I have stated in posts before now that I believe that the nature of wealth is that it flows upward from labor to capital accumulation, and downward from there in the form of reinvestment in plant and equipment that employs yet more labor – a nice system. But the great game is to grab the wealth produced by labor for one’s self. When investors do it, it is called interest, rent, capital gain and dividend. When workers do it, it is called wages, benefits, and secure retirement.
It’s always a fight between the two. In the period 1940-1980, labor had the upper hand. Right now it is capital, and labor is suffering. The best times for all of us are when there is balance.
I know of a small company whose owner is in the habit of employing ne’er do-wells and paying them $10 per hour with no benefits, quickly laying them off when work slows. The owner himself is not particularly talented – he has no mechanical skills of any note, but he does own plant and equipment due to inheritance. In the past two years alone, he has accumulated more than $60,000 in savings, mostly on the back of that $10 labor. He’s fiercely anti-union, doesn’t see why he should have to pay for unemployment, thinks Workers’ Comp is too expensive. When I first began to do accounting work for him, his employees were treated as independent contractors so as to avoid employment taxes. He’s now concerned about finding a way to extract that $60,000 from the business without having to pay taxes on the transfer. He’s anti-tax too.
I have told him time and again that his best bet for prosperity is to invest in skilled employees and pay them well. The result will be shared prosperity, the owner benefiting from ownership of capital, the workers by application of skills. No-go. He basically holds workers in contempt – I have told him of companies that pay mechanical workers $15-20 per hour plus benefits. He rolls his eyes.
Let’s be fair – it’s a combination of plant and equipment and labor that allows this owner to be able to bill out his help at $35 to $50 per hour while paying $10. The debate is, as always, about a fair split between labor and capital. (I like 50-50 as a general rule – obviously that would vary depending on capital concentration within an industry, but that’s just me.) Labor is always at a disadvantage, as there are always people willing to work for less in a high unemployment environment. The lower the skill, the less the security, the more likely one is to be replaced by someone earning less, an “independent contractor” who doesn’t qualify for benefits, or a Chinese man or woman.
Labor has very little leverage – even highly skilled engineers and computer scientists are now facing competition from Asia – unless something absolutely has to be built here, or a service rendered, there’s no reason not to outsource. Some 40% of what we call “trade” is really companies like HP and Ford manufacturing products in plants they own overseas, and bringing them here to sell. It’s nothing more than a game of arbitrage – that’s the “creativity” that justifies high pay for CEO’s.
Some business people are smart enough to see that we need a strong middle class to sustain our economy, but they cannot compete when their competitors have outsourced. So this is not about good people and bad people – it’s about a system that rewards bad behavior and punishes good.
The flow of wealth is upward, the game is to capture it before it goes by. Labor has fought for laws and rights to protect workers – minimum wage, organization of labor unions, worker safety, overtime and child labor protections. Most of those laws and rights are under attack from the right wing – that collection of workers taught to blame other workers and immigrants for their problems, wealthy people and their intellectual servants, inherited wealth, and religious bigots manipulated by wedge issues. These are the enemies of worker prosperity.
The fight over rescuing the Big Three is about labor unions. Citibank and AIG got huge bailouts, and no one asked a question about their wage structure. It’s not hard to figure – those companies are depositories of wealth for the wealthy. The Big Three are a depository of jobs, good union jobs that pay benefits. They are groveling to redirect $15 billion already appropriated to survive until January. Those opposed to the bailout are showing nothing more than contempt for workers who had the gall to organize, to fight against the race to the bottom. Big Three workers have interfered with the amassing of wealth from their labor by the people up above.
We learn as we go. Back in the 1930’s, we learned about speculative bubbles and unregulated investment. But that generation has passed, and now we have to learn all over again. During the 1950’s and 60’s, we learned that high wages produce a healthy middle class, but since 1980 we’ve been involved in class warfare – the upper classes seeking to extinguish the middle. It’s worked – the spread of wealth is more extreme now than in the 1920’s. Intellectuals will act in service of whoever happens to be in power, and we now have a huge sub-economy of think tanks and lobbying organizations who are in service of wealth. There aren’t many ‘thinkers’ out there right now who are fighting for unions, protected markets, and retirement security.
