Poverty and Minimum Wage

I read a study recently about poverty.  It claimed that the legal definition of "poverty level" does not match the legal definition of "poverty" in the U.S.  Specifically, for the government to consider a U.S. citizen or family to be under the poverty level, the household must be making less than somewhere around $20,000 a year (I think the actual figure is within a thousand of $23,000).  The study looked at cost of living all around the U.S.  Because cost of living is different in different places, the poverty level should also be different.  Using the legal definition of "poverty," the study found that the actual poverty rate averages over $30,000 a year.  There were a few places where it was as low as $25,000 a year, but there were many places where it was very close to $40,000 a year.  Given the legal definition of "poverty rate," which is used by many government welfare agencies, there as almost a $20,000 gap where people who  need government welfare cannot get it.  Imagine the dilemma of the guy who is making $19,000 a year, gets all of the food for his family through food stamps, and is paying only half the normal rent in subsidized housing.  What happens when his boss offers him a promotion that adds $5,000 a year to his salary?  If he accepts, he will make $24,000 a year.  Unfortunately, this will not cover his $30,000 a year expenses.  Further, loosing the food stamps takes out $3,000 a year from his income, and loosing qualification for subsidized housing takes out another $5,000 a year.  If he does not take the promotion, he stays at $19,000 a year, but food stamps give him $3,000 for food, and the housing subsidy gives him $5,000 for his family's apartment.  Before the raise, his gross income is actually $27,000, only $3,000 short.  After the raise, his gross income is $24,000.  He would be $6,000 short this way.  The only way he can take a promotion is if his salary is increased by more than $8,000 a year (plus the additional taxes, which he will now have to pay with his increased income).  What are the chances that he will eventually be offered a raise big enough to justify accepting it?  Approximately nothing.  Most employers do not even offer a $3,000 raise for a single promotion.  This guy will probably be stuck barely in poverty ($3,000 short) for the rest of his life, because any raise that would help him progress out of poverty will disqualify him for welfare and cause him and his family to starve and be thrown out on the street.  I guess the American Dream only exists for those who are already rich or the lucky few geniuses who can pull off a massively successful invention and manage to keep the rights long enough to get paid.

This gap between the legal definitions of "poverty" and "poverty level" is not the only gap that causes a major problem.  There is a similar gap between Federal Minimum Wage and the legal definition of "poverty level."  Current Federal Minimum Wage is $7.25 an hour.  Now, the legal work week is only 40 hours, according to Federal Labor Law.  There are only four professions which can legally be required to work more than this (other businesses can ask their employees to work more hours, but if the employees refuse, they cannot do anything that could be construed as punishment or retaliation).  There are also only 52 weeks in a year.  Doing the math, we find that Federal Minimum Wage enforces a yearly wage of only $15,080, for a full, legal work week.  This is only 75% of the Federal definition of "poverty level."  The Federal government itself is practically encouraging entry level businesses to keep their employees in poverty.  Worse, the actual poverty level is closer to $30,000 a year, which means that in reality, the government is allowing businesses to pay only half what a person needs to survive.  This is encouraging an 80 hour work week, with the additional overhead of working for more than one employer.  Further, most minimum wage jobs only schedule employees half time, to avoid paying benefits.  This means that the government is actually encouraging an 80 work week, split between four jobs.  Note that each job has extra overhead for taxes, administration of the businesses, and often extra travel time.  This is absurd.  How stupid do law makers have to be to miss this problem?

So, there are a few possible solutions.  The worst is to increase the legal work week to 80 hours and remove laws requiring benefits.  This would solve all of the problems for the businesses (besides extra hiring costs to replace dead employees).  This also happens to be 16 hours a day, 5 days a week.  The 40 hour Federal limit was placed to solve this problem, and it would be inhuman to change it back.  Also, if benefits are removed, the poverty level should be raised another $5,000.  The second solution is to fix the government definition of "poverty level."  This will allow more people to get on welfare, which will help to mitigate the problem.  Unfortunately, this will cost a lot of money, and if the government cannot get up the nerve to tax large businesses more, it will result in economic disaster.  Note that this solution should be used, but it will not fix the problem by itself.  The third solution is to raise minimum wage such that working full-time in any job will pay enough to stay out of poverty.  This will still not help people that cannot find jobs or that cannot find 40 hours of work each week, but it will take a huge number of people out of poverty.  The ideal solution would be both of the last two.  Fixing the definitions problem will make welfare work for everyone who needs it.  Fixing minimum wage will get a huge number of people off of welfare, which will balance the effect of fixing the definitions.  In this system, the guy above will already be out of poverty, if he is working full-time.  If he is not, he will be able to remain on welfare until he is entirely out of poverty.  This will allow him to accept the promotion without endangering himself and his family.

Now, there will certainly be some negative repercussions to this.  Businesses that base their profit margin on underpaying employees will probably fail (we will loose a lot of fast food places; is that really a bad thing?).  Initially unemployment will increase, which will increase the burden on welfare.  Ultimately though, this problem must be addressed.  If we do not start taking welfare money from the businesses that are causing it to be required, our government will eventually default on its debts, which will destroy its ability to borrow money.  This will force a massive lightening of government, which will probably result in a depression like the world has never seen before.  We might as well start now, where it will actually fix some major problems, instead of waiting until we are on the verge of government collapse.

Manufacturing vs. Service, Value vs. Competitive Advantage

I would like to assert that part of the cause for recent economic problems is related to the fact that most of our modern work creates no value.  These jobs include everything from cashier to manager to CEO.  Disagree if you want, but let me explain my reasoning.

First, most people will disagree with the assertion that most service jobs do not create value.  I would argue that rather than value they create competitive advantage.  Let me explain the difference.  When work creates value, the value created exists regardless of whether the work is eventually compensated.  When work creates competitive advantage, if that work does not immediately create value, then the work will never be compensated.  An example of the first is when someone builds a house.  The labor value (arguably, the purest measure of value) of the house persists whether someone buys it or uses it immediately or not.  Even if no one wants the house now, the value will still be there when the housing market improves.  The second example is a cashier.  The cashier is getting paid even when there are no customers to serve.  If the cashier spends an eight hour shift, with no customers, the value of the work done by that cashier will never be compensated.  That eight hour shift will not have any value the next day, when the store is very busy.  In other words, the wages paid to the cashier did not create any value.

Now, let's look at the idea of competitive advantage.  If work of the cashier does not actually generate value, why do we even have them?  The reason we have cashiers is that they create competitive advantage.  In theory, if everyone was honest, we could eliminate cashiers, and customers could ring themselves up and pay without any human intervention.  In fact, self checkouts are evidence of this, except that to make up for human error, most stores provide one cashier per four or six self checkouts, for oversight.  So why don't we replace all cashiers with self checkouts, with one overseer per four or six?  The reason is that many customers prefer dedicated cashiers.  Stores could eliminate cashiers, but they would loose customers.  Cashiers provide competitive advantage.  If you think that competitive advantage can be translated to value though, you are wrong.  No value is created by competitive advantage.  Competitive advantage affects how value is distributed.  This is a problem of looking at an open system as a closed system.  A single store might see that increased competitive advantage increases profits and conclude that competitive advantage generates value.  This is an invalid conclusion because the single store is not a closed system.  If a store has low competitive advantage, the lower profits do not mean that they are generating less value than the other guy.  The lower profits mean that the profits are being distributed in favor of the other guy.  In plain English, the money is being spent somewhere else.  Assuming that competitive advantage creates value is the same as assuming that lower competitive advantage reduces the amount spent everywhere.

