She, Darrell and I have been having a spirited little discussion about economic policy in a buried thread. Rin is skeptical about capitalism’s ability to lift people out of poverty, but says she is not making a socialist argument. I believe she is a classic welfare capitalist, which of course I am a lot of the time as well, inasmuch as I have no beef with some safety nets in this country. We can afford them, and I thank God for them.
So, there’s no price-fixing or colluding in corporate America? Do we not need anti-trust laws and close scrutiny of monopolies anymore? Since the legal definition of a corporation is an entity that exists to maximize its own profits, can we really trust them to act otherwise, to spend more than they want to on safety or wages or environmental protection? Why would they, if not forced to?
When one or two companies control 80 0r 90% of a market, they are effectively stifling competition, and can then set their own prices. This happens in insurance, in gas and power companies, in agriculture and manufacturing…. Suppliers and laborers are effectively prevented from competing for better wages, while consumers are effectively prevented from choosing a better or cheaper product. And new companies are kept out or driven out by corporate price-fixing (as when WalMart drops prices temporarily to drive a supplier’s price-point down or to drive a new competitor out of business).
As for your comment about how ridiculous it would be if everyone in the pie-production chain made $50,000…. So, you’re simply accepting that most workers will be poor, with bad wages, to boost profits for a few owners? Um, hmmmm. Something wrong there. Not a very attractive world-view, nor a terribly compassionate one.
Full-time at minimum wage is less than $17,000 a year. Is it really ok with you that an honest day’s work produces only a poverty-level wage? How much hard work, how many hours over 40, seems reasonable to you?
How quickly will that worker amass the capital with which to open his own bakery? How much pie can he afford in the free market you speak so highly of?
If America respects labor so much, and is a land of untold abundance and justice, how come those who work the hardest live on ramen?
If you respond, please remember the rules and argue politely: Rin drops by in good faith to say what she thinks, and I wouldn’t want her to pull her punches. We went to high school together, and a couple of years ago she helped me to scout for potential clients at the university where she works. She assisted my best guy friend in finding a place to live, and she gives of her time to others in a very selfless way.
So . . . be respectful. I don’t want to have to delete or edit anyone’s remarks, but I will if I have to. Best behavior, please.
UPDATE: Link added for those who need more context; I should have added it to begin with. My bad.
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{ 24 comments… read them below or add one }
Attila: It would be nice if I could find the appropriate link to that buried discussion you mentioned, so that I can have a bit of context and background. But seeing as I am an inveterate nosy parker anyways…
Rin, I do believe that we need to be looking at this from different angles, and see the bigger picture rather than just the bleakness as depicted in this comment of yours.
Firstly, let’s take a look at that number of yours on minimum wage. Now, I happen to disagree with minimum wage, but let’s take a look at it nonetheless. Assuming a conversion factor of 3.5, that amount in USD comes up to ~RM59,500 in Malaysia. The price of a large Big Mac meal here is RM10.25 so you can use the Big Mac index and work out the purchasing power parities. For comparison, I am a white-collar worker, probably lower middle class, and I earn ~RM42,000 sometimes a bit more, sometimes a bit less. And I get taxed on it, mind you. If I get to *keep* that USD1,400 per month, I’d be a damn happy camper.
In 2006, it was estimated that ~1.9 million was paid minimum wage. Hmm, that’s less than 1% of the total population of the USA. Possibly rising up to ~5% of the employable population of the USA. In other words, people working minimum wage is not a large enough group that can be used to showcase inequities in capitalism.
Let’s take a look at monopolies and OHS. Did you know, monopolies (or oligopolies) are generally created by barriers to entry for new would-be competitors? In some cases, this may be ‘natural’ – after all, if you’ve already dammed the Niagara Falls to produce electricity, chances are it’s going to be difficult for others to do the exact same thing. But I would bet you find a lot of the barriers to entry are actually created by the need to comply to government regulations and bureaucratic red tape. It has gotten to the point that an electrician now has to undergo God only knows how many years of courses, wear what looks like hzamat gear, and work only during certain hours under certain conditions. Um. No. My electrician in Malaysia doesn’t even have to use rubber boots or gloves.
Oh, btw, the insurance sector has a profit margin of ~3%. Not a hell of a lot of money, if you ask me.
Now, coming to the big picture. You see, Rin, the whole point behind the economy is *choice*. Choices are what enable economies to grow, and the lack of choices are what stifle economies. Information as well, but one might argue in the lack of sufficient, timely and accurate information, real choice is lacking as well. Government intervention in *any* economic transaction usually restricts information flow and choice.
You are correct; generally speaking, large corporations have as their top priority the optimisation of returns to their shareholders with minimum expenditures. But this is true regardless of whether or not government gets in the way. What makes you think corporations (especially if you believe them to be greedy, soulless, faceless and amoral) will not simply route around the laws? I can imagine two corporate lawyer drones calculating the price of compliance with various onerous regs, versus just disregarding them, and then counting the probabilities of having a major industrial accident too large to cover up economically, the probability of being caught, the costs of bribery and punitive damages, and making the decision based on that.
Finally, I would like to leave you with a thought. Supposing that I set up an economic simulation, where everybody had exactly the same amount of starting capital, and we had an economic base where everybody agreed on what the various sectors’ capital cost and products/output were worth. And then, so as to make it somewhat resemble real life, we threw in random factors to start the ‘land grab’, as it were.
Do you think that the simulated economy at the middle of this game will be anything close to ‘fair’ and ‘equitable’? Or would you say that the clever or very lucky ones will be able to rise to the top, whereas the not so smart or unlucky ones would not be in such good positions? And would you then recommend that the simulation *while in progress* reset itself every so often so as to give everyone a ‘fair go’?
Regardless of your answers, I would like to see you propose them for your next game of Monopoly and see how far you can get.
