Your employer gives you a job and you work 2000 hours per year (40 hours a week for 50 weeks).
Your employer employs 49 other people and they each work 2000 hours a year.
Assuming a fairly generous rate of $20/hour, you would be making $40,000 a year as would the other 49 people at your job. From a labor cost alone your employer would need to make $2 million to pay all of you, but he believes that his employees are worth it.
If the company pays rent on the building in which you work, we'll make a modest guess of $19,000 each month, for a total of $228,000 annually. (Assuming 400 square feet per person with a company of 50 people at $0.95/square foot)
The costs associated with doing business are typically coming out of the pockets of the owner of the business. We'll call this the "investment". In this office you are provided with a phone, a computer, a desk and a chair totaling about $700. Everyone in the office has one, so the cost would be $35,000. (These are dirt cheap rates I am throwing out. The real cost would be a lot more.)
So the owner would be paying about $2,228,000 a year to offer all 50 of these jobs at $20/hr. Before you are able to work, he has to pay about $35,000 to furnish the office, likely out of his own pocket.
He negotiates this workplace and gets everything up and running. In its first year, the company takes in $4 million in revenue. Things are good. He gives everyone a 3% raise to follow the average inflation and as a thank you for making him some money. (He is now paying $2,060,000 in labor costs bringing his annual cost to $2,288,000)
Unfortunately, the economy takes a slight downturn, and the company only takes in $3 million in revenue. His costs don't change, but his profits suffer. He makes the tough decision to cut 5 jobs so he can save $200,000 a year. Looking over his staff he cuts the 5 worst performing employees and gives the rest a 3% raise. (His labor cost is now $1,915,800 and his rent is $228,000 for a total of $2,143,800)
The workers that did not get laid off get kind of antsy because five of their coworkers got laid off. They decide to organize to ensure that the rest of the workers will be compensated in the event of layoffs. They demand a raise to $24/hour and that he pay any more workers that get laid off for six months at 70% of their pay ($22 of their hourly goes to them and the other $2 goes to union dues). He declines the agreement. The workers strike until he agrees to their demands. ($2,160,000 labor costs)
Unfortunately the economy takes another turn for the worse, the company takes in $2 million in revenues and the owner is forced to lay off 10 employees to make up for having to pay them 70% of their wages. The remaining ones strike until they get to keep 5 of the workers. The owner takes a loss in his annual pay.
He made the investment into the company and reaped some of the benefits, but the workers have swallowed his profits. None of the employees have even considered a pay cut, yet he is losing money paying their inflated wages. He once believed in his workers, but he can't anymore. They shared his vision when the revenue was coming in, but once the revenue lessened, they only saw how it affected them.
Why should he continue a losing venture? Should he continue to operate at a loss just to engender good will with his employees or should he shut the office down? His employees won't take any cuts for him, but they are demanding that he take cuts for them.
Monday, February 28, 2011
Saturday, February 26, 2011
Evil Employers (Part 2)
Unions are bad today even in theory.
A little history will come first. In the United States, unions were vital in improving working conditions in the 19th century, but like many of the innovations from that time period, they have become somewhat outdated (more on this later). The working conditions in factories during the American Industrial Revolution were far from ideal and the wages earned by the people might be described as exploitive. When groups of workers banded together and protested their employers for higher wages and better conditions, unions were established to coordinate such activities. In uniting, they were able to leverage their employers to improve their working conditions. By doing so, they were offered better wages and more stable jobs. The factory managers now had to deal with higher labor costs and thus lowered profits.
The middle class was emerging from the somewhat narrowing disparity in earnings. By exercising there collective bargaining powers, workers were able to negotiate the terms at which they were willing to work. By uniting, they used the leverage of their supply of labor against the demands of their time. In turn, they received higher wages and a comparatively better working environment. The wages for non-union members increased due to marketplace forces. Overall the working conditions of the emerging middle class improved. That is about where unions stop being a moderately good concept.
While labor unions used to be a barometer for defining the middle class, they have lost significant market share to more competitive forms of employment. While the private sector only has 7.6% of the workforce unionized, the public sector has about a 36.8% unionized workforce. This disparity is worth noting, because the private sector is typically more reflexive to changing market forces and is often far more efficient. The private sector is driven by the bottom line profits whereas the public sector is often far more politically driven.