We will learn the lessons again. The only question is how deep do we have to go? How bad does it have to get? Right now our wealth is being used to bail out the wealthy – there’s been no move to help distressed homeowners . If the stock market recovers, will that be enough? Will all of the upside-down homeowners have to become renters again? Will wages go up? Will benefits return?
In other words, is there anyone in power right now who cares about the fate or ordinary main street Americans? This is Obama’s test. So far, judging by the people he has hired, C-.
Piece of Mindful 
I’m going to wager that Michigan has one of the highest % of union workers in the states. That being said when unions gain ground unemployment rises. Now if a unemployment rate of 10% is your idea of balancing labor and capital you’re spot on. I prefer a rate of half that amount. Michigan’s numbers below.
http://www.freep.com/article/20081119/BUSINESS06/81119045
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Markist-Lennonism?
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A working class hero is something to be …
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>>>>the nature of wealth is that it flows upward from labor to capital accumulation
Not necessarily. You can overpay your workers and go into debt, pace GM.
>>>>But the great game is to grab the wealth produced by labor for one’s self.
This strikes me as a medieval attitude: hoarding stolen gold in a castle on a hill. Modern economics tends to keep money in circulation. My neighbor’s gain is my gain.
>>>>Most of those laws and rights are under attack from the right wing – that collection of workers taught to blame other workers and immigrants for their problems, wealthy people and their intellectual servants, inherited wealth, and religious bigots manipulated by wedge issues. These are the enemies of worker prosperity.
Bogey man time. I thought you would be against the big tide of immigration we’ve had in this country lately. If you control for the effects of immigration, wages have kept pace with your 1940-80 era.
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That’s beyond comment. You’re typically in contempt of any workers who make a decent living. Why do you side with the wealthy – against your own interest? You’re out of reach. Anyway, as I noted, “…the right wing – that collection of workers taught to blame other workers … for their problems.”
<em<
Whoosh!
That bears some Natelson-like documentation. You’re up.
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Anti-trust initiatives and making Mexico the 51st state might begin to turn things around for labor. Now that would be something (bold) to see: “The South” could compete with the new (Mexican) south for manufacturing profits. Best of all, the fence-builders could build a much shorter fence on Mexico’s southern border to keep illegals from ruining everything. Labor’s application of The Bbbbush Doctrine.
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rsf, just so that we’re clear, money and wealth are not the same thing.
It is impossible to “overpay” your workers, as long as the product they produce is selling.
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Compared to scientific theories (which have to withstand rigorous proof-tests or be rejected), economic theories, like religious beliefs, seem to me to depend on “the faithful” remaining “true” to their faith. No theory (scientific, economic, or otherwise) seems to suggest, let alone prove, that people who work to be paid are players in the same game with those who pay to play.
Adding to my earlier comment about Markist-Lennonism: Imagine all the people…
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>>>>That’s beyond comment.
I notice it didn’t stop you. Do you think it is possible to overpay people? Do you agree that pay should match productivity? Or is it all just arbitrary? Wulfgar wrote, “It is impossible to “overpay” your workers, as long as the product they produce is selling.” But, like GM, if you burn through all your cash, borrow against all your assets, borrow against your future earnings, cut your R&D and white collar side to the where you can’t compete, and you still come to a point where you can’t meet your payroll, I’d say some overpaying was done somewhere.
>>>>You’re typically in contempt of any workers who make a decent living.
No, just overpaid CEOs.
>>>>Why do you side with the wealthy – against your own interest?
It’s not necessarily a class struggle. Those who eat the rich do so at their peril.
