> If there are any profits to speak of, then clearly either already enough is spent on R&D or nothing at all.
What?
If you spent more on R&D you might make more sales, even if you are already profitable. You might also still be profitable (perhaps less so) if you spent less on R&D and made fewer sales. The sales numbers determine how many workers you need to make the stuff you're selling though.
It's also a common misunderstanding that a company is sustainable as long as its profit is above zero. It's only sustainable if its profit is above the market rate of return, because otherwise investors would make more money by shutting down the company and selling off its assets. If shareholders don't get a competitive return then they don't continue to lend you their money and you don't have a company. The management of the company can't change the economics.
If you have profits, then you're not spending them on anything, like e.g. R&D, or it's already budgeted in, meaning the argument that increasing salaries hurts R&D is not sound.
You can say you can't increase salaries because you're reinvesting profits into R&D, but you can't use the same argument when there was a several year streak of profits.
> If you have profits, then you're not spending them on anything, like e.g. R&D, or it's already budgeted in, meaning the argument that increasing salaries hurts R&D is not sound.
But you are spending them on something. Convincing shareholders not to shut down the company. It's like a loan, except that the terms are they get whatever profit your company makes instead of a fixed interest rate, but can call in the loan at any time and shut you down if the company doesn't make enough money.
You can't say that you don't need that unless you also don't the continued use of the shareholders' capital. You'd need another source of money to buy land and factory equipment etc., like a bank loan, and then you'd have to pay the interest on the loan instead.
> If you have profits, then you're not spending them on anything, like e.g. R&D, or it's already budgeted in, meaning the argument that increasing salaries hurts R&D is not sound.
The assumption you're making is that the money to increase salaries can only come out of profit and not by trading off against anything else, but that's not how it works. They're still going to try to maximize profit.
Maybe they used to have 15 models but they didn't all have the same profitability. At higher salaries only 10 of them could recover their R&D expenditure, so R&D for those lines gets cut, which means those lines get cut and a third of the workers lose their jobs. Meanwhile the company still turns a profit because the remaining lines are still profitable.
But all of this depends on the circumstances of the company. It could be that only one of the lines was making a significant profit and the others were barely breakeven, so at higher salaries 93% of the workers lose their jobs.
Or maybe there is only one product line. If they make a million widgets for $1500 and sell them for $2000 then they make $500M, and spending $150M on R&D to make the product a million customers want instead of half a million caused them to net $100M: They spent $150M to get $250M. But if labor costs increase so it costs them $1800 to make a widget customers will still only pay $2000 for, the R&D would still cost $150M but only recover $100M. So they cut the R&D rather than lose $50M, which cuts sales in half and that proportion of workers lose their jobs.