There was a case of a politician negotiating with a California public sector labor union in which the union official told the politician that if he didn't give in to the union's demands that they would elect someone else that would. Considering most elections are held on weekdays during which the majority of the population is working, the unions typically have a marked advantage in the negotiations using their voter base. Unionized workers are almost guaranteed to vote on a particular matter because they have a vested interest and the average non-unionized worker is less likely to because they wouldn't likely be affected by the measure at hand.
Another point worth mentioning is that public sector unions, such as teachers and police, are given more support because their jobs are considered righteous and completely necessary. These groups have a complete monopoly on their product and only have token amounts of competition. How many privatized police forces exist in the US and operate independently of the government run police force?
While private schools exist, they lack the overly abundant funding that public schools do and consequently can't pay teachers nearly as much. On average, despite these disadvantages, private schools perform better than public schools. In fact, in order to succeed a private school has to prove that the price of tuition is substantially better than the public school for which the parents will still have to pay. Like FedEx, they are competing against the US government.
What does this have to do with the unions themselves? Quite a bit actually. The National Educators Association is one of the largest and most powerful unions in the country. The police unions also carry a big stick (one so big that in some cases, speaking out against the police in any way can result in criminal investigations/allegations against you).
The public sector unions are supported primarily through tax dollars and the wages and pensions they demand are a burden to everyone. As the public sector outpaces the private sector in terms of pay, an untenable situation develops. The generous pensions are becoming a severe liability in many cases forcing state governments to go into ever increasing debt. California has been having problems paying its people for the past few years and the current economic downturn has exacerbated the problems.
As we are seeing in Wisconsin right now, when a politician tries to change or limit the scope of how much the unions can demand of the state, the workers strike. Much like years ago when factory owners had to meet the demands of the union at the expense of operating costs, the government is buckling under the crushing weight of their debt while the employees seem not to care.
There was a bread factory in Brooklyn that was struggling during the economic downturn of 2008 that was faced with striking workers demanding higher wages. The factory owner, rather than meet the demands, closed the factory and moved, taking all of the jobs (at whatever wage) with it. When faced with the prospect of diminishing or non-existent profits, the factory owners decided that neither was acceptable and took their jobs with them. In this respect, the employer still retains power and ultimately the control of the jobs.
In the case of the local government, the only leverage the government has is legislation. When the unions aim to stifle any legislation that would cut its pay, the government may have to shut down to get out from under the oppression of the workers.
A little history will come first. In the United States, unions were vital in improving working conditions in the 19th century, but like many of the innovations from that time period, they have become somewhat outdated (more on this later). The working conditions in factories during the American Industrial Revolution were far from ideal and the wages earned by the people might be described as exploitive. When groups of workers banded together and protested their employers for higher wages and better conditions, unions were established to coordinate such activities. In uniting, they were able to leverage their employers to improve their working conditions. By doing so, they were offered better wages and more stable jobs. The factory managers now had to deal with higher labor costs and thus lowered profits.
The middle class was emerging from the somewhat narrowing disparity in earnings. By exercising there collective bargaining powers, workers were able to negotiate the terms at which they were willing to work. By uniting, they used the leverage of their supply of labor against the demands of their time. In turn, they received higher wages and a comparatively better working environment. The wages for non-union members increased due to marketplace forces. Overall the working conditions of the emerging middle class improved. That is about where unions stop being a moderately good concept.
While labor unions used to be a barometer for defining the middle class, they have lost significant market share to more competitive forms of employment. While the private sector only has 7.6% of the workforce unionized, the public sector has about a 36.8% unionized workforce. This disparity is worth noting, because the private sector is typically more reflexive to changing market forces and is often far more efficient. The private sector is driven by the bottom line profits whereas the public sector is often far more politically driven.
There was a case of a politician negotiating with a California public sector labor union in which the union official told the politician that if he didn't give in to the union's demands that they would elect someone else that would. Considering most elections are held on weekdays during which the majority of the population is working, the unions typically have a marked advantage in the negotiations using their voter base. Unionized workers are almost guaranteed to vote on a particular matter because they have a vested interest and the average non-unionized worker is less likely to because they wouldn't likely be affected by the measure at hand.
Another point worth mentioning is that public sector unions, such as teachers and police, are given more support because their jobs are considered righteous and completely necessary. These groups have a complete monopoly on their product and only have token amounts of competition. How many privatized police forces exist in the US and operate independently of the government run police force?