If I’m in the market for a car, how does it help me to have a company that pays its workers 3x the going industrial wage rate? I either end up facing an overpriced car market, or a car with so many shortcuts in the design that it is less than it could have been. It is not always the rich that pay the price for overpriced cars. It is mostly the middle class. So how does it help me when I buy an overpriced/under designed car?
>>>>that collection of workers taught to blame other workers
So, should we all be taught to hate “the Man”? How has that worked out for you?
>>>>That bears some Natelson-like documentation. You’re up.
What’s your take on immigration? All good?
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GM was a successful company for 100 years, paying good wages. They started going downhill when people stopped buying their products. Laying at the feet of labor is a reach, but a popular reach.
CEO’s are overpaid, to be sure. No one is worth that kind of money. No one.
GM is not paying it’s workers 3X the going industrial wage. That lie has gone around the world three times now. Amazing how it catches. GM pays its workers in line with Toyota. the $70 figure was a compendium of all costs associated with all GM workers still alive and drawing a pension and health benefits. It’s mroe like $28 plus benefits, with new hires making $15 per hour. Pity.
Your attitude about workers making a decent living is typical and offensive. Are you one who gets upset if a waitress makes $200 a day in tips? Bet so.
Immigration … legal, good thing. Land of opportunity and all that.
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Your story about your client is interesting. Meaningless, but interesting. Aren’t you the guy who always discounts anecdotal examples? I’m positive there are many jag-off employers. I’m also positive there are plenty of jag-off employees. Conversely there are likely more good employers and good employees in the world.
“…with new hires making $15 per hour.”
New hires? Hahahaha. Which auto company has been hiring?
What’s interesting to me is that you, Mark, don’t seem to acknowledge that the $70/hr figure is the actual cost to the industry contracted between the UAW and the big three. The point being that the industry is not sustainable if human resources costs are so high – regardless if a large portion of it is the legacy costs. Sumpin’s gotta give.
Now, to the priceless part:
“Your attitude about workers making a decent living is typical and offensive. Are you one who gets upset if a waitress makes $200 a day in tips? Bet so.”
There’s a name for this fallacy – and you know what it is. Shame, shame.
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GM survived quite well as a company from 1908 forward, carrying forward its legacy costs, paying good wages to its current employees. Nothing has changed except that they are not selling as many cars now as they used to, and that is not the fault of labor. They have had a remarkably unimaginative management, and live in a climate where jobs that provide good wages and benefits for ordinary working people are considered passe.
Note that if they double their work force, that cost per hour is cut by half. Is there a fallacy at work here somewhere? Like measuring current costs with via a skeletal force?
Has any other company been subjected to such harsh measure of measurement as these guys? Jesus, public enemy number one in the mind of the right winger – the auto worker. The labor union. Workers resenting other workers. Contempt for working people.
That’s your world. Labor is OK, so long as it doesn’t organize. So long as they don’t do so well.
New hires are coming in by attrition, by the way, if the company is allowed to survive. And by AIG/Citibank standards, buddy can you spare a dime?
I noticed during the protracted minimum wage conflict that I was involved in in 1996 that restaurant owners were upset about the amount of tips their waitresses were making, and wanted to claim them for themselves via a lower minimum for food service people. You got it – the very idea that a waitress could make a decent living was pissing them off. Contempt work working people.
That’s no fallacy – it’s abundant these days.
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BTW, the point of my “anecdote” was an example, a very clear one, of how wealth flows upward. The owner may be a jag off, but that’s besides the point.
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“GM survived quite well as a company from 1908 forward, carrying forward its legacy costs, paying good wages to its current employees. Nothing has changed except that they are not selling as many cars now as they used to, and that is not the fault of labor. They have had a remarkably unimaginative management, and live in a climate where jobs that provide good wages and benefits for ordinary working people are considered passe.”
Oh, nothing has changed except there revenue is down by 40% and will likely stay down for years to come. There are 34 million more vehicles on the road than licensed drivers. Demand will be down for quite some time.
