Vault's Careers Blog

Career advice and job search strategies for the modern careerist

Should Profitable Companies Still Cut Salaries?

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Let’s imagine for argument’s sake that you’re one of the 90 percent of American adults who is working. Not only that, but you’ve got a job with a company that managed to make a profit even during the darkest days of the recession, and has so much cash on hand that it’s doling out generous dividends to its shareholders.

Sound like a reasonable time to ask for a raise? And even if it doesn’t, you definitely wouldn’t be expecting to be fighting against wage and benefit “givebacks,” right?

As The New York Times reported last week, employees of a Mott’s apple juice plant in upstate New York have been facing exactly that scenario since May. Plant owner Dr Pepper Snapple Group feels that “the Mott’s workers are overpaid compared with other production workers in the Rochester area, where blue-collar unemployment is high.” Accordingly, the company is seeking “a $1.50-an-hour wage cut, a pension freeze and other concessions to bring the plant’s costs in line with ‘local and industry standards.'”

Plant workers are understandably peeved by the plans, and have been on strike for more than 90 days. But the case is interesting for more than just the simple labor dispute at its heart—the Times points out that “[f]or unions across the country, the stakes are high because if the Mott’s workers lose this showdown, it could prompt other profitable companies to push for major labor concessions.”

The case is also being presented as another example of “corporate greed” running amok, with the president of the union claiming that Dr Pepper Snapple “just came in and said, ‘we have no financial need for this, but we just want it anyway because we figure we can get away with it.”

At a time of heightened focus on the growing economic stratification in the U.S., the case raises a number of interesting questions. Chief among those: whether a company that’s making a profit should be demanding givebacks from employees, regardless of local conditions.

Additionally, the case also highlights the severe income disparities between workers at the top and bottom of corporations. An employee at the Mott’s plant pulling in $15.00 an hour would make $120 for an 8 hour shift—not counting benefits—a figure that comes out to an annual salary of less than $30,000. According to Forbes, meanwhile, Dr Pepper Snapple CEO Larry D. Young pulled down a base salary of more than 30 times that figure in 2009—a total of $934,616. Factor in stock awards and other compensation, meanwhile, and his total for the year rises to some $6.5 million.

As ever, we’d love to hear your opinions: is the proposed action by Dr Pepper Snapple justified because of the local market conditions or does the attempt to effect cost savings from employee salaries despite making a profit just seem mean-spirited?

–Phil Stott, Vault.com

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Written by Phil Stott

August 23, 2010 at 3:07 pm

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