An Argument for a Minimum Wage

There have been myriad studies about the impact of having a minimum wage. Some indicate that there is no particularly strong linkage between creating a higher wage for low wage workers and some indicate that a rise in the min wage causes unemployment.

The politicians arguing against a min wage use a very simplified argument: namely that if employers have to pay their workers more, they will only be able to hire so many workers, mostly fewer. This is way too simple in thinking this. For one, if people are paid more money, they then spend more money (what goes around, comes around) which is good for business. There are many more facets to this issue.

If labor costs go up, and they have myriad times due to labor contracts, etc. how, oh how, do companies cope? (Yes, I am being sarcastic.) The amount of money that goes to labor in any company is not a fixed amount or even a fixed percentage of the company’s budget. There are many, many ways that those increased labor costs can be offset. For one, you can raise prices for the goods created. You could decrease profits. You could find other ways to reduce operating costs (reduce energy costs by going solar, etc.).

Knee jerk responses to these actions abound, of course. “If we raise prices, we will reduce sales!” Really? Companies never raise prices, then? C’mon, get real. Just raising prices alone, of course, is the lazy way to deal with increased labor costs; a combination of actions would be better.

Most of these minimum wage discussions are shallow and politically motivated. Basically, the opponents of min wage increases give minimal arguments and only add to them if we don’t accept (aka we reject vehemently) their overly simplistic argument.

Let me explain a real reason for min wage increases. Minimum wage increases are justified for the simple reason is that business interests (aka the plutocrats) have conspired to suppress wages for a long, long time. This involves bribing politicians to undermine union powers and privileges, delaying minimum wage increases, changing the laws in favor of employers over employees, etc. They have been particularly effective over the past 40 years (see the chart below as to the effectiveness of wage suppression over the past 40 years). The only power source of ordinary people to oppose these powerful business interests is government. The cabal wants wages low (too low) and so government must set a floor on wages. It is not simple but at least that is the political dynamic.

If you want to see this playing out right now, consider the current stance of the GOP. The GOP has been the champion of local rights for a long time. Education, for example, should not be a federal issue, but should reside in the states, with the states deferring to local communities and their school boards. So, what has been the GOP response to cities who have enacted their own min wage increases? GOP dominated states are passing laws to roll back those democratically achieved minimum wage increases and to bar such local increases in the future. Local control doesn’t mean a fig when the GOP’s paymasters issue directives (You will keep wages down, or else).

Getting Sharp with Razor Blades

I am getting very tired of things invented just to be able to make money and which actually do not create any value. (tag line Capitalism Amok!)

What got me thinking about this was razor blades, of all things. I had blanched at the last time I went to buy razor blades. They were thirty dollars for six “cartridges.” And I was in a discount store! So, I had my eyes open for an alternative and I found “Harry’s” (A good shave at a good price!) and they had a special offer on a handle and a set of blades, so I took a chance. The handle was quite nice (plastic but not flimsy) and the blades, er, cartridges were similar looking to many of the others. When I tried shaving with one, I discovered that there was a bit more drag than with a new Gillette cartridge, but they seemed to retain their sharpness for longer. The Gillette blades grew more dull faster. And they were a small fraction of the cost, so I was good to go.

Then I needed to reorder blades and I received a different cartridge, one “new” and “improved.” Nothing can be both new and improved, I assumed this one was new and better than the old one. Why change the design if it isn’t to improve the quality? Well, these new cartridges had much more drag than the old ones. They were still using (supposedly) German steel (not surprising as they have stopped making steel in the U.S.) so what was the problem? I looked at the new design and noticed that now there are five blades when before there were four.

I was disgusted. I then ran across an article extolling the virtues of old safety razors, like our fathers used, especially since you didn’t have to track down an old one; they were still making them. I hadn’t used one of these in over 50 years but the article was convincing. I bought an inexpensive razor and, at the recommendation of the article razor blades from Amazon: 100 blades for $10! Now we are talking! My cheap core soared like a bird.

The really interesting thing I learned when I took my first shave was that I got the best shave I had had in my memory. Not recent memory, all of it! I also got a bit of a nick, being out of practice with that instrument.

