Monday, March 16, 2015
It is often said by spokespeople for businesses that "we cannot afford to pay our workers living wages". However, there seems to be no difficulty in paying for increased costs for materials, or energy, or advertising, or increased costs of real estate, or any other such item. As I discussed in my blog about "supersizing", there are a number of things that go into the cost of an item versus its price.
The composition, or gathering of different parts, of the cost of an item will vary depending on the item. Some things are "labor intensive" which means that labor costs are a higher percentage of the cost. Others are based on scarcity -- or an aspect of "we have what you want -- who is willing, and able, to pay the most for it". In general, for many items, the amount of labor cost within the total cost for things that are actively made by people is a minority of the cost -- call it 30%. For stores that have high "turnover" (things sold quickly and new, replacement, items put on the shelves for sale again), labor costs are much less (such as for mass merchandizing stores) -- perhaps 10%.
For our discussion, let's just say that labor costs are 25% of the cost of the item. Doubling the labor costs would NOT double the base cost of the item to sell. It just adds an extra 25% -- so the base cost is now 125% of the former price. Let's say that the retail price (price charged to a general customer) was twice that of the base cost -- or an extra 100%. This means that the price is 112.5% of the original price (100% original cost + 100% original profit + 25% extra labor costs gives 225% which is "normalized" (brought down to a comparison against 100%) to 112.5%.
Now it is possible (even likely) that the merchant might want to keep their percentage profit rather than the actual amount. So, in the above comparison, the merchant got the same amount of profit as base cost. If we increase the base cost by 25%, the total amount doubled ends up at 125% of the original price (100% of original cost + 25% extra labor costs is equal to 125%; doubled gives us 250% and normalized brings it back to 125%).
We can see that even doubling the labor costs does not add a huge percentage to either the base cost or a retail price without penalizing the retailer. It can be argued that a 25% increase is still something that people are not willing to pay. After all, people do comparison shopping and retailers have sales, and price cuts (temporary or permanent). If Item X is sold at one store for $1.25 and the very same item X is sold at another store is sold for $1 then many people will choose to buy for $1. What would make people able, or willing, to pay more for products?
The first reason is that the above analysis is a simplification. Labor costs are NOT the same as wages. Although the blog on "supersizing" uses labor costs as a lump sum, labor costs are actually a combination of wages, benefits, the cost to find someone to work at the job, training, and other matters. Thus, doubling wages does not double labor costs. In reality, it will reduce "turnover" within the workplace and reduce the amount needed to find people to do the job and the training. So, a doubling of wages may actually only cause an increase of 20% overall (these numbers are all examples but probably in a reasonable range) so the product would only cost $1.20.
The second reason is what do people do when they make more money? Well, hopefully they will save some more. But almost everyone would also spend more. The products may cost a bit more but the business is also creating more customers and a percentage will buy from their store.
A third reason is that it creates a positive image. I am sure you can think of a company who does not treat their employees well and relies on charities and the benefits paid by taxpayers to subsidize the wages of their employees. Similarly, we can also think of companies who pay their people more than what is "required" and are known for treating their employees fairly and well. Because of these three reasons (and other reasons) these "good neighbor" companies often make a better profit than the ones who sponge off of the taxpayers to increase the owners' wealth.
The last reason leads into a future blog (maybe the next one). And that is -- it isn't always a matter of "nice people finish last". The above three reasons come into play to help people who do the good, proper, thing benefit financially. Regulations also help -- because the companies who care about people (and environment, and health, and ...) are not penalized because they operate "on a level playing field". That is, if everyone is required to do something good then no company is at a financial disadvantage for doing what is good. Everyone has the same requirements.
Can you think of other benefits to a company for paying living wages?
Saturday, February 21, 2015
It used to be that discussion was about the "minimum" wage. That was always a difficult discussion because it is totally subjective. If a person is starving and you agree to give them a sandwich and a glass of water if they work for you for eight hours then it is a minimum wage (anything less and they would die and be unable to do the work). Then there is the official "minimum" wage -- which is completely fictitious. People are paid less than the minimum wage all the time -- sometimes legally and sometimes not but it definitely is not the least amount of money people are paid.