Secondly, I’m not blaming labor. But if demand stays low history doesn’t mean anything. The business model is not sustainable and labor costs are a major component to that model. You act as if it doesn’t exist. But we agree that management has failed and I don’t think you’ll get an argument out of anyone on that. And one of their mistakes was making promises they can’t keep.
“That’s your world. Labor is OK, so long as it doesn’t organize. So long as they don’t do so well.” There’s that logical fallacy again.
“I noticed during the protracted minimum wage conflict that I was involved in in 1996 that restaurant owners were upset about the amount of tips their waitresses were making, and wanted to claim them for themselves via a lower minimum for food service people. You got it – the very idea that a waitress could make a decent living was pissing them off. Contempt work working people.”
Ibid – previous comment. Meaningless.
Now, please try to figure out which logical fallacy you continually deploy.
As to your assertion that wealth flows upward… does they word “symbiosis” mean anything to you.
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I just farted! Don’t take it personally, anyone!
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Oh, and BTW. GM has lost money for the last 4 consecutive years. Car sales peaked in 2006. Are unit sales the only problem?
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Bob, thanks for sharing. Ben Franklin wrote a book should read.
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Thanks Dave, I will order a copy in the morning. I am particularly interested in “Poor Richard in his Deafness,” since I am waiting for a call from Bozeman Deaconess to fit me with a hearing aid this week. In the meantime, I’ll settle for enjoying what you have to say (write), even if I don’t understand a lot of it. Reading Budge (and Tokarski) for me is a lot like reading Proust or Joyce. There is a stream of consciousness to it that makes sense to me, if when I don’t know what the hell either of you are talking about. Enjoy family, food, Hanukkah, Christmas, Kwanzaa, Obama, or whatever the holidays have to offer. It’s a good life we share, especially since none of us live long enough to really share it as we otherwise might.
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>>>>Immigration … legal, good thing. Land of opportunity and all that.
What about illegal immigration? It seems to be the elephant in the room amongst the pro labor/pro union left. How can you imagine that we import 1 million low wage workers a year and it will have no/little impact on wages? It seems it would be a little closer to your heart. A favorite time of your side is the late 60s/early 70s when we had a labor shortage and we saw rises in wages. Now we have the networks/information/transportation to tap into the world’s surplus labor force, and you wonder why wage growth has been stagnant lately. Thank Ted Kennedy and the immigration act of 1965.
Here’s a study that puts the overall wage suppression at 3% in the period 1980-2000. For low wage workers (less than a high school diploma) the wage reduction was 9%.
Click to access QJE2003.pdf
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Hardly meaningless. It’s an attitude pervasive on your side of the spectrum – contempt – absolute contempt – for working people unless they are willing to work for peanuts. Come over to this side some time, try to fight for an increase in the minimum wage, find yourself up against Cato, Heritage, the Republican Party, National Review, and petty restaurant owners.
Second, don’t condescend to me about your effin fallacy. If you want to teach school, go to U of M.
Good grief.
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Well, Mark, I’ll pass on the U of M gig. I was an adjunct professor at College of Idaho in the early 80’s and found it quite unfulfilling, but that’s another story.
I must say, however, that you can’t see the ad hominem fallacy you make. Here they are:
“Your attitude about workers making a decent living is typical and offensive. Are you one who gets upset if a waitress makes $200 a day in tips? Bet so.”
“That’s your world”
Let’s build the syllogism:
A rejects C
B rejects C
Therefor
C = B
And you do it with a personal attack that does not fortify your argument. That is to say that you accuse RSF and me of having contempt for workers. I can’t find anything in what either of us have said that support that conclusion.
And there’s lots of other logical holes in your argument as well. For example, you’re quick to tell everyone what memes have been “debunked.” In most arguments, such as the hourly wage issue herein, the point has been disputed not debunked.
