Are Housing Prices Mostly Regulatory Costs?

 I've done research on housing costs, inflation, and regulation many times over the last decade or so.  See my previous article for background information that might be useful in the following.  Recently I claimed that over 70% of material costs for housing are due to building cost, and someone challenged this claim, asking for sources.

Now, I may have gotten ahead of myself, and I need to explain a few things.  First, I don't actually think the costs are directly due to building codes.  Rather, building codes require specific types of materials.  Many other viable options exist that are much cheaper, but building codes generally don't allow them to be used.  These include things like compressed wood products that are stronger, more fire resistant, and often even cheaper than the much more heavily regulated 2x4s, plywood, and drywall that are practically mandatory.  (In fact, compressed wood products are even more fire resistant than most steel studs, which will weaken and even melt with heat that would require many hours to get through compressed wood.)  Why aren't modern homes just built with poured concrete?  Because electrical code has requirements that don't make sense and thus cannot even be followed with poured concrete walls.  There's a reason we don't see extremely cheap 3D printed concrete houses flooding the market.  It's because building codes assume houses must all be build with hollow walls where plumbing and electrical can go, and the requirements making those assumptions cannot be satisfied with any other architecture, even if it is far more fire proof, earthquake resistant, water proof, and generally safer and technically superior in every way than "traditional" construction.

If you need evidence of the above, see this source on legal problems with 3D printed construction.  If you need more, you can also look up legal problems with very low cost tiny homes and with cantilever homes.  Building codes also get in the way of underground construction, which can be much cheaper in some areas than traditional construction (and which can significantly reduce heating and cooling costs).

So, the point here is that building codes restrict what construction materials builders are allowed to use.  This is where regulatory costs of these "legal" construction materials becomes a building code cost.  I don't have the time or energy to find sources on every construction material used in modern home construction, but I can give you one very solid one: Wood.  Here is a 2018 article about the impact of tariffs (a form of regulation) on home construction costs.  It is estimated in the article that this increased home construction costs by an average of $9,000 (and apartment construction by $3,000 per apartment).  That's on the low end of regulatory cost increases, likely running around 0.25% to 0.33%.  And keep in mind that this is just one regulation increasing the price of wood.  EPA regulations on logging and on energy (used for milling and kilning the lumber) likely add significantly more than that.  That article also estimates that regulatory costs make up 32% of multifamily developments (mainly apartment complexes).

I also have some personal knowledge of concrete production processes, and one the steps is heating limestone to high temperatures and maintaining those temperatures for several hours.  This causes the calcium carbonate to release its carbon component in the form of carbon dioxide.  EPA regulation over the last ~10 years or so has hit the concrete industry hard both with regulations increasing energy costs and with CO2 emissions regulations, making concrete foundations (also legally required by most building codes) significantly more expensive.

A more recent article explores how lumber price volatility, caused in part by concerns about regulatory changes and the impact of U.S. Treasury interest regulation, has caused significant increases in home construction costs.  This article estimates that regulations on construction materials increases home construction costs by 14.94%.  I don't have data on what percentage of home construction costs goes to materials, but labor is generally the bulk of the costs, so the regulatory costs included in material costs are almost certainly well over 30% and it's certainly conceivable that they are as high as 70%.  (Also, thus far I've not seen a study that takes all regulatory costs into account, including trickle down costs like transportation, EPA energy regulation costs, and such.  So that 14.94% likely only includes direct regulatory costs at the last step before the materials are bought by the construction company, which is only a small portion of total regulatory costs.)

This paper explores the regulatory costs of construction during development and construction (which doesn't even include the regulatory costs that went into the gathering, fabrication, and transportation of materials), and it estimates a total regulatory cost during those stages of 23.8% for single family homes. 

This article discusses the study and includes some nice breakdowns of data from the paper.  It also includes some additional data about regulatory price increases of lumber (mainly tariffs and market volatility caused by unpredictable economic regulatory changes) and lists a number of other materials impacted.  It also mentions delivery delays caused by pandemic regulations, which also contribute to cost increases significantly.

On top of all of this, I did construction work off and on in my late teens and early 20s, and I learned about additional impacts of regulations that don't typically get counted in estimates.  On one construction site I worked on, a team of plumbers spent their entire work shift sitting around doing nothing, because the electrical union had convinced the state government to add to building code a restriction on who can even touch electrical equipment.  Some electrical equipment, I forget what but something like a breaker box or some such, had been left too close to a sewer line or water line, such that the plumbers couldn't do the work they were supposed to do, and they couldn't legally move it.  The electrical workers weren't scheduled to come in until the next day, but the plumbers couldn't just take the day off, because they had families to feed, so the construction company paid for a day worth of labor from some 3 or 4 plumbers for nothing.  And it actually ended up costing a bit more than that, because the plumbers weren't scheduled for the next day, and they had to get their job done before insulating (what I did) and drywalling could be completed.  Delays caused by regulations don't just cost time, they also cost the wages of people scheduled to work who can't because of the delay, because people still need to make a living, whether everything is ready for them to work or not.

Anyhow, I don't have the time or energy to go step-by-step through the supply line working out the exact percent of the cost that comes from regulations.  I've provided plenty of sources showing that individual steps can end up costing at least 30% each in regulatory costs for the end product of those steps, and there are many more steps than just one for any kind of construction material.  Just 30% per step hits 69% in a mere two steps.  (This is a compounding increase, not an additive one, so the math is 1.30^2, which gives 1.69 or an increase of 69%.)  The truth is, I was really hedging when I said 70%.  It's probably closer to 80% or 90%, and that's just material costs.  When you include labor regulations, direct costs of build codes, licensing, and all of the other stuff, the total cost of a home is probably no less than 60% to 70% regulation, likely at least 80%, and if the math on regulatory compounding in my last article is right, it may be as high as 90% or possibly even higher.

The fact is, a significant majority of the cost of houses today is regulatory costs.  Even before loan costs and bank fees, you are mostly paying for the regulation.  You are paying for contractors to use more expensive, inferior materials.  You are paying for vehicle safety regulations that provide only marginal safety benefits.  You are paying for emissions and energy restrictions intended to solve problems that haven't even been proven to be real problems.  You are paying for plumbers to sit on their butts all day, so that the electricians can feel more secure demanding excessive pay for their labor.  And after all of that, the little bit of money remaining is what is actually paying for your house and the legitimate labor that went into its construction.

How Regulatory Costs Can Compound to Suffocate an Economy

 Around a decade ago, I wrote a college English paper on the topic of inflation.  I went into my research with the assumption that inflation is primarily caused by greedy businesses raising prices faster than wages, and at the time I though my research supported this assumption.  I was wrong, but I did not realize this until several years later, when I was discussing my research with a friend over email, and he asked me some questions I had not considered.  When I did the math, it proved my original assumption wrong.

For the paper, I looked at inflation over the 50 year period from 1960 to 2010.  Now I don't recall all of the exact details, and I don't have the time or energy to search my archives for the original paper, but a few figures were hard to forget.  Average inflation from 1960 to 2010 was 659%.  That means that prices increased by 6.59 times over those 50 years.  Housing prices increased by somewhere in the neighborhood of 1,000% (a little more, I think), and car prices increased by somewhere in the neighborhood of 800% to 900%.  That's 10 times and 8-9 times.

I did some math on these figures, and they seemed to match up with some claims by others that greed driven inflation caused prices to increase, and businesses just deliberately lagged on wages, so that they would come out ahead.  I don't recall the exact value, but wages during that time period increased by significantly less.  A smoking gun?  I thought so.  Now, I did find some evidence that some of the inflation was caused by government regulation, so in the paper I accused businesses of taking advantage of regulation to justify bigger price increases than the actual cost of the regulation.  Again, the numbers seemed to support my claims.  I'm pretty sure I got an A on the paper.  It was a little controversial, but the professor graded based on my English writing skills and not the subject matter or opinions.

As mentioned above, several years later I was discussing this with a friend over email.  He wondered exactly how much role the government regulation played.  We both agreed that government regulation couldn't have contributed much, probably not more than a few percent.  At the same time, he wanted to know why houses and cars had inflation so much more than the average, and the obvious answer was regulatory costs.  During that time period, building codes grew quite substantially, and regulations around selling and buying homes grew a lot as well.  Similarly, this was the time period where all of the safety and emissions regulations for cars were put in place.  But could regulation alone really explain such a huge difference?

So I did the math.  Say regulatory costs increase prices for something by an average of 2% per year.  Over the course of 50 years, that's a 269% cost increase for producing that thing!  2% doesn't seem like much, but when you compound it over time, it adds up fast.  Of course, we don't have new building codes or car manufacturing regulations coming out every year, so this surely can't explain all of the difference.  This is true, but the 2% is an average.  Emissions requirements for new vehicles increased prices by far more than a measly 2%.  Each new safety regulation added significantly more than 2% to the price of new cars.  Periodic large regulatory cost increases can increase prices at least as fast as constant small ones.  A 15% increase each decade adds up to a 201% increase over 50 years.  When you intersperse that with multiple 2% to 5% increases every 3 to 5 years, that can easily add up to enough to explain the difference, and building codes are even worse, because they typically have a bigger impact.

