Mutually Beneficial Relationships

Mutual beneficial relationships where both the employer (owner) and employee (worker) both benefit (profit) from the relationship do not require an artificial pricing mechanism. Where did you come up with the belief that this is required? The employer simply has to accommodate the employee compensation in the business plan (that the owner controls).

Employee compensation is an expenditure just like every other expenditure for an enterprise. I don't know of anyone that would suggest that an enterprise should profit by forcing a supplier to provide a product or service for less than cost so why do we believe that an employer should be able to use "market forces" so they can pay less than what it costs for the basic (involuntary) expenditures of the employee?

That simply makes no sense considering that the employer can still earn a profit by paying, as a minimum, for the necessary (involuntary) expenditures of the employee by simply revising the business plan to accommodate the expenditure. In many cases this doesn't even require a pricing change and preferably it wouldn't. Typically by simply eliminating "non-value-added" tasks by revising the business plan it will accommodate and fund the increased compensation without a pricing change.

 

If two parties engage in a mutually beneficial exchange, each party is only responsible for fulfilling his part of the exchange. I see no evidence of any one person being legally responsible for the welfare of another, except in the case of a parent-child relationship. Each of us is responsible for our own well being.

 

This argument lacks a logical foundation. We produce many items that the employees cannot afford to purchase. I worked for a machine shop that produced landing gear actuators for Airbus airplanes and for one the raw material alone cost over $10,000 with a finished product price of over $100,000 and I don't even believe the director of operations at our facility could afford to purchase one.

Off shore manufacturing includes a significant overhead cost of shipping just to get the product to the United States. In my business we sell overseas to India and Austrialia and our shipping costs are more than the actual cost of producing the product.

You touch on a point but draw the wrong conclusions. A low paid worker spends all of their disposable income on consumption so by increasing their compensation it also increases consumption which creates more jobs, not less.

At the other end is the high income owner that only spends a percentage of their income on consumption (much or most goes into investments that don't consume anything) and they're often already spending all they would on consumption and would not increase consumption spending with higher income. They tend to just invest additional income as opposed to spending it. As more money is funneled into their pockets it doesn't result in increased consumption and no jobs are actually being created.

If we want to expand the economy and create more jobs then logically we need to get more of the money into the hands of those that spend it all on consumption and the low paid workers is that person. Consumption, not investment, drives the economy and creates jobs.

 

This is a point I make.

The employee is responsble for performing the tasks assigned to them by the employer.

The employer is responsible for ensuring that the tasks generates enough revenue to provide a "profit" to the employee performing the tasks.

If an employee cannot meet their basic (involuntary) expenditures then they're "operating at a loss" and the employer is failing in their responsibility to ensure the enterprise generates enough revenue based upon the tasks they assign to fund the basic (involuntary) expenditures of the employee.

The employer, not the employee, defines and controls the business plan and it's the business plan that determines the revenue for the enterprise.

 

One thing that annoys me is that everyone expects the employee to do the tasks assigned, and overwhelmingly they do, while not expecting the owner/employer to have a business plan that provides the revenue necessary to provide adequate compensation.

Making excuses for incompentent owners that don't know how to write and execute a quality business plan is not a valid argument.

I've been involved as an owner of numerous small enterprises and I've learned how to write and execute a quality business plan that always results in adequate compensation as well as profits for the enterprise. My most recent enterprise established a starting wage of $20/hr plus $5/hr in benefits for a new hire with zero experience and, based upon revenue generated by the business plan, the labor costs are less than 25% of gross revenue..... exactly where they're supposed to be.

If I can do it then the owner of a McDonald's franchise can do it but unfortunately McDonald's corporate, that provides the business plan and business model, knows it's dealing with complete idiots so the business plan and model are designed for idiots and not competent business owners. McDonald's furnishes an inferior product at an exceptionally high price and the franchise owner only profits by screwing the employees with inadequate compensation. That's no way to run a business.

 

Not really. When two people engage in trade, each is responsible for delivering what he promised. If one trades for a service, he is responsible for delivering what was agreed upon.

Neither of the trading partners is responsible for anything beyond the agreed upon exchange.

 

You refer to the "explicit conditions" of contract while I address the "roles and responsibilities" of the two parties to an employment contract.

All contracts include both explicit and implied conditions. Arguably the roles and responsibilties for the two parties (employer and employee) I've defined should be included as one of the implied conditions of a contract if not addressed explicitly. Implied conditions of contract are enforced by the courts along with the specific conditions of the contract. Implied conditions can also be imposed under the law to ensure equitability in contracts.