I fully understand the new wage structure of the UAW contract. It was negotiated to reduce standard wage rates to come more in line with competition. So on the one hand you’re correct. On the other hand, the effects of the new contract won’t be fully realized for several years. BTW, Forbes reports that about 1,000 workers (out of about 250,000) have been hired at the $15/hr rate but, due to union seniority provisions they will be laid off as the companies downsize. But the economic reality is that the new contract, including the legacy provisions, still has the domestic manufacturers paying about $9.00/hour, including benefits, more than foreign owned car makers. That still might be enough of a wage differential to bury the big three.
But more importantly, to the point, there are some of us who think that things like minimum wage are counterproductive and fly in the face of liberty. It’s more of an ideological argument than a practical one. Minimum wage isn’t a big issue for me except I think it hurts youth employment. What I have an issue with is the government interfering with the right to freely enter into contracts between two consenting adults. If I want to get my foot in the door of an industry I might be willing to work for bird feed. Should the government tell me or my prospective employer I can’t? Likewise, as it pertains to unions, most of the old rust belt states are not right-to-work states. Should the government have the power to force me into a private contract with which I disagree in order to work for a business?
I’ve written before that I don’t have a problem with unions as a matter of liberty. Collective bargaining has been beneficial over history. I’ve also done a great deal of business with unions and, it’s been my observation, that union bosses don’t really give a rat’s ass about their memberships. It’s the kind of stuff that George Orwell wrote about. It’s Animal Farm.
What surprises me, however, is the level of animus between the left and the right on the issue of labor. It doesn’t surprise me, however, that you’re as inclined as your conservative adversaries to pigeon-hole guys like me and RSF simply because we’re convinced of an argument that you dismiss out-of-hand. It seems to me that Fred would applaud anyone’s success and I know that I do. Your assumption that we’re puppy eating fascists (my words, not yours) seems to me that you’re unable to discern and argument from a fight.
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Oops, the “therefor in the syllogism should have read A = B. My mistake.
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I read contempt for labor into much of what I see and hear on the right – I see it in resentment when anyone does well, as is evident with the current attitude about UAW. I’m on the lookout for it. Probably oversensitive. Saying one has respect for labor is easy enough, paying a living wage is hard. Resentment of employees who collect tips in 1996 was a pisser that I carry with me. Waitresses are a collection of people with kids and bills and problems, and I resented the way they were treated and carry it with me. My pompous ass way.
But I reject your notion that asking the question was ad hominem. It was made in response to Fred’s remarks that certain workers were making “3X” times the going rate. He was talking about the Big Three – they hardly get 3X. I read resentment of working people getting a fair wage. I’ll stand by that if you don’t’ mind.
I am constantly running into people who tell me that this or that has been “debunked”, most recently, Montana Pundit on 47 million uninsured. I did use the word in reference to the myth that Canadians come to the United States “in droves” for health care, at another web site. I don’t recall using it here, but I could be wrong. At the other site I cited a careful study done of border hospitals most likely to absorb such traffic. The conclusion? Traffic is statistically insignificant.
That’s debunking. I’m aware of the meaning of the word. And the mere fact that someone disputes something, especially in this environment, is not significant. It could well have been debunked.
According to David Leonhardt in the NY Times,
if the government were to subsidize a $10 gap in legacy costs for the Big Three, it would save them about $800 per vehicle. That’s roughly the difference right now between the Big Three and their competition. So we’re not talking about much. (Thanks to Swede for that link.) I’m more inclined to read the attitude in Washington concerning the bailout as union busting, spoken in code, of course, and read into that contempt for labor. Sixty million of us want to belong, 16 million do. Something is stopping them.
I fully understand your argument on minimum wage, always have. What you overlook is that we have a steady pool of unemployed labor, and you as the employer will always be able to hire someone for less money. Without a floor, we will have starvation wages. You can bargain and barter all you want, but we reserve the right as a society to set basic standards of decency. Teen age employment has not been affected. That’s been debunked. (Joke. OK?)
I’ve belonged to unions before. While in high school, on principle, I refused to pay dues at the grocery store I worked at. I lost my job. And I know about the corruption. When I worked for the railroad on a shipping dock after high school, the old hands taught us newbies how to loaf. Firing someone was just about impossible. Jimmy Hoffa was a mobster. But I don’t write about the downside – why should I when I am surrounded by people who dislike unions anyway?
