Bonuses Matter?

The great tax cut of 2017 got me a $1000 bonus, what a deal!! My company really company really cares that I participate in their windfall. I mean, what’s not great about that. We need, okay, want a new car. Our 2008 Chevy is showing its age. I’m gonna get a brand new 4×4 Ford 150 super crew cab pickup. I mean with that back seat, the entire family rides in style. And since gas prices are low, I’m gonna get that big ass engine. My bonus will almost cover tax and license and I can drive that baby off the lot with a big fat zero down. Man, this is gonna be sweet. Let’s do it.

Uhmm. Let’s see how this works out in reality, for the company and the employee. Let’s start with the company. They have a one time fixed cost, $1000 per, and it’s done. All of course tax deductible for them. No permanent increase in payroll or payroll related costs – social security, unemployment insurance, benefits, retirement contributions (if any), accounting (no changing all that employee payroll data et al), and most important, the employees and the general public now sees us as generous, good corporate citizens sharing our new found wealth with our people. The rest of, the bulk of, our windfall goes to senior management and shareholders. Man, this is sweet.

What about our truck buyer? Let’s see. A $1000 bonus is equal to a one year pay increase of $83.33 a month, or $19.23 a week – for one year only. Next year, nada. One time, one off bonuses, feel good. They often lead to irrational financial behavior. But unlike say, Wall Streeters who get really massive annual bonuses, that $1000 changes nothing for that family’s financial health. Even if the recipient puts that bonus in a 401K or similar long term savings plan and never touches it until retirement … it will grow to roughly $7200+/-, with an average rate of growth of 6% (our candidate is 35 and will retire at 70). Doesn’t really change the future for the recipients of those $1000 bonuses.

However, if the business provided a permanent raise in salary of $19.23 a week, forgetting interest or other accumulation factors, over that same 35 years, that’s $35,000. That’s a hell of a lot more than $7200. But that $1000 in my pocket all at once feels nice. It plays well in the media. The reality is, even if it helps, really helps an individual or family get through to the end of February, come March, nothing’s changed. Except that senior management and shareholders have made out really, really well.

Is the bonus in and of itself a bad thing, no. Is it a way to make us feel good, appreciated, while continuing to shaft us out of our fair share of the fruits of our labor and creativity, absolutely.

For the past four or five years, big business has been setting new profit and earnings records almost monthly. Could they afford, have afforded, a $1000 a year raise for hourly employees? Yes. Could they have afforded a $1000 raise every third or fourth year? Take a look at the financial records of the publicly held corporations. Yeah, they could have without missing a dividend or lavishing money on senior management. Will they? Ever? Can the “government” make it more or less likely?

Ask yourself this. Is there any record of Manuchin, or Ross, or DeVos, or Pruitt, or Zenke, or Ivanka – Jared – Don Jr. – Eric paying their line employees well? Any? Even one? Is there any record of tresident prump paying hourly people, or contract people, well? For djt, the record is actually cheating anyone he could out of everything he could. Remember what he said about his projects in Atlantic City, NJ? “I took a lot of money out of there.” Everyone else that touched ’em, lost either a lot of or a shit load of money.

You decide.

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