Ok, so regulation can explain the difference between average inflation and the much higher inflation for houses and cars.  Those are only two products though.  Surely it doesn't play a big role in average inflation?  Unfortunately, this is also wrong.  It's easy to miss the impact of multi-stage supply lines, which are hit by regulatory costs at every stage.

Consider this: A car dealership gets hit with a new regulation requiring them to record some additional data about each sale or repair.  That data takes extra time to collect and extra space (physical or digital) to store.  Maybe that increases operating costs by a couple of percent per transaction.  So they must pass that cost onto customers (businesses can't take loses, therefore it is necessary that every cost be passed on to customers or be recovered by paying less for labor).  But also the manufacturer gets hit with a new safety regulation that costs an additional 2% (pretty low end for safety regulations).  That cost gets passed to the dealership, which passes it to the customer.  So now we've got a 4.04% total increase.  (Cost increases like this tend to compound, rather than adding.)  But wait, the steel mill supplying the manufacturer also gets a 2% increase, because of some additional regulation, and so that regulatory cost "trickles down" to the customer, compounding for a total of 6.12% inflation.  The steel mill isn't where the raw material originates though.  They are getting scrap steel from garbage dumps, recycling collectors, and scrap yards, who also got hit by a 2% regulatory cost increase requiring them to pay more for their electricity to meet new EPA requirements, and if they are smelting raw ore, the mining companies were probably impacted by the same regulation.  Now we are up to 8.24%.  There can also be cycles in here that cause additional compounding steps, for example, the mining company, the scrap companies, and the steel mills are also all using steel products, so their cost of operation increases a bit more than the 2%, any time they have to repair or replace steel equipment.

Now, this is a contrived example.  Odds of all of these getting hit all in the same year are pretty low.  At the same time, 2% is a really low estimate for cost of new regulations for any of these.  Not only would most of these regulations increase prices by more like 5% to 15%, government regulations rarely affect only one element of a business's operations.  One safety regulation might only cost 5%, but the bill with that regulation is going to have another two or three, each also adding 5% or more, because "Well, now that we are thinking about auto manufacturing, we might as well look at everything about it."  Additionally though, some regulations affect all industries.  For example, any new vehicle regulation is going to impact over-land shipping costs, and practically everything depends on transportation infrastructure in the developed world.  Fuel regulations also impact transportation costs heavily.  And there are tons of cycles in here as well.  If gas prices go up by 10%, prices for everything at the supermarket are going to increase by at least 5% to cover that, and now I'm paying more, so I have to ask for a raise to cover the increase in cost-of-living, and that will eventually trickle back to the supermarket prices adding an additional fraction of a percent to prices.  Anything that impacts electricity prices (basically and EPA regulation) will raise costs for every company that uses electricity, and businesses can't take losses, so that means prices increases across the board.

Between 1960 and 2010, we had a lot of significant increases in regulatory costs in industries that impact all other industries.  Gasoline and diesel fuel were significantly more heavily regulated.  Vehicle manufacturing was more heavily regulated.  Electrical power generation was more heavily regulated.  Even communications (from post office to every kind of electronic communication) saw heavy regulatory increases.  And housing costs do broadly affect the economy, so the very heavy regulatory increases in housing costs did contribute significantly to all of the other inflation.

When you put this all together, most industries saw significant cost increases due to regulation between 1960 and 2010, every single year, even when the new regulations didn't target them specifically.  The average annual regulatory cost increase to produce average inflation of 659% over 50 years is a mere 3.84%.  (You can calculate this including the compounding effect with 1.0384^50.  The 1.0384 is equal to 100% (the original cost) plus 3.84% (the average increase), and the 50 is the number of years.)

The truth is, it's actually surprising that average inflation was so low, despite the constant barrage of regulatory cost increases.  It's not just easily believable that most of the inflation was directly caused by regulatory cost increases, it's actually feasible that almost all of it was caused by rampantly growing regulation.  (Only "almost" because increasing government debt also causes inflation very directly.  That's a topic for another article though.)  And cars and houses increased in price faster because they were more frequent direct targets of the additional regulation.

Sadly, it really is that simple.  I was wrong.  Inflation wasn't and isn't driven by greedy businesses.  It's mainly driven by constantly growing government regulation, slowly suffocating the economy.

Children Aren't Important?

I keep seeing this come up, and I do not understand why there is not more public outcry over it.  It started with Trump's tax reform.  Now, Trump's tax reform helped a lot of people.  It increased refunds for a lot of lower income working Americans.  Unfortunately, however, it also neglected children.  In a sense, it counted adults as worth more, reducing the total amount of refund for lower income working families with more children than average.  (We saw more than a 10% decrease in our refunds, despite getting a little more back from the EITC.)  After Trump it was Yang, with a Freedom Dividend plan that would have given adults a basic income worth around half of a living wage but just plain did not even count children as people.  Now we have plans for an economic stimulus package with a relief element for individuals, and yet again, children are being treated as unimportant.

Trump suggested an initial relief check for all American adults, with some kind of cutoff to avoid giving a lot of money to people who do not need it.  This is not a bad idea, except for the fact that children are rapidly increasing in value in the U.S. (as fertility rate decreases), and this plan straight up neglects children.  Of course, others immediately pointed this out, and Trump agreed with plans that provide smaller amounts for children.  Now, I am not complaining about the fact that the amount for children is smaller in some of these plans.  Household dynamics work fine this way, as the biggest cost for most families is rent or mortgage payments, and this scales much slower with family size than other necessities.  But now Mitt Romney has proposed a plan to the Senate that has reverted back to this adults-only thing.  Is it just Republicans or wealthy politicians, or do Americans in general consider children to be unimportant?  This is ironic, given how much resources state and Federal governments put into oppressing parents for even the most trivial things that might be disadvantageous for their children.

There are a number of potential excuses for denying children disaster relief when it is being provided to adults, but they are all wrong.  The first is that the relief given to parents will help their children.  This is not untrue, but unless everyone has the same number of children, it is overly simplistic and punishes larger families while rewarding single people and couples without children.  Punishing larger families right now is a really bad idea, and it happens to be the next topic of discussion.

The second excuse is that counting children will reward larger families for having more children.  I have two responses to this.  The first is, that is straight up false.  I heard the same argument when I lived in Alaska.  I once overheard some of my coworkers complaining that certain Russian families had large numbers of children, so they would get more money from the Alaska Permanent Fund Dividend.  The largest payout I have ever seen from that is around $2,000 per person, and it pays out once a year.  (It has hovered around $1,600 the last two years.)  No offense to my coworkers, but anyone who thinks children cost less than $2,000 a year to provide for either has not had to provide for children or is in serious need of remedial math.  Even at the maximum payout, children do not turn a profit from the Alaska PFD.  (Note that I was one of 7 children, in my teens, living there.  My parents made enough to live comfortably but nothing more, and the PFD definitely did not cover all of the costs of 7 children, let alone turn a profit.)  The $500 per child suggested by some is only a quarter of that.  It would take more than $500 a month for most Americans to profit off of children*.  My second response is, is it wrong to reward parents for having more children?  Raising children is expensive, and it takes a lot of work.  If we wanted to be completely fair (especially to women), we would be paying at least $30k a year to stay-at-home moms with one child.  That is the long term babysitter average wage though, which only covers 40 hours a week.  Moms are more like nannies than babysitters, doing household chores, teaching children basic skills, and so on, on top of supervising and caring for children.  If we assume 14 hour days (children are recommended to sleep from 10 to 14 hours a day, depending on age), that comes out to $125k a year (average pay is $19/hr in the U.S.), if we do time and a half for overtime, with overtime being only anything over 40 hours a week.  (No, you can't pay babysitters or nannies salary.  They are non-exempt employees and thus must be paid hourly wages that comply with overtime laws.)  A nanny might be expected to care for one to three children at that pay.  $500 a kid, as a one or two time payment, is not actually a reward.  It is not even fair wages for services rendered!  And even if it somehow was profitable, encouraging people to have more children is not a bad thing right now.  The U.S. fertility rate is currently lower than 1.8 (average children per woman, in a lifetime).  The replacement rate is 2.1.  That means Americans are not having children at a high enough rate to sustain our own population.  Those panicked about overpopulation might see this as a good thing, but people who understand the economic impact of a declining population do not.  To maintain a healthy economy in the long term, it is important to maintain at least the replacement rate, and while immigration can help make up the difference, it is not a good long term solution, especially when Americans want stricter immigration regulation.  Not only is rewarding people for having more children not a bad thing, it is actually something we are going to have to do anyway, if we want to avoid long term economic decline.  The fact is, parents with large families should be treated as heroes for doing their part to slow the long term decline of the U.S. economy.  We should be happy to make children profitable for them, and they at least deserve some help with the costs of raising children, if not fair wages for the work.

