Last week in “The Magic Marketplace can be malevolent” I wrote that the marketplace for labor is not always a benevolent mechanism. This week I would like to consider some cases where companies have ignored value for price and where companies have put value ahead of price.
Management of a large electronic chain decided to fire all their high-paid floor employees and let them reapply at a lower pay level. The company ignored the fact that the high-paid employees had gained considerable experience and were providing exceptional customer service. Unfortunately, many customers lost their favorite go-to employees and found the remaining help unsatisfactory. And this attitude spread rapidly, years before social media. The company rapidly declined and has become a textbook example on how not to treat employees. Remember Circuit City?
Sometime ago I read a letter in a newspaper complaining about firefighters going for groceries with a fire truck. The writer questioned why they didn’t take a smaller vehicle. Did the writer consider the increased response time of a crew returning to the fire station to get the big rig? If the crew returned to the fire station to get the big truck, how much more value would be lost in a burning house?
“If you can read this, thank a teacher!” But too many begrudge teachers the salaries they get, using among other wild-eyed statements “greedy teacher unions”. After he resigned, Nevada Superintendent of Schools James Guthrie said the top tier of teachers should be paid $200,000. This would give teachers a salary commensurate with other skilled professionals. Do those who decry the lack of qualified workers see any connection to their unwillingness to pay sufficient taxes to educate future employees?
Some of those who grouse about teachers’ or others’ pay keep pushing their own pay up. Many CEOs and board members are getting pay far in excess to the value they give to shareholders. They often play games about comparing salaries “with comparable companies”, but it is the board or if the board is hand-picked by the CEO, it is the CEO who determines his or her own salary. Doesn’t sound like the marketplace is determining salaries. Sometimes they get the boot; sometimes they run the company into bankruptcy. Many CEOs groused about a law that strove to let shareholders have a say in executive pay; it was watered down so that the vote was non-binding. See “Time to Make CEO Pay Match Shareholder Performance”, Suzanne McGee, The Fiscal Times, 2015-05-01. She wrote that often the pay of the CEO is inversely related to the performance of the company. Interestingly, a proposal was made by the Securities and Exchange Committee to make corporate top executive pay more transparent to shareholders. It was voted against by the two Republicans on the committee. Could it be that Republicans aren’t business-friendly but CEO friendly?
As an example of the inverse relation of pay of the CEO to the performance of the company consider Walmart, Target, and Costco. The CEO of Costco gets a hefty pay package but it is far less than those of the CEOs of Walmart and Target. The Motley Fool published an interesting comparison on five measures of company strength. I haven’t fully understood it yet, but the Fool’s conclusion is that Costco is a far better long-term investment than either Walmart or Target.
Costco pays its employees about $20/hour compared to a third less for the other two. It has only about four percent of its employees as part-time. On the other hand, Walmart has one-half of its employees as part-time. Part-time is great for students, but it is lousy for people who have to support families.
Speaking of part-time, as a college student, I was getting $1.74 an hour for around 14-16 hours a week at Kroger. I did stocking, cashiering, and bagging. According to PayScale, Kroger pays its cashiers $7.26 to 11.99 an hour. Assuming an inflation rate of three percent, then somebody with equivalent experience should be earning about $10.88. I’ll let you play around with various inflation rates; for example, do these same calculations with the actual inflation rate for each year.
But average inflation doesn’t tell the whole story. Some things are a lot cheaper relatively than in 1958. Somethings are a lot more expensive.
When our daughter was born in 1962, I was a graduate student earning $75 a week. School insurance paid most of the cost. I do remember the room cost was $10/night and the obstetrician cost was about $700 total. At three percent inflation the room cost should be less than $50/night. In 2010, the average cost of a hospital stay was $1,600 to $2,000/night.
We bought our first new car in 1963, a Ford Falcon. Its cost was about $2,200. Assuming the average inflation it would cost over $10,000. You would be lucky to get a two-year old car for that price now. Of course, the cars of today are packed with comfort and safety features that were only dreams in 1963.
The cost of transportation has become a big part of the budget of those with lower incomes. And as we have spread out more, public transit becomes less available and a car has become more of a necessity.