Here you go, Gregory.
http://littlemissattila.com/?p=11081#comments
Yes a corporation exists to maximize the rate of return to its shareholders. Now contrast that with Rin’s definition “[A] corporation is an entity that exists to maximize its own profits…” The rate of return is dividends/market price plus growth. And we know that the role of dividends has diminished (circa 1980) since shareholders would rather see that money plowed back in the business for future growth, so growth is the prime return that shareholder’s see. Just maximizing profits may run counter to that goal of sustained growth so shareholders need to see new products, new markets, new facilities and constant reinvestment and innovation. Especially if it makes you a target for governments and competitors.
But I suspect that Rin isn’t here to debate. Or get a cheaper pie to poor Americans. She wants that $200 pie for all and no cheaper pie to be found on the market–just like they have in Europe. OK. Their pies aren’t $200—yet. But prices in general are two to three times ours–$25 magazines on the newsstands, $200-$300 for the digital camera I paid $100 for, $5-$10 to send a letter, etc. And they enforce these prices by trying to prevent any one from getting a better price elsewhere. That’s the real reason behind the French cracking down on Ebay purchases. And the real reason why Euro swells and Americans like Rin want to destroy what we have in America–a level of consumption that makes us the market maker for the world. Where everyone is willing to sell to us at prices close to marginal cost because that allows them to keep their factories open, people employed, and new products coming down the pipeline. People from other countries are often shocked to see their hometown products selling much, much cheaper here.
Rin see a US with higher wages for all–even those that don’t work–but with less purchasing power and a lower rate of consumption. And an end to alternatives for the rest of the world. I bet those European swells get mighty upset when they see how low prices are in the US. Socialism is about universally-shared misery. And misery loves company–it depends on it. That why she wanted to close the shoe factories in your neck of the woods, Gregory. Even though the “oppressed” workers there were making more in a month than they usually made in a year. Or two. And single workers got flooded with marriage proposals and requests to “woo.”
“Economic justice” doesn’t apply to your neighbors, Gregory, unless the wages are so high as to not motivate anyone to move their factory in the first place. And that was the real point because unions know who to support in elections and show up to Tea Parties when heads need to be busted. No future for you, buddy!
Rin knows the real truth about minimum wages, as well. She just never speaks it. Monopolies? Less likely than at any time in history. The closest we get now is the space program where $$$ concerns are through the roof and default monopolies like Microsoft where no one want to bother being the keeper of the operating system. Even with these we have the European Space Union and Russia and China–and Linux(and others), if MS should ever go too far.
And I say this all with love, Rin. If you were here, I’d give you the biggest piece of the apple pie I just baked. With your choice of ice cream or whipped cream.
Uh, Darrell, that link? It doesn’t quite work.
Rin, here’s what it is in a nutshell. For the vast majority of people, over the vast majority of time (and here I’m being a YEC, so about ~6-7k years), the entire reason for working, and many activities of life in fact, has been survival. We hunt and fish and farm so that we may eat. We band together in clans and tribes, so that we may benefit from group protections. We marry and have children, so that the next generation can help us out, and in turn survive.
Do you know what changed that? Industrialisation and automation. Those two trends meant that one person could indeed have the productivity of thousands. Those two trends are what is supporting consumption, and enabling the modern world and modern technology. It is what provided the non-aristocratic class to have leisure and spending power and propelled us into something resembling universal freedom. For varying values of universal and freedom, of course.
Which means, as time goes by, brute strength and labour will no longer be as important as it once was. The ‘labourer’ at his construction job will not be hauling bags of cement up twenty floors; no, he’ll be operating a crane that will lift it for him. ‘Bricklayers’ may once day find themselves operating, controlling and supervising robots that do that kind of work.
What I’m trying to say is that more and more, we will become knowledge workers, to use a phrase I’m none too fond of. The implications on a larger scale is the same for individuals on a smaller scale; generally speaking, the older a person gets, the higher up the societal ladder he should be. The frontline customer service drones and McDonald’s waiters? They’re not supposed to work there *for life*.
You see, the problem with a great number of socialists, and I don’t mean to say you’re one of them, is that they tend to think of people as stuck in stratas. But believe me when I say that the whole concept of universal education and college loans is to enable people to *move upwards through the stratas*. If you’re a labourer today, you should be a shift supervisor next year, and a team leader the next, and a project manager five years after that.
Darrel was right, you know. The factories that were being set up in the various parts of SEA (not necessarily in Malaysia, mind you, we’re too expensive) were several orders of magnitude better than the alternatives, which is why hordes of people clamour to work in them.
http://littlemissattila.com/?p=11025#comment-19340
Try this one then. You could have used clicked Rin’s comment in the Recent Comment section. But that wouldn’t be as fun.
It was my fault for not placing the link in the actual entry; someone held something shiny up in front of my face.
This is a lot all at once, and I’ll prolly get interrupted by students, but here’s a start.
First, thanks, Joy, for a lively conversation. I do like debate, especially about pie.
I don’t want a $200 pie, here or in Europe, and I’m not a socialist (anymore). I do agree that, at least for now, economic rewards foster innovation and cool stuff to buy, and we have not evolved (a la Star Trek) beyond the desire for incentives — which means we must continue to accept wage disparities. As does the fact that some folks are just cleverer or harder-working than others. True enough. And I’m fine with the cleverest and most useful people, say brain surgeons, making more than hairdressers. I’m not sure all the rich people are the most useful, but that’s another question….
What I want is NOT a socialist paradise where everyone gets paid the same and no one’s smarter or harder work is rewarded or recognized.
Instead, I want a just economic system in which an honest hard day’s work (not a lazy bastard’s pleasant loll on the beach with a Starbucks!) earns enough for 3 squares, some meat if desired, rent on a decent apartment (one bedroom per adult, unless sharing is desired), insurance, reliable transportation, a few days off, money for pizza, a tad of savings for christmas presents, and basic cable. And minimum wage, or even double that, fails in many markets to provide a “minimum” lifestyle in America. $15/hour wouldn’t get you that in New York!
Too many honest people, our waitresses and hairdressers and floorsweepers and carwashers and so on, have to work extra hours or second jobs, or do without almost all the trappings of first-world comfort. And that seems fundamentally unfair to me.
