs/Owners forget that without employees their businesses will not grow. Generally the pattern is CEO shits on key/all employees; Key/lots of employees leave for positions with less drama; Company implodes because the employees leave with the institutional knowledge of how shit works. Heck on at least one occasion I was one of those key employees.

esprit de l'escalier writes "Suppose two lab technicians end up working at different companies and one company makes it big. Why should the lab technician at that company 'win the lottery'? What about the other poor woman? What about the people who built the buildings that the companies did business in? The people who built the roads, etc. etc. I think everyone in society should get a piece of the pie. And this is why I agree with having corporate taxes. I don't understand the argument for profit sharing, but I'm open to being convinced."

Why should the CEO hit the lottery? It's rarely the case where the direction of the CEO is the soul reason a company makes it big.

esprit de l'escalier writes "If you really believe that anyone can become entrepreneurs and wall street traders, then why don't the underpaid math teachers do it? I have a friend who did energy trading for many years and recently quit to start his own company. Do you think that he should be worried about his high school math teachers competing with him?"

Because some people prefer to teach and they aren't beholden to the all mighty dollar. Really it's that simple. Or they prefer to only work 40 hours a week. Or even because they prefer not to live in the sort of place a wall street trader needs to live in. (Personally NYC sounds like a horror story of a place to live).

esprit de l'escalier writes "Surely the investors would vote in a board that would not make such poor long term decisions."

You would think but there are two mitigating factors. The first is that the short term thinker is often gone anyways having made bank. Secondly even if they are fired that usually comes with significant compensation on top of any bonus they may have collected for their actions. And finally the CEO/Board member world can be fairly incestuous; there is lots of mutual back scratching.
posted by Mitheral at 8:11 PM on May 13, 2012

Are you aware of anything that has changed about the regulatory environment for 0 to 1 employees in the past 10 or so years that could help explaining the large increase of 0-employee companies?

The new "auto entrepeneur" scheme, introduced in 2009, has apparently tempted a lot of people to start businesses by allowing greater flexibility in social charges for small business owners. The obstacles of time, fees and paperwork to start a business have also shrunk in the past decade or so - once can start a limited liability "SARL" with a capital or just a euro - plus about 2-3 months of paper shuffling and, say, €1,000 in accounting fees. Many businesses which would be a partnership in other countries new operate as collections of self employed individuals. I believe there is a growing use of self employment by knowledge workers, like me, also.

Not all single traders need or want to grow massively - but I suspect that most feel that they could do with, at least, an extra pair of hands to help with busy periods. Unfortunately there remain significant barriers to growing to take on more employees at this level: from the employers point of view there are large social security contributions to be paid on top of the person's wage. The employee will also have a right to plenty of time off - notably a period of 4 continuous weeks in July or August. If the employee is lousy then firing them can be very expensive. From the point of view of the prospective employee there are risks too: working for a fragile start-up can seem like a poor reason to loose out on social security benefits. If the French government could find a way of reducing these risks from the point of view of both parties then, I believe, it would do wonders for GDP and unemployment reduction.
posted by rongorongo at 11:48 PM on May 13, 2012

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