Why did this single edge razor perform so much better than these high tech modern ones. It was all very puzzling. The old razor took much less pressure and seemed to do a better job without needing a lot more strokes to get the job done. Then it occurred to me.

Can you see the gaps between the blades? They are there but really small.

Do you know how a knife cuts? Most people think that a knife cuts like a saw but really a knife is a pressure generating tool. The entire weight of a kitchen knife plus whatever force you add to that (usually not much is needed) gets distributed on a surface of very little area: the knife’s edge. Pressure is “force per unit area” and is calculated by taking the weight involved (weight is a force) and dividing it by the area it is spread over. How much area do you thing a knife’s edge has? (Hint: damned little.) And, of course, the only part of the edge that counts is the part in contact with the carrot or whatever, the rest doesn’t matter. A weight of just a few pounds (combined weight of knife and simulated weight added by your skillful manipulation of the knife) divided by a very tiny area and you get enormous pressures. This pressure basically pushes the carrot apart. (This is also why dull knives are so dangerous. The pressure created over a dull edge is much less which leads us to press harder and harder which leads to slips and … ouch!)

What is true for a knife is also true for a razor blade. When one blade was replaced by two you increase the area of edge by 2X. Now if what you were cutting was two times wider, that would have averaged out, but those blades are not cutting the same hairs. So, two blades, three, four, five…! We now have five times the blade area, so we have to use five times the push to get them to cut the same as the old razors.

So, thinking like “two blades ought to be twice as efficient/good/etc. than one” lead us down the garden path to $6 shaving cartridges (Each!) which do no better than the old one-bladed ones. We did not check our thinking; we just accepted their marketing as true and forgot about it. (Remember the frog in the pot of water with the temperature slowly rising?)

Does a two-bladed razor require half of the strokes to do the job? I didn’t notice any effort saving all the way up the ladder to five-blade “cartridges.” I did notice fewer nicks, though, even though I was pressing harder and harder all the time. The reason there are fewer nicks is plain to the naked eye. If you look at one of these cartridges, you will see than none of the blades is exposed much at all. This is where the safety razor had its fault. It exposed a lot of blade and that blade mowed down facial hair like a scythe; it also could nick you if you didn’t pay attention. To help with this, new safety razors have different amounts of blade exposure built in and there are various blade designs, etc. to enable a best set up for your face and skin.

It is a whole new … old … world. Old and Improved!

We Have Met the Enemy … and It Isn’t Us

We have met the enemy and it is … our corporations. Consider first a couple of examples:

You have heard, I am sure, of the so-called “skills gap,” which is that American workers just do not have the skills needed for “today’s marketplace,” so we need to issue more foreign worker visas to fill the necessary jobs. One of the fields clamoring for more of these visas has been Information Technology (IT). IBM, a quintessential American IT company, hid the facts for many years but now it is clear. Between 2003 and 2010, IBM fired so many American IT professionals and hired so many engineers and computer programmers in India that the workforce of IBM India is now larger than that of IBM USA. IBM India had a mere 6,000 workers in 2003 but by 2010 had somewhere in the range of 100,000-130,000 workers. How did IBM manage this into the teeth of the worst global recession ever? It did it by firing over 30,000 workers here in the U.S.

IBM calls this “cross border job shifting,” which sounds ever so much more like a transfer than people getting fired here and others getting hired there. And IBM is not alone in doing this, so how can there be a shortage of IT workers in the US when there are so many Americans who used to hold the very same jobs that are claimed are “going wanting?” What is the real rationale for the demand to be issuing more visas for foreign workers? There is no shortage of highly qualified IT workers. This is simply a classic wage-suppression tactic. Bring in foreign workers and pay them less than you would American workers with the same qualifications. This makes it very much harder for Americans to get wage increases here and also harder to form unions that would look into such practices. Foreign workers do not want to anger their employers because if they lose their job, they lose their job sponsor, and it is back to India for them. They will not join a union, period.

Now, consider another quintessential American company, Ford. Can there be a more American story involving business that the creation of the Ford Motor Company from scratch? But in the late 1990’s, Alex Trotman, Ford’s then CEO, admitted “Ford isn’t even an American company, strictly speaking; we’re global.”

