Taxes are fiendishly complex, so this post might have some errors. I’m trying to see where America ranks in terms of “top income tax rate.” Just to be clear, I am not including wage taxes, or corporate income taxes. Nor am I interested in the maximum MTR associated with benefit and deduction phaseouts. You’d have to be a rocket scientist to figure all of those out. I’d like to rank countries according to the MTR as one’s income goes out towards infinity. I believe the top 6 countries are:
1. Aruba 58.95%
2. Sweden 56.6%
3. Denmark
4. Netherlands 52%
5. Spain 52%
6. US 51.4% (but only in California.)
[Sources here and here]
Our top rate in a typical state is about 48%, which is roughly 10th in the world. The top federal income tax rate is 43.4% (39.6% plus the 3.8% medical income tax.) I got the California number by assuming their 13.3% top rate was deductible against the 39.6% federal rate, but not the 3.8%.
Update: Mark Sadowski points out that California also trails Belgium and Portugal.
Update#2: Steve points out that with the Pease phaseout California’s top rate is actually 52.6%, still number 6, but trailing Portugal and Belgium, not Netherlands and Spain.
Canada seems to have a top rate of 54.75% in Quebec, but only about 45% in a typical province, and about 42% in populous Ontario. Their top federal rate is 29%. (I assumed local taxes are not deductible at the Federal level, otherwise their rates would be lower.) Progressives want Canada’s health care regime. I want their banking system, military, and income tax regime. And their sound public finances. Oil-rich conservative Alberta’s top rate is 39%, versus 43.4% in oil-rich conservative Texas.
Recently a lot of zombie ideas have been resurrected by progressives (and even some conservatives.) These include 75% tax rates, much higher minimum wages, and guaranteed annual incomes. I realize that lots of people are worried about inequality. But there are sensible ways to address the issue (i.e. wage subsidies.) Let’s not shoot ourselves in the foot. There’s a reason that Aruba is the only country in the world with a top rate above 57%.
PS. The New York Times did a story on the Swiss referendum on a proposal that would pay every Swiss couple $67,ooo/year to do . . . nothing at all. Just for existing. They left the impression that it was a good idea. How did they accomplish that seemingly miraculous task? Simple, they “forget” to mention the size of the guaranteed annual income.
PPS. I have a better idea for the Swiss. Instead of giving $33,500 to each Swiss adult, at a total cost of $200,000,000,000, why not give $50/year to each human adult?
Regarding the minimum wage, here is some data for Western Europe:
There are nine countries with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.
There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland.) Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment.
Still want to raise our minimum wage to $10? Germany used to have really high unemployment. Then they did labor reforms to allow more low wage jobs, combined with subsidies for low wage workers. Now they don’t have high unemployment.
Still want to raise our minimum wage to $10?
Find the article here:
http://www.themoneyillusion.com/?p=24759
**************
Taxes are very counter-intuitive to some but the fact is, we tax people in this country too much... We don't tax them fairly ... we don't use the tax money appropriately... and a certain segment of society is convinced that taxing people into government servitude makes for a healthy nation....
What do you think about those minimum wage stats (Emphasis Added).... another counter-intuitutive subject....? Interesting just how many countries in 'Western Europe' (You know, the culture that we are trying to emulate), including Sweden, Finland and Germany who have no minimum wage...
(Reuters) - German Chancellor Angela Merkel has signaled her readiness to accept the Social Democrats' (SPD) demand for a legal minimum wage in order to secure their agreement to form a governing coalition, as negotiations enter the final stretch.
ReplyDeleteMerkel began preparing her conservatives for a compromise by telling a Christian Democrats (CDU) youth rally late on Friday that the 8.50 euros per hour pay floor which the SPD demands "will play a role" in future.
Actually, Germany has a minimum wage on selected occupations of critical importance to the welfare of the State, like bricklayers.
DeleteUnfortunately politicians and political parties will compromise on issues to keep themselves relevant and in power and not necessarily in the interest of their people.
DeleteInterestingly enough though, you didn't talk about the efficacy of the minimum wage to an economy and the low skilled laborers who are priced out of a job because they couldn't negotiate their worth below that set wage...
TS your example shows only legislated tax rates. What is important is what the actual effective tax rate might be. A California company might be in the 51% rate but when all is said and done the effective rate is probably much lower with all the loopholes, credits and subsidies given in the US tax code. Something is keeping some of America's greatest and largest companies with a presence in California. The taxes don't seem to drive them away. Is it the weather? Is it the workforce? Is it tax breaks?
DeleteState Debt per Capita
ReplyDeletehttp://taxfoundation.org/blog/monday-map-state-debt-capita
Mick, correlate the highest taxing states with the highest debt per capita.
1773-2009 It's called TAX and SPEND
Yep. Tennessee has one the lowest per capita state debts yet it has the absolute highest beer tax rates. http://taxfoundation.org/article/state-beer-excise-tax-rates-2009-2013
DeleteFlorida is near the bottom in both categories. Seems like most of the high-tax high-debt states are North of the MD Line. Those Yankees never could get anything right, Consider barbeque for instance, they call anything cooked outside barbeque, I call that barbarism.
DeleteMick, I love the avatar.
DeleteGo Tigers!
And this proves exactly what? Nothing that's what. States with lower/no taxes also may have less services. But getting back to your point this does not correlate at all. Alaska is a low tax state with high oil revenues and a small population hence less need one would think. They are #2 in debt per capita. Guess Sarah Palin couldn't get it right either. North Dakota who is drill baby drill 31st with all that extra revenue. Louisiana ranks # 17 another oil rich state. That's a worse ranking then California that bastion of progressivism. You're only kidding yourself if you think this spun up map shows anything important. There are too many factors that lead to where a state might lie in these rankings. And the states with the best rankings just happen to correlate with the states that receive the greatest amount of Federal aid per capita.
DeleteLet's see according to the Huff Post that would be
10. Mississippi
9. New Mexico
8. Maine
7. TENNESSEE (ain't this fun)
6 Louisiana
5 Massachusetts
4. New York
3. Alaska
2 Vermont
1. Washington D C now see a list that makes sense since everyone in D C basically works in govt some how it would receive the largest amount of federal dollars. If you can't understand that raise your hand and I can explain it for ya. So maybe a state like Tennessee has low debt per capita because it is spread over the other 49 states that are helping keep that great state. All kind of correlations can be spun my friends all kinds.
Yes we need to raise the minimum wage and at the same time control CEO compensation. Here's how we stack up and these are companies that can afford to pay more. Not only is the compensation of the CEO increasing but so are the profits of the companies on the backs of low wage workers.
ReplyDelete10. Starbucks, 120000 U S employees, CEO Howard Schultz, compensation 29M Starbucks net income 1.4B avg wage less then $9 an hour and this is a progressive CEO, he favors gay rights, does not allow firearms in the stores and supports the increased minimum wage.
9. T J Max Companies. This includes TJ Maxx, Marshalls and Home Goods stores.
US employees 138000 CEO compensation 21.8M net income 1.9B avg wage less then $8 an hour
8.Macy's US workers 175000 CEO compensation 13.8M net income 1.3B avg wage less then $9 an hour
7. Darden Restaurants, ah one of your darlings. Remember they cut full time employees so they didn't have to pay insurance.
U S workforce 208000, CEO compensation 6.4M net income $412M avg wages less then $10 and hour for non tipped employees. Wonder what they did with all that extra insurance money?
6. Sears Holding Company. Sears and Kmart Stores.
workforce 246000 CEO compensation 1.3M net income -930M wages less then $8 an hour This is one company I would excuse. Probably won't be around next year at this time although it holds some of the most valuable real estate in the country.
