The writing prompt for week 2 of this class was rather interesting and pertinent to my current job as well as current events.
The prompt was "From your perspective, what are two of the most interesting historical ethical dilemmas that we have faced as a society? How do they relate to our reading material from weeks #1 and #2?"
"How did Adam Smith justify the ethics of capitalism? How does capitalism fit in with modern business life and how does it impact ethical dilemmas that you have seen or heard of in the workplace? Use examples to support your positions."
Besides answering the prompt, we were supposed to weave a current event from an article on CNBC.com from the business section.
Below is my response.
Human civilization and ethics have evolved over centuries. By the time Adam Smith appeared in history, he based his ideas and ethics on forbearers like Locke. While Locke recognized life, liberty and property as natural rights, he fell short in acknowledging equal rights and status of class between land owners and laborers (Schweigert, 2016). The book notes of Locke, "not only did their low station in life show that they were incapable of rational conduct, but their poverty showed their moral depravity as well" (Schweigert, 2016, p. 73). Smith went further than Locke and argued that "the property which every man has in his own labour, as it is the original foundation of all other property" (Schweigert, 2016, p. 74). Therefore, capital in Smith's view is not simply land and physical assets, but also the physical and even mental work of the individual. This idea still finds relevance in modern business life in which individual workers ought to be compensated fairly for the physical and mental work they produce, regardless of their gender or race. Even still, there are ethical dilemmas which modern workers and corporations face when it comes to pay gaps.
While there are many ethical dilemmas, generally speaking I think historical dilemmas related to pay gaps and race seem to have long-standing dialogues which impact our society even today. One article from our reading this week (Shin, 2014) discusses the pay gap between executives and average workers for American companies. It notes that the pay gap actually decreased between the years of 1940 to 1970, but then after 1970 the gap widened and then significantly increased in the 1990s. To give a sense of just how significant the pay gap grew, the ratio of CEO pay to average worker was between 30 and 120 from around 1940 to 1970, but then that ratio grew to over 270 by the 1990s. The article further noted the key drivers for how that gap either decreased or increased. If workers form a union, then the pay gap can decrease, however, if "the CEO has a finance background" or if the CEO is an external hire, then the pay gap tends to increase (Shin, 2014, p. 1339).
Related to the executive to average worker gap, there are also gaps in pay between races. As more countries enter the global economy, the pay gap in job sectors becomes very apparent. For example, Sindwani (2019) notes that U.S. IT workers are paid eight times more than Indian IT workers. This pay gap has driven many U.S. based companies to outsource and offshore work to India. In fact, this pay gap has been leveraged through the H-1B visa program which has recently been in the news again. Several years ago, 60 Minutes (CBS News, 2017) ran a segment explaining this program and how many American companies have hired Indian workers for much less pay so they could replace American workers.
In both these cases, there appears to be a dilemma: should the company continue to find ways to deliver the same product for less cost, or should the company keep or increase costs but pay workers more? This dilemma may only become worse as more automation from Artificial Intelligence (AI) replaces many workers, in which companies do not have to pay health insurance or other benefits for AI bots. Also, these bots can work 24 hours a day. One company has plans for rolling out and implementing AI (Daniel, 2024) after which it plans to cut its workforce in half. While this company increased pay for its employees by more than 70%, its overall workforce will be reduced. This is one way a company can cut costs while addressing pay gaps, but then this introduces another dilemma: do companies have an obligation to hire people for the sake of giving people a job?
Another ethical dilemma businesses face is highlighted in the recent news article section of CNBC (Repko, 2024). Many U.S. based companies have implemented programs to advance diversity, equity and inclusion (DEI) in their workforce, especially since the death of George Floyd. However, due to pressure from consumers as well as pressure to reduce costs, many companies like Walmart are cutting DEI programs. Some companies contend that their DEI programs actually help them become more competitive and deliver a better product to the market, thus increasing revenues. However, other companies cite market research and consumer backlash as reasons to drop their DEI programs.
Speaking personally from a perspective of working in a global company and having worked with hundreds of teams and people from all over the United States, Canada, Argentina, Brazil, Hungary, Malaysia, India and the Philippines, I can confidently state that executive management has done it's best to move work and resources outside the United States to not only reduce costs, but to also avoid high standards of diversity, equity and inclusion set in and by the United States. While executives can claim they embrace DEI standards for workers in the U.S. (which may account for 20% of their workforce), they can ignore these standards in India and other places, which accounts for 80% of their workforce. In fact, almost half of the human work performed by my company is conducted out of India, which still lives by a caste system mentality. While globalization and modernization has eroded the influence of the Indian caste system (Alam, 2023), it still has sway in many business aspects today.
References
60 Minutes, & CBS News. (2017). “60 Minutes” examines H-1B visas outsourcing American jobs. In CBS News. https://www.cbsnews.com/video/60-minutes-examines-h-1b-visas-outsourcing-american-jobs/
Alam, M. (2023). Occupational and Educational Changes in Indian Caste System: A Systematic Review. Contemporary Voice of Dalit. https://doi.org/10.1177/2455328X231186255
Daniel, A. (2024). Klarna plans to nearly halve workforce as AI replaces human jobs. In Press Association. Press Association Limited.
Repko, M. (2024, November 26). Walmart pulls back on DEI efforts, removes some LGBTQ merchandise from website. CNBC. https://www.cnbc.com/2024/11/26/walmart-pulls-back-on-dei-efforts-removes-some-lbgtq-merchandise-.html
Schweigert, F. J. (2016). Business Ethics Education and the Pragmatic Pursuit of the Good. Cham Springer International Publishing.
Shin, T. (2014). Explaining Pay Disparities between Top Executives and Nonexecutive Employees: A Relative Bargaining Power Approach. Social Forces, 92(4), 1339–1372. https://doi.org/10.1093/sf/sou004
Sindwani , P. (2019, June 11). Here’s how much an IT employee makes in different countries. Business Insider. https://www.businessinsider.in/heres-how-much-does-an-it-employee-makes-in-different-countries/articleshow/69739244.cms
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