And if American companies like these do not consider themselves “American companies,” how much can we expect them to act on our behalf? When I was a young man, many corporations had multiple stakeholders. These corporations considered their customers to be one, along with their workers as another, and their communities, too. And, of course, also their shareholders. Modern business practices, spurred along by quack economists like Milton Friedman, had reduced the number of corporate stakeholders to one: the shareholders. Well, just one stakeholder if you do not count the executive’s self-interest in their own remuneration, which has skyrocketed while worker wages have been experiencing trickle-up growth.

As a union officer in the 1980’s and 90’s I participated in an experiment with management of our enterprise ($150 million annual budget) on creating a more cooperative governance structure. Part of that effort was coming to an understanding of relationships between and among the two groups. One facet of that learning was that “workers” (we all worked for the company) we all tended to imbue our work relationship with trust, that is we put our trust into our employer to some extent. This was not earned trust but, basically, we trusted our employer because we wanted to have a job in which we could trust our employer. This wishful thinking trust usually had no repercussions, but when something happen that a worker or workers did not like, they felt betrayed by someone they had trusted (trusted to do what was never specific, usually it was “the right thing”). Such “betrayals” existed in collective memory for decades. (I know this as when I was hired into this company I heard “stories” from other employees. I found out later that some of them were almost 30 years old.)

We are making that mistake now. We are told by representatives of these “American companies” that we should “trust the marketplace” and “trust them.” But their actions indicate that not only are they untrustworthy but they are not even American companies. Imagine how you would feel if a foreign company, say from China, wanted to come into your community and build a plant, one with a bit of pollution associated with it. Then think how you would view that intention were is an American company? Would your response be the same? Yet, these American companies no longer consider themselves to be American, and have acted accordingly for decades now, but we still “trust” them more than we do others.

These companies have no issue with firing you and hiring a replacement from overseas and ask you to train your cheaper replacement (happens all the time, happened to my ex-wife). These companies have no problem with going through bankruptcy to eliminate their obligation to pay into their worker’s pensions. These companies have no problem with manipulating our tax laws so that they pay no taxes, with the burden to make up the difference shifted to you and me. These companies have no problem in bribing our public officials to do their bidding instead of the people’s. And if you want to know why our recovery from the Mother of all Recessions was so weak, with employment struggling to get back to anything approximating normal, realize that business leaders see every crisis as an opportunity and in this crisis they used the opportunity to outsource even more jobs. They were hiring, just not in the U.S. That is how much loyalty they have to their bottom line and how much they have to you and me.

Ironically, we have just elected a corporate businessman President to fix this mess (drain the swamp). If this were not so ironic, so funny, I would be crying. When are we going to wake up? When are we going to invest our passion and our votes in organizations, like labor unions, that have proven track records for countering these un-American corporate interests?

Wake up people! It is very close to “too late.”

More Run the Government Like a Business BS

We have elected a “businessman” as president and we often hear a campaign trope that we “ought to run our government as a business.” This is inherently stupid. How many businesses do you know which have an army with nuclear weapons and which can print money? Government is not a business and while some business methods do apply, many more do not.

Consider the recommendation of the Trump administration to cut the budget of the IRS. Imagine a business take over artist, taking the reins of a troubled business and the first action he takes is to cut the budget of the Accounts Receivable department. This is guaranteed to reduce the company’s income for no benefit whatsoever. Reducing the budget of the IRS is no different. Increasing their budget would make more sense, even for the GOP.

Opponents of the IRS have an acute case of “shoot the messenger syndrome.” The IRS does not make the tax laws, it does not set tax rates. Congress does. The IRS only does what Congress tells it to do. To cut the budget of the IRS is Congress telling the IRS to not do what Congress says. This is at best bizarre.

When one examines this most recent budget proposal, one is reminded of the movie Dave in which an impersonator of the President (played brilliantly by Kevin Klein) asks his friend Murray, an accountant, to help him find budget cuts that allow for a program near and dear to the First Lady’s heart receive funding. The cuts in the movie are patently ridiculous (e.g. a program to make people who have already purchased autos feel good about their purchases) which reinforces the public’s idea of “stupid government programs,” but in the Trump budget, programs which are inherently valuable are being axed to fund tax cuts for the rich and a budget increase for the Pentagon that was neither requested, nor is it needed.

