What is Contributionism?

Contributionism is a philosophy that seeks to unite ethics with practical business, while avoiding unrealistic idealism. It’s the radical concept that, if you’re spending time and energy contributing to a company’s operation, you should be fairly compensated for giving the company that chunk of your life.

Likewise, Contributionism states that if you’re making money from the work of other people, you should not be reaping a disproportionate amount of the fruits of their labor.

Most importantly, Contributionism doesn’t require an entire overhaul of the system — simply a change in the way a business compensates its employees and investors. Read on to learn more.

Regardless of your stance on it, it is inarguable that capitalism motivates productivity and innovation. At the same time, it’s a matter of historical record that if not kept ethical, it can lead to harm, exploitation, and the devaluation of people’s lives. Contributionism recognizes both of these facts. It uses capitalism as a framework, keeping the best parts of it, but adding guidelines to keep it ethical. It does this in two main ways.

How does Contributionism work?

Contributionism ties the earnings at the top of a company to the average earnings at the bottom of the company. It states that no leader of any company is allowed to earn more than ten times as much in an hour as their average entry-level employee.

By tying earnings at the top to earnings at the bottom, company owners are incentivized to pass employees their share of the profits that their work has generated. This in turn motivates good workers, and puts wealth back into communities through individuals.

Pay Ratios

A bar chart illustrating different employee tiers and their maximum earnings compared to Tier 1. Tier 1 is labeled as Entry-level Employees. Tier 2 earns up to twice as much as Tier 1. Tier 3 earns up to three times as much. Tier 4 up to four times. Tier 5 up to five times. Tiers 6-10 show increasing maximum earnings from 6 to 10 times that of Tier 1.

Investment Caps and Profit Sharing

Contributionism places a cap on ROI (return on investment). This cap can go as high as 300%. While the company has investors still being paid out, they are paid 50% of the company’s profits.

Of the remaining profits, up to half may be reinvested into the company (for upgrades, financial padding, expansion, etc.) and the rest is given to employees (anyone including the boss who put in time) as bonuses.

Once the investors are paid out, all the profits are split between the company and employees as I just described.

Comparison of profit distribution. On the left, a rich man possessing a giant bag of money while the workers only get a little on the left. On the right, workers making fairer profits, while the rich man still has a fair amount.

Why use this approach?

Several other fixes have been tried over the years, namely increasing minimum wage, and using taxes to fund public assistance programs. Each of these has its own shortcomings.

Minimum wage - We have tried raising the minimum that employers must pay in an attempt to keep up with the cost of living. This has many limitations.

First of all, the cost of living fluctuates depending upon where you live - meaning that minimum wage might not be enough to cover your expenses.
On top of that, as the cost of living rises, new minimum wages must be debated and decided upon within our government - which can be a lengthy process that lags behind prices.
Then, when the new minimum wage is finally passed, companies can simply raise prices to recoup the money the spent on wages. As companies across the board do this, the cost of living goes up, and workers wind up right back in the same situation. They’re still stuck on the treadmill, running and getting nowhere - the treadmill just moves a little faster now.

Taxes - This is the other way that the government tries to compensate for low pay - by heavily taxing the wealthy and their businesses. Workers aren’t being paid what their work is worth up front, so the government comes in and reclaims a chunk of the profits that the workers generated. Then (theoretically) the government uses it to support its citizens. Taxation of the rich is a stronger fix than minimum wage, but at the end of the day, it’s a “backend” fix - and it come with its own share of problems.

This approach requires a great amount of trust that the government is handling and disbursing these funds responsibly. They could just as easily be earmarked for defense spending, funding a police state, or wasted on inefficiency and corruption.
By adding the government as a “middle man,” workers still don’t get the money they worked for. They may get assistance on groceries, housing, or medical care, but ultimately they’re dependent upon the government to provide for them - in spite of the fact that they’re working.
Just like minimum wage, tax rates are policies, and policies can change. If corporate interests get friendly politicians elected, they can repeal the tax rates, leaving their workers with low wages, and no assistance. This dependency is antithetical to self-sufficiency.
Finally, making much of society dependent on assistance from the government (whether that assistance was earned or not) can sap the motivation to work. If you can get assistance from the government regardless, why work at all? This is an unfortunate reality of humanity that we must consider when looking for long-term solutions.

Ultimately, taxes are a Band-Aid on the problem, not a solution to the problem. It’s treating a symptom instead of fixing the illness.

So, how does Contributionism solve this?

How will pay ratios help?