And don’t talk to me about argument versus fight. Many’s the day that you’ve come by to drop some bile, upsetting me and making me pissy. I don’t blame you for my behavior, ever, but don’t deny that part of your personality.
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This might interest you.
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“But I reject your notion that asking the question was ad hominem.”
But you were addressing me, not with a question, when you said “That’s your world”.
I don’t know where you get the data that says 60 MM people want to join unions. I don’t buy it and even if I stipulate to it as fact that hardly represents a majority of the employed (since you’re so big on things like “the majority.”) At one point in my career I had 26,000 employees under my charge. We started non-professional entry level hires at about twice the minimum wage but we paid high performing experienced employees very well – at or above the market. A few times a year there would be union organizing efforts (which I always ignored because too many employees would lose too much) but those who supported it were usually those who didn’t get the higher pay – a rather small minority – and came off as grievous because they thought they were as valuable to the business as those who made more. They weren’t. [Side note: you ask why there are not union troubles in the financial services sector. Mostly because they pay pretty well.)
But we paid employees well because we understood the costs of turnover. It took about a year of sub-standard output to train an employee so, for each employee that left in one year, we lost about $10K in the process.
In an earlier part of my career I recall doing an LBO for the former head of Johns Manville Corp, Josh Hulce. When I questioned if he saw any union issues (an appropriate question for a senior lender) with one of the plants he was buying he replied “There is only one rule with labor. You get what you deserve.
But the dynamism of the market place renders parts of the collective bargaining construct somewhat obsolete and unresponsive. You’re right that there are some employers that exploit labor but trade unionism can have the same effect on business that are under competitive pressure.
Fred does overstate a bit with his 3X claim. I don’t think that is a function of contempt for the working class. Most people, however, use the information their given and it is true that the automotive industry pays almost three times – all in – as much as the larger manufacturing base. And I doubt that whatever contempt most people have for the UAW is not directed at the workers but at the institution. As institutions go – and as you admit – some things they do are pretty contemptible.
“if the government were to subsidize a $10 gap in legacy costs for the Big Three, it would save them about $800 per vehicle. ”
Let’s see, that $800 X 11,000,000 cars/year that’s $8.8 billion per year. Capitalized at 3% that’s $293 billion. Seems a bit pricey to me.
“I fully understand your argument on minimum wage, always have. What you overlook is that we have a steady pool of unemployed labor, and you as the employer will always be able to hire someone for less money. Without a floor, we will have starvation wages. You can bargain and barter all you want, but we reserve the right as a society to set basic standards of decency. Teen age employment has not been affected. That’s been debunked. (Joke. OK?)”
I don’t overlook that at all but I also know, as someone who has employed a lot of people, that you get what you pay for. If an employer pays a “starvation” wage turnover will kill profits. If it’s mindless work, like putting lug nuts on a Chevy assembly line, when the cost of labor exceeds the cost of automation, jobs get lost. [Another side note: This is where Marx really flies off the rails.] The history of minimum wage had little to do with anything other than New Deal economics designed to offset deflation – regardless of what progressives believe is true. In the second downturn of the depression, FDR instituted the minimum wage to increase consumption demand thereby relieving deflationary pressure. It is one of those taxes on the economy that doesn’t show up on the federal budget. But as a policy tool it’s not very relevant. It just makes good feel good politics. In 1980 15% of the workforce earned minimum wage. By 2004 only 2.25% of the population earned minimum wage. That’s why it’s not much of a policy issue to me. And that’s why your assumption that businesses will always try to pay “starvation wages” is “debunked.” (no joke.)
“And don’t talk to me about argument versus fight. Many’s the day that you’ve come by to drop some bile, upsetting me and making me pissy.”
