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One such is Daksh Gupta, co-founder of Graptile AI, who recently tweeted that he tells job applicants that his company “offers no work-life balance, with typical workdays starting at 9am and “We finish at 11 p.m., often later, and we work Saturdays, sometimes even Sundays.”
To understand how capitalism works, we need a quick primer.
Before a business can make money, it must invest in two key things – capital and labor. The profit it makes depends on how efficiently it can use these two ‘factors’ of production in combination with each other.
There is very little leeway when it comes to capital; Its efficiency is more or less determined by the level of technology prevalent. For example, a machine that packs 1,000 boxes an hour cannot do more work than that. One can run it for longer periods of time, but that will cause it to wear out faster. A machine may need to be replaced after 10,000 hours of operation, whether you run it eight hours a day or 12.
Therefore, making employees work longer hours has, historically, been the easiest way to cut costs and improve profits.
For example, imagine that a company requires 336 hours of labor time per day to fully meet the demand for its products in the market. If everyone works eight hours a day, the firm will need 42 workers. If people could be made to work 14 hours a day, only 24 employees would work.
The wage bill will drop by 43 percent, and that will do wonders for profit margins.
Of course, if a company starts increasing working hours while others stick to the 8-hour workday, all of its employees will quit. By paying slightly higher wages, it can still hold on to them.
For example, in our previous example, instead of paying Rs 50,000 for eight hours, the company could have offered Rs 65,000 for 14 hours. This will attract many workers, who will be willing to work longer hours for higher pay. And, despite paying higher wages, the company will save 26 percent on its labor costs.
The most agile companies will attract the best talent and pay the highest salaries. They will gradually out-price everyone, take over the entire market and turn into a monopoly.
Their employees will earn more but work longer into the bargain. But the number of employees in this sector will reduce as the need for workers will reduce due to longer working days. This will increase the number of unemployed people in the economy.
Of course, increased wages of employed workers will allow them to purchase more goods and services. Therefore, there will be a slight increase in aggregate demand in the economy, but it will not be enough to compensate for the loss of demand created by workers who lost their jobs or those who could not find employment.
This is the ‘normal’ way capitalism works. Mostly.