This is not running government like a business, it is running a government via a bizarre ideology that rewards militarism (as long as it is profitable to GOP donors), diminishes succor to the poor and enriches those already rich.

We really need to have a serious conversation about the ideology of the GOP, being a manifestation of the mind of Scrooge McDuck at best and a national tragedy at worst.

The Utter Failure of Economics and Politics to Prevent the Ravaging of the Rich

I ran across this rather incredible graph recently:

The data are from the UK so I looked to see if I could find any similarities to data from the US, and yes, they are there.

The graph shows the growth of worker productivity from the years 1800 to 2010. Since all of the values are positive, productivity has trended upward in general. But you can see four distinct trends on this graph: first there is a strong increase in productivity from 1800 to about 1870, then a general decline in the rate from 1870 to about 1900 (while still being positive, the amount of increase dropped period by period). Then there is another long period of productivity increase improvements from roughly 1900 to the mid 1970’s, followed by another decline in the rate of increase from 1970’s to the present.

What do these periods in which productivity changes steadily decline in magnitude correlate with? Ah, the period 1870-1900 is often referred to as the “Gilded Age.” And the mid-1970’s to the present started with Reganism/Thatcherism and is the second great period of wealth transference to the few in this entire time period.

We have been told over and over that the accumulation of wealth by the few in our society is a good thing. The wealthy are the “job creators,” the movers and shakers who get things done. But the reality is exactly the opposite. The people who have been telling us that wealth inequality is a standard feature of capitalism and a “good thing” are just the PR men for the wealthy, trying to avoid pitchforks and torches showing up in the gated communities of their rich paymasters. That so many of these flacks are economists should be appalling to the intellectual community. (Maybe we should disbar them and transfer academic economic departments to become part of the marketing programs of schools of business.)

All of the data show that periods of extreme wealth accumulation by the few devastate economies instead of facilitating them. The steepest upward portion of this graph takes place between the end of World War 2 and the arrival of Reganism/Thatcherism and anti-unionism. Productivity grows the fastest when the wealth is shared more fairly.

Please note that there were rich people during this post-war period. There were many people getting rich for the first time. They weren’t, however, getting filthy rich by distorting the political systems in their favor. Becoming rich through your own skills is one thing. Becoming obscenely rich by hook or crook, though, hurts all of us.

Straw Dogs to the Left of Me …

The N.Y. Times is running a series on wealth with the subtitle of “Articles on Managing Fortunes, Improving Lifestyles, and Finding Financial Security.” (Somehow sucking up to the wealthy qualifies as all of the news fit to print.) Today’s contribution is “Why You Might Not Want to Take Away a Billionaire’s Money” by Jeff Sommer.

Mr. Sommer begins his article thus:
“There is a problem with billionaires: They’ve got way more money than any human deserves.

“But if you were simply to take it all away from them, you would, in many cases, be doing more harm than good.”

WTF? Who is calling for taking away all of the money from the rich? Anybody? Nobody I know. Then he uses John D. Rockefeller as an icon of philanthropy to support his thesis (all of those museums, and scholarships, and schools, oh my). He doesn’t mention Mr. Rockefeller’s rapacious business practices or any of his other negatives, he just mentions parks and museums and schools, etc.

His point is the same as many others: billionaires know better what to do with money than you do, no matter how they managed to acquire it. I have written about this before in “Bill Gates Ideas Are Better than Yours.” But the current point still has no basis in reality. The only way you could test this hypothesis, is to give an ordinary person a billion dollars and ask them how they would donate it to good causes, then compare the performances of the rich and poor philanthropists. Basically the article’s argument is that billionaires spend their money better than a guy who would pile it all up and burn it. (No, duh!) This argument is a version of the comedian Gallagher’s dog food commercial which goes “Look how much friskier the Alpo dog is than the dead dog over there.”