So, here is how service jobs can create problems.  When a store has to pay cashiers, that is overhead that costs money, but that does not create value.  In other words, the money spent on cashiers (in the open system, not per store) generates negative profit.  In fact, evidence of this is that many stores keep track of the labor costs as a percentage of revenue.  They recognize that non-productive labor generates negative profits, and they spend effort to try to minimize those costs.  The problem here is that when a business spends extra money to increase their competitive advantage, they must also raise prices to counter the negative profit created.  What this does is, it increases the number of people employed without increasing average wages (typically it actually lowers them, because the number of lower paid service workers hired is disproportionately large compared to higher paid service workers), while also increasing prices.  In other words, it causes unbalanced inflation.

Now you are probably wondering what I mean by unbalanced inflation.  You might recall in a previous article that I mentioned that between 1960 and 2010 average inflation was 659%, while average wage increase was somewhere around 75%.  This is what I mean by unbalanced inflation.  The problem this causes is that price inflation outpaces wage inflation, which makes the average person have decreasing relative wages.  Otherwise stated, prices increase faster than wages, making workers more and more poor.  Adjusted for inflation, the average worker now makes around one quarter what the average worker in 1960 made (I think my math is right; I'll make a chart from this data at some point).  No wonder we are having a credit crisis, and no wonder people are spending less money.  Adjusted for inflation, people have less money to spend.

The point of all of this is that service jobs need to be considered carefully.  Part of the fault is the consumer, who is often too lazy to bring their cart back to the return, do their own research for their project before going to buy supplies, clean up their own messes, and do anything else that they can reasonably do on their own.  When an employee of a business has to spend thirty extra seconds to get your cart from the far end of the parking lot, that increases prices slightly.  When this happens for hundreds or thousands of customers each day, it can result in a significant price increase.  Similarly, when a service associate spends half an hour helping you plan a poorly thought out project, that increases prices.  And again, when this happens for hundreds of customers per day, it results in a significant price increase.  Research and development teams also cost money where no value is created (if you disagree, read on; I am getting to this).  With the widespread automation of manufacturing, most modern jobs are service jobs.  Since service jobs do not create value, no wonder we are having problems.

I am sure there are still objections to the idea that service jobs do not create value.  I would now like to discuss what is probably the biggest objection.  This relates to my comment on research and development.  R&D does not create value.  The reason is that the product of R&D has no value in itself.  While you can use a blue print to built a house, which has value, the blue print itself has no value.  In fact, information in general has no value (right, knowledge is power, but without action, it still has no value).  The value in information is its use.  A blueprint for a new kind of computer processor is of no value itself, but it can be used to help create a large number of computer processors, which do have value.  Don't mistake my claim as saying that service jobs are worthless.  Many certainly have worth, because they are one step that leads to the creation of value.  However, there are many service jobs that are worthless.

Businesses typically use R&D as a means to increase competitive advantage, but R&D can also fuel increased ability to create value.  Good R&D produced the designs and ideas used to create hybrid cars, which most people will agree have higher value than gas only cars.  While the motive may have been increased competitive advantage, the result is higher potential for generating value.  This is sometimes also true of service jobs like accounting.  Sometimes even CEOs can improve ability to generate value (keep in mind, however, that increasing competitive advantage by itself does not generate value; the CEO that improves profit margins with a slick new ad campaign is only redistributing value,  not generating value).  It might sound like I am trying to justify spending huge amounts of money on some service jobs, but not others.  This is not true.  Any company that spends huge amounts of money on R&D, while severely underpaying their employees, is acting unethically and is ultimately harming the economy.  When employees cannot afford to buy the things they need, because money that they deserve is being redirected to R&D or any other competitive advantage service jobs, the economy suffers.  This is even more true when the employees have to resort to government aid, because that increases taxes, which further raises prices.

Businesses need to carefully weight the need for service positions against the need to pay their employees fairly and charge fair prices.  Most businesses do not recognize that this is important, because they do not look beyond their profit margins.  This is why we are having economic problems.  We might be seeing improvement in things like unemployment right now, but it will not last unless we can reform how we think about value.  (Recent research on unemployment has shown that part of the current downward trend is the result of people giving up on finding employment, so decrease in unemployment does not necessarily mean people are getting jobs.)  It turns out that this may be less difficult than most businesses think.

There is some irony in the idea of increasing service to increase competitive advantage.  The first is that it is malignant.  When one business increases competitive advantage, others must follow or die.  So, when a business increases service, value distribution is transferred to that business.  Others typically respond by increasing service to maintain balance.  There are more ethical alternatives though.  People like better service, but people also like lower prices.  Employees like higher pay as well.  If a business increases wages, they have a bigger selection of potential employees and can choose higher quality workers, which increases profits.  Higher pay also results in better morale.  Many customers will respond to the better treatment, even if there are fewer service employees.  Lower prices are always a good competitive advantage.  Many customers, especially the large spenders, will not mind fewer service employees if it means that they can save 5% or 10%.  (This is evident in the success of WinCo, which even requires customers to bag their own merchandise, to keep prices low.)  Having a big R&D department to compete with the other guys might sound good, but again, if cutting the size of R&D can lower prices significantly, more customers will come (even if they might occasionally go to the competitor for a more advanced product).  Note that all of these will appeal more to higher spending customers.  Higher spending customers typically know what they are doing, so they need service less.  They will prefer the better treatment over the larger number of service employees.  They will certainly prefer the lower prices, because they are getting more significant savings.  These are the most valuable customers, so pleasing them should be a priority.

This is a complicated matter.  We are finding service to be a more and more prominent aspect of our lives.  Many people feel that time saving services are valuable, even though they have no intent to use the time saved for anything productive.  Leisure time is great, but we are getting to a point where we are paying through the nose for it.  Businesses may not respond to the ideas I have written about, but consumers can.  We can start by bringing our carts all the way back to the store, cleaning up our own messes, doing our research so we don't need to spend half an hour of a service employees time for every project, and doing anything else we can do reasonably, instead of expecting someone else to do it.  If we really want to send a message, we can keep track of prices and only buy the cheapest (we don't have to sacrifice quality though).  If everyone in a town only ever bought gas from the cheapest station, even if it took an extra minute or two to get there, gas prices would drop.  The other stations would have no other option.  If people kept track of food prices and did the same thing for food, stores would be forced to compete on prices.  Our laziness has told businesses that we care more about service, which does not generate value, than prices, which at least save value.  If we would get off of our lazy duffs and take the effort to be cheap, prices would drop.  (And, certain cable shows about couponing have shown that the monetary savings can be well worth the time spent for shopping around.)

While I blame businesses for their irresponsible management of value (659% inflation to 75% wage increase), everyone has a responsibility for regulating this.  We have the ability to control how businesses handle value, by choosing where we buy.  If we really do value service more than value, then we are on the right track.  If we value low prices more though, then our laziness is betraying us.  So many people in the U.S. complain about high prices, but then do nothing about it.  People who are too lazy to shop cheap have no business complaining about prices and frankly deserve what they get.

Wage Cap

The 200 year experiment has failed. While we have shown that large businesses with centralized mass production reduce the cost of producing goods, we have failed to show that they reduce the prices of goods. Mass production is good and useful. When done properly, it decreases production costs and increases quality. Centralizing mass production has not been good or useful. Centralized production requires robust transportation fleets, which are expensive in fuel, time, and maintenance of both vehicles and roads. The failure of the experiment, however, is not related to transportation costs. The experiment has failed due to greed and corruption.