Pay ratios are far more durable than minimum wage hikes. While minimum wage increases can be avoided by raising prices, pay ratios aren’t that simple - because any extra profits generated must then be distributed throughout the company based on the ratio. Sure, companies could raise prices, but they must also raise worker wages before executives can see more earnings from those price hikes. Even if every company raised their prices, the resulting increased income of the workers would allow them to keep up with price increases.
Pay ratios present less opportunity for corruption and government dependency than tax-based policies. They ensure that workers are being paid fairly up front, rather than needing the government to step in as a middle man. This serves to return agency directly to the people, rather than making them dependent upon the government for basic necessities and services.
Pay ratios continue to provide strong motivation for hard work. The upper positions within companies are still able to make many times what their entry level employees do - up to 10x as much. Additionally, because wages are only limited by a ratio, earnings for the top of the company can continue to increase - provided that they bring the workers who make it possible with them. This ratio is eminently fair - check out the “Why” page for a breakdown of just what 10x entry wages looks like.
Transitioning to Contributionist pay ratios is fairly simple; a company’s payroll budget doesn’t even have to change, simply the way in which it’s distributed.

How will ROI caps help?

ROI caps include two important parts. First, an automatic “buyout” for investors. Second, profit sharing amongst employees putting in hours to make money for the company. As I mentioned above: while investors are being paid out, half the profits are paid to them, and at least a quarter are distributed to the workers. (“Workers” in this case meaning anyone - entry level or CEO - putting in hours to make the company run.) Once investors are paid out, at least half the profits are distributed to the workers, with any remaining being able to be put toward company improvements.

This addresses a few problems.

Perpetual shareholders drain money from both the workers and the company. In many cases, a significant portion of the profits go to investors within the company. This doesn’t just mean less money for the workers - it also means less money for improvements or support positions within the business. By buying out shareholders automatically, that money can be given to the workers who made it, and the management that directed their efforts.
Profit sharing motivates hard work. It’s a financial incentive in the form of regular bonuses based on how well the company is doing. The employees have a stake in things.
Once shareholders are bought out, the CEOs have more freedom to run the company in a conscionable way without risking their jobs.
This approach still provides strong incentives for investors. 100-300% is no laughing matter. But it also means that once they’re paid out, they must invest in new businesses if they want more returns.
As a bonus, this approach gives companies extra money to invest in energy independence, at the same time as higher wages allow employees to do the same.

ROI caps also take care of an ethical issue. Our current system of corporate capitalism inherently leads to dangerous and destructive behavior. Shareholders are many degrees removed from the day-to-day, ground level activities within a company. They only see the profits - yet they’re the ones who the CEO reports to. This in turn shackles CEOs, forcing them to either pursue policies that raise profits regardless of the costs, or risk their (often expensive) lifestyle. It’s a system that naturally leads to the reckless pursuit of growth above all else, with an utter disregard for the damage you may cause to others. By automatically buying out investors, ROI caps remove a key source of pressure to pursue profits irresponsibly.

In Summary

Instead of simply addressing symptoms, Contributionism seeks to address the cause of the problem - the vast majority of our nation not being paid a fair share of the profits for the time they contributed. This includes exorbitant chunks of profits going as pay to the executives, as well as profits being drained by majority shareholders who are contributing neither time nor effort to the company.

In 1965, the average pay ratio between CEO and Employee was 21 to 1. As of 2022, it was 344 to 1. People who have built their entire lives around the goal of becoming mega-rich will come up with all kinds of excuses for why the problems we’re facing today are unrelated to this trend. Of course they will - they want to keep taking more for themselves. But if you look at the data, it becomes obvious that there’s a strong correlation between this growing pay gap and the decreasing quality of life in the U.S. for the working and middle classes. Contributionism seeks to spread the wealth once more.

A Conservative Solution

If we look at the broad definition of “conservative” and “liberal” throughout time, conservatives tend to believe that problems are caused by a departure from systems that have worked for us before, and that we aught to return to them. Liberals tend to believe that problems are caused by flawed systems that we should replace with new ones. Technically speaking - this approach to income inequality could be considered conservative solution.

The 1960’s were a golden age of American industry. It was a time when one working parent could buy a home and support a family - and as I mentioned above, the average pay ratio between CEO and worker was 21 to 1. This average ratio brought with it a whole host of benefits; it provided American citizens with security, upward mobility, and free time to think, learn, and live. Greater opportunity and upward mobility led to more market competition and better products, powering the incredible American innovation we saw throughout the mid 20th century.

Contributionism pitches a return to these fairer pay practices. It’s a form of “trickle up economics” that improves opportunity and quality of life for the vast majority of our citizens, while at the same time allowing hard work to be rewarded, not just at the top, but throughout a company. At the same time as all this, it serves to reduce reliance on government assistance - because employees are paid enough to be secure and self-reliant.