5. Yum! Brands. Taco Bell, Pizza Hut, KFC.
workforce 694000. CEO David Novak compensation 14.2M net income $1.6B
avg wage less then $8 an hour. These employees took the lead in the fast food workers demonstration earlier this year.
4. Kroger Companies. Kroger's Dillon's City Markets.
US workforce 343000 CEO compensation 11.1M net income 1.5B
avg wages unknown, but many of these employees are under a collective bargaining agreement and it still makes the list.
3. Target Stores
US workforce 361000 CEO compensation 20.6M net income 3B
avg wage $8 an hour. These employees lead the "save Thanksgiving " drive last fall when target decided to open at 9PM Thanksgiving evening. 300000 of the 361000 employees signed the petition. The company's response? Opening even earlier this year.
2. McDonald's oh yeah ya knew it was coming.
US workforce 739000 CEO compensation 13.8M net income 5.5 B
avg wage 7.50 hour. This company had it's employees arrested for protesting low wages during a speech by it's president Jeff Stratton. It ENCOURAGES it's employees to sign up for food stamps and other welfare programs.
1. The biggie Wal-Mart Store Inc. Though they constantly deny it they are the Number #1 abuser of their employees. U S workforce 1.4M CEO compensation 20.7M net income17B avg wage? the company states it's avg wage for associates is 12d an hour. A survey of employees puts that figure at south of $9 an hour. I believe the employees. Wal-Mart wages hurt America. being the largest employer in the country they drive down wages while driving other businesses who might pay more out of business. Wal-Mart wages hurt American wages more then all the immigration problems. (unless of course Wal-Mart is employing= illegals!
With unemployment rates at near all time highs around the developed globe wouldn't it be logical to lower the minimum wage?
DeleteEveryone is free to work their way up to a CEO salary in our country. Or don't you believe in self reliance Rick?
http://www.wikihow.com/Work-Your-Way-up-a-Company
Mick,
DeleteI no not particularly like the very high ceo compensations, but why do you say 'we need . . . . to control compensation'? What would that accomplish? Don't misunderstand. I would love it if stockholders could REALLY dictate top management's total compensation, yes? I'm just not sure how you think that should be done, and what you think it will achieve.
Jean
That was Rick not me. Anyway, if the government can legislate a minimum wage then can't they also legislate a maximum wage? Not that I think they should, just wondering. As long as those maximum wagers are supporting political candidates it will never happen anyway, no matter what we the people think. Right?
DeleteHa Ha I read your little wikihow years ago William Martin and in a perfect world that's how it's supposed to happen. But here outside the bubble in THE REAL WORLD it is much more complicated then that simple little plan. 1st everyone has the same thing going on, the race to the top. 2nd it takes a degree of luck also or let's say being in the right place at the right time. 3rd Who you know if you think that doesn't matter get back in your box. $ in today's world most high paying jobs take a bit of formal higher education. Hell you got to have that to get hired at any worthwhile job and if you can't get that done well then you are out of the race aren't you. Except inside the bubble, where you can get a HS diploma get hired somewhere and in ten years own the company. Don't happen that way anymore come on into the 21st century.
Delete@ William Martin. Why would it be logical to lower wages? So more people could get a Job or would get a Job? I don't think so. How many people won't work now because they can do better sitting on their ass then being in the work force. Maybe if the minimum wage was 10 + an hour it would motivate some of these dead beats to get off their ass and get to work. You know I knew a guy and this was in the 80's that sent his wife out to work everyday at a $3.35 to put food on the table. He told me (and again this is in the mid eighties) that he wouldn't work if he didn't make 7.50 an hour. The federal Minimum wage hasn't even caught up to that statement and it is 30 years later. That is precisely the attitude of many people. If they don't get paid a specific amount they have in their head then they ain't working. If you make work worthwhile then people will work. If you make public benefits worthwhile then they won't. Or maybe we could just McDonald's everybody. Pay them the least amount possible and encourage them to get as many relief benefits as they can.
Deleteyou who are against the setting of a livable minimum wage are the same who bitch about people living on the public dole, but you don't want to create an incentive to get them off. You who are against the setting of a livable minimum wage are the same who bitch that wages have not gone up under Obama, when the fact of the matter is they really haven't went up since Ronald Reagan was president. You who are against setting a livable minimum wage are the same who bitch about the squeezing of the American middle class, a point you want to blame totally on taxes, taxes that are about the same % of GDP as they were in 1960, when the fact is people are working longer hours earning less expendable income year after year after year while CEO's and companies pocket record compensations and record profits. And how do these companies earn money? By the work that the employees do. And how do highly compensated CEO's build their company and it's value? On the backs of their hard working employees whom they care little or nothing about. By all means those who have worked their way to the top or those who took the risk to start an enterprise should be handsomely rewarded. But most could afford to give that extra dollar or two to an employee so that they can support themselves and their families through their hard work instead of having to turn to the public dole for food and rent assistance because they can't make a fair wage. Many of these people are the less educated, least skilled, but they are out there doing what they can.
And yes this week in Switzerland that bastion of hidden capital, they are in fact legislating to cap the pay that CEO's and Boards of Directors vote to pay themselves.
DeleteActually it is an initiative spawned by California style direct elections and referendum. It is easy to whip up popular sentiment against such things but what will the public do when these CEO's and their companies move?
DeleteSomething's not right rick. Raising the minimum wage is not going to help solve this problem. 91.5 million out of 317 million is not a good ratio by anyone's yardstick.
Delete"A record high 91,541,000 Americans did not participate in the labor force this October.
According to data from the Bureau of Labor Statistics (BLS), 932,000 people dropped out of the labor force last month, from at total of 90,609,000 in September to 91,541,000 in October.
The BLS defines a person “[n]ot in the labor force” as age 16 and older who are not employed and not considered to be unemployed as they have not looked for work in the four weeks prior to the survey."
Read more: http://dailycaller.com/2013/11/11/record-high-91-5-million-people-not-included-in-labor-force/#ixzz2lDduNcM6
"Food stamp enrollments have remained over 47 million for an unprecedented 13 consecutive months.
According to the most recent figures available from the United States Department of Agriculture (USDA), which oversees the food stamp program, in August 2012, 47,102,765 individuals were enrolled in the program, known officially as the Supplemental Nutrition Assistance Program (SNAP). Enrollments never fell below 47 million in subsequent months and as of August 2013 stood at 47,665,069, representing nearly one out of every seven people in America.
Recent years have seen an explosion in food stamp enrollments. Since January 2009, the number of individuals on food stamps has skyrocketed from 31.9 million to 47.6 million."
http://www.breitbart.com/Big-Government/2013/11/11/Record-Over-47-Millions-On-Food-Stamps-For-Entire-Year
oh dear Mr Martin where might have those figures come from. Now think about it. There are only 317.000,000 million people living in the U.S. Now my friend only 154,700,000 are of working age. The rest are too young (under 16) or too old (+65). Now you want me to believe that of these 154,700,000 working age people that 91,000,000 don't have a job? You do realize that that puts total unemployment well north of 50% don't you? Hell and they thought they had it bad in the 30's. Look dude you can't use total population in one part of your statement and then add under-aged or retired workers in to get your desired shock effect. Doesn't work on me dude.
DeleteHey while ya got nothing to do but look up bogus unemployment numbers look this up. How many Americans are on food stamps because their job doesn't pay them enough to support their family? No one No one ever considers that. Everyone on food stamps isn't sitting on their ass. They just need help because for a variety of reasons too numerous to get into... they just do
It is interesting how many of your comments are, if thought about, counter to your love of liberal policy. Most every problem you point to comes down to government fiddling in the market place. The real problem with the liberal mind is that they refuse to look, in depth, at the cost of government intervention and regulation in the market.