It is not true that all the waitresses can become management, or that they can all go to college and become accountants, let alone doctors. Some can’t, some don’t want to, and there isn’t room in the middle or the top for all the folks now at the bottom. And in any case, we would still need waitresses, and someone else would take their place at the bottom, so telling one specific waitress to move up doesn’t solve the problem of low wages for waitresses. And arguing that they’re young and that minimum wage is intended as a temporary starting-point on the way to a better job is not persuasive, since some people DO live on minimum wage (or a tad more) and many young people ARE trying to support themselves on that wage. And living on ramen is only marginally less appalling at 20 than at 40.
I recognize that raising wages would affect the economy profoundly, but I would argue that higher wages at the bottom would produce far more spending — and spending within America, not overseas — than lowering taxes at the top does.
Trickle-down economics, which has justified lower taxes and looser regulation at the top in the name of jobs (which just get outsourced, lately), does not seem to have made capitalism any more equitable or compassionate for those at the bottom. I’d like to see some trickle-UP economics instead.
And while I’m a fan of safety nets and aid to those trying to go to school or to stay home with small children or sick parents, I believe most adults should be expected to support themselves by honest labor. I’m not a big fan of welfare for all — or for a long time.
As for third-world factories and how great it is to work in one…. The sense I get is of low wages, 18-hour days, no days off, girls forced to take birth control and pregnancy tests, pregnant women beaten, people forced to pee in adult diapers because they couldn’t leave their sewing machines, child labor, people sharing a cement floor with a dozen other workers, living on rice and tea……… These are not jobs that will lift them out of poverty. I’m not sure what the price of a Big Mac in Malaysia has to do with anything, except that none of the workers in a Nike factory can afford one.
I may disagree with most of your politics, but I don’t dispute your intelligence or your desire to see America (and, secondarily, the rest of the world) do well.
Now, Darrell has offered me pie, and I want some!
What about those of us who like a bit of Ramen now and then? (Japanese brand from the oriental section, original flavor, with a bit of sesame oil added and half a teaspoon of Korean chili-garlic paste?)
And I know everyone’s going to get mad at me, but there are people who would rather live in a studio apartment and have a nice stereo than in a one-bedroom and not.
I’m not knocking ramen, only the necessity of living on ramen.
And if someone has enough for a 1-bedroom apartment and a bad stereo or a studio apartment and a bitchin’ stereo, he can make whatever choice suits him best.
I’m not saying that every worker gets every luxury, nor that I want to be in charge of which ones he gets. But I would certainly argue that too many honest workers have no luxuries or comforts. Too many don’t have a car or a decent place in a safe neighborhood or decent food or savings or money for the odd movie or concert or cable. Too many don’t have internet access at home. Too many don’t have insurance or money for school. Too many couldn’t imagine traveling for pleasure or to see a sick family member. Too many will never see Europe — or even Canada.
Questions of capitalism, its merits and effects on global justice, the appropriate role of regulation and oversight, and the fundamental purposes and goals of corporations are all interesting. But at a more fundamental level, I simply want the honest working Joe to have a burger ‘n pie every day. It’s little enough, surely?
And in the end, I would argue that deregulation and staying out of the way of corporate America have not led to better jobs, security, benefits, or wages for American workers (or those overseas). Left to its own devices, capitalism will pay as little as it can and charge as much as it can — and surely it’s clear that their goals, if untempered by some outside regulating and moderating force, can only produce more poor workers who can’t buy what they make.
We’ve seen a steady decline in the value of the minimum wage for 30 years, relative to inflation and cost of living, not to mention productivity. If the minimum wage had kept pace with inflation or productivity, it would be about $15 an hour. Instead, it’s slipped by about 30% in real value since I was living on $3.15 an hour in 1980 (and less as a live-in nanny 2 years later!).
Your faith in jobs is in part quite right. Absolutely, everyone needs a job and should support himself/herself. With few exceptions for age, health, babies at home…, this is true and a profound source of dignity and self-worth, not to mention progress for the self and the economy. Where your faith is misplaced, however, is in the belief that the employer will, on his own, offer a living wage, a just wage, a wage that reflects the worker’s contribution to the success of the business. (This is especially true in areas where labor is essentially captive, as in rural or underdeveloped or rust-belt or right-to-work areas where folks can’t move, can’t choose among employers, and must pretty much take what they’re offered.)
I have no such faith in the goodwill of the employer, by and large. In fact, I would argue that many employers, given the choice, would use (and do use, sometimes) slaves paid only in food and water. It happens every day, in America and elsewhere. Cases of slavery are prosecuted every year in California, Florida, and other agricultural areas.
In the end, slavery is the most perfect model of what corporations MUST by definition see: high labor output, low wages, and no complaints.
I don’t have to be a socialist to think that corporations must be regulated, inspected, overseen, and forced to pay more than they would like, lest the working Joes (and the middle class, too) in America get screwed, exploited, and turned into a glorified slave staff, working without the right to negotiate, complain, seek redress, or share justly in the profits they produce.
ps, and since a few companies, like In ‘n Out, pay more wages and benefits than they have to, and more than their competition, without going out of business or suffering, it’s obvious that it’s possible, that profit margins can co-exist with higher wages and less poverty.
McDonalds could certainly pay what In ‘n Out does, if not more.
WalMart could certainly pay what CostCo does, if not more.
Yes, in some industries profit margins are slim — but it’s workers who produce those profit margins, after all, and if they go home to ramen — not by choice but by necessity — it just ain’t right. Period.
But Rin, that’s the whole point.
Okay, so let’s have a look see. The average wage for Leisure and Entertainment (by which I presume they’re using the mean) in the US is $360 back in ’08. In NYC, it’s $766. That’s more than double. IOW, NYC employers recognise that they need to pay higher than minimum wage in NYC, and they do. By over 100% more. So what else do you want?
As for McD’s, the median wage for fast food workers is slightly over $7/hour, so they, too, pay over minimum wage. This wasn’t including the higher-ups – just the worker drones, so to speak.