However, when we come to the concept of the "living" wage, it is really easy. One thing to recognize up front is that there is not a single living wage. A living wage will depend upon the expectations within a society. It will depend upon the general cost of living in the area. It will depend on individual circumstances -- do you have children or others dependent upon you, do you have additional needs that others do not have (blind, deaf, mobility impaired, ...), and so forth.
So, there is not a single living wage for all people. But it is easy to determine. Add up the costs of everything it is needed to live over a year and divide that by the number of hours that are considered reasonable in your society. Let's put together a case example for an "average" city in the U.S.
There are a number of categories that MOST people would agree on. There are also a number of other categories that people would not agree on (is a phone required? is recreation required? is television required? is air conditioning really needed? is a personal car required? is it necessary to be fashionable? ...) Minimum requirements will include such as:
- Utilities (water, heat, sewage, power)
- Health-related Costs (incl. toothbrushes, toilet paper, clothes washing, etc.)
There's a certain range within each category that is required. Sometimes you might find a great deal on an apartment (or live with your parents). Sometimes you can find used clothing that is acceptable. Specific numbers can definitely be argued about and I won't say that you're incorrect. However, here are some (not the only) realistic numbers.
- Shelter -- a studio apartment; $900/month -- $10,800/year
- Utilities -- basics for a small apartment; $100/month -- $1200/year
- Food -- for one person, no fast food, no eating out; $8/day, $250/month -- $3000/year
- Clothing -- 3 pairs of pants, 2 underwear, 4 shirts, 5 pairs of socks, 1 pair of shoes, 1 coat -- $200/year
- Health-related Costs -- [# taken for an Affordable Cost policy for an unemployed single person] -- $340/month plus $40/month for medications/co-pays; approx. $4500/year.
This totals $19,760 for a year. For simplicity, round it up to $20,000. If we assume that working a 40-hour week for 50 weeks/year is reasonable then that is 2,000 hours. So, a "living wage" for a person with no special needs is $10/hour NET. I emphasize NET because this is what they have to have in order to pay for it all. If they have to pay country/local taxes or union dues or anything then that is added to the NET requirements.
So, we have determined a "living" wage. Even assuming that you agree with the above estimates the numbers can be moved around. If you qualify for food stamps, you might reduce your needs for food. If you can get subsidized housing, you might pay $500/month. But the foundation needs stay the same. Note also that there are no costs for childcare listed -- this is for a single person with no additional needs.
But society cannot afford to pay such!!! This is the statement that is echoed by businesses and wealthy politicians. It the next blog (hopefully -- I get distracted
Meanwhile, what things do you consider needed to live? Do you currently live on less? How do make it happen?
Saturday, February 7, 2015
A popular topic nowadays is the Internet of Things (IoT). This talks about tangible devices that are interconnected via the Internet. I might discuss that someday. However, IoT is really a subset of the interconnectivity of Things (InOT). And that interconnectivity applies at many levels. Today, in continuation of my recent blogs on economics, I thought I would talk about how work/jobs interconnect.
One way to examine this is to put forth a possible change to the economy -- a shift from private transportation to public transportation (to save space later, let's call this "the Shift"). How would this affect the economy and how would it affect jobs and work?
The first thing that can be done is to list the things that are associated with private transportation.
- Parking Lots (including driveways and garages)
- Gasoline (assume have not migrated to electric cars)
- Consumable parts (tires, windshield fluid, batteries, etc.)
- Car distribution (including sales and transport)
- Car manufacturing
- Car repair
- Car maintenance (including washing, upgrades, and so forth)
- Car disposal
I am certain that this is not an exhaustive list and, as we will see, each item can be broken down into many sub-items. The Shift is also not a truly radical shift as most things associated with private transportation also exist associated with public transportation. Thus, it is a shift for reduction rather than elimination and creation.
