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Margins over manpower

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Amazon just laid off over 14,000 people. According to Beth Galetti, Senior Vice President of People Experience and Technology at Amazon, who wrote that they are ‘Staying nimble and continuing to strengthen our organizations’, “The reductions we’re sharing today are a continuation of this work to get even stronger by further reducing bureaucracy, removing layers, and shifting resources to ensure we’re investing in our biggest bets and what matters most to our customers’ current and future needs.”

What are the ‘biggest bets’ they they are investing in? Chips. AI chips. Profits before people. Margins over manpower. The human equation in a company no longer matters. People are as expendable as office supplies. Need cost savings? Fired employees save a lot more money than reducing the cost of paper and staples.

The shareholder model of capitalism is slowly collapsing. It’s the middle and upper middle class that is getting laid off. Meanwhile, large companies like Nvidia invest billions of dollars in Open AI, and Open AI takes that money and buys Nvidia chips. Simultaneously, all these companies lay off staff to amplify margins, buy more chips and grow even larger.

Top executives who are already making millions hit their shareholder targets and get bonuses. Meanwhile regular employees face layoffs and have no job security. You think your $200,000 job is safe? Only until the next quarter’s earnings are going public, or until the merger is completed after your small company is swallowed up by one of the big guys.

If it was just Amazon, that would be one thing, but similar reports of layoffs have recently been announced at IBM (9,000 jobs in the US alone), UPS (34,000 jobs), Nestle (16,000 jobs), Intel (24,500 jobs)… the list goes on. What happens to the global economy when hundreds of thousands of people become jobless while large companies recycle their money, reinvesting in each other in circular deals where funding is promised back to the investors in product purchases?

What happens in a world where profits and margins matter more than people?

Profits and wages

It’s easy to see that capitalism is broken. Oil & gas, food, delivery, and online shopping companies have had record high profits shared with their shareholders in the past few years, while the workers in the same companies fight for a living wage. And the gaps get bigger. One thing not always recognized is that even when a ‘decent’ wage increase happens, it often benefits the wealthier employees more.

Here is a simple example of a company giving everyone a 7% wage increase. This is what it translates to:

  • A $25,000 a year employee gets an additional $1,750 before taxes.
  • A $40,000 a year employee gets an additional $2,800 before taxes.
  • A $75,000 a year employee gets an additional $5,250 before taxes.
  • A $150,000 a year employee gets an additional $10,500 before taxes.

The end result is that the gap gets bigger.

I believe that there is room in the world for social democracy. That we can lift the wages at the bottom without undermining a company. The only thing stopping this is the expectations of shareholders. Companies need to be beholden to their employees and customers first, and then shareholders.

I don’t see a workable way forward to fix the broken shareholder model, but it is undermining the balance between work and life in a free and democratic society. Surely the well-being of a company’s employees has to matter more than lining shareholder pockets… because it seems to be more and more of an either/or scenario, and the shareholders seem to be winning.