 

When two parties agree to engage in a trade, they determine the terms of the trade. As long as each party delivers what he promised he has fulfilled his obligation. Why do you, as a third party, get to superimpose your own conditions on their agreement?

 

There are always "assumptions" made related to the contract and an unbiased third party can be necessary in determining the validity of the assumptions not expressed in the actual contract. These are the implied conditions of contract. Let me provide an example.

I go to an auto repairs shop for work on my car and the "estimate" of repairs is $100. The repair estimate doesn't explicitly state how accurate that estimate is but based upon an implied condition of the contract the actual costs need to be relatively close to the estimate. If the shop, after the work is completey, wants to charge me $200 by claiming that the original estimate (contract) contained no provisions establishing how accurate the estimate needed to be the courts (an unbiased 3rd party) would enforce the implied provision that the estimate had to be relatively accurate to the final charges.

Of course the government can also step in to prevent abuses of contract. For example in the above case the government could establish by law that any estimate must be accurate to +/- 10% of final billing charges. That would prevent an auto repair shop from intentionally underestimating the costs to secure the work and then screwing the customer with a much higher cost when the repairs are complete.

 

When two parties engage in an exchange (for example, you and your mechanic) there is no expectation, implicit or explicit, that either one of you is responsible for the other person making a living. Each of us adults is responsible for our own life.

 

Again, ideology or loose interpretation of laws, etc. cannot change the reality which we exist...a reality that has good and bad and everything in between, which over long periods of time has evolved to this point and will require long periods of time to facilitate small tweaks in policy. We can advocate anything we wish and argue anything we wish, but when the rubber hits the road it is the current laws and policy that we must design our lives...

 

Americans and those around the world demand the best products and services for the lowest prices...and from mom-pop to the largest corporations this is precisely what these companies endeavor to do. I've said this many times that within my eyesight right now nearly everything is a 100% import or partial import. There is no way Americans are going to produce all the stuff each of us consumes because we are not willing to pay higher prices for made-in-the-USA. If you stop imports then you must also stop exports which might be 20-30 million American jobs. Forget all the ideology and look at what exists in the common business models across the world. Maybe it's not fair to everyone but it's what we must function in or get lost if we refuse. Lastly, can you guess how much a common Ford automobile will cost you if you don't allow imported materials? And you do realize you would also remove all foreign car manufacturers from the USA which alone represents billion$ in GDP and millions of jobs.

 

We both agree on this but I will address a problem based upon your example.

Yes, for the example you mention that is reasonable but a person/household can only reduce expenditures so far an no more. That couple could be renting an expensive apartment and move into a less expensive one to save money but they still have to pay rent and there is a minimum cost of rent and they cannot pay less than that. They can change their eating habits from steak to less expensive foods but they still have to eat and there is a basic cost of food and they cannot pay less than that. They can conserve energy by turning off lights when not being used but they still need so lighting and they cannot reduce spending to less than that. They can lower the temperature for heating saving money but they still have to heat the house and they cannot pay less than the cost necessary for the minimal heat required. They can take a bus and sell their car(s) but the bus may not go to where they need to go and maybe there's no bus at all. They still have minimum transportation costs and they cannot pay less than that.

All of these are what's referred to when we talk about the 'minimum cost of living' because a person cannot reduce expenditures to less than this. When this point is reached then the means must meet the expenditures because the expenditures can be reduced no further. If the person/household's "means" provided for by employment are inadequate then they must depend upon another means to supplement their income. That supplement is provided for by welfare programs.

My position is that if they're working then, at a minimum, their income and benefits from their employment should provide for the basic needs. The means must meet those fundamental expenditures that cannot be reduced any further.

 

When it comes to the enterprise furnishing goods/services I would argue that this is not true. The capitalist (owner of enterprise) is motivated by greed (according to Adam Smith) and greed alone. They want to sell products based upon how much money ends up in their pockets. Sometimes this is best achieved with low prices and sometimes with high prices. We could compare Microsoft and Apple if we want an example. Microsoft used low pricing to sell vast quantities of it's products while Apple relied on high prices and selling much fewer of it's products.

Don't ever believe that the motivation for pricing is based upon a corporation wanting to provide a product at the lowest possible price. The pricing is always based upon how much profit shows up on the bottom line.

 

No real argument but we also need to be forward looking and our current policies and capitalism as we know it fails based upon every long term projection.