(* I say most, because it might work in the lowest cost-of-living regions, for parents who are already covering a lot of needs through government welfare programs.  In this case though, it is not the $500 a month that is turning a profit but the $500 a month combined with the other welfare.  The $500 a month will never cover more than 100% of the costs of a child on its own.)

Now, I have never heard anyone argue that children are not as important as adults, as an excuse for only providing a basic income or disaster relief for adults and not children, but actions speak louder than words.  Clearly, Mitt Romney considers children to be worthless in comparison to adults.  The current House bill being crafted for relief does include children, but it also puts a cap on larger families.  A maximum of four children can be counted.  Families with more than four children, the true heroes, are out of luck.  Their children are counted at a value of four fifths or less of an adult each.  My value, as a teen with six siblings, would have been only 57% that of an adult.  Even a Democratic House somehow cannot manage to consider children as important as adults.  Yes, the House bill does pay out equal amounts for adults and children, but with a maximum family limit, it is still treating children as lower value, second class citizens.  It would be better to give children half the payout of adults, without a family cap.  (And yes, this would actually result in a smaller payout for my own family.  But at least it would treat children as equal, instead of devaluing children in larger families.)

The fact is, children are not just important.  They are critical.  We often hear the cliche that children are our future, a rather blatant statement of the obvious, but we do not seem to understand the extent of it.  Number are important.  Shrinking populations are populations in economic decline.  And immigration is not a long term solution, because they do not contribute significantly to an increase in the percentage of children.  The fact is, children need relief too.  If we cannot value our children enough to ensure their well being during this crisis, perhaps we deserve mass death and economic collapse.

Could Coronavirus Save the Economy?

First a disclaimer: This article is going to discuss the potential repercussions of a nationwide outbreak of COVID-19 in what may sound like a positive light.  This in no way means that I think such an outbreak would be good.  Given the estimated fatality rates, a nationwide outbreak would likely result in 2.3 million to 10 millions deaths, which would be tragic and horrific regardless of any positive effects it might have.  Even if such an event might have the potential for significant positive effects, the emotional value of the lives lost would far outweigh any positive effects it might cause.


COVID-19 has a death rate somewhere between 0.7% and 3%.  It has not spread enough outside China to get a solid count, but in China, the death rate is between 3% and 4% in a few places and 0.7% everywhere else.  Making a good estimate of the death rate would require knowing much finer details about these regions than we do, though certain organizations are estimating around 3% despite this lack of critical details.

COVID-19 affects adults far more dramatically than children.  Around 0.8% of deaths are in the 0-4 year old age range.  Only 0.6% are in the 5-18 year old age range.  Thus, minors in general are far less likely to die from the virus than adults.  The highest fatality rate is in the 65+ year old age range, with 72% of deaths falling within that age range.

Together these facts mean that a nationwide COVID-19 outbreak in the U.S. could cause as many as (given a 3% fatality rate) 79,200 deaths in the 0-4 age range, 59,400 deaths in the 5-18 age range, 2,633,400 deaths in the 19-64 age range, and 7,128,000 deaths in the 65+ age range.

China, Japan, and the U.S. are approaching economic decline or even disaster due to low birth rates.  This causes several problems, but one of the largest problems is that these countries have aging populations, where a much larger portion of the population is older people than younger people.  As this larger population of older people approaches retirement and various age related diseases, they are going to be contributing less to the economy, but they are going to need more care from it.  This means they will be contributing less labor while needing more, in a population where there are far more people needing labor than there are people capable of providing it.

COVID-19 promises some potential for improving the situation, however only at a horrific cost.  A nationwide COVID-19 outbreak in any of these countries will reduce the older, retiring population far more dramatically than the younger population (to be clear, it will do this by killing them, probably slowly and painfully).

In short, COVID-19 could save the economies of China, Japan, the U.S., and many other countries with low birth rates and aging populations.  Again though, this would come at a horrific cost.

Small Businesses in the 3rd World

Recently, American investors have started funding startups in 3rd world countries.  It turns out that in Africa, the Middle East, and Southern Asia, there are a lot of artistic skills, without much local demand for the products.  Well, Americans have both the funds and the desire to purchase these products.  Some U.S. investors and charities have started providing funding for people in these 3rd world countries to start their own businesses based around these local arts.  Among other things, the funding is used to obtain training, pay for raw materials, and start shipping the goods to the U.S. where they can be sold.  Programs like this are helping to lift people in these countries out of poverty, and they are providing middle and upper class Americans with goods that are often of superior quality to factory produced products.  The problem is that this does not do anything for our large numbers of people in poverty here in the U.S.

Helping starving people in 3rd world countries is a noble goal.  Helping them in ways that reduce their dependence on us is even better.  It cannot last though.  We are not in any position to be giving people outside the U.S. significant amounts of our time and effort.  Poverty is increasing in the U.S., and we have plenty of our own starving people that need our help.  Our welfare system takes away some of the burden, but it adds others, partly because it is poorly designed.  What we really need is not U.S. investors providing funds for startups in Africa.  What we need is U.S. investors providing funding for U.S. poor.  Most of these businesses that we are funding in 3rd world countries could exist in the U.S. as well.

Americans can make shoes and rugs and many of the other things that we currently import.  Training is not that expensive, and it does not have to involve expensive trade schools.  Things like knitting and weaving can be learned on the internet.  Those with any level of artistic talent can learn how to make high quality costumes out of fairly cheap materials, and the current cosplay trend would help fetch some pretty good profits on this.  Things like blacksmithing and metal casting are also easy to learn on the internet, and in most areas of the U.S. there are groups that would be willing to help with training for cheap or even free.  This just brushes the surface.  There is a market in fixing old toys.  Learning to make simple web sites for individuals and small businesses is pretty easy.  Many people with unusual talents have managed to make a decent income just recording and publishing YouTube videos of their performances.  All of these things are artistic in nature, which means that they are not subject to the same sort of competition that normal jobs and products are.  There are only two things most poor Americans are missing: time and training (and sometimes equipment and materials).

American investors and charities should be looking at the American poor, instead of, or in addition to, those living in 3rd world countries.  They should offer funding, including enough for living expenses and training, for Americans who have or want skills in things that would provide the opportunity to start a small business based on artistic skills.  Besides helping those in the U.S., this could also be quite profitable for investors.  Demand for artistic products in the U.S. is fairly high, especially among the upper class.  Art knives made by reasonably skilled blacksmiths can demand $10,000 a piece or more, for products that take about one month to produce.  Hand crafted shoes can bring in a few hundred to a thousand dollars each for a week of work or less.  An old doll that takes a few hours to clean, repair, and repaint can bring in $20 or $30 with a half decent job (more for an experienced artist).  Hand knit or woven clothing and rugs can bring in a reasonable income as well.  Many people have managed to make a decent supplemental income with YouTube videos, and good ones can bring in ad revenue for months or years after they are published, without any additional work.  Even for those with less skill, these kinds of work can be done from home and supplement a poor income enough to make a significant difference.

What about those who are starving in 3rd world countries and do not even have food stamps to help them out?  The more we help our own poor, the more resources we will have to help others.  Every poor American we help out of poverty in a sustainable way is another potential donor, investor, or customer for poor people in other countries.  Instead of looking at investing in Americans as a drain from funds that could be invested elsewhere, consider it an opportunity for a more sustainable investment model for everyone in need.  Any investment that pays off will provide additional funding that can be used anywhere.  In addition, investors might encourage Americans they help to invest in or donate money to organizations that help people in other countries.  One rich person investing in some businesses in Africa will help a few people, until something happens that prevents that investor from continuing to invest (death or massive medical bills, for example).  Several thousand middle class Americans donating money to charities that help people start businesses in Africa will ultimately provide far better funding and be far more resilient.

The best strategy here is probably a mentorship strategy.  Investors should start investing in hobby-style artistic professions for poor Americans.  They should provide paid or volunteer mentors for every person they fund.  Those mentors should help beneficiaries manage their finances, find training, and setup their operations.  The mentors can also report back to the investors, to allow them to bail as soon as possible when a beneficiary is not using the funds wisely.  Another responsibility of a mentor should be to encourage beneficiaries to help out others once they are able to, and this theme should be repeated during regular meetings of the beneficiaries with the investors.  With mentors, chances of success will be much higher, and imminent failure will be much easier to detect much earlier.

The long term effect of this will be to teach Americans that cannot find jobs to create their own.  It will improve the U.S. economy, and it may even reduce the burden of the poor on the U.S. welfare system.  More importantly though, it will provide Americans with the means to provide aid for others far better than we are currently capable of.  A few rich investors helping the 3rd world poor start businesses to get them out of poverty cannot compete with what a robust U.S. economy composed of a large number of American middle class donors can do for them.  A common religious theme applies here: You must help yourself before you can truly help others.  To maximize the good we can do, we must first remove the mote from our own collective eye.