Large companies have slowly robbed their employees and customers more and more. With this ill gotten gain, they have paid our government to make laws that give them even more power. We now live in a nation of slaves and slavers. The majority of us are slaves, while the rest are the slavers. There is no middle ground. Most of the people in the US work to produce enormous profits and are then paid only enough for room and board, while the profits they have worked so hard for go to some CEO or other person that does less work than they do. The people are now rebelling, but our government does not even know what to do, because they have never thought about how to best serve the people they govern. I have some suggestions.

I propose a wage cap. Presuming the average adult needs 8 hours of sleep a day and that this leaves them with 16 hours during the day that they could work, and presuming that the average person is capable of working like this 6 days a week, a person cannot reasonably work more than 5,000 hours in a year. Also presuming that a well trained individual can do work valued at over 10 times what the average McDonald's employee's work is worth, it might be reasonable to say that this individual should be paid $100 an hour. Given this, this person could earn $500,000 a year. If you want to argue that the work of the McDonald's worker is worth less than 10 times the trained individual, then the trained person cannot eat fast food and then shall only be able to work 13 hours a day, since he now has to spend 1 hour per meal in preparation time. So, I propose that a maximum wage be mandated that prohibits payment of more than $500,000 in combined wages and benefits per year per person. This is enough money for anyone in the US to survive quite comfortably, and it would affect less than 5% of the population.

In addition, I propose a profit cap for businesses. This should be a percentage and should represent a reasonable profit margin, that cannot be considered extortion (there should also be a fairly large maximum dollar amount, to limit the size and influence of businesses). Costs for maintenance and replacement equipment can be taken from the total profits, but research and expansion costs should not be (they must be counted as profits). Elective costs should also not be subtracted from profits, including charitable donations (it is unethical for a company to donate money that was generated by their workers). If a company generates more profits than are allowed, those profits should be equally distributed among employees (that have not reached their maximum wage) and a fine should be charged against the remaining profits (a company may instead choose to distribute before filing taxes to avoid the fine).

These two things would make a huge difference in distribution of wealth. Large businesses would be paying much less to officers, because of the wage cap. The profit cap would require the businesses to do something with this money and the rest of their overages, that does not directly benefit the company and that does not just get rid of it to charities. The only options would be to either use the money to pay the employees fairly, or reduce prices dramatically to avoid the overages in the first place. Either of these would be good. The first would directly ensure that employees get a fair share of the profits. The second would increase the value of the US dollar so much that even current minimum wage would be quite lucrative pay. In addition, many workers could cut their work hours, opening up jobs for the 9% of unemployed Americans.

An interesting side note: Those who already have large amounts of wealth would also benefit greatly from the second scenario (prices dropping), as the value of their accumulated wealth would double, triple, or even better.

I realize that this solution has some holes. The actual legislation would need to carefully address the question of exactly what costs a company can exclude from their profits, to avoid holes that would allow companies to use overages in ways that would not benefit the employees. The wage cap legislation would have to also avoid loopholes that would allow any form of compensation to not be counted in the cap. I am neither a lawyer nor a politician, so I am not qualified to actually draft this legislation, but I do feel that I am qualified to suggest a good framework that could be used in drafting legislation, by those who we pay to do that job.

I believe that this particular course of action would not only solve the distribution of wealth problem, but I believe that it would also solve most of the problems with our economy as well. It could potentially double the value of the US dollar, making us a real contender in the world economy again. It could put many Americans into higher tax brackets, which would solve the budget issues with our government (or at least make them less severe). Fixing the distribution of wealth problem would create more jobs (fewer people would need to work multiple jobs, some people would choose to work only part time, and many people would start small businesses), potentially entirely eliminating the 9% unemployment we are currently facing.

It is certain something needs to be done. As I have mentioned, I believe that we are on the brink of revolution, especially if the government does not act quickly to fix these problems. I believe this solution would fix a great number of our current problems. It would affect our capitalist economy (which, in case you missed it, is failing) by slowing expansion and limiting rates of gain, but it would not replace it will a more oppressive system, nor would it interfere with it significantly. This would benefit a vast majority of the US population, and those who did not benefit would not be significantly harmed. We need to do something, and I think that this solution would fix the most urgent problems the most quickly and the most permanently.

Lord Rybec

What's it Worth?

There are many different types of value. Humans perceive value based on usefulness, need, rarity, mental stimulation, work or resources that went into an object, age, and many other factors. Probably the biggest factor of real value is need. What value is a big screen TV when you are starving the death? Usefulness and cost of production are also very strong factors of real value. Humans have invented another factor of value though. The phrase, "It is only worth what people are willing to pay," has been misconstrued to mean that the value of a thing is the highest price people are willing to pay for it.

The phrase, "It is only worth what people are willing to pay," was originally intended to convey the fact that an object which is appraised at a high value is only really worth that if you can find someone willing to pay that price for it. It was not intended to mean that it is ethical to charge any amount of money for an object, if someone is willing to pay that much. In fact, the US has anti-extortion laws to prevent businesses from taking advantage of shortages of goods needed for survival by raising prices (laws which have not been enforced during the last few disasters of sorts that those laws were created to cover).

I find that the most ethical method of determining value of goods for sale is to base the price on the cost of production. If a device costs $50 in parts and labor to produce, then that device should not be priced at $1,000. If it is, then it is extortion and theft. Of course, if the production of that device requires expensive equipment, then the cost of the device should reflect that, but it is still not ethical to make the first 100 customers pay for the manufacturing equipment and then keep the excessive profits from future sales.

There are many industries that abuse capitalism in ways that rip off the customer. Companies that produce electronic media are a major contender for the least ethical business practices. Electronic media is especially easy to do this with, because it only has to be produced once and then unlimited numbers of copies can be made at almost no additional cost. A music artist may spend 320 hours (2 months at 40 hours a week) composing a new album. The artist might then spend 20 hours recording all the tracks. Several people (3 maybe) at the studio will also be working to record the album and they might then spend 20 hours editing the tracks and mastering the first copy of the album. The record label might spend 100 hours working on advertising and pay some radio stations or TV stations for advertising time. The label will then copy the master onto thousands or millions of CDs. After this, people or stores will order the CDs, but they will pay shipping and handling, so the label does not have to worry about that. If each person involved gets paid $50 an hour (which I doubt), then the total labor costs through creating the master comes out to $25,000. The cost of the actual CDs (let's say 500,000) probably comes out to less than $50,000 (10 cents a piece is probably a high estimate). If each CD sells for $15 and the record label gets $10 from each, that comes out to $5 million. Presuming $500,000 in advertising costs, the company spent $575,000 on the entire thing and just made nearly 10 times that back. That is 1,000% return. That is absurd, especially given that the stores only made a 50% profit. Worse though, if the CD sells well, then the record company can quickly make another 500,000 copies for less than $50,000 and make another $5 million, at a 10,000% rate of return. Right, some money goes to royalties, but the pathetic rate of royalties for nearly any form of media is negligible (ever wondered why many musical artists keep going on tour, even when they have repeatedly stated how much they hate it). Why do we let the companies keep charging us for a product when society has already paid back several times what it cost to produce? This is extortion. Continuing to charge for a product that has already been paid for is theft.