While private schools exist, they lack the overly abundant funding that public schools do and consequently can't pay teachers nearly as much. On average, despite these disadvantages, private schools perform better than public schools. In fact, in order to succeed a private school has to prove that the price of tuition is substantially better than the public school for which the parents will still have to pay. Like FedEx, they are competing against the US government.
What does this have to do with the unions themselves? Quite a bit actually. The National Educators Association is one of the largest and most powerful unions in the country. The police unions also carry a big stick (one so big that in some cases, speaking out against the police in any way can result in criminal investigations/allegations against you).
The public sector unions are supported primarily through tax dollars and the wages and pensions they demand are a burden to everyone. As the public sector outpaces the private sector in terms of pay, an untenable situation develops. The generous pensions are becoming a severe liability in many cases forcing state governments to go into ever increasing debt. California has been having problems paying its people for the past few years and the current economic downturn has exacerbated the problems.
As we are seeing in Wisconsin right now, when a politician tries to change or limit the scope of how much the unions can demand of the state, the workers strike. Much like years ago when factory owners had to meet the demands of the union at the expense of operating costs, the government is buckling under the crushing weight of their debt while the employees seem not to care.
There was a bread factory in Brooklyn that was struggling during the economic downturn of 2008 that was faced with striking workers demanding higher wages. The factory owner, rather than meet the demands, closed the factory and moved, taking all of the jobs (at whatever wage) with it. When faced with the prospect of diminishing or non-existent profits, the factory owners decided that neither was acceptable and took their jobs with them. In this respect, the employer still retains power and ultimately the control of the jobs.
In the case of the local government, the only leverage the government has is legislation. When the unions aim to stifle any legislation that would cut its pay, the government may have to shut down to get out from under the oppression of the workers.
Wednesday, February 23, 2011
One Man History Will Remember
Mohamed Bouazizi will be a person that should be remembered for some time. His self-immolation was the last straw for the people of Tunisia starting the revolution that has already overtaken two dictators in the Arab world. His contribution to history should never be forgotten.
While the revolts in the Arab world have yet to fully play out, the saber of the people has been rattled. Changes in the fabric of how the tyrants view their subjects has definitely shifted. The popular revolt is only one step towards change. Even governments not traditionally viewed as tyrannical have taken notice of the peoples' revolutions. While odds are good that the US has little to fear in a government take over, they have taken notice.
Mohamed Bouazizi should be remembered as a hero. In his act of defiance, he helped usher change in the world.
While the revolts in the Arab world have yet to fully play out, the saber of the people has been rattled. Changes in the fabric of how the tyrants view their subjects has definitely shifted. The popular revolt is only one step towards change. Even governments not traditionally viewed as tyrannical have taken notice of the peoples' revolutions. While odds are good that the US has little to fear in a government take over, they have taken notice.
Mohamed Bouazizi should be remembered as a hero. In his act of defiance, he helped usher change in the world.
Tuesday, February 22, 2011
Evil Employers (Part 1)
One thing that always gets under my skin is the concept of what a job is to some people. To some it is a right, to others a privilege. While I can kind of appreciate the plight of the worker, I can't believe that any job is something other than the property of an employer.
To elaborate, if you are hired to do a job, your employer is giving you the permission to perform the functions that the job entails. In return for your performance of said functions, the employer pays you an agreed upon amount. From its most basic elements, the two of you would be engaging in commerce: you trade your time for their money. In order to agree to the terms of the exchange, both you and the employer may set terms (including but not limited to them demanding that you be at your post at a given time in the attire befitting your post). They may give you concessions regarding the number of days a week you work or perks such as discounts on their merchandise, but these may not be completely to your liking. In the event that you and an employer cannot agree on terms of employment, then you are not an ideal candidate for the job.
Even in the negotiation regarding the terms of the job, you must be willing to meet the employer's expectations. To give an example, I sell cars for a living, and I have to work on Saturday every weekend, and in exchange, I am given a day off during the week. The reasoning behind this is that my time is more valuable to my employer on Saturday than it is on Wednesday. In exchange for maintaining my employment, I have to agree to the terms set forth. If I were to tell my employer that I don't want to work before noon, or that I am going to leave everyday at 5, they would tell me not to come back. The job is theirs by right and I am asked only to follow the rules that allow me to keep it.
The thing about this mentality is that once you have a job, you work to keep it. No employer have ever owed me anything other than the payment for the time I worked for them. The idea that a person should have a job by some sort of right is ludicrous. The workers that perform well are treated well because they perform well and the employer's yield from the worker's time is more than enough to justify higher pay. In the event that a person performs well enough to merit extra pay but doesn't receive it, they have the option to find a job that pays the amount they think they are due.