Now, again, we’re talking about ~2 million people here. Most of whom are either teens on their first jobs, deadbeats who couldn’t work worth a damn anywhere else, or *get tipped*. Nobody gets tipped in Malaysia. Nobody. And yet, I’m expected to tip smelly cab drivers, surly waitresses, the frigging hotel bellhops. But that’s a different story. Point is, it’s not the argument you want to be making.
Also, there’s the notion of *living within your means*. If it’s too expensive to live and work in NYC, there’s an entire continent’s worth of jobs to be explored.
Let’s take a look at your requirements;
“Instead, I want a just economic system in which an honest hard day’s work (not a lazy bastard’s pleasant loll on the beach with a Starbucks!) earns enough for 3 squares, some meat if desired, rent on a decent apartment (one bedroom per adult, unless sharing is desired), insurance, reliable transportation, a few days off, money for pizza, a tad of savings for christmas presents, and basic cable.”
Let me tell you what my fellow Nepali brethren in Christ go through. They come to Malaysia for 1-3 years; most of them working as security guards or waiters at The Ship (a local steakhouse). They come alone, leaving their wives and children back home, often with only the clothes on their back and their passport. They work in half-day shifts, and sleep 8 to a room (4 per shift). They do not eat out, in fact they eat two meals per day (and nothing in the way of meat, often), they sleep on very thin mattresses (no beds) with their own personal coverlets. Forget air-conditioning, they get a ceiling fan.
And they are just fine with it, because at the end of their work period they go back to Nepal rich as Croesus, comparatively speaking. In many instances, their standard of living while in Malaysia is higher, too.
So tell me, Rin, what is ‘just’? What is the ‘minimum’? It seems to me that what you’re describing above would sound like the very lap of luxury to the Nepali. Heck, it sounds like the veritable middle-class life I’m living right now. Except I don’t want cable – broadband is more my thing. And no way would I expect to get all of that if I’m working as a fast food drone, no way.
And finally, Rin, you need to think of it in more THEM vs US. *Everybody’s* an economic player. I am an economic player. My product is my labour. Companies may or may not want to buy my product at a certain price I set. Or are you suggesting a minimum price for bread, milk, eggs and so forth? But most people agitate for *lower* prices for products.
It’s different when you turn the perspective around, isn’t it? But there you are; you’re a seller of a product (labour), and employers are the buyers. Now, imagine yourself as a buyer, and tell me that the forced imposition of price floors is still a good idea.
I would argue, first, that comparing a first-world economy to a third-world economy is not terribly revealing. Yes, costs and wages and expectations differ — but what’s to be done with that insight? It is not practical, not fair, to imagine that an American in one of the wealthiest countries on earth should or could live on what a Malaysian does. The Malaysian deserves more, gets too little, and is exploited — but the fact that the American earns 10 or 20 times as much DOESN’T mean that the American is paid a reasonable or living wage, given that he lives in America.
I live in a slightly depressed area 60 miles from LA, and even here, someone making less than $1300 a month take-home is not going to be terribly well fixed. Food and shelter, yes, but probably not a car, or cable, or savings, or money for school, or enough spare money to be able to support a child. California minimum wage is $8, but even at $11 an hour, which few enough people make before the age of 25, you’re just getting by.
To say the poor New Yorker should move elsewhere on the continent is not fair or practical. He may not be able to move. He may not want to. And the service industry in New York needs poor people in its McDonalds, its minimum-wage jobs. The city can’t do without that labor, so suggesting that one poor guy pick up stakes and move to Iowa is disingenuous. Sure, one guy can move, but they can’t all move, and if they did, someone else would have to take their job and earn their wage and be poor, sharing a studio with 3 other guys…. Not a reasonable solution.
You say people get more than minimum wage. True, some do. A dollar more, sometimes. Even two. But almost never with benefits. And when your reasonable cost of living needs you to earn $14 an hour, getting $9 when the employer could legally have paid $7.25 (the federal minimum) is NOT enough.
Most minimum wage workers do NOT get tipped. And in some states, like Florida, tipped employees make as little as $2.42 an hour, with the tips making up the remainder of the minimum wage. That tip, then, instead of being a thank-you from the customer to the waitress, winds up simply helping the restaurant owner save on payroll. You may not agree with the concept of tipping, but it isn’t supposed to be a gift to the owner!
There seems to be a notion on this site that leaving business alone to do as it likes would solve all the world’s ills. Believe me, they would not pay more than they had to, would not raise wages, would not lift anyone out of poverty.
The restaurant-owners’ lobby has encouraged (bribed) Congress to keep the minimum wage low for decades. They boost their profit margins on the backs and the poverty of their employees. — And it doesn’t make me a socialist to say that the workers deserve a better share of the billion-dollar profits reported quarterly by America’s large corporations. Billions, per quarter, in profits — when is enough enough?
Rin: You know, maybe I need to put some kind of perspective on what you’re saying here. I am a middle-class worker, and I make about 3.5x-5x what you might call ‘minimum wage’, although there’s really no such thing here. But a bus driver can earn about RM1000/month, and a 7-11 worker gets about RM700, so I think it’s a reasonable baseline.
Now, what is true is that I’m piggybacking on my parents. Which, by rights, is what everybody should be doing. Family support is crucial, especially in the first decade of working life or so. Something that the West seems to have mostly lost, to your detriment.
My mother was a civil servant, so her pay is not great, and in fact I earn more than she ever did (although maybe not when indexed for inflation and whatnot). But my dad was, for about 15-20 years, part of a telco, and especially in the final years before his retirement, was making pots of money. But strictly middle-class for all that; I’m in the lower end, and he’s at the higher end.
My life includes; air-conditioning in my own room, an ensuite bathroom (well, shared, but no one else is using the other room), a PC, broadband (albeit very slow broadband), eating out at least 2-4 times a week, driving my dad’s car, and some occasional luxuries – oh, and a paid vacation every year at least.
Does that sound like what you would like everyone to have, more or less? The thing is, you seem to think that people in minimum wage jobs (or the lowest rung on the employment ladder, let’s put it that way) should be enjoying more than ‘survival’, and that’s not how it works. The expectation is never that you are stuck behind a fast food counter for your entire working career, but that there is sufficient social mobility so that you can move up, or out.