It is not just media companies that do this though. Whenever new technology comes out, prices start very high. They generally slowly drop over time, but not at the rate they should. I understand that the cost of research and development has to be paid. This does not bother me. Once it is paid off though, quit charging us for it. New computer technology can take years to perfect. A lot of money goes into research. When it is finally ready, the prices are necessarily high. Most technology research is paid off within the first year after release. Somehow, even though devices like laptops only cost $50 to $100 to manufacture, we are still being charged $1,000 or more five or ten years later. When I found out about the low cost of manufacturing laptop computers, the technology was 5 years old. Now, 3 or 4 years later, the prices are finally dropping to more reasonable rates (though, $200 from $50 is still 400% return). The funny thing though is that they are not even using the old, cheaper technology. The new laptops are using new technology, which leads me to believe that $50 a piece was a high estimate and that modern laptops cost more like $25 (or less) to make, which means the return on a $200 laptop is 800%, which is still extortion.

Most of the world may disagree with me, but I am here to say: Charging the highest prices people are willing to pay is not ethical. Cheating people because they don't know better or because they are desperate is wrong. The value of merchandise should be based on how much it cost to produce, not on some math that maximizes profits but puts it out of the budget of people who really need it. What happens to those people that need food, but the math excludes their budget? Ever wonder why so many people need welfare just so they can afford to eat? Charging more than the poor can afford for food just to get a few extra dollars is evil and wrong. People are going hungry in the US because businesses have convinced us that it is ethical to rip off anyone who can afford to pay. It is not ethical to base prices on what people can afford. This is what is destroying our economy.

Lord Rybec

Class Warfare

Mitt Romney made a statement essentially accusing the Occupy Wall Street movement of inciting class warfare. I find this interesting, given the fact that one basis of our original government was that it was a classless system. How then, if our government is supposed to be a classless system, can Romney claim that any political movement within the US could be inciting class warfare?

This actually brings up a much deeper problem within our society and government. The very existence of social classes within our society is in opposition to the basic precepts of the US Constitution. If anything can incite class warfare in the US, then our system is deeply flawed. The problem is not that anyone or anything is inciting class warfare, but the fact that class warfare is even possible. Instead of attacking those "inciting class warfare," we need to be questioning the existence of social classes in our society in the first place. If we were living in a truly classless system, class warfare would not even be possible. Occupy Wall Street is justified, by the entire concept of the US government, in inciting class warfare against any social class that believes that they are above another (or that even sees themselves as a separate social class). The upper class should not exist. The lower class should also not exist. How then is it that distinct social classes have come to exist within our society?

Our founding fathers left Europe for two reasons: first, to gain religious freedom, and second, to escape the oppressive class system that allowed the upper aristocratic classes to lord over the the less fortunate. They created a government system designed to allow each person an equal chance in life. They swore off the social and financial class systems of the European nations and designed the new government system to not tolerate classes. However, as our society has evolved, our government has not. The old system worked fairly well for the technology and knowledge of that day. Now though, we have much more complex economical systems that are not sufficiently covered by the old system. In the old system there have been found many loopholes that have allowed social classes to reappear. We now have the ability and power, which was not had in the past, to fix this problem. Unfortunately, our current government does not have the ethics of our founding fathers. Our founding fathers actually cared about the people they governed. Our current government does not.

We need a government that will eliminate social classes. We need a government that will listen to the people and do the will of the people, not the will of the companies or the will of the 1% of the population that is rich. Many people in Europe immigrated to the US to escape oppressive social classes. We do not have the luxury of a place to run to, to escape oppression. We have been backed up against a wall by an oppressive government that is allowing itself to be controlled by an oppressive social class that should not even be allowed to exist. The peaceful protests of Occupy Wall Street should be taken by our government as the warning hiss of a cornered wild cat. Guess what will come next?

Occupy Wall Street

It is time for me to discuss a number of political ideas that I have had that could solve many of the current problems with the economy and the distribution of wealth issues that plague our nation and much of the world. First though I would like to discuss the Occupy Wall Street movement and the obvious implications of not fixing these problems.

Occupy Wall Street is the child of oppression. Much like the communist revolutions in Russia, Vietnam, Korea, and China, this movement is a response to the continued oppression of the poor and middle classes by the rich. As with the communist movement, I believe that if these problems are not fixed in a timely manner, this will end in a bloody revolution and the utter destruction of the US government. Thomas Jefferson once said that he believed that every government needs a good revolution at least every 200 years. The US government has gone far over that, and really has not done too badly. If the US government wants to survive though, it must bend to the will of the people that it was designed to serve. The American people have a strong sense of entitlement (which I do not necessarily agree with, but which exists nonetheless). This sense of entitlement is evolving into the sense of freedom that our founding fathers had and people are beginning to realize that the people of the US are no longer a truly free people. As the Occupy Wall Street movement points out, 99% of the US population are enslaved to 1%.

We may not see this as slavery, because we have the freedom to quit our jobs whenever we want. No one is applying physical force to cause us to provide them with labor. Further, the labor that we provide is compensated. It is easy to miss the fact that we are indeed slaves. Maybe I can make it more obvious. The 1% of the population that are the slavers require that we work for them. They force us to do so by taking away opportunities for us to work for ourselves. Small businesses have an extremely high failure rate. Obviously, some of the problem is that not everyone has the skills to effectively run a small business. However, a larger part is that small businesses have to pay full taxes, while large businesses get many tax cuts. Also, the monopolistic practices of large businesses make it impossible for small businesses to be profitable in a vast majority of markets. Occasionally slaves do escape, but often only to join the 1% that are enslaving the rest of us. Furthermore, the black slaves of the South were also compensated for their work. They were given room and board. Likewise, most modern jobs provide only enough pay for room and board, and many do not even provide that. A majority of Americans are literally being paid like slaves were in the South and a good portion of those are getting paid less than that. Evidence of this is that so many people have to rely on the welfare system to survive. Like slaves, most Americans are being forced to work for wages that are far less than fair.

The people of the US have finally begun to protest against the slavers and against the corrupt government that is supporting the slavers. Occupy Wall Street is the organized embodiment of a literal slave uprising. It is growing at an ever increasing rate as the slaves are recognizing the truth it is preaching. Thankfully, unlike historical slave or peasant uprisings, the people of Occupy Wall Street have chosen to begin the uprising in a civilized manner, with peaceful protests. Now it is the government's turn to act. It can either decide to eliminate corruption from within its ranks and reform our entire economical system, or it can do what it has become accustomed to and take bribes in return for keeping the slavers on top. This time though, that could be a fatal mistake. If peaceful revolution fails, our government will eventually be destroyed.

Occupy Wall Street has been criticized for choosing not to make any formal demands. Attacks have been made claiming that the movement must be disorganized and without focus. I agree with the assessment that an organized protest does not need to make specific demands. Occupy Wall Street is demanding reform that will correct a number of problems, problems which they have stated loudly and clearly. They are not required to provide the solutions; that is the job of the government. Frankly, most of the people of the Occupy Wall Street movement are not qualified to suggest solutions and they obviously realize this. Given this I find great wisdom in their choice to not make demands. The goal of the movement is not to correct problems. The goal of the movement is to identify problems and then demand that those problems be corrected by those with the responsibility to protect the 99% of the population that they have been neglecting.

We need an economy that allows us to escape slavery without becoming the slavers. We do not want wealth at the expense of everyone else and we do not want others to be wealthy at our expense. We have a government that we have hired through elections to protect us. It is their responsibility to provide us that. Instead of criticizing Occupy Wall Street for not offering solutions, our government needs to step up and earn their pay. It is their responsibility to enforce fairness, not that of a group of regular citizens that have no training in policy making. It is our job to tell our government what we want. It is their moral obligation to figure out how to do it. All we want is an honest government and our fair share of what we have worked so hard to create. Occupy Wall Street is not making demands because it is only asking for honesty and fairness. If the people of a nation must demand honesty and fairness from their government, it is time for that government to be overthrown and replaced.