Let's look at the first item on the list -- roads. First thing is that roads occupy space -- lots and lots of space. The Shift would not eliminate the need for roads but probably no roads would need to be more than 2 lanes (one each direction). In fact, many low usage roads could probably be a single lane with pull-over areas (similar to low-traffic roads in Europe). As a conservative estimate, let's say that, with the Shift, we could reclaim 80% of the land currently used for roads. (Skipping to item two, we can also probably reclaim 95% of the space needed for driveways and garages.) It also reduces the size needed for bridges and tunnels. What can this space be used for? Parks, farmland, recreation, pasture -- whatever space is presently used for.
One website indicates about 18,000 square miles (about 0.6% of the land area) are used for roads in the US. That site argues that that isn't very much but I would note that there are 9 states in the US that are each less than 18,000 square miles and it would be the same square miles as Rhode Island, Delaware, Connecticut, and New Jersey combined. The Shift would reclaim about 15,000 square miles or a little more than the size of Maryland.
Space was the first part of the first item. Roads also includes heavy construction equipment, labor (about 140,000 workers in the U.S.), concrete and asphalt manufacture and transportation, bridge and tunnel design, and so forth. Let's say that there are 200,000 jobs associated with roads and the Shift would eliminate the need for 50,000 of them. This means that 150,000 people in the US would need to find different jobs.
And this is just the very first item associated with the Shift. Every item above involves jobs, land use, energy use, and so forth. As a conservative guess, the Shift would cause the need for a million people to find new jobs.
So, yes -- many reasonable people would like to see the Shift, but resistance to the Shift is not just an automatic resistance to change. It is also based on the economic turmoil to families and economic infrastructure.
Once upon a time, I suggested a tool that would make analysis of such changes as listed above much easier. In my next blog, I will go into more detail of the design of such.
In the meantime, what effects do you see would come out of the Shift and would it be worth it?
Sunday, January 25, 2015
The dictionary tells us that the root origins of the word media is the plural of medium and is from the latin word for middle. The plural word media has been taken over to indicate a particular type of medium -- associated with mass media (television, radio, printed or texted material). Thus, within this context, there may be a plural of the plural -- medias.
No matter how you pull the word apart, it still indicates something that is between. Roots of the concept are really part of what is now called social media. This might be surprising to people who have grown up in the Internet era but not at all surprising to people who grew up in a small town. In medieval times, there was often an official person -- the town crier -- whose job it was to stand on a corner or before a building and call out information considered to be important by the person who paid the town crier. This was often a method of the government to tell people something. More important, both in medieval times as well as small towns, was the town gossip who was an individual through whom information passed from people and groups all over. I am certain that, even in cave dwelling times, there was always a particular person who found out information and passed it along.
The primary difference between mass media and social media is that mass media is more of a one-to-many spread of information while social media is a many-to-many. One source of information is taken by an individual (or group of individuals) and passed along to a large number of people and that is mass media. Or many people provide information which is collected by one (or more) person that is passed along to as many people as who will listen. In today's world that collection point can be human or electronic.
All of these are good methods of collecting and distributing information -- but they do not guarantee that it will be GOOD, or valid, information. We see this currently in discussions about existing events. We are often divided -- and very firmly divided -- because the information sources (and associated media) are very different and the people either do not have the time, energy, or desire to research the information themselves to determine.
So, people decide who they trust and rely on that information. If the media are trustworthy, it works well. If not, they are the sources of the lies and rumors that damage, and sometimes cripple, people and societies.
The moral of the story is -- make sure you can trust the sources of your information and verify for yourself when you can.
What media types do you rely on for information and why do you trust them?
Monday, December 29, 2014
In the previous post, I talked about how money is basically an abstraction of the combination of resources, labor, and energy. We are fortunate that we do, presently, have more than adequate amounts of each. Distribution of such, however, is very uneven and, thus, causes areas of poverty, famine, and other physical and social lacks.
I ended the previous post with the idea that -- although our current problems are more concerned with distribution rather than actual shortages -- the New Age idea of an unlimited pool of money is not currently a reality. Is there anything to be done about that? Is there actually a way that everyone can have more (even with distribution problems)?
To address that question, it comes back to the three components of money -- resources, labor, and energy. It also requires a fourth "catalyst" which is technology. By using technology, energy can be converted into additional resources and increased labor availability. This argues that energy is the prime limiting factor within economics.