Also, it stacks museums, etc. on one side of the ledger and doesn’t place anything on the other, other than “non-museums.” I think if you were to do the most draconian thing, take away 80% of a billionaire’s money and give it to the poor, that money would vanish from human sight. (It would get spent.) But what value do you place on being able to feed your children, send them to school, or afford medical care for your spouse. No one could visit those things sometime in the future but the benefit would be very, very tangible to the people afforded those things, the hundreds of thousands of people afforded those things.

And what about the billionaires, like the Koch brothers, using their wealth to make sure that ordinary people have no say in our government, that their ideas get implemented and the poor, well they need to go get a job. These people have amassed great wealth by commercially taking small amounts of money from many, many people. Then they used that wealth to rig the game to make even more wealth. Consider the Bush tax cuts that transferred large amounts of money to the very wealthy in the form of taxes not needing to be paid, with the shortfall in federal receipts being made up by smaller amounts collected from millions of Americans. Because of this, if the wealth were to be transferred back, it would only involve a small amount to each individual American, but the point is that wealth should never have been accumulated in the first place. (I will blog about this shortly.)

And before I hear from droves of apologists for the wealthy, you can stick your globalization and free trade arguments where the sun doesn’t shine. The same factors affect all of the world’s economies and in none of those other countries has wealth inequality anything even approximating what it is in the U.S. The rich have captured our government and are running it for their own benefit, which proves my second point: the damned billionaires can’t be trusted with the power that comes with that wealth. For every benign billionaire, like Warren Buffet, there are a dozen rapacious assholes, like the Koch brothers.

Also interesting is how such poorly-argued propaganda for the rich got past the editors of the N.Y. Times. Oh, I forgot, the Times is owned by the wealthy, as are most of the rest of the news media. Sucking up to the boss is so very easy to do.

An Appalling Lack of Chemical Knowledge

As reported in The Grist:

This Plant in India Transforms CO₂ into Baking Soda
“Tuticorin Alkali Chemicals promises to prevent emissions of 60,000 tons of CO₂ a year by redirecting it from a coal-powered boiler to a new industrial process.

“Here’s how the technology works: As the chemical plant’s coal-fired boiler releases flue gas, a spritz of a patented new chemical strips out the molecules of CO₂. The captured CO₂ is then mixed with rock salt and ammonia to make baking soda.

“The process, invented by Carbon Clean Solutions, marks a global breakthrough in carbon-capture technology. Most such projects aim to bury CO₂ in underground rocks, reaping no economic benefit; that’s called carbon capture and storage (CCS). But Tuticorin represents the first successful industrial-scale application of carbon capture and utilization (CCU), meaning the carbon is put to good use and helps turn a profit.

“Tuticorin’s owner says the plant now has virtually no emissions. And the facility is not receiving any government subsidies. Many carbon-capture projects have needed subsidies because of high costs, but Carbon Clean’s process is more efficient, requiring less energy and less equipment.

“Carbon Clean believes that CCU could ultimately neutralize 5 to 10 percent of the world’s CO₂ emissions from coal.

Hello?

The operative (and errant) phrase here is “Most such projects aim to bury CO₂ in underground rocks, reaping no economic benefit.” The reason is that if sodium bicarbonate (aka baking soda, or sodium hydrogen carbonate) gets used, the CO₂ gets released back into the atmosphere! Bloody Hell!

Effing morons!

Here are some of the myriad uses of sodium bicarbonate:
Used to kill cockroaches. Once consumed, it causes internal organs of cockroaches to burst due to gas collection. The “gas” is CO₂!

Sodium bicarbonate is one of the main components of the common incendiary “black snake” firework. The effect is caused by the thermal decomposition, which produces carbon dioxide gas to produce a long snake-like ash as a combustion product of the other main component.

Sodium bicarbonate can be used to extinguish small grease or electrical fires by being thrown over the fire, as heating of sodium bicarbonate releases carbon dioxide. Note: It is also used in “dry chemical” fire extinguishers. The CO₂ released is what really extinguishes the fire.

Sodium bicarbonate mixed with water can be used as an antacid to treat acid indigestion and heartburn. Part of the relief is due to CO₂ being released which adds to the pre-existing stomach gas causing that gas to be released in a belch.

Morons! “… meaning the carbon is put to good use and helps turn a profit” means the CO₂ is put back into the atmosphere! But as long as there is an effing profit, who cares!