My colleague used to work in KFC, and she reliably informs me that most of the front-line counter staff are students, or retirees who just want that additional income. Moreover, many of the high-ranking executives started their careers as front-line staff. True, there’s a high turnover, *and that’s how it’s supposed to be*.
I get the sense that you think people working in these font-end jobs are there for life, or that they cannot proceed further anywhere, at all. I think it entirely unfair that you would continue to think like that. Nobody ever expects to be stuck with the salary he originally contracted at his entry-level job; either you move up or move out. And if you’re happy doing the work you’re doing for that pay, or at least you do not find it onerous enough to leave, then that’s that.
You see, most rational people weigh economic costs. At some stage, working for 3x minimum wage in NYC sounds like a real stupid idea compared to working for 3x minimum wage in West Podunk, Tennessee, and *why* can’t you move out? No, seriously. Why can’t you move out elsewhere? If you’re a hale and hearty 18-35 y/o, what’s stopping you? A sick mother? The Mob? Your crazy insane Muslim father who will run you over because you moved to Florida?
A Youtube wag (commenter) opined that more than 98% of minimum wage earners have not got a GED – whether that’s because they’re still students or didn’t bother with studies I don’t know. But if this is true (and take it for what it is, an anonymous comment in teh intartubes), then really, I can’t help but think that you haven’t studied the matter completely.
Or think sideways. Why should you work in a salaried position? Salesmen get paid crap, but their commissions could float the Titanic, for instance. Think ‘entrepreneurial’. Write a book. Compose a song. Go fishing. Till the soil. What I’m saying is, there are entire lines of work out there that even an illiterate truck driver could excel in and become rich beyond belief. Lim Goh Tong was such a man, and when he died he owned Genting Highland Resorts (go ahead and look it up, I’ll wait).
Or, if you have the gumption to become a plumber, electrician or bricklayer, move to Australia. Instant PR, and get paid scandalous sums. Presumably, the situation is similar right home in the States.
At the end of the day, I do not believe that we should be making case law because of edge cases.
You notice that people like Rin, the millions like her, aren’t starting business that
pay significantly higher than all those “robber barons” even though they’ve been spouting the same gospel for fifty years now. Or is that 130 years now? If they did, they would lure away all the workers, wouldn’t they? If profits are so excessive, how come they average 6-8% ? How come depreciation is always the principal source of cash flow? Is there really that much room to raise wages without a significant change in prices? Of course not. Is Nancy Pelosi going to make us buy $20 burgers under penalty of huge fines and jail time? If she could.
Take a look at the counter people at the fast food places you patronize and see if Rin’s description rings true. Look at their cell phones. Look at their kicks. Ask about the last concert they went to. Look at their age. Do the same at Walmart. Ask for some assistance and see if it was better than if you asked that support post. Ask how their mom gets their clothes so clean. Ask if they are working the mandated four hours a week to qualify for public assistance and housing. Ask which blunts are really best.
Sorry Rin that pie is almost gone. If you get together with AG, I’ll pick up the tab for pie and coffee. Find a nice Polish bakery.
Rin, you keep talking about what is “practical,” but your own ideas are less than practical.
You would like someone to ensure that people on life’s lowest rungs enjoy some luxuries. There are many ways to make that happen, but only one to ensure it–via government. Which is, I think, where you are going. Despite the fact that you yourself have witnessed at least one person whose will to achieve was completely destroyed by getting too much handed to him too early on in life.
Both my brother and DC worked at McDonald’s early on; it was an entry-level job for each of them.
As for restaurateurs, their businesses are very fragile and particularly vulnerable to downturns. Restaurants go out of business every day. With one exception, every place I ever waited tables at has died–and they were robust businesses.
Larry Elder likes to tell the story about how, whenever minimum wages were raised, his parents would have to sit around the kitchen table and decide who they were going to lay off at his dad’s restaurant.
The solution to the problem of bad business owners who do not care about their employees is for good people who do to go into business. Most people, after all, work for small businesses, and they are quirky places that tend not to have HR departments to field complaints. The more nice people we have as employers, the better. For instance, Starbucks provides benefits for its part-time employees, and both Safeway and Whole Foods have been very innovative in providing healthcare for its employees.
I would encourage you, Rin, to read one of Thomas Sowell’s introductory books on economics, so you can find out why distorting the market never works out the way it’s intended. (Or try Ayn Rand’s Capitalism: The Unknown Ideal, which is a bit more strident, but still enlightening. And short. I tend to prefer Sowell, though.)
Also, I’m not so sure that simply waving away the achievements of the U.S. in lifting people out of poverty is a good idea. What I’m hearing is that you would like to simply redefine poverty as “not being able to afford Christmas gifts and pizza,” and there are two issues with that: 1) it is ahistorical; and 2) it ignores the fact that in transnational companies American workers are competing with workers who have much lower standards of living. To the degree that a middle-class income is guaranteed by edict, Americans lose jobs. In a global economy we keep more jobs here by keeping that bottom rung as low as we can get it.
Keeping the bottom rung of the ladder very low is also helpful for minority workers and young people, who really need those jobs to get started in life.
Businesses are failing all over the place right now, and taking their jobs with them. And being out of work really, really sucks. Much more than not having pizza on Friday nights.
Even when the economy was solid enough for the middle class, the bottom rungs were not doing well and the minimum wage (which people DO try to live on) was not enough. Obviously being a factory-slave in the third world is worse than not having pizza on a Friday night in America. My point is simply that a hard worker, even if he’s young and a bit doofusy, should be able to afford a pizza once a week.
And I grant that my definition of poverty is first-world and twenty-first century and American. Here, now, poverty means sharing a room, not having a car, not eating meat, having no access to recreation, having no insurance. I realize all too well that the poor working stiff in America is better off than 95% of the workers in a third-world country. Alas, but that’s another conversation.
Certainly, handouts can be debilitating, and we’ve seen that play out in horrible ways. I’m no fan of laziness!