Mandatory Benefits Enforce Slavery

Freelance work is becoming a big deal in the U.S. for several reasons.  One reason is that the currently very poor economy (yeah, they claim it is improving, but really it is only getting better for the wealthy but no one else) is still making it extremely difficult to find decent work.  Right, you heard on TV that unemployment is decreasing, but did they bother to mention that most of the new jobs are low paying jobs?  Did they even point out that wages are staying stagnant while inflation is still increasing?  A lot of Americans are finding that freelance work is easier to get than permanent employment.  That is not the big driver of freelancing though.  Over half of freelancers are doing it entirely voluntarily.  They have chosen freelance work over long term full-time work because they like being their own boss.  They like setting their own hours.  They like the ability to choose what work they will do and what work they will leave to someone else.  Many even like the fact that they do not have to work a full 40 hours a week to get by.  Freelancing comes with a cost though: No benefits.

Aside from social pressure, wage slavery is primarily driven by mandatory benefits.  I know many people who would like to start their own businesses, but they cannot, because they cannot afford private health insurance.  Other benefits are a problem as well, but health insurance is, by far, the biggest problem.  I even know a few people who have their own businesses and work a regular job for the health insurance.  Businesses, like Lowe's, that offer these benefits even to part-time employees are a great blessing to business owners who cannot afford private health insurance.  (Years ago I worked at a Lowe's store, and at least two other employees there owned their own businesses, but worked 10 hours a week at Lowe's for the health insurance package.)  This is a problem, because it discourages freelance work and the creation of new businesses.  For the most part, only independently wealthy people can really even afford to start their own business, and I am not just talking about businesses with really expensive startup costs.  I have several computers, I have access to all of the tools I needed, I have all of the necessary knowledge and training, but I still cannot afford to start a software company, because I am stuck spending nearly all of my time working for someone else.  Even most middle class employees are stuck in this situation.

What is the solution?  Get rid of mandatory benefits.  In fact, ideally, all non-monetary compensation should be prohibited.  Someone still has to take responsibility for health insurance, because costs are still too high.  Obamacare made health insurance mandatory, but it did not solve the underlying problem, which is that it just plain costs too much.  At this point, a single payer system seems like the best option, and the retirement of Medicare and Medicaid would go a very long way in funding it (actually, if you add all the costs of the multiple Obamacare failures, it might make up the difference).  Further though, if there was still a deficit, another side effect of this would cover that and then a whole lot more.  The single most abused benefit is stock options.  Eliminate those and tax revenues (especially from CEOs and such) would increase dramatically.

Taking the burden of health insurance off of employment would release millions of Americans from wage slavery.  Of course, they still have to work to survive, but they would have much more control over that work.  Without employer provided health insurance, more people would be motivated to start new businesses, and more people would be willing to work for those businesses.  More people would be able to go the freelance route.  In addition, one more awesome benefit of this is that more people would feel free to choose part-time work instead of feeling compelled to work full-time, making more jobs available for others.  More Americans would be free to choose their own paths than ever before.

Now, I am sure you are aware that I endorse a basic income in addition to this, and a basic income would free Americans to a degree never before seen in all of human history (accepted history, anyhow).  Even without a basic income though, eliminating all non-monetary benefits would go a long way to increasing freedom in the U.S..  Of course, if stock options were eliminated, the increase in tax revenue would likely cover a large chunk of the costs of the basic income.  I just wanted to point that out.

Unions

I have a problem with unions.  It comes down to two things: Unions are too powerful and too easy to abuse.  Unions are currently absolutely necessary to take care of problems that the government refuses to treat fairly.

The recent Supreme Court ruling on a dispute between an Amazon contractor and its warehouse employees (which I have discussed in more detail in a previous post) illustrates the second part of my problem.  Without unions, many workers are just plain not treated fairly.  In the Amazon case, workers were being forced to go through excessively long security checks daily without pay for the time spent.  Our Supreme Court justices (whom I must assume are idiots, because the only other option is that they are deliberately helping to enslave and oppress innocent Americans, and I want to give them the benefit of the doubt) declared that businesses do not have to pay workers for time spent doing anything that is not, in essence, part of the job description.  At this point, this declaration now counts as an infallible part of U.S. law.  The government offers no protection for what amounts to blatant wage theft.  There is only one solution: unions.

Unions were originally created in response to government inability to enforce fair labor practices.  In the early U.S., it was common for employers to underpay workers and to require far more hours of work than is healthy or fair.  Unsafe work conditions were more common than safe ones by a very wide margin.  People were regularly inured or killed in workplace accidents that could have easily been prevented, because owners were too cheap to spend even small sums to ensure safety.  Children were treated as slaves, working 16 hours days in these conditions, for so little money that entire families had to work, and that was still not enough to get by.  The government was not powerful enough to do anything to stop these unfair practices, and in many cases, the government did not have enough reach to even be aware of them.  The solution was labor unions.

Workers in these conditions eventually banded together, demanding fair treatment.  Their employers refused the the demands and threatened to fire anyone who continued to dissent.  Eventually the workers realized that if all of them dissented at once, their employers would be unable to replace them all fast enough to avoid financial catastrophe.  The worker strike was born (it was actually born in France, but it was quickly adopted by oppressed U.S. workers).  Nearly all of the workers in one or more factories refused to continue work until conditions, hours, and wages were improved.  Employers were powerless against the unions because they were dependent on the employees.  Firing them all would result in financial ruin for the company.  Initially the government panicked: Worker's unions threatened the U.S. economy.  If workers had so much power, they could easily force businesses to pay so much that it would cause rampant inflation.  Besides that, even short strikes resulted in production halts, and in factories that produced necessities, those halts could result in serious harm.  This did something else very important though: It put the problem of workers right in the face of the government, where it could no longer be overlooked or ignored.

The government realized that treatment of workers was a major problem.  It also recognized its responsibility in doing something about it.  The government still did not have the power or reach to handle the problem on its own.  It did have the power to protect the workers in their own attempts to deal with the problem.  Business owners lobbied the government to make unions and worker strikes illegal.  Their claim was that these things caused economic instability.  Their claims seemed reasonable, however, the government eventually recognized that the underlying problem was not the strikes, but the unsustainable hours and pay, as well as the often deadly work conditions provided by employers.  Laws were passed to protect unions and striking workers from retaliation.  Currently, workers cannot be fired for discussing unionization, actually unionizing, or for striking.  Workers who are striking on economic grounds (wages, other compensation, or work hours) can be "permanently replaced" (they cannot be fired, but if a willing replacement can be found, the strikers hours can be reduced to 0 indefinitely, which is approximately the same as being laid off).  The government also created a set of safety and treatment requirements and guidelines for how employees may be treated.  Strikes related to these issues are further protected, prohibiting even permanent replacement.  When it comes to safety and other government protected employee rights, replacements hired during a strike must be fired to make room for striking employees returning to work once the dispute has been resolved.

The potential for abuse of unions was still clear, so some restrictions have been added.  Closed shops, where the company may only hire union members, was strictly prohibited.  Closed shops allow the union to control all hiring decisions by restricting admittance into the union.  This gives the union veto power over any hiring action.  In the U.S., closed shops are illegal.  Union shops, where new hires are required to join the union after being hired, are legal, as well as agency shops, where non-union members must still pay union dues, and open shops, where employees may choose but are not required to pay dues if they are not union members, are all legal in the U.S..  Prohibition of closed shops prevented the most obvious abuses of unions, but it still left some loopholes, most of which still exist.


When unions were originally created, they were necessary.  They were very useful, and they did a great deal of good.  Since then, many things have changed.  The biggest change is power and reach of the government.  Workplace safety is no longer a serious union issue, because OSHA, a government agency, defines and enforced workplace safety.  If a workplace is unsafe, it is faster and easier for an employee to report the violation to OSHA than it is for a union to try to resolve the issue, and the penalties for those violations are enforced by the government, making workplace safety violations fairly rare.  Wages are still a problem, but not because the government is not powerful enough to do anything about it.  They are a problem because the government refuses to do anything about it.  Worse, the most common places for wage issues are not well suited to unions, because employee turnover is too high.  In the past several decades, most union wage issues were not problems of employers paying unfair wages.  Most of the issues were greedy employees who were already being paid far higher than the U.S. average wanting more than their fair share (and, in the case of the U.S. steel industry, this was one of the blows that ultimately killed it).  Unions are no longer useful tools for enforcing fair wages.  Instead they are tools for overpaid employees to rip off their employers even more.