ReplyDeleteIt is interesting that 27 years before the start of the labor union Henry Ford doubled his workers wages. He did so not out of concern for the worker but for the profitability of the business. Yet, had he been forced into the modern day world of unions, labor regulations and government meddling, the auto industry might not have ever taken hold in America….
Lets look at productivity for its effects on wage… purely from a business point of view. Lets look at the fast food industry, which employs a lot of lower-skilled, lower-paid employees. Since 1987, output per hour in all non-farm businesses has risen by around 71%, according to the Bureau of Labor Statistics, an annual rate of 2.19%. Minimum wage logic says wages in the fast food industry should have risen by a like amount. But BLS data show that productivity at self-serve restaurants has risen only by 0.45% annually since 1987, for total growth of 12%.
The simple fact is that if fast food restaurants increased wages by 71% over a period in which their own labor productivity rose by only 12%, they’d be out of business. Ask yourself: do shuttered businesses pay higher wages than firms that remain in business? If not, you might want to think twice about that $15 minimum wage.
Another fact that points directly to government meddling in the markets is that from 1913 to about 1940, wages for both the 1% and the 99% on a pretax basis was about the same (they rose and fell similarly). Starting around 1940 the 99% exceeded the 1% by a large margin all the way to the mid 1990’s. It was at this point real government intervention and trade treaties got underway rite large and the 1%’s pretax wages have skyrocketed.
Free choice in education is certainly a factor. We know that since the inception of the Dept of Education and the push for universal standards (and dare I add ‘social engineering’) as set by a singular group in Washington, student ability has flat lined irrespective of the amount of money thrown at the problem. Rather than leaving state education systems to compete or providing a mechanism for state run schools to compete with private schools using, for instance, a voucher system, progressives insist that they know how to educate our children…. And those children are losing in ability, in opportunity, and in wage.
Much evidence points toward declining demand for low-skilled workers as a crucial factor. In the view of many economists, the principal source of this shift has been technological change that has allowed firms to economize on low-skilled labor while increasing the demand for highly educated workers.
I could go on for days talking about all of the ways government laws, while well intentioned, have created so many unintended consequences.
The government has refused to prosecute CEO’s for the crimes executed by their companies… laws created after the Enron and Worldcom trials. Why create laws if you are only going to pick and choose the ones you enforce.
How many examples of inflation created directly by the government do you need to understand that wages at the lower end aren’t necessarily low but prices in food, housing and medicine are running away from wages. Without fail much of the market and therefore price distortions stem from some form of ‘rent seeking’ rather than competitive pricing and wealth creation. The very lobbying in Washington that you say you dislike is where the real money is diverted away from wages and the wages paid to CEO’s of these companies is compensation for the kinds of people who know how to exploit the government, not run a truly competitive company.
1st you drastically over state inflation. From 1914-2013 do you know the yearly avg inflation rate? It is my friend 1% yes 1%. Now considering that inflation in the mid seventies was 23% I'd say in the last 100 years we have actually had deflation, which only reached a -15 % during the Great Depression. So washing out the decade of the thirties and the decade of the seventies, inflation runs about 1 % on avg per year. Inflation today runs about 2% against wage increases of .07% the latest year in which that complete figure is available. Inflation isn't running away, wages are not keeping up. So what does the average business do with that 2%?
DeleteI never said anything about any thing near $15 an hour.
I answered your question
"Still want to raise our minimum wage to $10?"
And my answer is yes.
At $10 dollars an hour a working couple who both got 40 hours a week would make a paltry 41,000 dollars a year. You willing to live on that? Possibly raise a kid or two on that. Ah you say don't have kids if you can't afford them. Well TS they just kinda have a habit of showing up whether we are ready or not. What's your solution to that little problem? You are against helping with birth control, you are against planned parenthood, and you are against abortion, and you sure as hell can't stuff em back in until you get financially ready.
Do you really want to get into a food service productivity pissin' match with me? have you forgotten how I make my living? Friend I have forgotten more about food service then you'll ever even know.
Self serve restaurants what's that Golden Corral? If you would read you will find that the BLS really doesn't have an accurate gauge of how to measure food service productivity because the standard input out put method does not work adequately. Too many sub jobs in preparation etc that yield no immediate output. Because the American people want high quality and they want it now food service which is very labor intensive has got to be ready at any hour of operation to handle the business that comes quickly, efficiently and with a high quality of FRESH made products in a timely manner. Otherwise people like you expect it for free. So in our industry we measure productivity in a unique way, not input /output. It is derived through a complicated matrix that measure productivity in labor hours per 100 customers. The matrix figures and measures the premium number of hours for each work category in the restaurant. This includes the none productive hours of prep (non productive meaning $0 in the input output method used by the BLS.) Now based on historical data we enter a sales projection into the matrix for scheduling purposes. But TS because I have to be ready for the business that historical trends tell me I am going to get to keep you from getting pissed because you have to wait 3 minutes longer then you think you should I staff to meet my historical data. But oh no today during that 1-2 PM hour that I assumed based on historical data that I should do $1000 dollars and I only did $200 on this particular day I am now fucked on my productivity estimates and what you see as a productivity measure input/ output. Yes I used too many dollars for the business I did that hour. But you now TS I didn't know it until the hour was over. Could I cut at 1:05 maybe it won't get busy until 1:15. Can I cut at 1:30 maybe some but maybe it will get busy at 1:35 my historical data says it will. Well by 2:00 I am screwed aint I and I couldn't do a damn thing about it. Welcome to my world. Therefore we use the labor hours per 100 guests method which evens things out.
And that my friend is how we remain one of the best paying restaurant groups in the country. We don't measure labor dollars to sales dollars. We measure true productivity as in how many hours does it take to prepare for and serve X amount of people. You take care of that true productivity measure and you wages percentage will take care of itself.
Delete100 Years of Inflation Rate History
DeleteInflation can be devastating; while it has been under control for the past 25 years, there is no guarantee that it will remain so. Since this blog emphasizes long-term planning, it is important that we address the issue of inflation, and the impact that the declining purchasing power of the dollar has on our investments. For perspective, as always, let's first look at the past century.
U.S. Inflation Rates since 1900
U.S. Yearly Inflation since 1900
The above chart shows the yearly rate of inflation as measured by the Consumer Price Index for All Urban Consumers (CPI-U) for the past 100 years. By early 2012, prices were more than 28 times higher than in 1900 -- the CPI increased from 7.9 to 226.7. Phrased differently, a dollar buys 28 times less now than a dollar bought in 1900 (see inflation calculator). While inflation has averaged only 3% for the complete period, and also 3% since 1982, such subdued inflation has clearly not always been the case. The graph shows several periods where inflation rose to 10% or more. Here's a quick summary of inflation's impact on some key areas.
The Impact of Inflation: A Dollar Buys a Lot Less Than it Used To
Inflation increases the
price of the things we buy. When I first started driving, gasoline was 25 cents a gallon; now it's more than $3/gallon -- more than 10 times higher. On the other hand, salaries are also more than 10 times higher; if not, few people could afford food or housing, or gasoline. As a result, you could argue that the ultimate net impact of inflation on income and expense for working people is relatively small. (However, it can be painful since increases in salaries often lag behind inflation. In addition, unless/until tax brackets are adjusted, it pushes taxpayers into higher tax brackets). Partly for that reason, in this post I'll focus on the impact on assets. (Note: To see just how much less a dollar buys than it used to, see The Declining Value of the U.S. Dollar.)