But I’m not talking about handouts, but about a wage aimed at a livable lifestyle, even for the young and the minority worker. And that just is not $8 an hour.
When I read blithe predictions of workers moving up quickly, becoming management, going off to school, getting raises, I remember that pyramids have a lot more room at the bottom than at the top. It simply is not true that every worker can move from fry basket to franchise owner, let alone CEO. One might, sure, but which one? And for those who don’t move up, whose highest raise will take them to shift-leader and $10 an hour, what is life like on a daily basis? And is that life fair, given the high profits of a company like McDonalds (and its access to government incentives like SBA loans and a $4000 stipend for each teenager they hire)?
When I read of multi-billion dollar profits, I can’t help but suspect that wages could be higher. Just a tad. Without necessarily crippling the economy, either. Perhaps there’s a period of adjustment, but higher wages mean more spending which means more jobs, not fewer. Give the pizza delivery guy a few more bucks an hour and he’ll buy some shoes, get cable installed, take a class, jput $50 in the bank, and get a haircut — all of which build the economy. Keep that guy broke and he’ll drop $1 on a ten-pack of ramen for the week, and how much does that help the economy?
Rin: You keep circling around the same core issue, which I think I would like to enumerate here and please do let me know if I get it wrong.
Essentially, you believe that corporations, legal fictions that they are, making tonnes of money in profit that they are, should be giving more of that money to the employees in the form of higher salaries, or bonuses, or in-kind (fringe benefits), right? That way, the employees can contribute more to the economy, spend more, and what not, right? And that would be the fair thing to do, so that honest, hardworking people are not left to be poor.
Okay, let’s take it one at a time.
1. It’s. Not. Management’s. Money. Or rather, it’s not necessarily management’s money. A publicly traded company like Yum Brands, or WalMart, or McD’s, or for that matter, Enron back in the day, is owned by its shareholders, which may include upper management but could also include the new hire who just started work. Management is supposed to account for every dollar spent on expenses, and every dollar that is spent unnecessarily is a failure on management’s part. Of course, if it’s a private company, management probably are the owners, and can make different decisions; maybe economically not so wise, but that is their choice to make.
2. If you see the corporation as just another economic actor, then essentially what you’re asking it to do is to pay higher prices for a commodity (yes, a commodity) it can get cheaper just to fulfill some sort of ‘economic justice’. This goes contrary to every prudent shopper’s goal, which is to get the most bang for the buck. But it’s worse; that which you call the minimum wage is a price floor, not a price ceiling, and that practice is called price-fixing, which is what a monopoly does. And it’s illegal.
3. You think that profitability is so easy to calculate? McDonald’s had a revenue of USD22 billion last year, but a net income of USD4 billion. Assuming net income = profit, then that’s a 20% profit margin. Pretty hefty, right? Surely they can dispense some more of that largesse, right? Wrong! McD’s has about 400,000 employees. Let’s assume that McDonald’s pays each employee an extra $12,000/ year, which is $1,000 extra a month. That’s what you’d like, right? After all, the fat cats at the top which surely earn multi-millions won’t even notice this marginal increase, but the poor folk working for slightly more than minimum wage would have their salaries increased by 100% – certainly a good thing, right? Well, that wage bill just ballooned by USD4.8 billion. Guess what? That profit margin you see has just turned into a deficit, and no company will remain in business for long if operating from a deficit. But hey, maybe we can cut the fat cat’s salaries, and it will *only* balloon by $2 billion. Well, your profit for the year has just dropped in half, by a whole 10% margin. Not going to make your investors or your shareholders, or your creditors very happy.
Now, I don’t know what you consider to be a reasonable or high profit margin, Rin. Don’t forget that some of that ‘profit’ has to be plowed right back into the company for equity and growth purposes, and most of the time the shareholders get a dividend of cents per share. Again, I don’t know how much ‘just a tad’ is in terms of minimum wage you would like to see increased, but I suspect it would be more along the lines of 20% or more, in order to make a real difference.
What I do know is that we haven’t even included opportunity costs in the equation yet, and so once that is factored in, my guess is that the ‘profit’ will vanish Poof! into the air.
I implore you, Rin. Read a Microeconomics 101 textbook. Heck, refresh your memory if you’ve done it umpteen number of times before. Figure out supply and demand, and why letting the market come to an equilibrium is really the best outcome for everyone.
Okay, moving on. You mentioned that the pyramid’s bigger at the base than at the top. Uh, no. Not necessarily. Ever heard of the Peter Pyramid? Yeah. Of course, it’s not often a good thing, but you can have a situation where there are far fewer people who actually do the work and a whole lot more management types.
And it’s not blithe predictions either. It’s what the world expects nowadays. Gone are the days when you work for life in a single company. Move up or move out, that’s how it works. If you’re a fry chef, and you stay at that job because you cannot see anywhere else to go *ever*, you’re doing it wrong. A stay-at-home mum can scribble a novel on shopping bags, and become rich almost overnight.
It’s all about empowerment. Which is why most Chinese prize education above almost everything else, because to us, that’s the ticket to a good life.
I would respond, again, by pointing out that some companies pay more without going out of business. In ‘n Out, Starbucks, Costco…. They choose to pay more, often with benefits, while remaining viable. So it’s possible.
I did not, obviously, suggest raising wages so much that a company went into the red…. But the funny thing about profit margins is, they’d go up if more poor people had more money, especially for a company like McDonalds. And the funnier thing about profits is that, when accountants want them to disappear, they do. When a film company pays part of its wages in “points,” or percentages of the profits, *poof* there are no profits! So imagining that McDonalds would go out of business if it raised wages a bit is ridiculous. With their multi-billion dollar profits, they are not that close to the edge.
In addition, most of what you say simply accepts poverty (first-world poverty, anyway) as natural and inevitable, at least for anyone without the gumption to leave New York or write a novel. I would counter that the economy doesn’t allow everyone to become management, let alone to become a successful novelist, nor is it fair or practical to tell all the poor people to leave New York for cheaper climes. It just wouldn’t work. There will be poor people in expensive cities, there will be people living on minimum wage, there will be people who don’t want to, or can’t, move up into management. And it is unfair for those people to live on ramen.