Work hours were another major thing that unions were good for.  Twelve to sixteen hour work days were common.  Unions pulled the U.S. work week down to 40 hours and the work day to 8, requiring extra pay for any time worked beyond that.  Of course, the goal was actually closer to 35 or 30 hours a week (20 according to some), but unions lost sight of that goal almost a century ago.  Unions are no longer necessary to enforce this though, because the government has enacted laws prohibiting employers from giving employees more than 8 hours of work in a day and 40 in a week, with an additional requirement that when this is violated, employees are paid extra for time beyond those limits.  This is no longer a union problem; it is now a government problem.  Worse, despite unions and government, the average American voluntarily works an average of 50 hours a week and often the overtime goes entirely unpaid.  When the workers don't care, there is little unions can do to fix the problem.

Overall, unions have lost most of their usefulness.  They still have potential for abuse though.  Unions have a great deal of lobbying power.  In Alaska, in the mid '90s I believe, the workers at some of the power plants went on strike.  I don't know all of the details, but I do know that the labor union exercised power that belongs only to government and individual citizens, by manipulating the state government in making some very harmful laws.  The power plants hired electrical workers from Washington state, as temporary workers until the strike was resolved.  In retaliation, the union lobbied the state government to change certification laws to require electrical workers in Alaska state to have gone through their training in-state.  In other words, a journeyman or master electrical worker in Washington state could only be hired as an apprentice in Alaska, without going through all of the time required for certification within the state of Alaska.  The union did this to put more pressure on the power company by denying them well qualified temporary workers (the law specifically prohibited hiring them into positions that normally required journeyman certification).  Besides being a low and very unethical blow, this has some severe economic implications.  I am certain the argument given to the legislature and governor was that hiring out-of-state workers would drain money from the state economy.  I don't think this justifies using the law to lie about a person's job qualifications, but besides that, this economic justification was incomplete.  The end result was that the workers got most of their demands.  The economic consequences of that was increased cost for power, which resulted in economically damaging inflation in a state where the cost of living is already quite high.  There may have been short term economic costs of hiring out-of-state workers, but the long term costs of not doing so were far worse.  There is also another long term economic cost: The electrical workers union in Alaska now has a legally enforced monopoly on electrical labor.  The political power held by unions has not just been harmful in Alaska.  In other places in the U.S., unions have used the law or other political influence to merge with other unions against their will (by "merge," I mean "hostile takeover").

Unions have largely become for-profit institutions in the U.S..  Their primary goal is no longer doing what it best for the workers or even representing the workers.  Their goal now is to do whatever gets the union the most money.  This frequently means demanding higher pay even when it is not needed or fair.  It also preempts any requests for reduced hours, because reduced hours means lower gross pay, which means lower dues.  By allowing union and agency shops, the government has allowed unions to force employees to become union members and to pay union dues against their will.  Unions in the U.S. typically have a number of permanent employees who are not actually members of the union.  In many unions, this includes a CEO and other administrative positions, who make decisions about what the employees want, without actually having any experience of being one of those employees.  Some of these positions, like lawyer and accountant, are justified, but full-time administrative positions in a union are absurd.  Unions are now run primarily by people who are totally disconnected from the union members and their work environment.  Frankly, a union that is a for-profit business should not have any degree of legal protection beyond what is normal for any other for-profit business.  Otherwise, it is even more prone to abuse.

So, now we come down to the problem: The government now has the reach and power to make unions entirely obsolete, and it has already made them mostly obsolete.  Instead of doing that though, it is actually making unions more necessary.  Unions should no longer exist, because they should no longer be needed.  When they were created, the potential for good outweighed the potential for abuse.  This is no longer true...except, when the government fails to do its primary job of representing the will and best interest of the people.

The Amazon case is prime example of where unions are useful.  The employees are being robbed by their employer.  They could unionize and strike, demanding pay for their time worked, demanding that the security check be listed in the job description (making it an essential part of the job, and thus legally part of paid work time), or demanding that the security checks be discontinued.  They could even unionize and heavily lobby Congress to repeal the highly constitutionally questionable law the Supreme Court used to justify its appallingly oppressive decision (even abuses of power can have legitimate non-abusive uses).  The problem I have with this is that they should not need to unionize to get paid for all of the time they spend doing work required by their employer.

An employer should have the right to require employees to do worthless work (plenty already do it anyhow), but employees should have the right to get paid regardless of whether the work required is profitable or not.  This should be legally protected.  What free society has a law that explicitly permits employers to blatantly and openly require work time from an employee that does not need to be compensated?

Pulling Your Own Weight

The idea of pulling your own weight is based on the idea that each person incurs costs for upkeep, including food, water, clothing, and shelter.  In the U.S., we might add things like internet and electricity to this, but really it comes down to the fact that every person has an upkeep cost, and someone has to pay it.  The idea of pulling your own weight is a very old idea, but also a conditional one.  Each person in a society that is capable of doing so is expected to pull their own weight.  Of course, there have been some deviations from this, but it is largely the most common way of running an economy.

There are some occasional historical exceptions to this, but there are also some chronic exceptions.  Historical exceptions almost always involve slavery.  Greek philosophy and math were built by people who did not pull their own weight.  In fact, if they had not had slaves to pull their weight for them, we would probably not have modern technology and science as we know them.  Slavery has been common off and on throughout history.  In the U.S. and most of Western civilization, slavery (overt slavery, anyhow) has been abandoned and replaced with an economic philosophy very common to cultures that reject slavery.  This philosophy is the idea that every person must pull their own weight.  Chronic exceptions to this are very common and will never go away.  Babies, young children, elderly people, and disabled people are not expected to pull their own weight, because they cannot.  Stay-at-home mothers are treated as not pulling their own weight in many parts of modern society, however this is a filthy lie.  They may not be producing goods, but stay-at-home mothers are doing work that is far more important than most of the work done outside the home.  Now, the slavery exception is becoming an unusual one that is likely to overturn how we view economy, probably within the next half century.

In older economies, the pull-your-own-weight ideology was a fairly sound one.  While it is possible for a small number of people to provide for a large number, the work involved has been excessive.  One slave working 16 hours a day might be able to provide the needs of ten or twenty other people, but that slave cannot have any freedom because there is just no time for it.  Modern technology has changed this though.  Besides finding more efficient ways of producing, it has also provided ways of replacing human labor with mechanical slaves.  Mechanical slavery is completely ethical.  The machines can work 24 hours a day, and they never need time off or personal time.  The only down time is time spent on repairs and maybe upgrades.  Experts estimate that this ethical form of slavery will replace about 50% of the human workforce by 2050.  This presents a very serious ideological problem.

Here is the problem: The U.S. economy is based on this pull-your-own-weight ideology.  We are in the process of rapidly replacing human workers with mechanical slaves.  These two things are completely incompatible.  If we replace half of the human labor force with slaves and then still expect the humans to pull their own weight, we are expecting the impossible.  Actually, we are perhaps doing something worse.  We are missing something important. What is the actual weight of a human?

The "weight" of a human is the amount of labor required to meet that human's needs.  Slavery with human slaves does not change the weight of a human; it just displaces the labor.  Some human still has to pull the weight.  Slavery with machines slaves, however, does change the weight of humans.  Replacing human labor with machine labor directly reduces the human labor required to meet the needs of humans.  This is what we are missing: As we automate more processes, we are reducing the weight of humans.  The problem is that we are not accounting for this.  We have high unemployment largely because we have reduced the weight of humans, and those humans that are still doing the same amount of work are now pulling more than their own weight.  The result is that there is not enough work left for everyone else, because their weight is already being pulled.  Unfortunately, because we have not noticed this problem, we are not distributing the results of the work appropriately.  The consequence is that some people are pulling more than their own weight, and they are getting the proceeds of that.  The people that are not able to pull their own weight are stuck without enough to survive, because their portion is being given to the people that are pulling their weight for them.

This is complicated, and it is not obvious that this is what is happening.  Further, there is a very important reason that this is happening: We have reached a point where it is actually substantially less efficient for each person to pull their own weight.  When each person's weight costs 2 to 4 hours of work per day (and, when that burden is centralized to one or two people per family), it is fairly efficient for businesses.  Each employee spends enough time working to easily keep up with overhead.  Now, however, each person's weight comes out to around 1 or 2 hour per day, or even less.  When centralized, this comes out between 10 to 20 hours a week.  Having every employee work half time doubles the overhead, because the number of employees are doubled (reducing hours does not reduce overhead).  In addition to that, higher end jobs often have warm up and cool down time that results in unproductive hours on each end of a shift.  This means, in an 8 hour shift, if an hour at each end is unproductive, 75% of the work time is productive.  In 4 hour shifts, productivity is reduced to only 50%.  In lower end jobs this effect is dramatically lower, but in high end jobs (especially in problem solving work like engineering and science), this is a major obstacle to reducing hours (note that in these jobs, longer time between shifts tends to increase the unproductive warm up time, so 8 hours three days a week is not an efficient solution either).  This is an efficiency problem that is never going to go away.  It is just not efficient at current human "weight" for each person to pull his or her own weight.