Meaningful discussion about these issues, as it has always been, comes down to point of view. We are right and you are wrong. Too many of us ignore our wrong choices and give too much importance to being in the right place at the right time.
It reminds of Pete Seeger’s tale of two slugs that fell off a shovel. One falls in the gutter and the other in a dead cat. After a few days of eating and eating, the lucky one goes looking for the other. When asked how he became so fat and sleek, the lucky one says, “Brains and personality!”
Many may dispute Mel's brains and personality, but he knows that a bit of pluck and a lot of luck helped.
Showing posts with label wages. Show all posts
Showing posts with label wages. Show all posts
Thursday, May 07, 2015
Friday, February 01, 2013
"Makers" are takers and "takers" are makers
The "masters", in Adam Smith's parlance, claim they are the makers, the one's who get things done. Or are they the "takers" who depend upon other people's work but take credit for it?
Adam Smith did write, "It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects."
In other words, if someone doesn't invest the capital, lots of things won't be done. Would you be reading this on your computer if there hadn't been the capital to start a company that made a lot of computers?
Smith also wrote, "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences [sic] of life…" and "The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."
If there are no laborers, then there is no one to carry out the "plans and projects of the employers of stock". Michael Dell may have been able to assemble computers in his dorm room, but he needed others to make the parts. As his business grew, he needed others to assemble and ship the computers.
But how many CEOs started the companies that they head? Very few. Most either came up through the ranks of management or were hired from outside. They weren't the ones who put "into motion the greater part of the useful labour". Thus, they are not the ones who make, but are the ones who take the work of others. In fact, they often consider the actual makers as taking from the company and as such are disposable.
How many restaurant chain CEOs are cooking the hamburgers? Where would the CEOs be if there were no hamburger cooks, no cashiers, and no clean-up crew? If their companies have a good year, how much of their bonus are they willing to pass on to the people who made those profits possible?
We have at least one good example of the effects of treating well-paid employees as expenses rather than assets. I saw Circuit City's demise coming when they fired all the high-paid experienced clerks. These clerks made the sales; the executives took the profits of those sales. See "Labor is not a commodity".
Adam Smith did write, "It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects."
In other words, if someone doesn't invest the capital, lots of things won't be done. Would you be reading this on your computer if there hadn't been the capital to start a company that made a lot of computers?
Smith also wrote, "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences [sic] of life…" and "The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."
If there are no laborers, then there is no one to carry out the "plans and projects of the employers of stock". Michael Dell may have been able to assemble computers in his dorm room, but he needed others to make the parts. As his business grew, he needed others to assemble and ship the computers.
But how many CEOs started the companies that they head? Very few. Most either came up through the ranks of management or were hired from outside. They weren't the ones who put "into motion the greater part of the useful labour". Thus, they are not the ones who make, but are the ones who take the work of others. In fact, they often consider the actual makers as taking from the company and as such are disposable.
How many restaurant chain CEOs are cooking the hamburgers? Where would the CEOs be if there were no hamburger cooks, no cashiers, and no clean-up crew? If their companies have a good year, how much of their bonus are they willing to pass on to the people who made those profits possible?
We have at least one good example of the effects of treating well-paid employees as expenses rather than assets. I saw Circuit City's demise coming when they fired all the high-paid experienced clerks. These clerks made the sales; the executives took the profits of those sales. See "Labor is not a commodity".
Monday, December 10, 2012
A different idea for capital gains tax
Many don't want capital gains to be taxed any amount, even if a stock was bought and sold in seconds. But how does such a short term profit make any real contribution to the economy compared to an hourly worker producing a tangible product such as vegetables or automobiles?
We really should tax capital gains on a sliding scale. Securities held for less than a year should be taxed at the same rate as earnings. Securities held for more than a year should be taxed at a progressively lower rate until securities held for, say, ten years should be taxed at zero percent.
Of course, we are still rewarding people for luck at throwing darts more than people who show up for work everyday.
I'm probably preaching to the choir on this. I've been writing for some time on this and you can see how much it's caught on.