Occupy Wall Street is an uprising of the oppressed peasant and slave classes that have been oppressed since the middle of the last century (and some would even argue much earlier). This is the US equivalent of the communist revolutions that spread across the Eastern Hemisphere at the beginning of the last century. If our government ignores this movement, we could end up in the same situation as many communist countries did, when their governments were overthrown and replaced with governments that eventually became tyrannical dictatorships. I support the Occupy Wall Street movement and I hope that our government has sense to act before it is too late.

Lord Rybec

An Allegory About a Villiage

There was once a small village. In this village lived an older man. He was in the business of producing a useful product for people in the village. Three of the older boys in the village worked for him, building this useful product. When he began, this product had never been dreamed of before, but now it was integral to life in this village and also in nearby villages, some of whom had similar businesses producing this product.

In the past, the man had not treated the boys fairly. He had required them to work long hours without breaks. He kept most of the profits of the business for himself, paying only enough to keep the boys from quitting.

One day, many years ago, the three boys realized that they were not being treated fairly, and demanded higher wages. The man was forced to comply with their demands, because he could not keep up with demand by himself and he was also getting old and was not able to work as fast, or efficiently as the three boys.

One year, there was a drought. The people in the village started being more careful with their resources. The man discovered that his business was doing poorly. To further complicate matters, some of the nearby villages were offering the product to people in the village. Their product was higher quality, because they were careful to treat their workers well, giving them regular breaks and shorter hours, so that they would not be tired when they worked. Their products cost slightly more, but lasted longer and worked more efficiently. Most of the people in the village decided that they did not want the lower quality product and started buying the higher quality products from other villages.

The old man realized that his business was going to fail if something was not done. He had enough wealth to retire, but he liked being able to buy anything he wanted whenever he wanted. He did not want to have to sell all of the fancy decorations, furniture, and clothing he had accumulated and he especially did not want to have to give up his giant hut. Of course, there were also the three boys he employed. He did not care about them much, but he did realize that they would probably starve if they lost their jobs, or worse, they might try to get the village elders to seize his production facilities and give them to them, when he was unable to pay their wages.

He cooked up a plan. He went to the village elders and plead his case. He told them the sad story of the three boys who relied on him for employment and for their very survival. He explained his current situation and how the drought had caused the people to quit buying his product. He closed by asking the village elders for assistance to help him keep his business operating.

The elders debated. One wanted to just let the man's business die. He explained that the man had done a poor job of running the business and that allowing the business to fail would help improve the economical situation because it would reduce waste and it would encourage others to run their businesses more carefully, if they knew that they were on their own. Another disagreed, pointing out that this man's business was an important source of revenue for the village. A third said he agreed with the first, but that he could not support such a plan because it would harm the three workers employed by the business.

The three each argued their point and then finally it was put to a vote. The final conclusion was that the village elders would provide some resources to help this man's business, not because they cared about the man, but because it was an important source of revenue for the village and because they did not want to see the three workers starve.

The next morning the village elders went to the hut of each villager. From each villager, they selected a few goods which they took. When they had taken some goods from each villager, they brought all of the collected resources to the man and gave them to him, to help prevent his business from failing. The village elders when home, happy that they had been able to help the village and the three boys.

The man brought the goods home. He used some of them to trade for more supplies for producing his goods, he used some to pay the wages he owed the three boys and the rest he kept for himself.


Analysis:

This is a story where the bad guy wins. This man runs his business poorly and treats his employees unfairly. As a result of producing low quality products and the consequences of treating his employees poorly (they unionized), he is put in a position where minor economical problems result in his loosing business and having more expenses than revenue. When the villagers decide that they no longer want to support his business, he goes to the local government for help (in this case, the local government is analogous to the national government, as they are the only governing body over the village). Their solution is to take resources from the people and give them to the man's business. In other words, when the people choose to stop supporting the man's business, the government forced them to support it, by taxing them and giving the man their money anyway. The big difference being that if the villagers had voluntarily supported the man's business, they would have gotten something in return for their money.

If you have not figured it out yet, this allegory parallels our own country's government bailouts. When we chose not to support some businesses in our country, our government stepped in and forced us to support them by taking our tax money and giving it to them. And, worst of all, we did not get anything in return for our money. This is nothing short of legalized theft. When we chose not to spend our money (or invest our money) with specific companies, the government forcibly took our money and gave it to them anyway, with no strings attached.

Right, there were a lot of people who's jobs were at stake. Besides the fact that we obviously did not need the product they produced, which made their jobs pointless (if you read my last allegory, think, digging holes), there were several better solutions to this problem. My personal favorite was that the government should have evenly disbursed the money with tax returns and told the people to stock up on food and other necessities, then just let those companies crash. In the long run, the recovery would have resulted in a much stronger economy that would be more likely to avoid the things that caused the problem in the first place. Another solution would have been for the government to allow the companies to go bankrupt, then appease the unpaid workers by awarding them full ownership and control of the company and all of its facilities.

While the first solution is my favorite, the second solution is probably better. It would leave those who caused the problem out in the cold, where they deserved to be anyway, as a consequence of their greed and incompetence. It would also give the innocent employees a way to continue getting their paychecks and would give them much bigger paychecks since their hard work would no longer have to support the extravagant lifestyles of those freeloading bums that caused the problem in the first place. It would also likely have resulted in higher quality work, and lower prices, which would have allowed US companies to compete with foreign imports.

I don't think it was intentional, but our government's decision to use our hard earned money to support companies that we had already chosen not to support helped the bad guys to win in this particular situation. It is our responsibility to regulate our government through our decisions on who we vote for. Obviously we have failed and have instead elected people who are willing to steal our money to support causes that we have already chosen not to support. Now the question is: Are we going to vote for this same den of incompetent thieves again?

Lord Rybec

An Allegory About a Family

There is a family of five. There is a father, a mother, and three children. In order to make sure that everyone is pulling their own weight, the parents decided to set up a chore system. Each child must earn each meal, a small allowance, and a place to live and sleep by doing some amount of household work. The parents decided that each meal costs an hour of work, allowance costs an hour, and living space costs two hours. So, for three meals a day, a few dollars a week allowance, and a bedroom and bed to live and sleep in, each child was required to work for six hours each day (maybe they were allowed to take weekends off without penalties). Any child could take time off, but they would have to sacrifice meals or allowance, and if they skipped enough work, they would even have to leave home and find another place to live.

When they started this plan, it was easy to come up with enough work for their three children. One did laundry by hand, for several hours a week. Another mowed the lawn with a mechanical push mower for several hours a week. The third spent a few hours a day cooking meals. They all spent a few hours a week cleaning the various rooms in the house. The entire family lived fairly well. Each child earned their three meals a day, their weekly allowance, and their living quarters.

One day, the father came home with a new invention. He had a gas powered lawn mower. The child that mowed the lawn discovered that the gas mower could mow the entire lawn in 30 minutes, instead of the 2 hours that were required for the mechanical push mower. Fortunately, there was always more work to be done and the hour and 30 minutes that were saved were instead spent doing other work.