Is there a solution to this?  Yes, but it is not a very popular one.  It is incredibly unpopular among conservatives, and it is at least mildly unpopular among liberals.  The solution is abandoning the pull-your-own-weight ideology.  We are quickly becoming a slave state, just like Greece was, except that we are doing it ethically.  If we do not abandon this pull-your-own-weight ideology, we are going to either let the majority of Americans starve as their jobs are replaced by machines, or we are going to have millions of Americans working workweeks so short that they are costing more overhead than the value they are generating.  Neither of these is a good long term economic plan.  One short term solution might be long vacation time, where each employee works "normal" hours, but only for 1/4 of the year, and the rest of the year is vacation time, however, that only partially mitigates overhead costs.  The most efficient solution is for some people to work 20 to 40 hour weeks at least 50% to 75% of the year, while everyone else lives off of the proceeds of that work.  Some kind of motivation would be necessary for those who work, and this would probably be complicated and difficult to do without resulting in an overprivileged working class and an underprivileged non-working class (ironic, given that historically the opposite happens).  Ultimately though, it is going to eventually become necessary, or we are going to have an epic economic crash when so many consumers starve to death that consumption drops below an economically sustainable level.

Things are changing rapidly.  Technology continues to advance faster than we can keep up with.  In the past, the impact of this has been primarily limited to the tech industry itself.  In the near future, however, this is going to have a massive economic impact.  If we are not prepared, we are going to suffer.  In some degree, the consequences are not predictable, but there is one thing that is predictable: If a large portion of human labor is replaced with machine labor, we cannot have a sustainable economy that is based in the pull-your-own-weight ideology. 

Overtime

It turns out that the average working American is working around 50 hours a week.  Almost 12 percent of Americans work more than 60 hours a week.  This is a problem, for several reasons.  First, we still have a high rate of unemployment, and I have said before that people working more than 40 hours a week are effectively stealing work from those working less than that (who want to work 40 hours a week).  Second, many of these workers are salaried, which means that no one is getting paid for this extra work.  In these cases, the extra hours are being stolen, without any benefit to the thief.  Some workplaces even mandate that salaried employees work more than 40 hours a week.  Hourly employees are legally entitled to extra pay for overtime hours, but this does not justify stealing work that is needed by others.  Ironically, hourly overtime costs the employer more, in addition to increasing unemployment.  This free labor and poorly distributed work is a big problem, even though it may not be obvious.  Given current unemployment as well as the 50 hour a week average of most U.S. workers, a redistribution of labor could easily solve unemployment entirely.

The first thing that needs to be done is the elimination of any unpaid labor (within an employer/employee relationship).  Salaries should only apply for the first 40 hours a week of work.  Even salaried workers should be entitled to overtime pay for any hours beyond 40 in a week.  This by itself would push businesses to hire more employees, instead of expecting free labor from salaried employees.

The second thing that needs to be done is fines for overtime.  Many states' labor laws technically forbid overtime, but they include clauses stating that overtime must paid at a higher rate when it does occur.  Federal labor law does not forbid overtime, but it also requires a higher pay rate for overtime.  In all cases, however, salaried employees are exempt.  Federal labor law needs to remove the salaried employee exemption, and it needs to turn the 40 hour a week limit into a hard limit.  No states with a hard limit actually enforce it, and there is no set penalty for violation of the limit (though, the limit does entitle an hourly employee to refuse to work overtime without threat of retribution).  In addition to a Federal hard limit, penalties need to be set and enforced for violation of that limit.  Fines for overtime would accomplish two useful things.  First, it would encourage employers to hire more employees instead of facilitating the theft of work.  Second, it would provide a source of funding for welfare to support those who are not able to find work because that work is being stolen by other people working overtime.

A more extreme third thing that could be done is fines for employees working more than 40 hours a week.  The point of this is to combat the likely response of getting a second job for people who loose overtime hours due to the first two things.  Again, this would both discourage working more than 40 hours a week, and it would provide a source of funding for welfare when people choose to work more hours anyway.

There is a fourth thing that needs to be done, and perhaps it should have been the first.  Overtime labor laws need to be strictly enforced.  Wage theft is becoming a major problem in the U.S., and a majority of it comes from unpaid work and overtime paid at a non-overtime rate.  There is a local business where I live that has a strategy for avoiding overtime pay that happens to be highly illegal.  This business logs hours based on client projects.  Employees are forbidden from working more than 8 hours a day and 40 hours a week on any one project.  The business owners seem to think that overtime pay is only necessary if overtime is worked all on one project.  This business has employees (as well as ex-employees) who are owed thousands or tens of thousands of dollar in unpaid overtime.  At least one has tried to report the situation to the state labor board but was told that they are too far behind to do anything about it.  Evidently this situation is common across the U.S.  In many cases, employees do not know their right, but in other cases, they fear retribution (also illegal) or state labor boards are understaffed (or, possibly, just lazy).


It is absurd that our country has set a 40 hour work week, but we have a high rate of unemployment largely because the average work week is actually 50 hours.  Enacting and enforcing laws that push this back down to 40 hours could increase the amount of available work by up to 20%, which would completely cover our unemployment with some to spare.  This would tip the economy to favor employees over employers, which would go a long way in increasing wages and reducing poverty.  Our economy needs us to eliminate unpaid overtime and dramatically reduce overtime overall.

The Little Red Hen

There was once a little red hen.  She owned a wheat field.  When duck came asking for a job working on the farm, the little red hen told him that she did not need any help, because she had an automatic system for planting, watering, harvesting, and separating the wheat.  The little red hen also owned a flour mill, but when pig asked if there was anything he could do to help, the little red hen told him that she had an automatic delivery system from the farm to the mill, and the processes for milling the wheat and bagging the flour were automated as well.  The little red hen had a bread factory, but when cow asked if there was something she could do to help, the little red hen told cow that the factory was so well automated that she did not even need someone for quality control.  The little red hen had a bakery as well.  When horse asked if he could help sell the bread, the little red hen showed him rows of completely automated bread vending machines, and she told him she already had it covered.

When it came time to harvest the wheat, the automatic harvester harvested all the wheat, it dumped it into a thresher, which separated the grain from the chaff.  The wheat was then pour into buckets on a conveyor belt, which carried the wheat to the mill next door.  Machines at the mill dumped the buckets into the milling machine, and the flour cascaded down a funnel into bags.  Another conveyor carried the flour next door to the bread factory, where they were dumped into huge mixers along with water and other ingredients, then divided into loaves, cooked, bagged, and sent to the bakery on yet another conveyor.  A complex mechanical system hidden behind the vending machines filled each one with bagged loaves of bread.  The little red hen then waited for customers to buy her bread.

After a few hours with no business, the little red hen looked out the front window.  Standing outside, across the street, stood duck, pig, cow, and horse, looking longingly at the bakery.  The little red hen walked outside and called across the street, asking why they were looking but not buying any bread.  One by one, each of them explained that they had been unable to find any jobs, so they had no money.  They just could not afford the bread.  The little red hen stuck up her beak and went back inside.  She did not need friends who were poor, when she had so much.  If they did not have any money, then they would not have any bread.

Duck, pig, cow, and horse lived on the streets until they starved to death.  Only the little red hen was left in the town, but she was content.  She had plenty of bread.  Her lack of friends did not bother her.  She was rich, so she did not need any friends.  Her money and her property could be her friends.  At least, this is what she told herself when she started feeling lonely.


(In case someone thinks that this story is about the evils of automation, read my opinion on that subject: Dehumanizing.  Automation is not evil.  People who succumb to greed are what is evil.)

Taco Bell App

Taco Bell has come out with an ordering app that allows customers to use their smart phones to put in an order and pay for it.  As the customer approaches a Taco Bell location, the app asks if they want the restaurant to start preparing their food.  This process can involve almost no human contact (I suppose someone has to pass the food out the window, but ordering and paying is entirely electronic).

As this becomes more popular (Taco Bell is not the first to try this, and it most certainly will not be the last), a lot of jobs are going to be lost.  Eventually, most drive through orders will not require a cashier, because most of them will already be ordered and paid for before the customer even enters the drive through.  This will allow the drive through cashier position to be combined with another position.  It is also likely that the added convenience will reduce the need for inside cashiers.  Eventually this is going to spread to all fast food restaurants, because otherwise, they will not be able to compete.  This is going to add up to a lot of jobs that are lost.

It is about time!  Fast food restaurants severely underpay their employees.  They claim that they cannot afford to pay more.  I have argued this before, and I will repeat it again: A business that cannot pay employees enough to survive on is not worth existing.  Work that is not worth a living wage is not worth doing at all.  Pay that is below a living wage is just plain not sustainable.  A business that cannot pay a living wage is not profitable enough or valuable enough to justify its own existence.  Fast food is practically the bottom of the barrel (ok, agriculture is far worse, but also far less prominent).  Current Federal minimum wage, which most fast food places start at, generates well under the poverty level in income, even full time.  One of the most effective ways of reducing costs (so that employees can be paid fair wages) is automating processes and eliminating unnecessary employees.  Food assembly is hard to automate (though, certainly possible).  Automated order taking is now very easy to automate.  It is the low hanging fruit.  It is nice to see that fast food is finally figuring this out.