In a free marketplace, the number of people an employer is able to find meritorious enough for a given post is directly proportionate to the pay that the post yields. The laws of supply and demand are in full clear effect. One would not expect that there are many people able to do as well as the CEO of UPS at running a company. There are millions of people who may be able to do a Burger King fry cook's job. Thus there is only one CEO of UPS and a staggeringly large number of Burger King fry cooks and the disparity in payment between the two reflects the demand for the abilities.
This is barely scratching the surface of the job matter. More tomorrow...
To elaborate, if you are hired to do a job, your employer is giving you the permission to perform the functions that the job entails. In return for your performance of said functions, the employer pays you an agreed upon amount. From its most basic elements, the two of you would be engaging in commerce: you trade your time for their money. In order to agree to the terms of the exchange, both you and the employer may set terms (including but not limited to them demanding that you be at your post at a given time in the attire befitting your post). They may give you concessions regarding the number of days a week you work or perks such as discounts on their merchandise, but these may not be completely to your liking. In the event that you and an employer cannot agree on terms of employment, then you are not an ideal candidate for the job.
Even in the negotiation regarding the terms of the job, you must be willing to meet the employer's expectations. To give an example, I sell cars for a living, and I have to work on Saturday every weekend, and in exchange, I am given a day off during the week. The reasoning behind this is that my time is more valuable to my employer on Saturday than it is on Wednesday. In exchange for maintaining my employment, I have to agree to the terms set forth. If I were to tell my employer that I don't want to work before noon, or that I am going to leave everyday at 5, they would tell me not to come back. The job is theirs by right and I am asked only to follow the rules that allow me to keep it.
The thing about this mentality is that once you have a job, you work to keep it. No employer have ever owed me anything other than the payment for the time I worked for them. The idea that a person should have a job by some sort of right is ludicrous. The workers that perform well are treated well because they perform well and the employer's yield from the worker's time is more than enough to justify higher pay. In the event that a person performs well enough to merit extra pay but doesn't receive it, they have the option to find a job that pays the amount they think they are due.
In a free marketplace, the number of people an employer is able to find meritorious enough for a given post is directly proportionate to the pay that the post yields. The laws of supply and demand are in full clear effect. One would not expect that there are many people able to do as well as the CEO of UPS at running a company. There are millions of people who may be able to do a Burger King fry cook's job. Thus there is only one CEO of UPS and a staggeringly large number of Burger King fry cooks and the disparity in payment between the two reflects the demand for the abilities.
This is barely scratching the surface of the job matter. More tomorrow...
Monday, February 21, 2011
On Villainy
I attended a training session today that amounted to little more than group therapy. At one point the idea of manipulation and greed came up as inherently evil concepts. While to an extent I can see how that could be the case, there are very few individuals out there that genuinely believe what they are doing is evil. Some are misguided and some deranged, but rarely do they ever truly believe what they are doing is evil. Even Lex Luthor believes that he is saving the world from an alien menace. Occasionally I wonder to what lengths the most heinous people have gone to to convince themselves of the righteousness of their crusades.
Another topic that came up was the religious aspect. While I can appreciate that some people believe that faith alone drives them, it seems like something of a cop-out. By viewing life through the ultra-religious lens, one can absolve their self of any responsibility for their actions. I understand that God may have put you on a certain path, but to think that He put temptations along that path in order for you to fall victim to them is an odd thought. Not to knock how people view their faith, but I can't imagine enjoying life believing that I am not at all responsible for my actions. In fact, that mentality can be quite dangerous.
To an extent that mentality can be to blame for a lion's share of the problems in the US right now. Only rarely do I meet people that believe that no one owes them anything. I would guess that the majority of people are content shifting the blame to someone else for their misfortunes without looking inward and trying to glean some sort of insight regarding them. McDonald's doesn't make your kids fat unless they eat it all day every day. Spilling coffee on yourself should result in burns, it is a hot beverage.
Another topic that came up was the religious aspect. While I can appreciate that some people believe that faith alone drives them, it seems like something of a cop-out. By viewing life through the ultra-religious lens, one can absolve their self of any responsibility for their actions. I understand that God may have put you on a certain path, but to think that He put temptations along that path in order for you to fall victim to them is an odd thought. Not to knock how people view their faith, but I can't imagine enjoying life believing that I am not at all responsible for my actions. In fact, that mentality can be quite dangerous.