The Rule of 72 & the Impact of Inflation on the Value of a Dollar
The rule of 72 says that if inflation is N%/year, prices will double in approximately 72/N years. For example, at 3% inflation, prices will double in (72/3=) 24 years; at 12% inflation, prices will double in (72/12=) 6 years. This means that at 3% inflation, the purchasing power of a dollar will be cut in half every 24 years; since what you could buy for $100 will cost $200 24 years later, the value of the original $100 has effectively been reduced by 50% -- to $50.
http://observationsandnotes.blogspot.com/2011/03/100-years-of-inflation-history.html
http://www.zerohedge.com/news/chart-day-803-years-global-inflation
DeletePrior to the twentieth century years of deflation were almost as common as years of inflation. However as discussed above, this all changed over the last 100 years or so. Indeed we haven’t seen a year of deflation on this median Global YoY measure since 1933. So we’ve now had nearly 80 years without a global year on year fall in prices.
Speaking of efficiency any one ever been to an Aldi grocery store? Aldi is a German company operating under the Aldi USA banner and based in Batavia Illinois. They run these things with 2-4 people max. Everything is palletized. So one employee stays at the register ringing in the dollars, one stocks and one floats between stocking and the register. These things are efficient. Now they sell mostly their own brands of products but most of what I have ever bought there has been good, keeping in mind that no grocery company produces anything, major packers do it for them under grocers brand name (s). We shop there this time of year to get momma her baking supplies etc, because let's face it flour is flour sugar is sugar and you can get a lot of it cheap at these stores. It costs you a quarter to unhook a shopping cart from the stall but you return the cart you get your quarter back and surprisingly a quarter is enough of an incentive that 98% of the carts are returned so another cost cut, no one has to collect carts all day, When they ring your order they put everything back into your cart and you bag it yourself or you can just throw it into the trunk loose your choice. They sell you bags or if you can find enough boxes you can use those so no employee has to go around cleaning that up the customers are doing it for you. Bags are a nickel for paper a dime for plastic, (it is a green company so they encourage paper through the cost) and 15 cents for an insulated freezer bag. All are reusable for your next trip. Aldi is a private company so we don't get figures of how this is all adding up to profits but they have expanded to 1200 stores in 32 states in about 25 years. They don't do coupons, checks or credit cards (more cost cutting) but they will do pin based debit cards. They have several regional warehouses serving smaller areas then a typical store so they cut down on shipping costs and the need for their drivers to overnight in a motel on most runs. They do make special buys on brand named items and have many offered for sale at greatly reduced prices. And at this time of year they import real german rye, and stolen, the best I have ever had bar none. A true model of efficiency.
DeleteThe most efficient method for construction is one lead man and one helper. Small is good. Quality is enhanced by Small units of labor.
DeleteSmall business produces the majority of jobs.
1773-2009 Stop retarding the growth of SMALL BUSINESS!
The Patriot act has provision for foreign banks and money laundering yet two US banks paid a pittance in fines for laundering drug money. I don’t here Democrats shouting ‘rule of law’ when government agencies use judges to outlaw many business practices as unsafe to the public with little or no proof of a consequential hazard. The Obama administration has added thousands of regulations to business with no oversight or congressional debate what so ever.
ReplyDelete“you who are against the setting of a livable minimum wage are the same who bitch about people living on the public dole, but you don't want to create an incentive to get them off.”
I must ask… does the minimum wage create jobs?
Where liberals go wrong is that when they create a law, they look almost without fail at its’ 'intent’ and for some reason neglect a look see at the potential long term possible results. Anyone who opposes such a law is therefore against the 'intent' of the law. They are painted as uncaring, greedy and ruthless even though their objection is to the actual consequence, as they see it, and not the intent which they often agree with. Often they are painted as the party of ‘No’ and without idea…. When actually the ‘idea’ is that many problems are self correcting if left alone.
Let me ask you a question. If an employer is taking advantage of employees by skimming wages for their own enrichment, why is it that no entrepreneur who should be able to easily see this distortion in the market, set up a competing business offering higher wages. By doing so, they would, with little effort steal the experienced but low paid workers away and in doing so, create a highly motivated workforce thus raising productivity ever higher by raising moral, efficiency and quality? Are you saying that ALL employers are greedy?... they certainly aren’t all republican. The fact is that if profits were to be made taking business away from greedy owners... it would happen.
There are lots of reasons for wage disparity and wage inequality….. most of them stem from will meaning but ill conceived laws and regulations.
Oh my friend you are spinning 'em like a top this evening. While regulations under Obama have actually dropped I will grant you that his are more expensive. At equal points in their tenures Bush Jr had enacted 643 government regulations to Obama's 613 through the first 40 months of their terms. Bush regulations cost industry 6.9 Billion dollars Obama's are projected to cost about 8 to 9 billion. But both men are mere children to the
Deleteregulation master of our modern era, Ronald Reagan his 40 month output cost American business 16 Billion dollars in today's money. Geesh and you thought he was one of you.
Wow Rick, you must have woke up on the wrong side of your spatula. It is abundantly clear that I have not made my positions on anything clear to you or you just want to paint me as a bad guy, the way Democrats do. Well Rick, you will not find that I have ever said that abortion should be outlawed. I have said what a disgrace it is that Democrats have turned it in to such a social choice of convenience that women chose abortion over responsibility with similar heartfelt concern as they do when they contemplate divorce over commitment. I have never said that gays don’t deserve equal rights although I do have my concerns that elevating the gay relationship to equal status with hetero relationships will have long term negative social implications. Nor have I said that people in need should not receive some form of help but I, like a whole lot of other people, am quite pissed off at paying for the multitude of scammers who steal tax money and the people who enable them to do it. This summarizes my points with relative succinctness:
Deletehttp://market-ticker.org/akcs-www?post=226118
Now for the rest of your response.
First ‘Food Meister’, it matters not the internal matrix you choose to use in determining your business model because externally food services are no different than any other business: profit=gross receipts – expenses. If your business model allows for higher wages, that is wonderful but the fact remains that to take the order, prepare the food, plate the food, serve the food, clean the facility and recycle the cooking and dining utensils has not changed much since I was a busboy come shortorder cook at Kip’s Big Boy in 1968. Technology has not raised productivity in that business in any appreciable way compared with a whole host of other businesses. Productivity, by its nature, is deflationary allowing business to 1) lower prices 2)raise wages 3)expand business 4)all of the above. If you don’t have that engine then all of the above will be hampered compared to businesses that do experience large productivity gains from sources other than labor.
Again, if the food industry, particularly the fast food industry, raised its wages at the same rate as companies who experience higher levels of external productivity gains…. THEY WOULD GO BROKE!
To your comment: “Inflation today runs about 2% against wage increases of .07% the latest year in which that complete figure is available. Inflation isn't running away, wages are not keeping up. So what does the average business do with that 2%?”
You make it sound as if inflation were just another profit center for a business… you neglect to suggest that perhaps that inflation came from increased cost of food because of increase cost of transportation because of increased cost of oil because of loose money policy of the fed. You neglect to suggest that perhaps the market will not bear a price increase at the retail level and that the business owner might have to absorb that 2% just to keep the doors open…. Come on, you can do better than that.
Your suggestion that the minimum wage be raised is purely an emotional one based on the cost of living… not at all on the cost of actually running a business…. So are prices too high?... we know that the fed created a bubble in housing… we know that trade agreements and immigration policy put pressure on wages yet when someone who wants controls at the border (THE paramount Federal responsibility) or for the FED to be audited and more closely monitored (an abrogated duty assigned to the government) people start yelling terrorist and nutjob at those who propose it.
Let me ask you this question again. If an employer is taking advantage of employees by skimming wages for their own enrichment, why is it that no entrepreneur who should be able to easily see this distortion in the market, set up a competing business offering higher wages. By doing so, they would, with little effort steal the experienced but low paid workers away and in doing so, create a highly motivated workforce thus raising productivity ever higher by raising moral, efficiency and quality? Are you saying that ALL employers are greedy?