See "Let's do away with capital gains taxes, dividend taxes, and estate taxes by…" or do a search for "Irregular Blog" and "Capital Gains".
We really should tax capital gains on a sliding scale. Securities held for less than a year should be taxed at the same rate as earnings. Securities held for more than a year should be taxed at a progressively lower rate until securities held for, say, ten years should be taxed at zero percent.
Of course, we are still rewarding people for luck at throwing darts more than people who show up for work everyday.
I'm probably preaching to the choir on this. I've been writing for some time on this and you can see how much it's caught on.
See "Let's do away with capital gains taxes, dividend taxes, and estate taxes by…" or do a search for "Irregular Blog" and "Capital Gains".
Monday, November 19, 2012
The economy ran into trouble when…
...When employees became associates;
...When personnel became human resources;
...When employee pay stagnated and executive pay soared;
...When executives were more concerned with the bottom line than with employee safety;
...When executives complained more about regulation instead of examining their own business.
...When personnel became human resources;
...When employee pay stagnated and executive pay soared;
...When executives were more concerned with the bottom line than with employee safety;
...When executives complained more about regulation instead of examining their own business.
Thursday, October 25, 2012
The Invisible Adam Smith
Many who claim to be "free market proponents" cite the "invisible hand" of Adam Smith in "The Wealth of Nations". However, Adam Smith only uses the term once, only in reference to individuals, and in the context of trade among nations. The chapter is "Of Restraints upon the Importation from Foreign Countries of Such Goods as Can Be Produced at Home". Among the questions Smith raises is :
If a restriction benefits an industry, does it also benefit society?
As to the "invisible hand", Smith does not apply it as a metaphor for an absolutely free market, but as an indication that the acts of an individual can lead to consequences not intended by the individual. A more complete citation than "invisible hand" is:
"[The individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." - pages 242-243
In other words, seeking his own security he may benefit society and seeking his own gain he may harm society, or otherwise, depending on the circumstances. In no way does this describe a "perfect market".
All page references are to the PDF version of "Wealth of Nations" transcribed by the Gutenberg Project. You can select your preferred format from http://www.gutenberg.org/files/3300.
For the most part, I don't think Adam Smith provides a prescription of how an economy works. Instead he provides a description of what he observed worked or didn't work.
Smith only uses "free market" once, in a discussion of the bad effects of restricting exports - pages 353-354. Woolen manufacturers wanted to restrict exports of wool so that their supply of wool would be increased. The problem was that English wool was inferior for clothing compared to wool from other countries. The prohibition of exports caused the price of wool to drop drastically, making it unprofitable to produce. The "invisible hand" now works to raise the price of mutton because the farmer has to pay his costs. That means to give the woolen manufacturers cheap wool is to give the consumers expensive meat. So, restricting exports did not give society much benefit.
A word that Smith uses frequently is "labour", would you believe over one thousand times? And how many times do you hear proponents of the "invisible hand" talk about labor, other than "greedy labor unions"? Smith looked favorably on labour, both as the basis of all economic activity and how labor can be marginalized by those with power.
The opening paragraph of "The Wealth of Nations" is:
"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies [sic] of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations." - page 3
In other words, without labor, nothing happens.
"The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."
As the National Football League found out, not paying referees what they asked lowered the owners wealth.
As for those who complain about "greedy unions" and promote "right-to-work laws", consider:
"The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment." - page 142
Few seem to understand the need to balance interests. When profits and wages are out of balance we are in deep trouble. Given the rising cash hoard of many large corporations and the still uncertain job market, we should consider:
"It is the stock [materials, equipment, and workplaces] that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin." - page 142
In other words, without corporations much work doesn't get started and without labor it doesn't get finished.
Finally, Smith didn't think business people ["those who live by profit"] should be trusted in public affairs:
"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." - pages 142-143
Adam Smith was an academic who read widely, considered what he read, and wrote an opinion for the powers-that-be. Those who consider "invisible hand" and "free market" as the only things important about economics, should consider reading more of modern economists, who have the benefit of having read all of "Wealth of Nations" and over two centuries more of data to consider. They are no more in an ivory tower than Adam Smith was.