Sometime later, the father came home with an electric washer and dryer. The child that did the laundry suddenly found that a task that used to take most of a day only took a few minutes here and there, leaving 5 hours of time to fill. With a little work, he found other jobs to take up this extra time.

Next came a microwave oven and microwave dinners, which left the third child with a few hours a day to make up. The same day, the father also brought home a vacuum cleaner, which cut several hours a week off of all the children's work. There was barely any work left to fill the extra time. The child who had been cooking meals found that he could only manage an hour of work a day with what was left. The other two children still had enough work for 3 meals a day and for living quarters, but not enough for any allowance. When the third child went to his parents begging for more work, they told him that there was not more work left to do. His two siblings told him that he was not looking hard enough for more work and told him he was lazy.

The parents discussed several solutions. First, they discussed dividing the work evenly amongst the children, but did the math and found that dividing the 11 hours of work 3 ways came out to 3 and 2/3 hours, which was only enough for each child to have living quarters and a single meal a day, with a second meal every now and then. This was discarded, since it would leave all 3 children malnourished and the current situation was bad for only 1 child. They considered just giving the third child food and shelter anyway, but found it unfair that he should be allowed to break the rules while the other two children had to work hard for their food and shelter, though they did decide to give him a little bit of food, so that he would not starve.

Eventually they found a solution that was not unfair to anyone and still provided the work that the third child needed to survive. They bought a shovel and assigned the child to dig holes on the land they owned just past the edge of the back yard. He was assigned to spend 7 hours a day digging holes, since he was already spending an hour a day making meals. No one needed the holes to be there and nobody benefited from their creation. The entire purpose of the work was to give the third child a way to fairly earn his food, shelter, and allowance.

Analysis:

Ok, if you had not yet guessed (and not read the title), this is an allegory. The parents are those in authority and power, including the government and large businesses. Of course, in real life the work that the "children" are doing directly benefits the "parents". Specifically, the parents tell the children what work to do and how to do it, and then keep a majority of the proceeds for themselves, giving the children only enough to survive and a little bit extra to prevent rebellion.

When the parents in this story obtain technology that reduces the work required for the same amount (or better) of production, instead of allowing the reduced costs of production to benefit the children, they require the children to do other work and keep all the increase for themselves, much like modern businesses.

When the work available is not enough to support all of the workers at the going rates for labor, the businesses blame those that do not have enough work and encourage other workers to believe that they are lazy, regardless of effort spent trying to find work.

When the government steps in to help those that are suffering due to lack of work, they are attacked because it is not fair that people who are not working are getting food and shelter. In short, many people believe that those who are unable to find work due to a lack of available work are the ones at fault and should starve out on the streets.

The current solution is to invent new work to employ some part of those that cannot find work. Much like the child that was given work digging holes, much of this work is pointless labor that accomplishes little or nothing. Further, much like the boy digging holes, some of this contrived work damages the environment and saps resources that we may need in the future.

The best solution the parents in the story had was to divide the work evenly amongst the children. Now, many people may find this to be a poor choice as it would spread resources too thin and none of the children would be able to survive. This is not true. Our economy, even when is was failing recently, is producing far more than is needed for our entire country. It is producing more than is needed for our country and all of our exports. If the analogy is accurate, the parents in the story had more than enough resources to feed, house, and pay their children, even if they were each only doing 3 and 2/3 hours of work a day (note that the children were accomplishing the same volume of work during the 11 hours total that they had previously done over the course of 18 hours; the parents were benefiting no less, even though the number of hours spent working was nearly halved). The reason that they did not split the work evenly is that they did not want to change the rules and they did not want to pay more for labor than they had originally decided on. In short, they liked living like kings at the expense of their children and were unwilling to give up any part of their own obscene salaries, even if it meant that one child was going to starve.

Over the last two centuries, we have advanced technologically by leaps and bounds. Work that used to require hundreds or thousands of people can now be done with only two or three people making sure the machines are working properly. You might argue that the machines have upkeep costs and initial costs that are fairly high, but keep in mind the businesses would not be using them if they cost as much or more than the human labor they replace. Machines that cost thousands of dollars over their lifetimes generally save millions of dollars in the wages of the people they replace. Somehow, in the last two centuries, businesses are making enormous amounts more money, while individuals are only making slightly higher wages (dollar amounts may be significantly higher, but measured by the value of the money, people now are making only barely more than people 100 years ago, and many are making less).

The point of this is that our society would not tolerate a family that was run like this. The parents would be subject to legal action for neglect and for exploitation of children. The workers in this country may be mostly adults, but we are being exploited just like the children in the story. Our government is playing the part of the good guy that makes sure everyone has enough to survive, but just like the bad parent, they are benefiting from our exploitation as well, and are not willing to make sure that we are treated fairly if it means that have to give that up.

I suggest that the best course of action would be first, to set a wage/salary cap. This would cap the hourly wage, as well as the yearly salary, of anyone working as an employee of a company. This includes board members and executive officers. If an owner of a company is taking a wage or salary, it would apply to that wage or salary equally. I further suggest that mandatory overtime pay begin at 20 hours per week (and 6 hours per day), instead of the current 40 and 8. This should not apply on a per job basis, but on a total hours worked. If a person has more than one job, the two jobs should split the overtime pay based on the percentage of time spent at each job. These requirements should be strictly enforced and heavily fined for infractions.

The intent of this plan is to discourage people from working multiple jobs (and discourage employers from hiring people already working another job), and to discourage employers from scheduling employees more than 20 hours in a week. This would double the number of full time jobs available and further increase jobs available as fewer people work multiple jobs. This is essentially forcing work to be split up more evenly. Employers would be forced to raise wages and/or lower prices, since 20 hours a week is not currently enough hours to survive on (and if they choose not to increase wages, they will loose employees or end up dealing with very large unions). The first step, capping wages and salaries, would help facilitate increasing wages and/or lower prices, since a lot of money will be saved by decreasing the wages of board members and officers of large businesses. The large companies are making enough to pay all of their employees fairly and still have plenty for upkeep and expansion. The problem is first, the extremely uneven distribution of wages and second, to rapid of expansion and development.

It is absurd to me that we are producing far more than we need and still we expect those that cannot find work to work for a living. I thought that the objective of technology and advancement was to reduce the amount of work required for people to survive. The information age would never have existed if we had not gotten to a point where we can produce enough for everyone, without needing everyone to work. The Renaissance would never have happened if the Greeks had not had slaves that were able to produce enough goods for the entire civilization, allowing everyone else time to theorize and philosophize, and now we have the ability to do this without slaves and yet somehow we are stuck expecting half of our population to find work that does not exist. We need to take advantage of this unique situation. I think the best way to do that is to reduce the work week by half, and encourage the populace to use the extra time doing things that are productive, like learning new things, experimenting and helping advance technology, and generally working to further improve our quality of life.

At the rate we are going, we are going to entirely replace the workforce with machines, produce extreme surplus, and everyone is still going to starve because we don't think it is fair that they should get any of those goods without doing their 40 hours a week.

Lord Rybec

What does that yacht represent?

If you asked your average CEO this question, in reference to a boat that he owns, he would probably tell you that it represents years of hard work. He would be right, but there is one thing he would not tell you (and probably does not even admit to himself).

That yacht represents years of hard work, but not his hard work. Yes, his work is represented in it, but only a very small portion of it actually represents his work. In reality, that yacht represents the hard work of thousands, tens of thousands, or hundreds of thousands of minimum wage grunt workers (ok, maybe a bit above minimum wage, but not by much). Furthermore, the money that paid for it actually was probably earned in weeks or months, though the hours added together probably do add up to years.