DeleteWith respect to the inflation / wage relationship, I would say that we should be much less concerned with the last 100 years than we are with the past 40. Post WWII wages did in fact run ahead of inflation but a funny thing happened in the mid 1970’s when Nixon decoupled the US dollar from Bretton Woods. Wage gains slowed except for a Fed juiced and policy pumped period in the 90’s which created worthless jobs and wage gains that were not real, but inflation has been on a steady march up since. Significantly in mid 2000’s, they crossed and now inflation is indeed running away from wage. Had it not been for the faux boom in the 90’s it would have happened much sooner)
You folks on the left are so damn hard to pin down…. You use a number of ‘isms’ to support your arguments…. If someone successfully debates against one point of view, you drag our another ‘ism’ to counter. The gay rights movement is a perfect example of the hypocrisy used. First it was a genetic thing. When a genetic link was discredited, they rolled out examples of how this bird or that lizard exhibited homosexual traits…. BUT… when someone might say that human nature instinctively makes us ‘self preserving’…. Well, then we are called Neanderthal’s or social Darwinists because we have ‘evolved’… but if you then say well, perhaps we should teach our evolved children sexual restraint rather than running headlong to it…. Well, (rolling eyes in their sanctimonious heads) they charge those suggesting it to be puritan assholes!
Now, for the federal register and all things regulatory. I should have said that Obama has added hundreds of regulations and posted tens of thousands to the federal register. While it might have looked like I was singling out Obama, it was not my intent. Federal regulations are killing America. You know when regulations have gotten out of hand when a kid can’t set up a lemonade stand in their front lawn without violating health laws or operating a business without a permit… So I am talking about all presidents who put out regulations that stifle American ingenuity, creativity and drive. By the way, you are correct, Reagan did create a similar number of regulations which, in the eyes of a liberal, makes him an equal comparison with Obama but altogether, the Federal Register shrank from 87,012 pages in 1980 to 53,376 pages in 1988. Making him one of those ‘irresponsible Republican deregulators’…. But against the collection of 1.43 million pages, each president puts his own nail in the coffin of American prosperity.
Rick, I am afraid that in your rush to counter my argument rather than understand its point, you have validated most of what I was trying to say which is that government interference in the markets creates problems and exacerbate others regardless of how well meaning those intrusions are. While you want to defend your precious Obama, you failed to see that I was talking about government…. Not democratic or republican government… but government.
Well said TS.
DeleteHa William Martin you are in a discussion way over your head. You sound like a little magpie in there.
Delete@TS. So as all good conservatives do you change the argument. We started at productivity and now you have manipulated us to profit, two very different monsters my friend. Especially in food service.
Productivity= the measure of efficiency of the production process. In that the aforementioned Matrix is our standard measure.
Profits = the excess of returns in a transaction or from business operations.
It's pretty neat that being a busboy and short order cook in 1968 qualifies you to be any kind of an expert on today's food service world.
Oh you are so far behind so far that hell we haven't even had busboys for years. I'll let you ponder on how we get tables cleared and cleaned in a much more efficient or shall we say productive way.
Profit, while productivity is a piece of the puzzle there is so much more. There is raw materials costs, rents, fees for music, labor, licenses, services for cleaning that have to be done professionally, trash pick up,
grease pick up all these things affect profit but have nothing to do with productivity. So let's look at profit. 1st do you really think that a restaurant picks up the tab for raw materials costs. No no my friend we have menu increases 2 times a year. It's not a favorable thing but everyone in the business has to do it so the affect on competitiveness you might think it is. A national company such as I work for then has 2-4 different menu tiers to compensate for regional wage differences to keep everyone on a somewhat even playing field.
Now fast food they don't enjoy the luxury of steady price increases completely. It's a very competitive industry. While we can combine price, quality and service to create value they can only offer quality. Price? Some but they have the dreaded 99 cent menu with which to create value and this is where 50% of their sales come from. In case you haven't bothered to notice the big three, Wendy's, Burger King and McDonald's are starting to get some tier pricing even in their now renamed "Value Menus". They can no longer hold the line on the 99 cents crap.
Now not increased profits as much as some other businesses you say. That is probably the one true statement you made. But let's do a comparison. let's use the service or shall we say repair industry. You know the guy that charges me $75 just to drive to my location. Wasn't long ago that the truck fee was $50 and some are even now going to $85 although gas prices have held pretty steady this year. He pays his mechanic $15 dollars and hour to drive the truck. He has spent maybe, MAYBE 5-10 dollars in gas. That's a pretty good profit center don't you think. You had your car worked on lately? what's the Charge per hour for labor 75-100 dollars. A good mechanic gets paid about $28.00 an hour and provides his own tools. Where does the rest of that money go? And figure most places are working on 5 8 10 cars at a time. Quite a profit center isn't it? And if the service truck fee goes to 100 dollars I have to pay it I need his service. If the garage charges 125 hour we pay it because we need the service. quite a way to increase profits. But my friend we don't need food service, there are no bullshit profit centers to be had. So a lot of your so called "profit increases are merely smoke and mirrors, fee increases for no reason except that the other guy gets it so I am going to get it also.
Regulations? Who started regulation and government interference in business? You little Federalist writing hero Alexander Hamilton. Without Alexander Hamilton's treasury Dept being involved with low cost bonds and loans America would still be trying to get our manufacturing going. We didn't have know how we didn't have capital, we didn't have capitalists. He created it all with government intervention. Look this guy was no small government renegade. His treasury dept had over 500 employees in it's first year. The Dept of war and State had less then 50 combined. He regulated, and he believed that government should control monetary policy. Quite a visionary this one. Why do we need regulation? Well hell son just look at our recent past. Because we deregulated banks, because we let banks and investment exist as one we damn near collapsed the entire world economy and why? Greed. Greed greed greed. Why did we have to break up monopolies and level the playing field for the small businessman? Greed Greed Greed. greed is inherent in the human psyc and greed causes us to do things that are irrational and immoral. Maybe not you maybe not me but for a vast majority yes. That is the reason for some regulation. Should a kids lemonade stand be regulated of course not but if you closely check that one out that is some local bullshit going on somewhere. Other regulations are for protection. Worker protection because greed will make a capitalist abuse employees that is going on in China today, safety, public safety. These are the main sources of regulation and again to see the results of an unregulated business environment you only need to look to China. Do you want to walk around with a mask on because you can't breath the air? Do you want to boil water every time you need a drink because otherwise it will harm you. Now I will extend a palm branch on regulation in that in the million pages you mention there are probably loads of outdated and un-necessary laws and regulations on the books but my friend they are also no longer actively enforced. Real world stuff here TS I invite you into it and out of the bubble.
Delete"Should a kids lemonade stand be regulated of course not but if you closely check that one out that is some local bullshit going on somewhere."
DeleteProfound Rick. I admit it's hard to keep up with your depth of knowledge.
@Rick
Delete“@TS. So as all good conservatives do you change the argument. “
Not really, except for higher end restaurants profit margins are slim and like you said, all like restaurants have similar overheads for food resources. So labor becomes a primary cost in every step of the food service production process and productivity of that cost is a major factor in a food service profit margin
I’m not denying that a restaurant business has other overhead. I am not ignoring that fact but labor, unless you screw the hell out of them, are a major portion of the budget. Interestingly enough much of a restaurants costs come from government ‘over’ regulation. Heck, I have been in a lot of greasy spoons where the food was wonderful… You can tell they are good because of the number of cars in the parking lot. The public will sort out a bad business faster than less than dedicated health inspectors.