For a poster of "The proposal of any new law…" see "Poster: A warning from the 'Invisible Hand'".
Updated 2013-07-21 to include Adam Smith's words for "business people.
Updated 2013-08-20 to include link to the poster.
If a restriction benefits an industry, does it also benefit society?
As to the "invisible hand", Smith does not apply it as a metaphor for an absolutely free market, but as an indication that the acts of an individual can lead to consequences not intended by the individual. A more complete citation than "invisible hand" is:
"[The individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." - pages 242-243
In other words, seeking his own security he may benefit society and seeking his own gain he may harm society, or otherwise, depending on the circumstances. In no way does this describe a "perfect market".
All page references are to the PDF version of "Wealth of Nations" transcribed by the Gutenberg Project. You can select your preferred format from http://www.gutenberg.org/files/3300.
For the most part, I don't think Adam Smith provides a prescription of how an economy works. Instead he provides a description of what he observed worked or didn't work.
Smith only uses "free market" once, in a discussion of the bad effects of restricting exports - pages 353-354. Woolen manufacturers wanted to restrict exports of wool so that their supply of wool would be increased. The problem was that English wool was inferior for clothing compared to wool from other countries. The prohibition of exports caused the price of wool to drop drastically, making it unprofitable to produce. The "invisible hand" now works to raise the price of mutton because the farmer has to pay his costs. That means to give the woolen manufacturers cheap wool is to give the consumers expensive meat. So, restricting exports did not give society much benefit.
A word that Smith uses frequently is "labour", would you believe over one thousand times? And how many times do you hear proponents of the "invisible hand" talk about labor, other than "greedy labor unions"? Smith looked favorably on labour, both as the basis of all economic activity and how labor can be marginalized by those with power.
The opening paragraph of "The Wealth of Nations" is:
"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies [sic] of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations." - page 3
In other words, without labor, nothing happens.
"The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."
As the National Football League found out, not paying referees what they asked lowered the owners wealth.
As for those who complain about "greedy unions" and promote "right-to-work laws", consider:
"The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment." - page 142
Few seem to understand the need to balance interests. When profits and wages are out of balance we are in deep trouble. Given the rising cash hoard of many large corporations and the still uncertain job market, we should consider:
"It is the stock [materials, equipment, and workplaces] that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin." - page 142
In other words, without corporations much work doesn't get started and without labor it doesn't get finished.
Finally, Smith didn't think business people ["those who live by profit"] should be trusted in public affairs:
"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." - pages 142-143
Adam Smith was an academic who read widely, considered what he read, and wrote an opinion for the powers-that-be. Those who consider "invisible hand" and "free market" as the only things important about economics, should consider reading more of modern economists, who have the benefit of having read all of "Wealth of Nations" and over two centuries more of data to consider. They are no more in an ivory tower than Adam Smith was.
For a poster of "The proposal of any new law…" see "Poster: A warning from the 'Invisible Hand'".
Updated 2013-07-21 to include Adam Smith's words for "business people.
Updated 2013-08-20 to include link to the poster.
Thursday, August 16, 2012
What does a teacher make? Surprise answer!
If you're tired of the bashing of teachers, tired of the complaints of their performance, and tired of the charges of "greedy" teacher unions", you'll enjoy this bit of stand-up ire by Taylor Mali.
You can find his biography at http://en.wikipedia.org/wiki/Taylor_Mali. His website is at http://www.taylormali.com/.
You can find his biography at http://en.wikipedia.org/wiki/Taylor_Mali. His website is at http://www.taylormali.com/.
Friday, June 29, 2012
Greedy CEO Unions
The mantra of "greedy teacher unions" or "greedy unions" or "greedy overpaid government workers" appears in letters to the editor, blogs, and even in articles by people who should be more objective. These phrases have the same nebulousness as "paying fair share". "Fair share" generally means "more" but little thought goes into why some should pay more taxes.
"Greedy unions" generally comes from those who not only don't want to pay more taxes, but they don't want to pay more wages to their employees. And guess what they form to advance their agenda? Unions!