To an extent that mentality can be to blame for a lion's share of the problems in the US right now. Only rarely do I meet people that believe that no one owes them anything. I would guess that the majority of people are content shifting the blame to someone else for their misfortunes without looking inward and trying to glean some sort of insight regarding them. McDonald's doesn't make your kids fat unless they eat it all day every day. Spilling coffee on yourself should result in burns, it is a hot beverage.
Friday, February 18, 2011
Free speech restrained successfully.
Apparently Hillary Clinton was giving a speech about condemning governments that arrest protesters and don't allow free speech at George Washington University a few days ago. Much like the governing body of Iran in their support of the people of Egypt while silencing protests at home, the former first lady showed great resolve continuing her speech while someone silently interrupting her was dealt with.
The man, Ray McGovern, is a 71 year old retired CIA analyst. He was reputedly standing up facing away from her in silent protest regarding her speech. He was blind-sided by security forces and forcefully taken away. This occurred within plain sight of the Secretary of State while she was speaking. She did a splendid job of not interrupting her message despite this silent objector being dealt with. She even had the poise necessary to ignore his lone cry of "Is this America?". Without missing a beat she managed to deliver her message with great aplomb.
Thankfully we live in a tolerant nation where people have the right to speak freely and not have their pleas ignored by the reigning government. In the US, everyone has a voice in how the government operates and the participation of the masses should be a shining example of what can be achieved when everyone works together.
/sarcasm: If this doesn't scare you, nothing will. This man was silently protesting Mrs. Clinton and facing away from her when he was attacked by security guards. His actions may be considered rude, but if you were to silently face away from someone and their friends attacked you, all kinds of legal actions could be taken (unless you are Hillary Clinton of course).
Thursday, February 17, 2011
Mid East Revolt and Parallels
There's been a lot of talk lately about the uprisings in the Middle East. One of the things I am constantly hearing is that the ruling party is resulting to violence to suppress the people. The interesting thing about this phrasing is the word "violence". Whenever the US uses force (be it violence or coercive actions) the media consistently obfuscates the picture when describing the the actions: police never accidently shoot people, the gun misfires or is accidently discharged to no fault of the police officer holding it.
The monopoly on the use of force is the domain of governments worldwide. I find it telling that the US is quick to condemn the Iranian government for resorting to violence to quell uprisings when our own government is responsible for multiple violent actions against peaceful people. These actions are justified by the agents of the state that engage in them because they somehow protect everyone from the peaceful people.
To provide contrast, in the Egyptian uprising, numerous acts of violence were perpetrated by the protesters (though more by the pro-government forces), and those were merely reported on as "unfortunate". When the state engages in these types of incidents, the response is nearly always that the actions were either justified and necessary or "pending investigation". The actions that trigger the militant response from the state are sometimes civil disobedience. In the case of Egypt, the protests of the masses brought about the downfall of the ruler with whom they had objections. If 10 million people marched on Washington demanding reform, would the US government listen to their pleas, or would the batons and tear gas come out to "preserve the peace"?
The monopoly on the use of force is the domain of governments worldwide. I find it telling that the US is quick to condemn the Iranian government for resorting to violence to quell uprisings when our own government is responsible for multiple violent actions against peaceful people. These actions are justified by the agents of the state that engage in them because they somehow protect everyone from the peaceful people.
To provide contrast, in the Egyptian uprising, numerous acts of violence were perpetrated by the protesters (though more by the pro-government forces), and those were merely reported on as "unfortunate". When the state engages in these types of incidents, the response is nearly always that the actions were either justified and necessary or "pending investigation". The actions that trigger the militant response from the state are sometimes civil disobedience. In the case of Egypt, the protests of the masses brought about the downfall of the ruler with whom they had objections. If 10 million people marched on Washington demanding reform, would the US government listen to their pleas, or would the batons and tear gas come out to "preserve the peace"?
Tuesday, February 15, 2011
This is pretty much just a time sink.
I have a lot of down time at my new job (car sales) and I feel like I should be somewhat productive with it.
I'll be compiling things that I read and also writing quasi-discourse on things I think about.
Odds are good that I am the only person that will read most of this, but on the off chance that I reach someone else, cool.
I'll be compiling things that I read and also writing quasi-discourse on things I think about.
Odds are good that I am the only person that will read most of this, but on the off chance that I reach someone else, cool.
Subscribe to:
Posts (Atom)