Think Daily for Businesspeople Messages
Say I am paying a team of guys to dig a giant ditch with shovels. They can only move so much earth a day with shovels, so I can only pay them $5 an hour. The only way I can pay them more is if they become more productive. This will involve an investment on my part – in capital equipment – in this case an excavator. If I invested $150,000 in an excavator, I can pay the operator $25 an hour. Some jobs will go away (shovel operators) and others will be created – in manufacturing, servicing, selling and marketing the excavators.
Wage growth comes from productivity gains. Productivity gains comes from capital investment (facilities, software, machinery, etc.) But business owners will only make capital investments if they feel safe about the future, feel the risk is worth a potential reward and profits will not be taken away by excessive taxation, and if they have access to financing in stable financial markets.
If we don’t have a safe environment for businesspeople and entrepreneurs, we don’t have capital investments, innovation or wage growth for workers.