They aren't called unions, but they are in the sense of coming together to advance an agenda. These include Chambers of Commerce, American Legislative Exchange Council (ALEC), numerous "conservative" think tanks, and many, many trade associations.
Like every other group, they work more to advance their short-term interests than to advance the public good. They want government off the "people's backs", but then they rush to government for contracts or laws favoring one industry over another.
Like every other group, they purport to represent all like them. As the Occupy movement claims to represent the 99%, these CEO unions claim to represent all businesses. But the large corporations do not all have the same interests, and the large corporations do not have the same interests as smaller businesses. McDonald's does not represent the interests of all restaurants, and Walgreen's does not represent the interests of all pharmacies.
Organizing to promote a special interest is the American Way. It was going on before the ink was dry on the Constitution. We just have to be vigilant in our reading to look for hidden agendas and slogans over careful thought. It's a hard job being a good citizen and voter.
"Greedy unions" generally comes from those who not only don't want to pay more taxes, but they don't want to pay more wages to their employees. And guess what they form to advance their agenda? Unions!
They aren't called unions, but they are in the sense of coming together to advance an agenda. These include Chambers of Commerce, American Legislative Exchange Council (ALEC), numerous "conservative" think tanks, and many, many trade associations.
Like every other group, they work more to advance their short-term interests than to advance the public good. They want government off the "people's backs", but then they rush to government for contracts or laws favoring one industry over another.
Like every other group, they purport to represent all like them. As the Occupy movement claims to represent the 99%, these CEO unions claim to represent all businesses. But the large corporations do not all have the same interests, and the large corporations do not have the same interests as smaller businesses. McDonald's does not represent the interests of all restaurants, and Walgreen's does not represent the interests of all pharmacies.
Organizing to promote a special interest is the American Way. It was going on before the ink was dry on the Constitution. We just have to be vigilant in our reading to look for hidden agendas and slogans over careful thought. It's a hard job being a good citizen and voter.
Tuesday, June 19, 2012
The fallacy of paying by "productivity"
Many claim that more productive workers will get paid more. That may be true of sales representatives who work on commission, but what about other workers who have several constraints on their "productivity".
I thought of this as I was driving on a weekday on the dirt road in Brimson on the way to our cabin. In front of me was a trash hauler. He stopped to pick up one neighbor's trash, and while he did so I passed him. He continued behind me and I knew his next stop was not for another mile.
When I drove back to Duluth a couple of hours later, the same driver, or at least the same firm, was in front of me on the main highway. I thought he has over an hour's drive to get to the landfill.
It would take him a lot longer to fill his truck than it would for a driver with a city route. Should this first driver be paid for his "productivity"? Or for his time?
Possibly his lower "productivity" is partly compensated by a higher pickup rate for rural customers.
The same holds for UPS and FedEx drivers, and as far as I know the rate for the senders of packages are the same for a given large area. The sender pays for the terminal-to-terminal distance, but not the local distance. Should these drivers be paid for packages per hour or be paid for hours worked?
I had the same situation when I drove for a school and transit bus company. I was paid by the hour no matter what I did. And I got a premium for seniority. Many was the charter on which I read, slept, played chess, ate, or went to the same event as the customer. I had one charter for a theater company where not only did I not drive for the two-to-three hours of the production, the production manager gave me and wife very good tickets for the last performance.
So, what was my "productivity" on this charter. Showing up on time, getting the passengers to their destination on time, driving safely, and being friendly.
I can't end this without mentioning another "productive" kind of employee who is often overlooked - the schmoozer. This is the employee (or even owner) who takes time to know customers and make them feel welcome. During this time they provide no goods or services. But they certainly increase return business. Think of places where the sales staff is on commission and you can hardly stand doing business with them. They are know-it-all fast talkers who want to close a sale as fast as possible. You may wind up buying from them, but only because of the salaried or hourly support staff who act like you are the only customer they have.