If you do not see what I am getting, what I am saying is that the money that paid for that yacht was money fairly earned by bottom level employees, that was given to the CEO, instead of the employees that earned it. Now, I am not saying that every bit of profit generated should only go to the person directly responsible, but rather that each lower employee is being robbed a few dollars an hour, so that the CEO and upper management can have more money than they will ever need.

You might disagree with this (please shut up about it if you are in the upper management category, since you have a vested interest in opposing my position), so I am going to give you my reasoning.

Normal bottom tier employees in the US get paid $10 an hour or less. Now, assuming that this is the actual value of their labor, what do you think fair hourly wages would be for someone with a masters degree or PhD would be? Additional education does increase the value of one's work, so obviously, they should get paid more. In addition, they had to pay for this education (actually, in the US, most students are only paying for part of their education, while the government covers the rest), so the cost of time and money spent to gain the education have value. I submit that if the inherent value of education makes it worth paying for, then once you have graduated, the entire cost of your education has been compensated by the increase in value of your work. In other words, you can either claim added value for the education, or for the cost of the education, but not both.

Work experience also generally increases value of work (generally, but definitely not always). So, a person with an equivalent degree to a PhD, with twenty or thirty years of work experience obviously is capable of more valuable work than someone without, again, in most cases.

So, back to the question: How much more is this person's work worth? I think that 10 time is probably a bit low. It is probably fairly reasonable for someone with a masters degree or maybe 25+ years experience, but I would buy that it is a bit low for a PhD with decades of experience. How about 100 times? Is it really possible that one persons work can be worth 100 times that of another person? It probably is possible. In engineering, it is not uncommon for one engineer to be 100 times more productive than another. In business, though, does 100 times seem reasonable? Note that we are considering value of work and productivity, not the actual money generated from that work (businesses do this all the time, when they choose to pay their lowest employees, who make up a majority of the workers, orders of magnitude less than the relatively small number of upper management). I think it is safe to say that 1000 times seems a bit absurd. Even in the above mentioned engineering example, generally a small group of 5 or 6 engineers can get similar productivity as a single 100 times engineer (this may not make mathematical sense right off, note that I am not adding the individual work of 5 or 6 people, rather I am accounting for the fact that generally groups working together can accomplish far more than each person working individually, especially in engineering). So, if 5 or 6 people can do the same work as the one, it cannot be considered reasonable that someone should be paid 1000 times that of the lowest workers. (Another thing to take into account is that complex executive style decisions can usually be made better by large groups of entirely uneducated people than one highly educated person. So, if 100 grunts can make group decisions better than one executive, the value of the work of the executive cannot reasonably be considered more than 100 times the value of a single grunt, even if his decisions generate far more profit than that.)

So, by this reasoning we have established that it is very likely that the work of a CEO cannot be worth more than 100 times the work of a single grunt employee. Now let's assume the grunt employee is getting paid $10 an hour. This means that the highest reasonable hourly wage for a CEO is $1,000 an hour (and even then, this value seems absurdly high). We are going to select a grunt that works 40 hours a week, with no vacation or sick time to determine yearly wages. With 52 weeks in a year, that makes his yearly pay $20,800. Now, I'll give the CEO the benefit of the doubt. Let's assume that it is fair to say that he works around the clock, every hour of every year. At $1,000 an hour, 24 hours a day, and 365 day a year, he would make $8.76 million a year. Ok, so most CEOs actually make less than this. Some make more and some, a lot more. Now, since we know that CEOs need to eat and sleep like the rest of us, let's see what happens when we make this more reasonable by assuming they work 16 hours a day (it is probably much closer to 12 or 14, if even that). Let's also give them 4 weeks (28 days for the math) of vacation time (time not spent working is non-productive and thus cannot be considered into fair pay). That gives us $5.392 million. A lot of CEOs do make more than that, though not by a whole lot.

Ok, so the grunt makes $20,800 a year, without vacations, while the CEO makes $5.392 million a year with. Even after the above reasoning, this seems pretty absurd. The CEO is getting paid over 259 times more. Yes, he works more hours, but does is really seem fair to pay him that much more for less than twice as many hours and several years of education?

Now, other things to keep in mind are cost of living. Everyone has this. If we assume that the grunt is renting an small apartment for $500 a month (from my experience, this seems to be a fair guess at a national average for reasonably habitable 1 bedroom apartments), then we can subtract $6,000 a year. If he pays $100 a month for food (this guy never eats out, always buys in bulk and rarely or never buys prepared food), that is another $1,200 a year. We will just assume that he never has doctor bills, utility bills, walks everywhere (no gas or insurance costs), and does not need things like toilet paper or deodorant. This means that he is getting $13,660 a year in spending money. The CEO, is getting $5.385 million in spending money. Yes, I know, he has a bigger house, a car, a yacht, etc... to maintain. These things are luxuries. He has them, because of the spending money. All he really needs to get by is the same things the grunt needs.

Ok, so now for the point. If the grunt is getting $13,660 spending money and the CEO is getting $5.385 million spending money, the CEO is getting 394 times the spending money that the grunt is. Now, in real life, the grunt is probably paying well over $12,000 a month for cost of living, and is bringing home less than $8,800 a year. The CEO is bringing home more like 611 times the spending money of the grunt, but even 394 times the spending money seems pretty absurd.

So, where is this money coming from? Don't tell me it comes from the corporation. The corporation does not make money, they just do business to earn money from people who are willing to pay for their products. You might tell me that the money comes from the customers and you would even be half right. If you follow the actual cash flow, the money does seem to come from the customers. It also comes from the employees, at least, in any instance where the employees are not being paid fairly.

Again, my reason is as follows. Let's take a company that starts out charging fair prices and paying fair wages. This company is essentially neutral. It does not unfairly take money out of the economy or withhold money from parts of the economy that has fairly earned it. Now, let's say this company raises its prices. It does not raise wages equivalently. It is now ripping off both its employees and its customers. By raising prices, it requires that others pay more for goods. When others have to pay more for goods, they will have to raise their own prices (that, or they will suffer unfairly). Eventually, everyone will have to raise prices, to compensate. If this company does not increase the wages of their employees, they are now paying their employees less than they were originally. Now, you might think that the employees are still getting paid the same and if you are counting pay only in dollars, you would be right. The catch is that the inflation caused by the increase in prices reduced the value of the money itself, thus if the people are getting paid the same amount of money, they are being paid less value for the same amount of work. In other words, the money that the company is overcharging is also the money that they are underpaying. When a company pays one person more than the value of their work, the company is helping that person steal money from their customers and their employees.

Now, let's take this one step further. Most CEOs also get many extra work benefits. To get a fair representation of how much they are actually making, you have to quantify the value of these benefits. Yes, the grunt is also getting benefits (he is working 40 hours a week, after all). Now, assuming the grunt can afford all of the benefits (most can't), the value of his benefits are still hundreds of time less than those of the CEO, if not thousands (this is not unusual, and that is just counting stock options). So, the CEO is making 200-500 times what the grunt is. Some of this is fair, but even if his work is only worth half of that, he is still overpaid by $2.69 million a year. He is stealing $2.69 million a year from the employees and customers of the business. That amount of theft is considered grand larceny. In the US, it is illegal for a poor person to commit this crime, but for a CEO no one even blinks.