Just because I was a busboy has nothing to do with the fact that now you use waiting staff to police the tables. This is more efficient to some degree but I wouldn’t call it an earthshaking productivity gain. I have noticed however that by the elimination of the dedicated table cleaners, facilities use more waiting staff per seat in order to cover the extra work…. This works out well for the restaurant owner. More efficient and you get to pay a staff tip subsidized wages….
With respect to your costing, of course you don’t pick up the tab for your overhead…. If you did, you wouldn’t be called a business... you’d be called bankrupt. This by the way is the very reason I roll my eyes when people start talking about corporate taxes. Within that thought however is the fact, as you well know, that the buying public only has so much tolerance for price rise. Regardless of the restaurant, if the customer does not perceive value for money they will go elsewhere or stay home… you are out of business. This brings us back to the cost of a very labor intensive business and the inability to achieve large productivity gains compared to other business types.
Interesting that you don’t see the fallacy in your comments with respect to ALL the costs of running a resturant…. First you want to tell me that labor is only one part of what is a hugely labor intensive business by pointing out all of the overhead but then act like the repair industry only needs to consider the price of gas to get the repair person to a location and back… no mention of the cost of the truck although you did elude to the high cost of repairs to the truck after an irresponsible driver runs the vehicle into the ground.. You didn’t talk about parts inventory, test equipment and tools, facilities, various insurances, licenses and training. I am quite sure that you are very competent at your profession and are smart enough to understand that every business has similar overhead.
Telecom for instance…. It use to require, like a copy machine repairman, a lot of onsite expertise; highly trained and resourceful. Over time a company’s R&D created firmware coded diagnostics that allowed for remote and many times automated trouble determination. Sometimes this determination allowed for remote resolution. On those occasions where someone must go on site to fix the problem, they now just replace major modules (Plug and Chuck) with much less skill and training. Now, the ‘tech’ might only receive a small amount of the fee paid by the customer, that doesn’t mean that the company didn’t pay a lot of money for the equipment and center manned labor that got you up and running again. That.. is a measurable productivity gain and why the onsite repair person earns much less than they use to while at the same time the firm must charge to recover costs of highly productive plant and facility.(as well as any liability created by the dude they dispatched to your location) I will give you however, that car dealerships seem to run a pretty good racket…
“Regulations? “
DeleteHeck Rick, you need look no farther than the Federalist and Anti-Federalist papers to understand that there has always been big government yahoos doing their dead level best to consolidate power at the federal level and indeed into one branch of the federal, all for the very things you mention … greed and power. So you are correct, government has been sticking its meddling nose in business and citizens lives from the beginning. Hamilton can be credited with getting US debt under control. How he managed that was by robbing the responsible to pay for the irresponsible…. The south, who we have previously talked about provided 70% of the export tariff revenue to the new treasury… the ‘compromise’ for them to foot the bill was for the US capitol to be moved to its present location. This established Americas credit worthiness causing huge amounts of capital investment to come from European financers and entrepreneurs … He also tried to start the Bank of the United States, modeled on the bank of England… can you imagine what kind of hole we would be in now if we had a central bank 100 years earlier than we did? The only ‘help’ I can see that Hamilton provided to business was protectionist tariffs… Of course just because I can find no evidence of government funding doesn’t mean that the government wasn’t in the business of picking winners and losers even then..
“Greed Greed Greed. greed is inherent in the human psyc and greed causes us to do things that are irrational and immoral.”
You are right and I find this comment particularly telling coming from anyone who would vote for bigger government….
As far as protection goes, workers have created their own nightmare (The American voter acts exactly the same way)… They, as a group of individuals, could put an end to any harm that an employer might do. They don’t because of the same greed that motivates an employer. Why do some workers stay at work to the determent of their own long term interest, while others walk out?…. Why is it so easy for a factory to bring in ‘scabs’ to break a work action?
You want to blame the lemonade stand on local action … two points. 1) Government will seek power; World, Federal, State, County or local. 2) Many local actions are forced because of some federal funding catch 22 where they must enforce some federal law to get the bucks..
“Why do we need regulation? Well hell son just look at our recent past. Because we deregulated banks, because we let banks and investment exist as one”
Actually, had the government not been the catalyst, much of the subprime problem would not have occurred. Had the government not had its fingers in 70% of the subprime loans, investment banks would have never bundled them in the first place? Had the government actually sent people to jail as they did with Enron and Worldcom, bankers would get the message. Had the government actually clawed back all the clandestine profits from these banks rather than just cost of doing business ‘fines’, banks might have gotten the message. Had the government actually followed up on complaints about Madoff and enforced laws on the books, perhaps people’s lives wouldn’t have been turned upside down. If the government hadn’t been so quick to sink Lieman bro’s to save others, perhaps it would have actually seen the Libor rate fixing (if they weren’t part of it) in 2008 instead of 2013. Had business feared government prosecution enough, perhaps they wouldn’t have attempted to pass off over 100,000 forged documents to the court…. Fraud upon the court and they got a fine!? What good is the mountain of regulations if half of the malfeasance is a byproduct of the government and the other half is because greed knows that the government is a toothless tiger?
In other words…. Had the government just done its fundamental job of preventing fraud and enforcing contracts and staying out of the business process all together, most negative things wouldn’t occur in the first place and those that do, would, with a reasonably educated and engaged public, self correct. Of course, the government has its mitts in that too.
DeleteWe find this most readily apparent in housing, student loans, medicine, pharmaceuticals, finance, and lemonade.
Now… where were we… Oh yes… Minimum wage… If one of your direct competitors is scamming their employees with low wages just to boost profit, wouldn’t you as a fair honest employer just take his talent…. If you could afford it? Again, minimum wage just prices people out of the job market. I would be complaining about the Fed holding house prices artificially high and forcing all of our imported food to cost more and pumping the cost of medicine to the roof…
I left that simple statement in there just for you wanted you to get some understanding out of the piece.
ReplyDeleteOpinions of Hamilton have run the gamut: both John Adams and Thomas Jefferson viewed him as unprincipled and dangerously aristocratic. Aaron Burr shot him. Hamilton's reputation was mostly negative in the eras of Jeffersonian democracy and Jacksonian democracy. However by the Progressive era, Herbert Croly, Henry Cabot Lodge, and Theodore Roosevelt praised his leadership of a strong government. Several nineteenth- and twentieth-century Republicans entered politics by writing laudatory biographies of Hamilton.[note 6]
DeletePrinceton historian Sean Wilentz in 2010 identified a scholarly trend very much in Hamilton's favor, even though Wilentz himself does not go along with it:
"In recent years, Hamilton and his reputation have decidedly gained the initiative among scholars who portray him as the visionary architect of the modern liberal capitalist economy and of a dynamic federal government headed by an energetic executive. Jefferson and his allies, by contrast, have come across as naïve, dreamy idealists. At best according to many historians, the Jeffersonians were reactionary utopians who resisted the onrush of capitalist modernity in hopes of turning America into a yeoman farmers' arcadia. At worst, they were proslavery racists who wish to rid the West of Indians, expand the empire of slavery, and keep political power in local hands – all the better to expand the institution of slavery and protect slaveholders' rights to own human property."[138]
Wiki
Again we have our matrix that controls productivity. Here's the problem with the standard input output or as you put when you changed the discussion:
Delete"profit=gross receipts – expenses. "
Now we started at productivity. but whatever. Control of productivity does control labor expenses. In the restaurant let's look at a prep cook. This cook is given a list of specific items with an estimated time it takes to do the work. Sort of like the labor book at a car dealership. Now like the mechanic we hope that the cook gets done in a time that is under budget just like the auto shop. Difference is , the auto shop still charges you the book fee regardless of if the mechanic finished sooner or not. We can't do that. Also many products have a useable shelf life of 48-72 hours. So the production of this employee and the cost of his time now has to be spread over two or three days to get an accurate measure of his productivity using the input/output measure. Another way to look at it is that we are paying the full labor cost up front one day for products that will be sold tomorrow. Ah you say it's the same but no it isn't. Because this cook is going to work again tomorrow the same amount of hours doing some of the same stuff and some stuff for the next day or two. So you cannot use the input output method of productivity to accurately attain the productivity of the employee. What he produced today may return $0 dollars today. Tomorrow when we begin to realize sales on his work he is still there making the same wages, doing the same job. This is why the matrix works far better then the input out put method or labor percent. We know day to day what our labor percent needs to be. By controlling productivity using the matrix we can attain that. My friend in restaurants it's all about labors hours per 100 guests. Argue all you want but that is how it is done.