I had a vehicle for 13 years and for the last six I kept going to a certain dealer because the service department was good and the front guy was a schmoozer who always acted glad to see me. They had a really good salesman who kept kidding me about buying a new vehicle from him, another schmoozer. Well, by the time I decided to trade-in that vehicle he had retired. A friend told me she bought a truck from him because all the other salesmen were jerks. I found out she was right. And so, I went to the guy who sold me the truck in the first place, also a schmoozer. He was now selling another make of vehicle. He schmoozed, listened to us, and had a selection of vehicles ready for us to test-drive. We bought one of those vehicles.
For those not completely familiar with colloquial English, a schmoozer is someone who makes other people feel at ease with friendly, non-intrusive, conversation.
I thought of this as I was driving on a weekday on the dirt road in Brimson on the way to our cabin. In front of me was a trash hauler. He stopped to pick up one neighbor's trash, and while he did so I passed him. He continued behind me and I knew his next stop was not for another mile.
When I drove back to Duluth a couple of hours later, the same driver, or at least the same firm, was in front of me on the main highway. I thought he has over an hour's drive to get to the landfill.
It would take him a lot longer to fill his truck than it would for a driver with a city route. Should this first driver be paid for his "productivity"? Or for his time?
Possibly his lower "productivity" is partly compensated by a higher pickup rate for rural customers.
The same holds for UPS and FedEx drivers, and as far as I know the rate for the senders of packages are the same for a given large area. The sender pays for the terminal-to-terminal distance, but not the local distance. Should these drivers be paid for packages per hour or be paid for hours worked?
I had the same situation when I drove for a school and transit bus company. I was paid by the hour no matter what I did. And I got a premium for seniority. Many was the charter on which I read, slept, played chess, ate, or went to the same event as the customer. I had one charter for a theater company where not only did I not drive for the two-to-three hours of the production, the production manager gave me and wife very good tickets for the last performance.
So, what was my "productivity" on this charter. Showing up on time, getting the passengers to their destination on time, driving safely, and being friendly.
I can't end this without mentioning another "productive" kind of employee who is often overlooked - the schmoozer. This is the employee (or even owner) who takes time to know customers and make them feel welcome. During this time they provide no goods or services. But they certainly increase return business. Think of places where the sales staff is on commission and you can hardly stand doing business with them. They are know-it-all fast talkers who want to close a sale as fast as possible. You may wind up buying from them, but only because of the salaried or hourly support staff who act like you are the only customer they have.
I had a vehicle for 13 years and for the last six I kept going to a certain dealer because the service department was good and the front guy was a schmoozer who always acted glad to see me. They had a really good salesman who kept kidding me about buying a new vehicle from him, another schmoozer. Well, by the time I decided to trade-in that vehicle he had retired. A friend told me she bought a truck from him because all the other salesmen were jerks. I found out she was right. And so, I went to the guy who sold me the truck in the first place, also a schmoozer. He was now selling another make of vehicle. He schmoozed, listened to us, and had a selection of vehicles ready for us to test-drive. We bought one of those vehicles.
For those not completely familiar with colloquial English, a schmoozer is someone who makes other people feel at ease with friendly, non-intrusive, conversation.
Saturday, February 11, 2012
Comment on taxable income
I posted the following comment to "CommonWealth:Assets vs. Income" by Will Rice on the Facebook page of the Coffee Party. It and the comments are various positions about taxing interest and capital gains.
If John and Mary start a company and sell stock in it to you, you have made an investment. If later I buy that stock from you at more than you paid John and Mary, I'm not making an investment in John and Mary's company; I'm providing you with liquidity for your investment. John and Mary have gained nothing from my purchase of your stock. Well, not quite, the liquidity I have provided to you makes it easier for them to sell new stock if they need to expand.
If purchase of stock on the open market is truly an investment, then why are you taxed at the full rate on the whole amount that you withdraw from your IRA or 401k? You are not taxed on the sale price minus the cost basis as you would be if you had bought stock for a regular account.
In either case, we have not done much work for our gains, unless you count biting nails when the stock goes down as work. The people who have done the actual work are John, Mary, and their employees. They have sweated and worried as we watched on the sidelines. And for this, we tax them at a higher rate. That does not sound like an incentive to get people to work.