Ever wondered why our economy is doing poorly? It is because the bottom resource is not even valued enough to pay for its own upkeep. Some products are fair to negotiate the lowest price for, but since labor costs actual man hours, if it is treated like one of these products, the economy will continue to flounder until it fails.

So, what does that yacht represent? It represents the theft of millions of dollars from those who can afford it the least. It represents the work of thousands or millions of other people, from whom the value was taken forceably and without consent. It represents the largest flaw in our legal system. Any other form of theft would be punished with severe consequences. This form, though, is rewarded with more riches than one person can ever spend.

Lord Rybec

Cutting Costs

You may have noticed that the U.S. economy is having major problems right now. You may also have noticed that most of our economy experts are at a loss as to why we are having these problems. You may also have noticed that the answer is obvious. Anyhow, that is not what this article is about. This article is about cutting costs in business and government, in an effort to survive the current economical problems.

Businesses and government should always be keeping an eye open for new ways of saving money. If this advice had been followed over the last two decades, we might not be having these problems with our economy. The problem is that most businesses only take advantage of the cost cutting techniques that hit them in the face. I would like to propose that businesses and government agencies should have small departments dedicated to research and development of cost management. If the right people were hired for the job far more money could be saved than it would take to fund the department. I have some suggestions on how this should be handled.

The first thing to consider with cost management is where money is being spent. Retailers probably already have someone who negotiates prices with wholesalers. The new department might be a good place for this person.

The next thing to consider is operating costs that don't result in direct income. Supplies like toilet paper, paper hand towels, cleaning supplies, receipt paper, and office supplies are among these. At my job, our store has changed the style of paper hand towels we put in the bathrooms three times. Each time the claim has been that the new method will save money. The funny thing is that we are now back to the ones we started with, but we had to replace the dispensers each time, so ultimately, even if each change saved money on towels, we incurred extra costs on the dispensers. If I was to make a guess, I would say that we are probably not the only store in the corporation that has done this and I would also guess that there are currently other stores using the less cost effective route. It may be that costs differ between regions because of shipping costs or other variables, but if we had a person calculating these costs, there is a very good potential that we could save enough to pay this person's salary, as well as save additional money. The person in this position would probably be in charge of bathroom supplies, cleaning supplies, and office supplies.

The next area is IT. Technology is an area where most businesses are either willing to spill money into it like a black hole, or they go as cheap as they possibly can. Neither of these are cost effective methods of running a business or government agency. Companies that go cheap on technology generally suffer for it (although, since they have never had sufficient technology to begin with, they usually do not even realize it). On the other hand, it is pretty obvious to most people that businesses that pour money into technology suffer from lack of funds elsewhere. Businesses and government agencies need technology workers who have an understanding of what the organization needs. The problem here is that many IT professionals do not want to cut costs; they want the business to have cutting edge technology. Now, there is nothing wrong with wanting the cutting edge for your home, but you do not need a gaming computer for running the business's accounting software.

What businesses need to look for is IT people who understand what the business needs and what it does not need. An important thing to look at when hiring an IT worker for this type of position is someone who has a good knowledge of all current technology. A good test for this is another article I wrote: Open Source Software in Business and Government If your candidate reads this article and is surprised to learn the things it discusses, they are definitely not the person for the job. The article outlines many ways an organization can save money on software licensing costs. The information therein is widely available for anyone with access to the internet. If your candidate has not been able to discover this information on their own, do not expect them to suddenly become good at finding other cost management information just because you hired them to do it. You may actually be better off finding someone without certifications or degrees, if they have the ability to find information like this. A good person for the job might be someone who has never bought a new computer in their life, but is able to do everything they need with the computers they have. These people have probably used their cost management abilities to obtain computers that are sufficient for thier needs at the lowest possible cost. This kind of candidate would be ideal for an IT cost management position.

The most expensive things most businesses buy are computers and software. Some businesses have managed to cut costs by using free software alternatives (see the article mentioned in the previous paragraph). One of these businesses is Lowe's. Lowe's uses the Linux operating system for their POS system, as well as most of their order management system. Even a small proprietary alternative would cost at least $50 per computer and Lowe's has at least 30 computers per store. That is a savings of at least $1,500 per store. For a large corporation, that does not seem like much, but if Lowe's has 200 stores (I believe it has more), that adds up to $300,000. Not only that, but eventually computers must be replaced and each replacement would cost another $50 for licensing costs for the software.

Since my other article covers software very well, we are going to discuss hardware. Businesses often discover that they can save money by making contracts for hardware, like computers. The problem with this is that frequently businesses and government agencies accept poor contracts because they believe that because it is a bulk contract, it must be a good deal, and no one wants to take the time (or has the knowledge) to shop around. Often this results in expensive long-term obligations. In additon, many companies that sell preconstructed computers use low quality products that will not last very long. Good warranties and service plans can circumvent some of the costs associated with these problems, but you should also consider downtime for broken hardware. This is an area where a good IT cost management employee is valuable. Many IT professionals might recommend that you sign a contract with a company like Dell, or Gateway. In some cases this might be cost efficient, but many times a good IT expert (with some cost management skill) can find a better deal than that and in addition, they may be able to arrange it without a long term contract that may become oppressive in the future. (Consider a contract that has you paying $1,200 each for a computer that was good 5 years ago, when you signed the contract.) This is not work that a normal IT graduate has been trained in, so businesses should take care when looking for people for this sort of position.

There are many ways businesses and government can save money, but lack of technical knowledge, lack of time, or just plain laziness often get in the way of this. If no one is willing or able to do this kind of work, businesses and government agencies should consider hiring people to do it. Even if your business is not struggling, it is a good idea to consider this, because someday it may make the difference between business as usual and going under. Most government agencies are already underfunded, so they have no excuse for failing to find ways of stretching our tax dollars. In some cases, businesses may not benefit from this sort of program, but since most businesses will benefit from it, it is worth the risk to invest in better cost management.

Lord Rybec

Economy Fix

I have become quite tired with all the stupid arguments over what will or will not fix the economy. In my personal opinion, our economy is so flawed that continuing to run it like we have been is impossible. Even government stimulus is only delaying the inevitable.

Stimulus is like an addiction; the only way to sustain the economy with stimulus is to continue to give it. Once it is being given, it will integrate itself into the economy so totally that removing it will result in a worse crash than not giving it in the first place. The problem is the way businesses are handling assets.

In the past the economy has worked fine without large amounts of consumer debt. If it can't do it now, there is a problem. The solution is not to throw money at the problem. That will only result in dependence. I have a better, albeit harder, solution.

The government is throwing enormous amounts of money at this problem. Part of it is in the current stimulus package and part of it is in public assistance programs (welfare). The government also has plenty of other programs that are costing large amounts of tax money.

Here is my solution:

Take all of that money; temporarily suspend some programs, reduce spending to minimal amounts on others, then divide all of that money among the populace. Send the checks out with pamphlets that tell people that the money should be used to stock up on food and other resources, for coming hard times. Then sit back and watch the economy crash. From the ashes a new, more resilient economy will arise.

Yes, there may be several years where it is very difficult to find food or other resources, but that's what the money was for. The pamphlets should have instructed people on what kinds of resources were available that would last that long. If people chose not to heed the warning, the fault, and consequences are their own.

Many large businesses will fail, but consider this: how long have you been complaining about those big businesses robbing us blind? Yes, it is true, many of them are. I think we will be better off without them! As far as I am concerned, while times may be hard during the recovery at least we would have the opportunity and means to secure resources to hold us over this way. The current policy will only help the businesses, while the rest of us starve.

Lord Rybec