Cleaning the tables. You are of course wrong. Servers are only required to prebus tables which is and has always been a part of their job. It's one of the customer focus group points to increase tips. guess again how we do it.
So another contradictory point you make to justify the predatory practices of the repair business is recouping costs. Like a restaurant do you really think a truck of parts rolls up and I pay only labor for the work. Not so my friend. I not only pay for parts I pay an extraordinary cost for those parts. You ever got you car fixed and not paid for parts? It's just another high profit center for the repair business that can be inflated at any time, I have to pay it because I need my shit fixed.
Truck fees? Yes they are ridiculous. Keep in mind that truck costs the next guy an additional $75 dollars even if he runs the business next door. How many $75 dollars can you generate in a day TS? 5-10-15- how many trucks you got out there getting this $75? 2-4-6-10? All the argument in the world cannot make that high fee just to move the truck
acceptable. the way I see what your saying is this It's OK to screw each other as long as the government isn't involved.
Alexander Hamilton. How many times has a conservative cited something that Hamilton wrote in the federalist to prove a point about the constitution? The Federalist was written as the opinion of a couple men, men who didn't even get along when the business of governing under the constitution they wrote about began. Why because although they wrote together they didn't believe the same. Alexander Hamilton and James Madison wrote the Federalist for one reason only. To attain the passage of the new constitution in the states of Virginia and New York two keys to the passage of the whole thing. So they wrote what people wanted to hear, they wrote to convince the ratification to pass it. Hamilton then didn't live by it so therefore much of what he wrote was pure B>S> Thomas Jefferson looked at the constitution and found it to be an acceptable document but also said that advances in technology will result in it having to be updated from time to time. Well we certainly have had the technological advances but we have never really directly updated the constitution. No one hates the constitution, no one wants to do away with it. But it must be seen for what it is. A frame work of a new government, not the end all to every issue to come up in our country. Could you imagine from 1789 until today the mess we would have if every change in our land had to be ratified as an amendment to the constitution by 2/3 of the states. The constitution would be a million page document and just as un-understandable as our code of laws.
DeleteBut the trashing of the constitution goes back to your Federalist writing hero Alexander Hamilton.
In his argument for his bank and for his Manufacturing Societies financed with government loans and bond sales, he greatly emphasized the "necessary and proper" clause. So today we still use that to get around constitutional changes that have to be ratified. Every law could be construed as a constitutional change using this clause, especially if you want to hold up the constitution as the supreme and only law of the land.
First let me say that I hope that you and your family had a very nice Thanksgiving Day.
ReplyDeleteThis entire conversation started over one simple disagreement of thought about the minimum wage. I said that minimum wage did more harm than good and you said that you not only liked it but felt it should be raised.
My original points were that minimum wage isn’t the problem nearly as much as government policies, interventions and regulations that cause the cost of products to run ahead of wages( The two are not linked because labor is no less a product than wheat or oil) and that it is not an inherent trait of businesses to skim wages to increase disposable profits.
To prove that I asked you to answer a question: If an employer is taking advantage of employees by skimming wages for their own enrichment, why is it that no entrepreneur who should be able to easily see this distortion in the market, set up a competing business offering higher wages. By doing so, they would, with little effort steal the experienced but low paid workers away and in doing so, create a highly motivated workforce thus raising productivity ever higher by raising moral, efficiency and quality? Are you saying that ALL employers are greedy.
I went on to make the point that not all business is equal with respect to their ability to raise wages particularly when it came to productivity realization and pricing ability. I used what I thought would be a very easy to understand example…. Fast food establishments.
To be able to raise wages a company needs the extra money to do it. That extra money comes from:
• Excess Profit (Hence the Gross Revenue-Expenses=Profit)
• Productivity gains capable of covering the increased wages
• Ability to raise prices
Fast food establishments are, by their nature, very labor intensive and are, by your own admission, very competitive and are locked into a rather tight price structure… but as noted, they are starting to diversify.
• Because of the labor intensive nature of the business, they do not have the ability to realize large productivity gains that are very easy for a business that uses automation and technology.
• Because of the competitiveness they don’t have a wide margin in profits (Unless you believe that all business proprietors are greedy con artists)
• Because of the competitiveness they don’t have much room to move prices
Because of the above constraints on this business segment, a forced and highly artificial wage increase that has no excess profit from which to pay the increase it must do one of a couple of things:
• Remove money from profits that might otherwise be used for capital improvements or otherwise expanding the business. OR
• It must get rid of some workers to cover the cost of those remaining.
If it is the former, the possibility exists that its business model might be harmed more than a competitor and put it at a disadvantage. If it is the later one of two things might happen, neither of which is good for the long term success of the business.
• If the company has already built procedures to extract the maximum amount of productive efficiency, then the remaining employees will be hard pressed to keep up a quality product. In time this will hurt the product reputation… perhaps irrevocably.
• The company makes a conscious decision to limit its client base to insure a quality product. This causes a drop in revenue requiring still more people to be let go… a death spiral
So you see Rick, just as you stated at the beginning of this conversation about very large companies that have the excess profit to pay more, the amount of available profit is the key to how a minimum wage effects a company and there are considerably more people working for little companies than there are people working for big ones.
I hope that I have explained myself better this time…. If not… I guess we will have to agree to disagree, but I, personally, would not be too sure just exactly what it is that we disagree about.
With respect to the cost of repair service… I think you haven’t thought about this enough. Let me ask you a question. If you had a system go out at your business (Refrigeration, HVAC, Cooking equipment, cash register system) and you called for a repair person… How long are you willing to wait for them to show up? 1 hour?… 24 hours?... 4days?...maybe 1 week?..... how about 2 weeks? If you are like most businesses you would probably say somewhere between the 1 hour and 24. Given that a ‘repair person’ is hired for their highest and best use, anything they do that is not directly related to ‘repair’, including the drive time to and from you facility is economic waste to the employer.
DeleteIf you want a person to respond to you within a given time period, the vendor must have repair people on hand (salaried or waged at an 8 hour day) to handle a ‘normal but high traffic day’. While you can use temps, most vendors would want to do some training before they turn them loose on a customer so temps, other than for seasonal highs is not practical. Where do the wages for these repair people come from on a ‘normal but low traffic day’ while they are sweeping the shop floor waiting for your call?
I worked as a telecom field engineer. I was 1 of 4 people out of a service department of 23 who could be counted on to respond to the most serious problems anywhere in the world. I got paid rather well for my expertise and my willingness to go anywhere on very short notice. If there were no emergencies to attend to, my next fallback 'occupation' was a project manager for large installations and my last job in line was to sit at a desk waiting for the phone to ring as technical support for less experienced engineers. Regardless of what I was doing, I got paid the same…. From working on site in Indonesia to sitting at a desk doing nothing. That is what is built into the hourly fee of a repair tech. So, while I feel your pain, the disparity between the hourly wage that you see and the fee that you pay to cover the hours that you don’t see is just a matter of necessity.