We can look around at the world and see how the availability of energy (applied via technology) has increased the "wealth" of the world. Farmers, via the use of equipment (using energy and technology to create and energy to keep active), can produce much greater amounts of food than what one person working the ground with manual labor can do. Harvesting of material resources -- trees, ores, fish -- are possible on a much larger scale than a single person could do making use only of manual labor (allowing a hand-built boat and fishing equipment).
The above paragraph indicates how energy (with technology assistance) can increase the amount of labor. It does NOT increase the amount of resources. But the amount of food for people has been increased -- isn't that an increase in resources? No, it isn't -- because the ecological pyramid has not changed. The amount of base-level food has not increased. The plankton, plants, and other solar-using food plants have not increased. The labor has been used to change the varieties of food harvested and the distribution of the food (from other animals to people). In fact, due to pollution and other side-effects of application of energy to increase labor, the total amount of food resources may go down (decrease in sea life in general, decrease in fish population, decrease in non-human animal population).
Can energy increase resources available to us? Yes, in two ways. The first is a continuation, and expansion, of what we presently do -- redistribution. We find other, more energy intensive, methods of accessing resources. However, this often has negative environmental effects and is also just speeding up the use of resources. So, although it increases resources available on a short-term basis, it does NOT increase the amount of resource. A second aspect of this (still redistribution) is to bring resources from other places -- the asteroid belt, for example, is a potential area from which to redistribute resources.
The second method of increasing resources requires much higher levels of energy. Besides the potential of alchemy (changing one element into another -- possible with huge amounts of energy), there are many endothermic reactions possible with increased energy available. Endothermic means "requiring the absorption of heat". Thus, it is possible to convert raw elements into more complex molecules and, finally, into "organic" materials needed for human eating, or use for furniture, or such. This is actually a metamorphosis of resources and not an increase -- but it's "close enough" for our uses.
So, with energy, the pool of "money" becomes bigger. Distribution remains a major problem. A larger problem is making sure that the energy is renewable -- we do not want to empty the bank as that would cause widespread catastrophe for the existing economy. The other problems aren't directly concerned with energy-as-money but are related to social, and environmental, responsibility for using it in a life-affirming way.
Saturday, December 6, 2014
I usually look at the economy as a form of applied sociology. Money is only worth something if people believe that it is worth something. This applies equally to gold and jewels as much as it applies to pieces of paper with people's pictures printed on it. In a similar fashion, money is distributed according to the rules (explicit or implicit) that people decide upon.
A barter system works when each person (or family) is capable of doing most things needed for survival on their own. They then trade things that they have in excess for things that others have in excess. I give you an extra chicken and you give me a bushel of potatoes. I give you a length of material that I have woven and you give me a chair. Barter is a mixture of labor, materials, difficulty, and time combined into value.
When each person can NOT do most things they need for survival, the barter system becomes very inconvenient. It is necessary to keep records/charts of equivalences. One type A chair is equal to two meters of cloth. Two type B chairs are equal to one type A chair. Ten chickens are equal to one meter of cloth. This complexity arises out of the need for each family unit to trade for many different types of things. Once this happens, the next step is to equate the value to something in common. Ten seashells represent the value of one chicken. A meter of cloth is equivalent to 100 seashells. Every item of value can be represented by a certain number of seashells. This representation of value is called money.
Once the value of work and things have been "abstracted" into money, it is very easy to lose sight of real value. The work done by an experienced, talented teacher is probably worth more to society than that of a software developer -- but the software developer probably makes a higher salary. In "capitalistic" societies, the control of money is considered to have value in itself. That is, if I possess one million seashells then I no longer have to produce anything of value myself -- the circumstances (earned and saved, gifted, or inherited) of having the seashells allows me to distribute some portion to other people who then produce the actual value (plus more for me to hold).
Within "new age" philosophy, it is popular to think that the economy is no longer a "zero sum" game. That is, each and every person, can earn as much money as she/he wants -- that there is not a "fixed pot" of X seashells in the pot and each can have as much as they want without reducing the amount that others are able to have. That's a happy philosophy but is it true?