I probably won't survive to see that day but it's very much like global warming. We can do something now to change the future or we can wait until it becomes too late to do anything to change the future.

 

I can't support defining for others what 'their minimum cost of living' might be. It is impossible for me to judge what others must need in order to survive, for example I know they require food but what a person eats and how much this should cost is their business. The same with their shelter, transportation, etc. We also never know the living arrangements; are they living alone, with family or friends, with a partner, etc. how much they depend on others for their support, or, how many others depend on them? For these and other reasons I simply cannot agree to quantifying a 'living wage' or any other personal economic factor. This is why it is imperative for everyone to live within whatever their means might be.

I'd like to ask you how government can help these people without meddling in the private sector with forced minimum wages and living wages etc.? Do they need less expensive shelter? Do they need more access to food? Do they need health care? Do they need affordable and efficient public transit? Do they need job training and jobs? Do they need education? Seems to me if government truly feels they must satisfy a problem then government must do something other than meddle in the private sector...

 

There can be no profits and no business without the consumer. The consumer will not purchase the products and services unless the price and quality are right. Whatever the consumer is willing to do is how the business model must be defined. If the consumer won't allow profits to sustain and grow the business then the business model is not viable. It must be a win-win scenario between business and consumer!

In the USA, tens of millions of Americans have equity investments in private portfolios and institutional portfolios ALL OF THEM DEMANDING THE BEST ROI. Pensions holding billion$ in investments will seek the highest ROI. You cannot expect consistent high ROI without allowing companies to grow and expand their profits...essentially ALL companies are responding to their shareholders desire for success and ROI and it has little to nothing to do with greed. Do you think the $15 trillion invested in the stock markets want higher or lower ROI?

Like so many other scenarios today, too many people want to take and not give...and this cannot work long term! We cannot demand high ROI from stock investments then complain about corporate profits! IMO higher profits are the best thing that can happen...

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Well...another reality...people and government are not proactive. And even if we were proactive, today we cannot find consensus on which direction to take...

 

I also have to admit that I'm personally incapable of quantifying what it costs for a household to survive unassisted by others but that doesn't imply it's not quantifiable because it is. MIT, where some of the most brilliant analytical minds in America reside, has been able to quantify the minimum necessary income for households based upon location (the cost of living in not the same throughout the United States) and household size. MIT is not politically motivated and does not argue for any government action based upon it's analysis but instead simply provides the facts based upon analysis.

So while I'm incapable of the quantitative analysis I'm even less incapable when it comes to disputing the analysis by the brilliant minds at MIT that are capable and that have quantified the minimum costs of living throughout the United States based upon local economics and household sizes. This would be like trying to argue quantum physics with Steven Hawking.

That is not to say that I don't have any disagreement at all but in the end I have to accept MIT's analysis. For example I believe the costs for medical are underestimated but I can't back that opinion up. I would also address retirement where MIT didn't. Social Security and Medicare, that MIT assumes, from my perspective are nothing but tax and spend government welfare programs (and they were sold to the American people as tax and spend welfare programs when they were created).

This is a problem that is hard to answer but we can look at what's not working very well.

Poverty cause by under-compensation for employment (i.e. not enough income to meet expenditures) imposes a huge financial burden on society. Currently we have local, state, and federal funding plus private charities to address this financial burden. While I don't have the numbers related to local, and state welfare programs nor do I have the numbers on private charities we know that the federal government alone is spending about $500 billion/yr in providing welfare assistance. I could make a wild guess that between local and state welfare programs plus private charities the actual financial burden being funded doubles that amount to well over $1 trillion per year. What we also know is that it's not enough. There are still millions of households constantly deciding what bill not to pay because they just can't afford to pay them all even though they're not spending money unnecessarily on luxuries. They're just trying to pay the basic bills that they have.

So what we're doing based upon government welfare programs and private charities isn't meeting the total financial burden created by poverty.