I will give you another example of additional costs for covering my time. Consider I am doing an installation as PM in Mexico. The contract that covers the installation requires that a PM be on site when ANY work is done by installers, technicians etc. (Typical clause and one insisted upon by the customer as sole point of contact and responsible of all worker actions). The other 3 senior engineers are in Asia and Europe. A customer in Brazil calls with a serious outage. I am geographically closest but for me to leave would shut down the project and all work, which could include as many as 20 people plus possible contract delay penalties, until I return which could be up to a week. The company must fly a junior engineer to Mexico to take my place pay per diem, hotels and fly them back when I return which could be as little as 2 days… Brazil pays and it shows up in my hourly costs.
Do I agree with you that some businesses take advantage … They may for a period of time but when it is time to renew your contract, you just might find another provider that will take their business away. One thing we all know is that if we by a Mercedes we will pay for the name and the service… our choice not theirs. And I still contend that the market will eventually put bad business out of business and over priced products to reduce or not sell.
Why can't an entrepreneur scan the world and see these wage distortions? Some can but it takes more then knowing that to hire away workers. How much does it cost to get into a restaurant or other business to utilize these workers? I know as far as restaurants go 1-5Million. So if I did see this wage abuse what would I do with my new found friends if I couldn't afford to erect a restaurant or buy one? In the business it doesn't happen because every one does it. It is why our company has well trained, long term employees. We pay better then most. When we get them they stay. The current restaurant I am in opened in 2007. The longest term employees we have left from that opening are all in the back of the house. I have a cook who transferred in from Jersey who has been with the company 13 years. A bar tender who has been there 6 and another one 10. We pay a fair wage, we treat our employees with respect and we keep them.
DeleteYou have sorta blown this LOCAL service thing a bit out of proportion. First we are not dealing with engineers here and we are not dealing with international boundaries, nor are we dealing with a corporation. We are dealing with people who hire technicians at 10-15 an hour but charge 75-100 dollars an hour for labor. I understand your view that they are sometimes in down time around the shop but that again like restaurant labor comes back to managing your work force in size and in the scope of what you are doing. Now when we call for a repair we don't have the luxury of saying I want you here now. No sir. It is more like them telling us that they will be there when they can free someone up and if that happens to be off hours the labor fee goes up although the techs wages may or may not depends on if he is on overtime or not, not the hour of the day or the day of the week. You know I am pretty handy so except for refrigeration and HVAC I watch what they are doing like a hawk. Next time I can possibly make the repair myself. Refrigeration and HVAC, well I don't have the tools for a lot of that although I will replace a fan etc.
Here's an example. The company recently bought from a company a little device called a "keg saver". Each of these little "wonders" cost about 50 dollars. supposedly they will allow you to completely pump all the beer out of a keg where without them the bottom inch or two is waste. We'll see jury is still out on that. They were sent in and it would be a simple plumbing procedure to install them. But of course they took some specialized couplings which I could not buy at the plumbing store so you had to call the company for installation. They didn't send the couplings forcing you to call them. They roll in with the accustomed $75 truck charge and charged $125 an hour for labor, and in the end we spent 462 more dollars to get these things installed. Had all the parts and pieces been sent, I could have done it for nothing. Had the things used standard plumbing parts I could have installed them. A racket is what this is but I know you can't see that through the blinders you wear covering the real world.
Don't deal with the ones who use these predatory practices you say. Well my friend those are few and far between. They are all pretty much the same price per hour labor, they all charge the truck fee, they all come on their schedule not yours. It is the nature of the business. So you find the one who is most dependable, by that I mean they fix it right the first time, and you stick with them. We have very few contractual relationships with repair companies. Because we are spread over the nation and there are very few national repair companies we do all that at the local level. One national repair company I can think of is Hobart and they are by far the most expensive. As I blame our country's largest employer WalMart for much of our wage deflation I blame Hobart for the inflation in repair prices. they are a bit of the national standard and the local shops stay just below them enough that you will call them instead of Hobart. So on the local level you have three or four you can call but the difference except the quality of work is minimal.
DeleteHope your Thanksgiving was well also. We dodged a bullet to get to enjoy ours. Momma who is a retail manager (not Walmart of course) didn't have to work on Thursday and our pregnant daughter remained that way although Thanksgiving was her official due date. Still waiting this morning for our first grandchild. Any day now. This girl can't get much larger without popping!
Happy thanksgiving and good luck with the grandchild Rick. Waiting on our fifth this February.
DeleteLife is grand ain't it!
We had that baby on the 2nd a nice healthy boy.
DeleteCongrats grandpa!
DeleteBiggest congratulations Gramps! Got that brag book started yet? Hope all is well with mother and son...
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ReplyDeleteWell Rick, I can say, with almost absolute certainty, that if a person can find a profitable exploit in a business, have created a business plan and presentation to sell that exploit, there IS venture capital out there to help you make your business a reality. The only caveat to that is the mess the banking industry and government have gotten the business environment into. Finding money at these times is no doubt more difficult- BUT- if the profit is good enough, someone will fund it.
ReplyDeleteWhile I used my own experience on a global scale, everything I said is scalable. Resources scattered from one side of the country or state or city to the other. Also, most of these repair people must be certified; plumber, electrician, HVAC, ect. While they are simple repair people to you, they are (you hope) highly trained pros. You do not want the company to hire temps as most temps generalize within their fields and not necessarily on you specific equipment.
You say yourself that when they come is due to constraints on their ability to deliver a technician to your location. HVAC for instance; you know yourself that Carolina weather can be unpredictable sometimes. Have a heat wave in early May and you are likely to find the facility short staffed… have an unusually cold spell in September and the same thing might happen. Have a serious cold snap and watch the plumbers helpers go into overtime to keep up. Electrical storms play hell with all kinds of electronics… you get the picture. I am not so privy to the nuance of either your business or that of a HVAC company but I would venture a guess that business is less predictable (day to day) in HVAC then it is an established restaurant. I could be wrong
It is interesting that you bring up non standard parts. Would you do me a favor please? If your restaurant is as popular as you indicate would you send me an email with all of your recipes and your source for ingredients? I don’t necessarily agree with it but proprietary software and hardware lock you to a specific vendor… by design. Restaurants, while they can be copied, try hard to have a menu that is unique and guarded which is why if someone wants to experience your product, they must visit your restaurant. This is one of the reasons we have a copyright and patent system…it’s a broken system but it does serve a purpose.
I hate to say this Rick but your ‘keg saver’ experience appears to come from not asking enough questions up front. I am sure that the total cost of putting them in service was written on something you signed. I know that knowing all the right questions is sometimes difficult but transacting a deal without understanding it is down, I am afraid to the buyer, unless it involves fraud or deception. If you were deceived then there is a court for that kind of bad business practice and an Internet to tell the rest of the world about them.
I like you; I watch and learn from these folks because I can turn my hand at things pretty well also... Occasionally I will run into someone who is deliberately evasive… ‘cause he knows that if I know what he knows, I won’t call him again.
Again, my feeling in so many areas of business is that the government causes the price distortions much more than unscrupulous business. OCHA Regulations, records compliance, hiring and firing and of course the favoritism played by the government in picking favorites… Halliburton comes to mind and Dodd-Frank picked winners in banking, Fannie Mae partnered with certain underwriters, Medicare Part D helped some pharma companies more than others, Monsanto etc. etc. etc. Each of these interactions in regulation and favoritism cost you right down to the cost of repairs, the cost of insurance and every aspect of your business plan. You mentioned that, except or quality, they all do it… either it costs all of them about the same and they are honestly charging you a fair price (even if it looks outrageous)… or they a colluding with each other to fix prices, which, if you can prove it, is against the law- a law I approve of.
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