The notion that a corporation is capitve to its shareholders, or that its $22 billion dollar profits are a fragile margin that must be protected, just strikes me as silly.
If you want to talk about a very small business, say the local donut shop, being squeezed by a sudden rise in minimum wage, I’ll concede that it’d be a bit of a shock at first, an adjustment — until greater local spending rebuilt their profit margins and in fact put them ahead of where they’d been with cheap labor and poor customers. But I have no sympathy for any large corporation with multi-million, let alone multi-billion dollar profits.
Rin, there is something a little childlike about your insistence that the laws of economics work the way you would prefer that they work, rather than they way that they do work, and that it would be a simple matter for companies to pay people more, in order that no one be “poor” any more, and someone [presumably the state] ought to make them pay above market price for labor in order to get them up to the lower middle-class life that Rin feels is a bare minimum.
Your minimum requirements seem to recognize that we do not, as Kathy Shaidle once put it, have “the poor” in many parts of the Western World–but rather “the broke.” And instead of finding something to celebrate in that, you’re complaining about people who can’t afford Christmas presents, people who live in studio apartments, and people who can’t afford pizza.
I think the Marine Corps’ Toys for Tots charity takes care of a lot of very poor households that cannot afford presents for their kids, so there’s something that works in nearly every city. And with Thrift shops in every city, there are also things to be had for very cheap.
First off, Rin, that $22 Billion is total revenue, not profits. Funny you should make that mistake. Actual profits were $2.6 Billion on a total revenue of $20.5 Billion. That’s about 9% of the asset value of the company. Starbucks’ annual revenue is $6.3 Billion, with about a half a $Billion in profits. That profit figure is about 14% of their asset value. Maybe Starbucks’ should raise their wages a little more, hmmm? Still I’d rather pay $2.50 for a burger than $5 for a cup of coffee.
Secondly, can’t you take down that strawman yet? Minimum wage jobs are entry level jobs. And the vast majority of those holding those jobs have additional family income. According to the Bureau of Labor Statistics, for those minimum wage earners under 25, family income is around $64,000 per year. For those older, it is $34,000 per year. Most minimum age workers are part-time workers. Only 6% are single parents. Are there people working these jobs in order to qualify for public assistance under the work-fare rules? Absolutely. The number is around 5% of the total, and most work minimal hours which can be as low as 4 hours per week. Entry level jobs provide a stepping stone to higher wages with accumulated work history and acquisition of skills. For most, it is not the means of support, but money for extras while they pursue an education, or other reasons. So, in essence, it’s all pizza money….or pie money….or…?
But you’re not talking about minimum wage workers are you? Your heart is bleeding for those making, say, $10 an hour or $12 an hour too, isn’t it? The old “living wage” end-around, the bastard cousin of the old “comparable worth” scheme. If a secretary wants to get paid like a truck driver maybe she should become a truck driver, don’t you think? And work like a truck driver thereafter.
Government has been the mad scientist of the grand social experiments, as long as taxpayers permit it to continue. Can’t you leave private employers alone? Or start your own businesses where you pay what you wish? Where did you get the idea that you can tell someone else what to pay? Do you ask those $35/hour union workers to return their pay increases whenever the minimum wage rises? You do know that most union contracts are linked to the minimum wage, don’t you, specifying some multiple of the prevailing rate?
The best way for someone to accept that you are no longer a Socialist is to stop talking like one. And thinking like one, too. The change will set you free. Just like workers that can move to better jobs when they develop skills that businesses are looking for.
Attila: I know that you asked us to be nice and polite, but seriously, it’s as if Rin’s being deliberately obtuse. And I suck at being patient, it’s one of my besetting sins; one amongst a legion of them. This is possibly my final patient post. Sorry if I’m reading you wrong, Rin, but you have not yet substantively demonstrated any cognition of our points other than to circle the wagons.
Look, you harp and harp and harp on the lowest paid people around, and we have tried to explain that for the vast majority of people who work in entry-level positions, that’s exactly what it is. An entry point into your working career. You’re supposed to progress. That’s how it works. You start off as unskilled or semi-skilled, and you gradually work your way to to skilled, experienced, expert, specialised, supervisory, management and so on.
People work hard for their money. As they should. But don’t look at labour and work only in terms of physical work; like I said, sooner or later we’re all going to be knowledge workers. A TEENAGER managed to earn pots of money coming up with a trite, hackneyed absolutely fucking horrible fantasy series that is utter rubbish and unreadable. Harry Potter, it ain’t and he still made oodles and oodles of cash. Speaking of, HP absolutely SUCKED as well, and cannot even be compared to Enid Blyton stories – but guess what! it made pots of money for JKR.
And I will be brutal and honest here. If you will not consider taking risks, if you will not go beyond your comfort zone, if you will not better yourself and take charge of your life, then quite frankly, you deserve to stay right where you are. And be honest; most of those who are stuck in dead-end jobs are stuck there because they do not WANT to move out, not because they CAN’T.
And you keep harping on bloody ramen as well. Okay, let’s take a look. I’ll assume that you’re talking about instant ramen here. Now, I’m gonna assume that you eat the stuff three times a day, seven days a week, for a total of 21 times a week. At an average of ~$1.50 a pack, that’s about $31.50 or so. For $31.50, you can get
– 5 lbs of potatoes at $5
– 5 lbs of chicken at $5 ($1/pound)
– 5 lbs pork belly at $15 ($3/pound)
– assorted spices, veggies and fruits at $7
Now, I dunno about you, but that sounds like a far more sensible approach to food, and far more nutritious, not to mention tastier and definitely more healthful. If you eat rice instead, a 10 lb bag of rice will last you literally months. If you eat less meat, you could probably have a really, really good feed for that $31.50/week.
Track with me here, okay? You pay each worker more, because of minimum wage rises. That means, in order to retain the same payroll expenses (and assuming ceteris paribus), I’d have to cut staff. When I cut staff, in order to maintain the same supply of my goods, I have to demand increased productivity from my staff.