Although money makes lots of games possible with the distribution and use -- the basis of money still goes back to production and use. If 100 people each want a fish but there are only 50 fish then the value of each fish will rise until the 50 people who most want a fish have them and the other 50 do not have them. If 100 people want a fish and there are 1000 fish, then the value should (the concept of money makes direct value difficult if not impossible) be equated to that combination of labor, materials, difficulty and time mentioned above. An abundance of resources (fish) causes value to go back to basics.
Our global economy makes distribution of resources extremely unequal. Most people estimate, however, that there are enough resources (food, labor, energy) to support everyone currently on the planet. The fact that that does not happen is a problem with distribution and allocation. But, there is still a limit. Perhaps at twice the population there would NOT be enough for everyone (in an ideal world). This argues that it is a "fixed pot" -- there is a limit of resources to be distributed. In order to eliminate the fixed pot, it is necessary to get rid of the limitations of resources.
Is there a way to eliminate the limitations of resources? I will look at that possibility in the next blog.
Saturday, November 8, 2014
When scientists discovered that the average temperature of the oceans was increasing, it was picked up by the media as "global warming". While I don't know whether this name was embraced by the scientific community or not, it wasn't a bad name -- at a scientific level. A much better name would have been "global ocean warming" -- for reasons to follow.
A name is a powerful thing -- attitudes, and historical associations, come along with names. If a highly anti-patriotic thing is NAMED something patriotic then it is easier to associate it with positive, patriotic, meanings. This is just how our brains work -- we associate names with other things connected with the names. Politicians, Public Relations people, and advertising agencies make use of this to a great degree.
If the word "global warming" is used then it can be MIS-used. If there is a huge snowstorm, it can be used as "evidence" that it is "obviously" NOT warming all over the globe. The more precise, and accurate, the word that is chosen, the more difficult it is to skew the interpretation. As mentioned earlier, it would be more difficult to misinterpret "global ocean warming" -- since a snowstorm is not immediately connected to the ocean (although it is actually true that the ocean warming might directly help the snowstorm to happen).
Of late, the dialog has mostly changed to that of "global climate change". This is associated with the effect of "global ocean warming" -- but it seems to have been easier to migrate to this phrase than to expand upon the "global warming" media phrase. It is a reasonable phrase and much more difficult to subvert by politicians as there IS (unfortunately) increasing indications of global changes in the climate.
The other part of the "discussion" (actually more of a taking of sides) -- beyond whether or not global climate change is happening -- is whether it has been caused by human activities. It will be impossible to totally prove this as that would require comparing two parallel worlds -- one world where changes in energy use and other human activities took place in a timely manner and comparing that to our current world.
When historical evidence is examined, it shows how, and when, such global changes in climate have occurred before. This evidence does give us some ideas as to how various components (Carbon Dioxide in atmosphere, Ozone levels, water levels, average temperature, etc.) work together to change the climate and it does indicate how ongoing, present, changes are likely to affect climate. Politicians are correct that climate change has occurred many times over history. However, the rate of change of factors that have been occurring over the past 100 years has only been found in association with large scale catastrophes (huge volcano eruptions, widespread biologic changes, and so forth).
This rapid change is the most scary part of global climate change. Humans are very adaptable. In fact, a great name for the species would be homo adaptabilis. If a desert turned into a a wetland over a period of a couple hundred years, people would adapt. In fact, much of the Sahara desert was once a tropical forest at one time (but the change was much, much slower). If the coastline disappears under water an inch a year, people will adapt. That is our current goal -- to slow down the rate of global climate change to allow people to move from one place to another, to allow changes in basic crops grown in an area, to allow people to change housing and energy use, and so forth.
But, all of this is still an exercise in the dangers of allowing the media to choose a phrase to describe something. Insist on precision in descriptions. Refuse to use labels that are obviously inaccurate -- reverse it by saying "the so-called xxxxxxx". When a debate arises where one side is labeled as "pro-AAAAA" then insist that the other side be called "anti-AAAAA" rather than "pro-BBBBB"
What misuses of labels have been the most upsetting for you?