I just can't help thinking about the math when it comes to how terribly corps are treating their employees. I wanted to lay it out and see if maybe I was missing anything. I'm going to do 2 examples based of where I work and where my wife works.
I will be making a few assumptions:
- Labor is the most expensive business cost. This is pretty much a fact but for the sake of argument lets call it an assumption.
- Calculations based off the average labor cost. Since I know what the companies start at, but I don't know everyone's compensation exactly, I'll be making assumptions on the top end.
- Estimations of some business costs like Cost of Goods Sold and Rent and Taxes. I'll be making some estimations based of my experience running operations for multiple companies.
First, my Job. I work for a big box retail pharmacy as a manager.This store starts at $15/hr, $16/hr for Supervisors and $17/hr for managers. I managed to negotiate $18/hr. The manager in training starts at $22/hr. The manager makes salary.So the average hourly rate is $18.5, but probably lower because there are many more people making $15/hr than $22. We'll still stick with $18.5. The store should be staffed at around 30 employees, but regularly runs on 15. We'll assume that the store is fully staffed for the sake of numbers.
So, on average, the store will spend 18.5 * 40 * 30 = $22,200/wk in Labor. Add the manager who probably makes about $60k/yr or roughly $1200/wk for a total of $23,400/wk for labor.
The store makes between $100k -$140k/ week. So average of $120k/wk.General knowledge dictates that labor will be around 30% of your income.120,000 * .3 = $36,000/wk would be the typical amount spent on labor.
$36,000 – $23,400 = $12,600/wk extra they could be spending on employees. Or roughly 50% more. This company could be paying an average of $30/hr and still make profit.
Lets look at the other business costs to get a rough estimate of exactly how much profit this store is probably making.
Labor: $30,400/wk
COGS: 20,000/wk
Rent & Utilities: $12,500/wk
Insurance: $4000/wk
Taxes: $9000/wk
Total Cost to run business: $75,900/wk
$120,000 – $75,900 = $44,100/wk IN PROFIT on average. Remember this is assuming a full staff, which the store did not have my entire time working there, so the labor costs are usually even lower!
Now lets look at my wife's job. She works for a major, nationwide grocery store that originated in California as a crew member. They are currently starting at $15. My wife currently makes $22.5/hr after 9 years with the company. The supervisors make around an average of $25.
Manager: $2000/wk (100k/yr)
30 Supervisors: $25*30*45 = $33,750/wk (30 supervisors at $25/hr for 45hr/wk)
100 Crew: $20*100*35 = $70,000 (100 crew at $20/hr for 35hr/wk)Total Labor per week: $105,750
The store makes between $700k and $1.2m per week. Average of $950k/wkat a typical 30% labor they should be paying $950,000 * .3 = $285,000/wk. Again 50% more. They could be paying an average of $50/hr and still be under the projected Labor os 30% of profit.
Using the same estimates as before, total cost to run this business
Labor: $135,750/wk
COGS: $285,000/wk
Rent & Utilities: $18,000/wk
Insurance: $40,000/wk
Taxes: $250,000/wk
Total cost to run business: $728,750
$950000 – 728750 = $221,250/wk IN PROFIT on average. I know this company is currently running with about 30 people less than full staff, so again, actual labor costs are probably lower.
I don't have a problem with companies making a profit. But if they put their labor costs at what they should be, they could still be making great profits while taking care of people. So next time you feel like you're not getting paid enough…the math confirms it.
Edit: Included business insurance but forgot to add health insurance. You can assume this is going to be around 30% of your labor cost and add that on top, but still didn't change the outcomes much.