There is a catch.  The most common response to increased profits through automation is faster expansion and better shareholder payouts (or, even worse, increased CEO salary).  If Taco Bell choses to take this route, then not only is it not worth existing, it is actively worth destroying.  Why?  It is already vastly underpaying its employees.  It should take this opportunity to make its employment system more sustainable by raising wages.  Admittedly, eliminating maybe two or three employees will not save enough to pay all of the rest a living wage.  An effort, however, would be nice.  It would show that they care about paying their employees fairly.  If, instead, they spend the profits on something else, then they are showing that they could care less about their employees.  If this is the case, then the business does not deserve to exist, and additionally, it deserves to die so society no longer has to pay the costs of its freeloading on our unpaid labor (if it pays less than a living wage, then it is not paying for all of the labor it is getting).  I hope they do the right thing, but I am not holding my breath.

What Americans Care About

The job description of the U.S. government is to serve the people, largely by doing the will of the people.  It is a Republic, and a Democratic Republic at that.  What this means is that the government represents the people and is lead by people who are democratically elected to represent the people.  Now that this is out of the way, let us consider what Americans actually worry about.

According to Pew Research, the second biggest concern of Americans is religious hatred.  Obviously, this plays directly into religious freedom, and it is, in fact, one of the most major elements of religious freedom.  Religious hatred is what ultimately caused our Founding Fathers to be so explicit in protecting religious freedom and in prohibiting preferential treatment of any religion by the government.  As the second biggest concern, we should see a lot of discussion in Congress over this issue, given that it is the second most important thing Americans seem to care about.  Sadly, Congress is more worried about things that Americans seem to find trivial.  This is not the most disturbing part of the situation though.

The research indicates that the first biggest concern of Americans is income inequality.  This subject has gotten some attention in Congress, with the most prominent result being a health care law that forces those at the middle and lower ends to spend a larger percentage of their income on health care insurance than those with much higher incomes.  Technically, this is making income inequality worse, not better.  While this subject seems to come up a lot in Congress and in Presidential press conferences and such, little is being done to actually address it.  This is currently the most important issue to Americans, and Congress cannot be bothered to give it serious consideration long enough to actually do something about.  Instead, Congress is doing things like harassing our (admittedly poor) education system, repeatedly forcing it to adopt untested techniques to improve test scores.  Income inequality has consistently been proven to affect education outcome more than any other factor.  Income inequality is the primary reason than a significant percentage of Americans cannot afford health care insurance (and making laws requiring them to purchase it does nothing to fix that problem).  Income inequality is also very strongly linked to our recent and current economic problems.  It also seems to have strong links to crime as well.  Income inequality also has links to many types of self destructive behavior (drug and alcohol abuse, for instance).  Income inequality is closely related to a vast majority of the big problems Congress keeps failing to fix.

There is a field of medicine that is starting to get more attention recently called "functional medicine."  Traditional medicine treats symptoms.  If there is pain, pain killers are administered.  If there is skin dryness, lotions are administered.  If there is depression, medications designed primarily to make a person feel good are administered.  The catch with a vast majority of these treatments is that they treat the symptoms, but they do not treat the cause.  Chronic headaches, which are often treated with ever stronger pain killers, are typically caused by something that can be treated to eliminate the problem entirely.  Skin dryness, even chronic types, can often be cured by functional medicine, when normal dermatologists would prescribe a life time treatment of lotions and moisture buffers.  Instead of treating symptoms forever, functional medicine aims to cure the underlying cause of the symptoms, eliminating the symptoms for good.  Now, apply this to income inequality.

Income inequality is a known cause of many of the problems we currently face.  It is a likely cause for many other problems that we have either not researched or have not gathered enough supporting evidence to constitute proof of a causal relationship with.  The evidence indicates that this one thing could solve nearly all of the big problems Congress has been trying to fix over the last half century.  It is also currently the biggest concern of Americans.  Congress should be tackling income inequality head on, instead of skirting around it trying to cover up the symptoms.  Congress needs to stop flirting with special interests and start taking care of its primary responsibility: The people it is sworn to serve.

Time is Not Money

"Time is money."  This phrase is used so frequently that it has become a cliché.  Clichés like this one are so overused that they quickly become annoying.  The worst part about this one, however, is that it is patently false.  It may be possible, given the right circumstances, to exchange time for money.  On its own though, time is far more valuable than money.

Time is flexible.  Money is not.  Time can be spent on any number of things, including love and friendship.  Money cannot buy friends or love (another common cliché that contradicts the time cliché).  Time can be spent on many things that money cannot.  In addition, spending time can benefit both parties.  Trading time for money always benefits the employer more that the employee (otherwise it would be unprofitable).  Time can be spent on intangibles, like worship, while money cannot.  In addition, anything worth spending money on requires time to benefit from.  Even food takes time to eat.  Time is an incredibly flexible resource.  Money is an extremely limited resource.  Time is, in a sense, more raw.  It can be turned into money.  It can also be turned into a huge array of other things that money cannot be turned into.  Once time is turned into money, all of the other possibilities are lost.  So, time is far more valuable than money.

Knowing this, why are we so willing to give up more of our time in exchange for money?  Many Americans take work with them wherever they go, even when it is not a required part of the job.  Spending part of vacation time working has become a very common practice.  Even worse, those who do it the most are on salary, not hourly pay.  They are not actually being paid any more for their extra work.  Many people who become extremely rich through their "hard work" are trading time for money on a grand scale, and many of them are miserable or at least unhappy without the distractions of work.  Consider the relationship between cash and gold.  The value of gold typically rises at least as fast as inflation.  The value of cash diminishes over time, due to inflation.  Time is more flexible than even gold, but like gold, its value rises with inflation.  Even as the value of money decreases, the value of time increases.  This is not just a function of rising wages (which have actually risen slower than inflation over the past 60 years).  As travel becomes easier and cheaper, as knowledge becomes more readily available, and as more activities become available, time becomes ever more flexible and thus valuable.  Not only is time more valuable than money, its value is rising.

This begs an important question:  When people go into fields where their work is very valuable, why do they put up with long hours at higher wages?  I am a computer scientist.  Entry level salary in this field pays around $65,000 a year.  Some deluded companies expect 50 hours of work a week for this pay (there are plenty that will pay more for only 40 hours a week).  This pay is enough for a family of 5 or more to live fairly comfortably in most places in the U.S..  In fact, my family of 7 could do perfectly fine on half that.  That much money per year would be nice, but time is more valuable than money, even at that pay scale (in fact, it seems the higher the pay, the more valuable the time becomes, because less time is required to be traded to make enough money to be comfortable; also, more money opens up even more options for spending time).  Instead of desiring additional pay for higher quality work, we should be desiring additional free time.  If time is more valuable than money, then we should be willing to trade only as much time as is necessary to get enough money to be comfortable.  We should not be willing to squander all of our valuable time in trade for more money than we will ever need.  That is the definition of waste.  Working more than is necessary is literally a waste of our valuable time.

The aggressive, and rather excessive, tax systems in most European countries has driven this point home.  People who make too much money end up giving a majority of it to the government.  Instead of raising wages, at a certain point, employers increase vacation time and reduce hours, because employees will not accept promotions that will ultimately not benefit them significantly.  Those near the top of the pay scale (doctors, lawyers, and some tech industry) only work around 6 months out of the year, and sometimes even less.  They get copious vacation time, and promotions for this class of workers generally involve little or no salary increase, but instead involve added weeks of paid vacation time.  The time thing aside, this has some other pretty great economic benefits as well.  Overall though, wealthy Europeans clearly see that time is more valuable than money, though it may have required oppressive taxes devaluing money to open their eyes.

A major peripheral benefit of valuing time more than money is economic.  Employees who value time more than money will prefer reduced hours and increased vacation time to pay raises, once they earn enough to be comfortable.  Reducing the amount of time employees work will ultimately increase the number of jobs available.  A 30 hour work week would add one job for ever three full time employees.  That is a 33% increase in the number of available jobs.  A 20 hour work week (many workers in the medical, legal, and tech industries make enough to half their hours and pay and still be able to live better than a vast majority of Americans) would double the number of full time jobs.  In addition to all of this, shorter work periods would not significantly reduce productivity in most jobs.  Working eight hours a day, five days a week is quite tiring.  Even just eight hours in a day is pretty tiring.  After around five hours, productivity will drop significantly, as employees begin to experience fatigue.  This may also result in increased incidents of mistakes and accidents, which can lead to negative productivity.  Likewise, after three or four days in a row working eight hours, fatigue begins to set in and not just physical fatigue but also mental fatigue.  This will further reduce productivity and increase potentially costly errors.  Reducing hours (while maintaining total pay) of more productive employees will ultimately result in higher quality and more productive work.  Added to all of this is morale.  Morale has repeatedly proven to have a bigger impact on productivity and work quality than nearly anything else.  Economically, valuing time more than money is both healthy and profitable.  Not only is time more valuable than money, but treating time as more valuable can lead to higher profits and thus more money.