Alternatively, I can live with the lower total productivity, but then my supply of products will decrease, I will have to increase my prices to maintain profitability, and higher prices mean less demand. Further, it means fewer people are able to afford my products, which is exactly the opposite of what you want to do!
But let’s examine the argument that some companies can afford to pay higher than minimum wage. Yes, they can, and here’s why. The labour market is not homogeneous. There are separate supply and demand curves for each labour market out there, you see, and for Starbucks it’s entirely possible the supply and demand curves intersect at $16/hour.
Now here’s what could happen. Everyone thinks that Starbucks offers $13/hour and goes, wow, that’s way more than minimum wage, what a bargain, and hordes apply. Starbucks is able to pick and choose the best ‘baristas’, but due to the effect of the minimum wage law, Starbucks can get away with paying less than equilibrium price and still look like the good guy. But I would wager all that I own that given the scenario as above, if minimum wage suddenly became $19/hour, Starbucks would scream bloody murder as much as McDonald’s.
Let me put it in even easier terms for you. I think it’s called the 401(k) plan in the US; we call it Employees Provident Fund (EPF), the Singaporeans call it CPF, the Aussies call it Superannuation, but basically it’s a forced savings fund. About 10% of your pay gets docked and put right in this account, your employer dumps in another 10% or thereabouts, and you live on this account (including the interest) at retirement.
The arithmetic is really simple. If you have worked for, say, 40 years, you can probably live for 10-15 years on that account (depending on the interest paid) at the same rate of expenditure you’re used to. That’s it. And it’s obvious, isn’t it? At the end of 40 years, you’ll have paid in 4 years worth of your average salary, your employer would have paid in another 4 years, and the rest of it is your interest if you’re lucky.
The same is true for organisations. The profit margins you decry are the equivalent of their savings. Paid out to shareholders means less savings. And if you continue to spend at deficit, it’s not long before you’re bankrupt. High profit margins, very much like Joseph’s 7 fat years, are essential for companies to put something away against the 7 lean years.
And one final note on ‘the poor’. Good God, seriously. Jesus Himself tells us that we will always have the poor with us. You know why? Part of the reason lies in the definition of ‘poverty’. Most definitions in the USA index poverty in line with inflation and current average incomes; therefore, the lower x% of the population will always be defined as ‘poor’ – even though they may have housing, clothing, sufficient food, stable jobs, transportation and electronic appliances.
I really don’t know how else to put it to you. Crunch the numbers. We’ve done some heavy lifting here. Do some of your own. Prove substantively your points using real, verifiable statistics and arithmetic.
I would say that working adults shouldn’t need charity to provide their kids with christmas presents. I would also say that when a minimum wage job is counted as part of a household income of $64,000, that wage is probably fairly necessary to the family’s well-being (and $64,000 isn’t that much for a family of, say, 2 adults and 2 teenagers).
I would also say that your rhetoric about necessary relationships between profit margins and wages seems to me to be belied by the fact that the minimum wage used to be much higher, relative to inflation and cost of living. Companies did pretty well in the 50s and 60s, though they paid 30% better. So, it’s not the case that a fixed relationship must exist between profits and wages in order to keep companies (big and small) solvent. I’ll leave out the fact that increased productivity (and profits) might justly be predicted to lead to increased wages.
The poor you have always with you. Yes, Jesus said that, but I don’t think he meant we should be complacent about it or that we should blame anyone who didn’t have the gumption to leave his home, write a novel, open a business, or work 80 hours a week. We do not live in a system that makes becoming middle class easy. At the moment, staying middle class is an iffy proposition. So a little less rhetoric about how all those who stay poor are lazy would be appreciated.
Anyway, this doesn’t seem to be going anywhere, so I think I’ll bow out. I need to get busy working on a speech my union asked me to write about layoffs and the fact that the University of California (a corporation as much as an educational institution) is saving money by firing experienced workers, increasing workload, cutting benefits, reducing needed services to vulnerable students, and gutting the future of California.
Thanks for the conversation.
On the other hand, you’re employed in an economy that features over 10% unemployment (which means 17% if discouraged workers are included), and you own a home that you bought in a down market in Southern-freakin’ California.
And you live in a country with a class system that is incredibly fluid, and depends more on initiative than on brains or being born in a certain stratum–the fairest system ever produced in human history, and the richest.
And, from what I’m hearing about your minimum requirements for poor people, you can afford more pizza than I can.
Even the Great Depression, they tell me, wasn’t too bad if one had a job.
Aw, don’t go away just because we asked you to do a bit of arithmetic now, Rin, don’t be like that, come back…
1. Okay, let’s say the minimum wage was higher, given NPV, back in the 50s and 60s. What has since happened? Well, could it be that there is a larger supply of labour due to an increase in population, which leads to a downward pressure on prices, as well as a decrease in demand of labour, due to greater automation and technological progress? That’s how the cookie crumbles.
2. I don’t blame people, especially the poor, as lazy or otherwise too useless to climb up on their own. God knows, seriously hardcore poor in, say, Botswana, certainly do exist and there is insufficient infrastructure for them to uplift themselves.
But I certainly do blame a minority of citizens of the United States of America for being too lazy, pig-ignorant, willfully stupid and unwilling to better themselves and take hold of all the various resources available to them in order to move upwards. I mean, a sufficiently motivated person in the USA can work miracles in his own life. A fucking B grade actor can become the most influential POTUS of modern times! Hell, apparently an empty suit and a smooth baritone can achieve the same position.
I do not demean people and disparage their abilities. I suggest you might give them the same courtesy.
“I need to get busy working on a speech my union asked me to write about layoffs and the fact that the University of California (a corporation as much as an educational institution) is saving money by firing experienced workers, increasing workload, cutting benefits, reducing needed services to vulnerable students, and gutting the future of California.”
Oh no! Where will our eager young minds get their Marxist indoctrination then?
In the back alleys? Under rocks? Must workers buy non-organic vegetables? Processed cheese? I see the end of the world coming! I now feel like wailing and gnashing my teeth. . .