Why wages should be paid in cash, not stock options
By William Gottlieb
The economic crisis has been most severe in the high-tech
sector. This part of the economy grew fastest during the 1990s
upswing and, as would be expected, it has been hit hardest by
the inevitable crisis of overproduction that followed.
The evolution of the high-tech industry is important because
U.S. imperialism has increasingly relied on it to offset the
decline of so many traditional industries in the U.S. During
the last economic boom, there was a great growth in the number
of workers employed as computer programmers--usually dubbed
software engineers--and systems administrators, etc.
Many of these high-tech workers were partially paid in
something called stock options.
It goes like this. Startup dot-com companies like to pay in
options because they usually do not have cash on hand to pay
workers the old-fashioned way--in money. An option is a
contract that enables the owner of the option to purchase stock
in the company at a certain price. There may be a certain
period before the options can be exercised and eventually they
expire.
Suppose at the time the options are issued, the stock of
Exploiters Software is selling at $50 a share. If the stock of
Exploiters rises to say $100, this means that the owner of an
option can buy stock for $50 and then sell the stock for $100
and pocket the difference, less broker commissions, etc. But if
the stock falls below $50, an option to buy the stock at $50 is
worthless. What good is the right to buy a stock for $50 if you
can buy it on the market for $49 or less without the
option?
While holding any stock is risky, holding options is riskier
by a wide margin. It is easy to lose everything, especially if
one is not a "professional investor," that is, a very wealthy
capitalist. But there is also a much greater possibility of
getting rich very quickly than through the holding of "mere
stock." Many of the early employees of Microsoft, for example,
became quite rich--not nearly as rich as Bill Gates, but rich
all the same--through stock options.
However, with the collapse of the stock market bubble, many
of the options issued by Silicon Valley firms are now quite
worthless. The workers of "the brain" who were paid in options
were effectively swindled. They sold their labor power for what
turned out to be very little. Many of the victims of the
options swindle in Silicon Valley are programmers and systems
administrators from India who hoped to strike it rich in the
U.S. through options.
One of the consequences of paying salaries partially in
options is that tech workers hope to get rich. They are
therefore unlikely to identify themselves with industrial and
service workers, seeing themselves as future members of the
capitalist class. They are therefore likely to be hostile to
unions, and the most reactionary and pro-imperialist currents
are strengthened in this way.
The stock market culture
This points to a broader problem. The U.S. ruling class is
continually encouraging at least the better-paid U.S. workers
to put their modest savings into the stock market. The IRAs and
401K plans encourage this.
George Bush and other Democratic and Republican politicians
continue to talk of "privatizing" Social Security and
encouraging workers to invest "individualized" Social Security
accounts in the stock market. According to official figures for
1998, just under 50 percent of the U.S. population is directly
or indirectly in the stock market, mostly through private
pension plans. The current figure is well over 50 percent.
All of this is designed to break down working class
solidarity and prevent the development of class-consciousness.
Stock market culture is the opposite of class-consciousness and
solidarity.
The current stock market crisis underlines also that all
these stock-market-based pension plans are a deadly danger to
the finances of the workers. The working class should leave the
stock market to the capitalist class and demand the expansion
of the social insurance principle, not stock-market-based
saving schemes. The new workers of "the brain" should learn a
lesson that the workers of the brawn learned long ago: wages
should be paid in cash and nothing else.
Reprinted from the Sept. 5, 2002, issue of
Workers World newspaper
This article is copyrighted
under a Creative
Commons License.
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