As our tax system is not as oppressive as that of most European nations, we cannot rely on it to force the truth down our throats.  Businesses in the U.S. are not smart enough to recognize that increased free time is more valuable to them and their employees than pay raises, so we cannot rely on businesses to change.  Our government is stuck on what was initially a temporary 40 hour work week, and it is unlikely to ever change that on its own, even though it is quickly becoming the only viable option for long term economic recovery.  The only way companies will reduce time worked, instead of paying more money, is if the workers refuse anything less.

Most companies will not fire a person for refusing a promotion.  Next time a promotion is offered, try negotiating for time instead of money*.  It probably will not work the first few times, because business tradition in the U.S. does not recognize time as a negotiable commodity.  You can either refuse the promotion outright if your boss will not negotiate time, or if the position really is one you want, attempting to negotiate time may at least increase the amount of raise that is offered.  If enough people do this with many different employers, businesses will eventually start to take notice.

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* Note that hourly employees should probably do the math for this to make sure that the requested time change will still earn enough money at whatever wage increase is settled upon.

Donating Ourselves to Death?

We might be donating ourselves to death.  Wealth goes two ways.  The first, and most often noted, is how much money a person has.  The second, and most frequently ignored or overlooked, is how much stuff costs.  A salary of $350,000 a month sounds like a lot, but when a one bedroom apartment costs $59,000 a month, suddenly that salary seems a bit low.

According to one website, ¥350,000 is about the average monthly salary in Japan, and according to another ¥59,000 a month is about the average rent for a one bedroom apartment outside of a city center.  Right, it is yen, not dollars, but given the same values in dollars, those wages would not be that impressive given those costs.

Where ignoring costs and focusing on dollar amount becomes problematic is when average pay raise is less than average inflation.  When pay increases less than inflation, it is the same as pay decreasing by the difference.  This has been happening in the US, especially among the middle and lower classes, since at least 1960.  That, however, is not the subject of this article.

Modern companies are expected by many consumers to back popular causes.  Companies that donate to educational, environmental, or human rights causes are are revered by many consumers, and companies that do not are viewed as evil money grubbers.  The consequence is that companies feel obligated to back some popular cause, because otherwise they will loose business and eventually fail.  From a cost point of view this is problematic.

It is possible to reduce the income of the poor without ever touching their money or reducing their wages or welfare benefits.  All that is necessary is to raise prices without raising the wages and benefits of the poor.  An extremely effective way for the general public to do this is to make companies feel obligated to spend money on something that will not bring any profit.  Consumers who refuse to do business with companies that do not support some popular cause force businesses to spend more money on unprofitable things.  This, in turn, forces those companies to raise their prices.  Increased prices make the poor even poorer.

While supporting moral causes is a good thing, expecting businesses to do so is a misplacement of resources.  When a business donates to a cause, it is indirectly forcing all of its customers to donate to that cause.  If some of those customers cannot afford to donate, then this practice is unethical.  This kind of shopping habit perverts competition to force businesses to do things that are oppressive to the lower classes.  The correct application of market forces uses competition to keep prices low, and this application of competition supports a healthy economy.  Competition that values things other than price or product quality almost always results in increases in price and reductions in quality.  Admittedly, competition that encourages businesses to act ethically (from a business standpoint, not a popular cause standpoint) can be very good and can help keep workplaces safe and encourage ethical treatment of employees (though it still increases prices and/or reduces quality but justifiably).  Competition that encourages or forces businesses to start acting outside of their sphere of influence, however, is harmful to the economy, because it drains funds from the rich and poor equally and without their consent.

We might be donating ourselves to death.  The graduated income tax system is designed to put the majority of the tax burden on those with the majority of the money.  At first this may seem unfair, but a government that protects the ownership of property benefits the wealthy far more than the poor, because the wealthy have more to protect.  In addition, the poor cannot afford much if any of the burden, and what good is a government that favors protecting property ownership over the lives and well being of its citizens?  When businesses donate, they impose a sort of flat tax on all of their customers.  Of course, the rich pay more than the poor, because they spend more, but the poor cannot afford to pay any of this involuntary tax.  By donating to popular causes, businesses are harming the economy and robbing the poor.  When people refuse to shop at the cheaper stores because those stores do not donate to a popular cause, they are paying the more expensive store off for oppressing the poor.

It is not fair to blame the businesses for this problem, because they are not, for the most part, responsible.  They are responding to market forces.  If they did not do this, they would ultimately fail.  The blame goes to the people who blindly choose to avoid stores that do not donate without considering the consequences.  The blame goes to the people who are too lazy to donate directly and instead patronize businesses that donate so they can feel good about themselves anyway.  If a cause is worth supporting, it is worth donating directly, instead of spreading the burden to those who cannot afford it by expecting businesses to do the work of donating.

Philanthropy does not belong in for-profit business.  Those who want to donate to a cause should do it themselves instead of expecting someone else to do it for them.  It is hard enough for the poor without forcing them to donate to every popular cause.  This problem is one of the many reasons the US economy is struggling and taking so long to recover.

Fair Pay

I believe I have expressed my opinion on this subject before, so I will summarize:  Any job that cannot pay enough for employees to live off of is not worth doing.

Minimum wage is starting to become a big deal again, as Obama pushes to have it raised by around 33%.  Fast food employees have started a movement to have minimum wage, at least for fast food jobs, raised by almost 100%.  Current minimum wage is almost half the poverty level (70% according to the government definition, but according to actual accurate data it is less than 50%).  If minimum wage is supposed to provide enough to live on, why has it not been raised sooner?

The Republican Party is largely to blame, along with many large businesses.  The claim is that raising minimum wage will put more people out of work.  This is probably true.  So, I guess they think it is better to let most of the population starve than to make businesses pay fair wages and have less workers but with fair pay.  Really, this is an unsolvable problem from this point of view.  I have already shown how a basic income would solve this problem, so I am not going to harp on that, but I would like to discuss how some large businesses are actually trying to do something about this problem.

I just read this article.  It discusses how some businesses are voluntarily raising their minimum wage.  (I would like to point out how absolutely disgusting it is that self interested businesses have recognized this problem before our government, which is supposed to be paying attention to our needs.)  Ikea recently announced an internal minimum wage of $10.76 an hour (to be implemented soon).  Gap is raising their minimum to $9.00 an hour and already has plans for increasing it to $10.00 an hour in the near future.  Costco already pays a minimum of $11.50 an hour, but the article says that bonuses bring it up to an average of $21 an hour.  Whole Foods also pays $10.00 minimum (with an average of almost twice that).  The last two mentioned in the article are fast food places.  Shake Shack and In-N-Out pay a minimum of $10.00 and $10.50 an hour respectively, with In-N-Out also providing vacation and retirement benefits.

None of these companies are doing poorly.  Costco says the higher wages pay off in productivity and lower employee turnover, and compared to Sam's Club, which does not pay fair wages, the evidence supports that claim (also note that Costco still manages to charge very low prices despite paying their employees around twice what Sam's does).  As far as claims that raising minimum wage will hurt businesses go, the evidence seems to prove the exact opposite.

It is probable that raising minimum wage will make unemployment worse.  This is a natural effect of the law of supply and demand.  When supply and demand are not a matter of life and death, it might be ethical to consider their impact before raising the cost of such an essential commodity as labor.  When it is a matter of life and death, it is not ethical to consider the problem entirely from an economic point of view.  Minimum wage is exactly one of these life and death cases.  Due to a number of different factors, our economy is incapable of providing enough work for everyone who wants it, and the consequence is that the U.S. is slowly sinking into widespread poverty.  There are many solutions to this problem, but they all require more than just changing minimum wage.  Businesses should be required by law to pay fair wages, and a minimum wage that pays $15,000 a year is not fair wages.  We need a minimum wage that pays more than the poverty level to have a sustainable economy.  Raising minimum wage should not even be a question, and if our government cannot see that, then they are not qualified to rule anything, especially not a large country.  Bickering about minimum wage and unemployment is a waste of time.  Once minimum wage is taken care of, we can start looking at other options to take care of the larger problem.  So long as people are relying on minimum wage as their primary form of support though, businesses and the government are morally obligated to make sure it is high enough to provide sufficient support.

I have multiple suggestions to solve the worst of our economic problems, and a basic income is at the top of that list (a basic income would also obviate the need for any minimum wage).  A wage cap would help take care of the supply and demand problem inherent in a minimum wage.  Even a more robust welfare system would help, though it would cost far more than it is worth, with the current needs based system.  Ultimately, we really are living in an unsustainable economy.  It is impossible for a business to survive when it pays less for its resources than they cost to produce.  Minimum wage was designed to solve that problem for labor.  It currently does a very poor job.