Worse, we expect them to pay for all the infra-structure that makes their company successful: education, streets and sewers, police and fire, courts, and many other public goods. Those who pay a smaller portion of their income for public goods are free riders; without public goods they would have much smaller incomes. If you don't think public goods matter, consider that more large corporations tend to have their headquarters in "high-tax" states than in "low-tax" states. The public goods in the "high-tax" states made the corporations possible and the CEOs like the quality of life in these states. See "The fallacy of ranking states by 'tax burden'".
If John and Mary start a company and sell stock in it to you, you have made an investment. If later I buy that stock from you at more than you paid John and Mary, I'm not making an investment in John and Mary's company; I'm providing you with liquidity for your investment. John and Mary have gained nothing from my purchase of your stock. Well, not quite, the liquidity I have provided to you makes it easier for them to sell new stock if they need to expand.
If purchase of stock on the open market is truly an investment, then why are you taxed at the full rate on the whole amount that you withdraw from your IRA or 401k? You are not taxed on the sale price minus the cost basis as you would be if you had bought stock for a regular account.
In either case, we have not done much work for our gains, unless you count biting nails when the stock goes down as work. The people who have done the actual work are John, Mary, and their employees. They have sweated and worried as we watched on the sidelines. And for this, we tax them at a higher rate. That does not sound like an incentive to get people to work.
Worse, we expect them to pay for all the infra-structure that makes their company successful: education, streets and sewers, police and fire, courts, and many other public goods. Those who pay a smaller portion of their income for public goods are free riders; without public goods they would have much smaller incomes. If you don't think public goods matter, consider that more large corporations tend to have their headquarters in "high-tax" states than in "low-tax" states. The public goods in the "high-tax" states made the corporations possible and the CEOs like the quality of life in these states. See "The fallacy of ranking states by 'tax burden'".
Tuesday, June 01, 2010
"Revolutionary" ideas
I serendipitously picked up “The Case for Big Government” by Jeff Madrick.
One of my favorite quotes is “If high taxes allegedly reduce efforts, surely unfair compensation should do the same. Fair compensation should improve effort.”
I have several other quotes that I may post from time to time.
If you would like to read a description of the book and some reviews, visit the Hennepin County Public Library catalog https://catalog.hclib.org and enter its title in the search box.
Health was worse in the cities than in the country because of sanitation. Government provided sewer systems and the health improved. Government also mandated certain vaccinations and funded the development of many vaccines.
Bumper sticker: if you don’t have smallpox, thank the government.
One of my favorite quotes is “If high taxes allegedly reduce efforts, surely unfair compensation should do the same. Fair compensation should improve effort.”
I have several other quotes that I may post from time to time.
If you would like to read a description of the book and some reviews, visit the Hennepin County Public Library catalog https://catalog.hclib.org and enter its title in the search box.
Health was worse in the cities than in the country because of sanitation. Government provided sewer systems and the health improved. Government also mandated certain vaccinations and funded the development of many vaccines.
Bumper sticker: if you don’t have smallpox, thank the government.
Saturday, November 10, 2007
Whose entitlement?
Business Week, Oct. 15, has a feedback section on a previous article on overtime.
Several of the respondents complain of a litiginous society with an entitlement mentality. One thing often overlooked in these kind of arguments is that more suits are filed company against company than individual against company. On entitlements, who are those feeling entitled: employees requesting just payment for their time or employers demanding more time than they are willing to pay for?
One business administration professor wrote about letting the "market work". She forgets that a truly free market consists of willing buyers and sellers with complete information on the transaction, the ability to quickly enter and leave the market, and no consequences affecting other than the buyer and seller. Employment is not easily entered or left, especially quickly.
Several of the respondents complain of a litiginous society with an entitlement mentality. One thing often overlooked in these kind of arguments is that more suits are filed company against company than individual against company. On entitlements, who are those feeling entitled: employees requesting just payment for their time or employers demanding more time than they are willing to pay for?
One business administration professor wrote about letting the "market work". She forgets that a truly free market consists of willing buyers and sellers with complete information on the transaction, the ability to quickly enter and leave the market, and no consequences affecting other than the buyer and seller. Employment is not easily entered or left, especially quickly.
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