There are times when I pick fights. And there are times when I just like to push your buttons. Guilty as charged. But when I make reasoned arguments you often often just reduce it to what you perceive as my “out-of-touch right-wing extremism” and launch off ad hominem as in “That’s your world…” I know you get a lot of that from the right personally. I read it (AKA Mark Trotsky) but I’m trying, really I am, to be much more Socratic in my debating. And you’ll notice that I haven’t called you Chomsky in at least six months.
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This might interest you.
The financial services industry has never had a need for unions because of the level of skill involved. Including sales. The standard of living there is quite high.
It appears we have no argument about the minimum wage – you don’t like it, I do. But it is a race to the bottom – that’s why sneakers are made in Korea – no – Philippines – no Vietnam, or wherever the next lowest paying place is. It’s a global economy.
The race to the bottom is real. That’s why auto makers first moved south, and to Mexico. (Some people are suspicious that the bailout will be used to complete the move to Mexico. Talk radio, you know.) That’s why apparel and manufacturing has left the country, why even your toothpaste is made in China. It’s why people are fighting to maintain this standard of living, and losing. Protect our workers, protect our markets. It’s about workers and families and standards of living for ordinary Joe’s. We differ.
And if so few people are making minimum wage, we really ought to raise it to 1980 levels. Can’t live on it without having two or three of those service jobs. 1980 likely saw higher incidence because it was a more meaningful number then. Anyway, raising the minimum raises everyone – I’m all for it.
This might interest you.
Then there’s the matter of illegals. Tell me there’s no race to the bottom.
8.8 billion per year is no big deal. They are not asking for a $300 billion bailout all at once. Time value of money … you’re doing baseball economics. Anyway, yf it were AIG, the satchel would have changed hands already. We all know what that’s about. Unions.
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“This might interest you.”
Not much. According to NFCO 82% of the traditional families can’t afford to live. How, oh how, do they do it?
Seems to me, after reading the report, that there are more than a few assumptions about who has a “right” to what kind of living standard. The report seems to assume a car payment (or two) and a pretty good stipend of cloths and personal items (which, BTW, is more than I spend on my household of 5) and I can even figure out WTF they are doing with taxes.
A gross income of $62,000 for a family of four is more than the national average. How does everyone do it?
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There was another link that I opened with that went to the 60 million wanting to belong to union figure. It came from hart and Associates. It didn’t work so I fixed it.
I wasn’t troubled by their assumptions. taxes did not look out of line – Fed, Payroll, Sales (WA and ID), State (MT, OR, ID). Income for a family of five – don’t have so many kids. But the figures for small families and individuals looked OK to me. I once figured I could live on $10 per hour if I had to – around the time of my divorce. I thought it might come to that. Transportation is cost of vehicle plus insurance plus gasoline plus repairs. It’s not a frickin’ car payment.
A “right to a living standard” – can’t deal with you there – you’re so inured with the idea that we are all isolated individuals with no responsibility to one another. Most people feel differently.
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Notice they have them saving every month. Go figure.
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Hey, don’t blame me for AIG.
The time value of money is “baseball economics”? I don’t even know what that means but I do know something about discounting cash flow. After all, we have to have some type of relative yard stick.
As for your race to the bottom thing that’s where you owe it to yourself to read Smith. I know you resist it for one reason or another but comparative advantage in trade makes sense.
Ask any random economist, even Keyesians, and 95% of them will tell you that we’re better off with trade where we employ our resources to our most efficient production. What we’re experiencing now is the pain of globalization. But it won’t last forever and we’ll redeploy our excess labor in useful ways over time. That is, unless we stifle innovation with protectionist policies.
This is not some zero-sum game. The entire world has seen a marked increase in living standards. Does not the rest of the world deserve better living as well? By every material measure our standard of living is higher than it’s ever been – house size, number of cars, # of appliance, number of homes with A/C, etc., etc.
Now, here you go again making assumptions:
“A “right to a living standard” – can’t deal with you there – you’re so inured with the idea that we are all isolated individuals with no responsibility to one another. Most people feel differently.”