You mentioned additional education and that could be formal education or job training but the problem is that while it might help an individual it doesn't change the poverty statistics. Roughly 40% of all jobs pay compensation below the amount necessary for the household to live on and that number doesn't change based upon one person moving up the economic ladder. For that one person going up today there's two people (perhaps an exaggeration) moving down. We know that middle income jobs are disappearing while the number of low income jobs is increasing. The middle class, that doesn't require assistance, is in decline today and no amount of job training or education is going to change that fact. Those jobs are being replaced by Artificial Intelligence and Technology (AI&T) and the cost of job replacement with AI&T is being dramatically reduced. Even the "burger-flipper" job is threatened today because we have robotic burger machines that custom cook, assemble, and package hamburgers for less than the cost of the minimum wage burger-flipper. Not a rosey picture but we're looking at a future where human labor and thought will be replaced by AI&T in the future and when human labor and thought is not required our economy collapses because it's based upon human labor and thought. That's a long term problem that few are willing to address today. This is the long term problem but since about 1970 it's been a growing problem not just for America but for the entire world economy.

Are there alternatives to what we're doing today (that isn't working) other than increasing the minimum wage to a liveable wage? I can think of one but not one that I'd necessarily support.

We could have our government fund the necessary "cost of living" for households so that the individual does not have to accept employment for compensation below this amount. While this might sound like an absurd proposition it's actually based upon my personal experience.

From the age of 64 to 66, when I officially retired, while unemployed I refused employment for less than $50/hr (plus benefits) because I had the personal wealth to be able to afford to refuse the employment. Juxtaposed to this, when I was young without any financial assets or savings, there was a time when I lived in a 1960 Ford van and I worked day labor at minimum wage and was paid daily just so I could eat that day and the following day. There was no way on earth that I could afford an apartment and other expenditures and I literally used gas station restrooms to "shower" to survive. I couldn't afford to say no to employment that didn't provide enough income to live on.

Tens of millions of households today are basically in the same position I was in when I was young. They can't afford to say "No" to a job that doesn't pay enough for them to live on. If they could afford to say "No" it would force employers, that need the labor, to pay more than the "cost of living" because they would be unable to secure labor for less than that cost.

An outrageous idea? Probably but it would work in forcing employers to pay enough in compensation for a person to live on without the mandate for a minimum wage based upon the cost of living. They would either pay enough or not be able to employ anyone because the people would just say "No" to the job offer.

 

It actually has to be a win-win-win situation where the vendors, enterprise (business), and consumer must all benefit. If the vendor doesn't benefit along with the enterprise and the consumer then the system collapses. While many recognize other enterprises as being the "vendor" they ignore the fact that the employee is also a vendor that's providing a service (labor) to the enterprise under contract.

The capitalist, which can be the owner of a small business, or a person with assets in an investment portfolio, is always motivated by "greed" which is exactly what you're stating. Seeking the highest possible ROI is based upon greed. Seeking a reasonable return on investment could be argued as not being based upon greed but when a person seeks the highest possible ROI, as opposed to a reasonable ROI, the difference is based upon greed.

One point left out is that an enterprise can still have the highest ROI while providing a liveable wage, and even more, to it's employees. Adequate compensation and a high ROI are not incompatable.

Once again the "higher profits" argument is based upon greed as opposed to "reasonable profits" that arguably is not. I don't have any problem with an enterprise profiting, and in fact support that, but I do have a problem with an enterprise that derives it's profits by undercompensating it's workforce. I avoid shopping at Wal-Mart for exactly that reason. I'd rather pay more at another retail outlet that pays it's employees more.

No argument from me on this and I've also found that people and government are far more likely to address a symptom of a problem as opposed to addressing the problem itself. In industry I was a part of a defect reduction team where "root cause analysis" was employed to eliminate manufacturing problems. You'd be surprised at how many times the symptom of the problem was identified but fixing the symptom does not correct the problem.

Socials Security is the best example of this from a government standpoint. In the 1930's the Congress accurately identified that about 1/2 of the people at retirement had not created the personal assets that would provide the income necessary. The government did not create a program to increase the personal assets but instead created a program that provided the income. The lack of income was the symptom and not the problem. By the 1960's the same problem was once agian identified because about 1/2 of retirees didn't have the personal assets to generate the income to fund private health insurance. Once agian, ignoring the problem of a lack of personal assets, the government created Medicare to provide the insurance. If the government had created a personal asset program (e.g. privatized Social Security based upon investments) then people would have the assets necessary to provide income that would fund retirement, including the purchase of health insurance, when they retired. That's why I've made a proposal to do exactly that.

We can note today that Republicans in Congress are addressing the high cost of federal welfare programs while ignoring the fact that this cost is just a symptom of the problem. Poverty is the problem and the costs to mitigate the poverty are just a symptom of the problem.

We need to address the problem, POVERTY, because if we reduce the poverty then the costs of mitigation (welfare assistance) is also reduced.