I believe no such thing. I believe we have huge responsibilities to one another. I also believe the unintended consequences of social engineering are often worse than the problem. And this report, saying that we should strive to make the minimum household income to be greater than the average household income, will have economic consequences that will make everyone poorer in the offing simply because of inanity of it impracticability.
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Baseball economics is the tendency of baseball people to report the value of a multiyear contract as a single about, as they are currently doing with CC Sabathia – 7 years 167 million, forgetting that it’s paid over seven yeras and weighted towards the end.
Rest of your post – manyana. It doesn’t settle well. I think you’re overlooking some things very obvious.
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Well, the time value of money isn’t then “baseball economics.” It puts the heaviest weight in the earliest years and it discounts all forward years.
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8.8 divided by .03 is not a very sophisticated computation either. But this is a blog and we’re firing shots – enough of that.
I’m interested in your earlier comments regarding air conditioners and the like. I’m also interested in your laissez-faire attitude about declining living standards, as expressed by the study I cited, surely flawed in some aspects but indicative of a problem. You seem to that to address the problem in any way other than to let events unfold will create even worse problems.
You also cite Smith’s comparative advantage – I actually recall reading about that in high school geography classes, maybe grade school, not to be snide, but it’s an obvious concept. I’m not sure it really applies in the globalization argument, as it doesn’t allow for developing countries to protect their labor force or develop their own industries, a standard practice throughout history, one that allowed the United States to grow into a powerhouse.
It also assumes that countries are pursuing comparative advantage, overlooking the most obvious aspect of it all, that it is global corporations seeking to take advantage of their one biggest advantage – the ability to play countries against one another in order to exploit cheap labor.
This thread has gone on too long. These matters are percolating in my head, and is my wont, will reappear in later issues of Marvel Comics, but for right now, have the last word, and we will meet again.
Respectfully,
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“8.8 divided by .03 is not a very sophisticated computation either.”
Ha! It may not be very complex in its final form but if you think it’s not sophisticated I implore you write the unreduced formula that gets us to P1/Discount Rate and why an assumed perpetuity doesn’t need to exist for the model to be accurate. I bet you can’t do it without cheating.
And actually, Smith thought a great deal more about absolute advantage but laid the groundwork for David Ricardo’s extensive development of comparative advantage. Smith was the father, Ricardo was the husband and John Stewart Mill was the heir. I think you would enjoy reading Mill simply because he had more than a little dash of utilitarianism and secularist mindset. Still, he was more of a libertarian than you might embrace.
But I digress. Comparative advantage is not so obvious at all. It’s founded on the most efficient use of resources in production. For example, Country A can produce a product X at, say 70%, of the cost than country B. But country A can produce another product Y at 50% of the cost than country B. Ergo, it makes sense for A to produce Product Y and buy Product X from Country B even if Country A has an absolute advantage in producing both products.
You consistently hold the view that this country, and others, were built on trade protections. That, sir, is highly disputed. In fact, I see most protectionism arriving from mercantilism – which only serves to protect the invested capitalists. I have a problem with that.
As Gottfried von Haberler put it:
“Nearly every industrial tariff was first imposed as an infant-industry tariff under the promise that in a few years, when the industry had grown sufficiently to face foreign competition, it would be removed. But, in fact, this moment never arrives. The interested parties are never willing to have the duty removed. Thus temporary infant-industry duties are transformed into permanent duties to preserve the industries they protect.”
I’ll agree that trade, in its modern form, is too far from optimal and does but protect multinational capitalists. But just because the current form of trade agreements is often modern corporatism doesn’t mean that trade is bad in any sense. The reason the Doha rounds failed is because we allow bi-lateral trade agreements as opposed to insisting on multilateralism which is what GATT was designed to do. Perhaps if we had real free trade we could judge but there is so much corporate welfare in the world it’s hard to understand the true costs of most products.
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I love it when people get together and share ideas. Great site, stick with it!
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