Would you have read this and believed it? Would you have been fooled into thinking that this is a good thing for Climate Change reduction? Basically these idiots are renting the CO₂ for a short time, causing no net reduction in atmospheric CO₂. The only way for this to reduce CO₂ accumulation in the atmosphere is for it to be not used! Which is exactly what this company scorned? Sequester it, lock it away? But we could sell it!

Morons!

 

Conservatives Find this Lack of Greed Un-American

The owner of a bookstore business is just going to give the business away! Shocking!

Final Chapter for Petaluma Bookstore

I am sure conservatives are scurrying to find away to block this abominable action, before it becomes a trend!

The Productivity Paradox

From a N.Y. Times column by Neil Irwin (Faster Growth? Two Things Trump Supporters Won’t Like, 12-28-16) the following excerpt was taken:

The Productivity Paradox
Low productivity growth has been one of the chronic problems of the economy in the last decade, and an important contributor to the low growth rate, even if economists aren’t entirely sure why it’s happening. If we want living standards to rise over time, we need productivity to rise.
But the connection between productivity gains and higher incomes can take time to play out. Often it means short-term disruption — job loss — for workers whose jobs are rendered unnecessary.

Apparently the low productivity growth of the last ten years puzzles the author. It shouldn’t. Here’s why.

Since higher and higher productivity over the last 40 years hasn’t resulted in higher wages, just what is the incentive for workers to produce greater productivity? I am sure the economically inclined could point to the earlier years described by the data on this graph as one in which workers produced more because of the salary incentives, precisely  because productivity and wages were linked and had been for quite some time. In fact, I can remember UAW negotiations for new labor contracts with Detroit automakers specifically mentioning that for higher wages to be part of any new contracts, higher productivities must be produced. It was a common discussion.

But now, all of the benefits of higher productivity go elsewhere than into worker’s pay envelopes, so what did Mr. Irwin think was going to happen? Does he thing that 40 years is an appropriate amount of time for “the connection between productivity gains and higher incomes … to play out”?

If You Think The System is Not Rigged … Read This

We will have Mr. Trump as our next president precisely because voters thought that the economic and political systems are rigged against them. That this “feeling” is based in fact should give pause to those currently excoriating Trump voters for voting against their own financial interests.

A Financial Times (London) report on a Lancaster University Management School study, said in part:

“The correlation between high executive pay and good performance is “negligible”, a new academic study has found, providing reformers with fresh evidence that a shake-up of Britain’s corporate remuneration systems is overdue.

“Although big company bosses enjoyed pay rises of more than 80 per cent in a decade, performance as measured by economic returns on invested capital was less than 1 per cent over the period, the paper by Lancaster University Management School says.

“Our findings suggest a material disconnect between pay and fundamental value generation for, and returns to, capital providers,” the authors of the report said.

“In a study of more than a decade of data on the pay and performance of Britain’s 350 biggest listed companies, Weijia Li and Steven Young found that remuneration had increased 82 per cent in real terms over the 11 years to 2014.

“Much of the increase was the result of performance-based pay. But, the report’s authors say, the metrics used to assess performance — such as total shareholder return and earnings per share growth — are unsophisticated and short-termist, acting against the interests of long-term investors. The research found that the median economic return on invested capital, a preferable measure, was less than 1 per cent over the same period.”

What is true in the UK is more than true in the U.S. as we are the leaders of this “the CEO is King/Emperor” movement. Like all of the other propaganda, black is white (and vice-versa). CEOs claim their compensation is “performance-based,” which it clearly is not as they have rigged the system by defining “performance” in a way that results in raises for themselves but no one else. When people hear that CEO salaries are “performance-based,” they assume the huge salaries and retirement programs CEOs “earn” are warranted because they don’t think to ask for the details. Well, the details are now out in the open and “the King/Emperor has no clothes” or any other kind of protective cover.

I am declaring that it is not open season on CEOs (no, not the Second amendment kind), but let’s see how many we can take down.

Since the CEO’s aren’t doing much for those gaudy salaries, one approach would be to fire them and ask the First Vice-CEO if he would like the job at half of the current CEO’s salary. I suggest no one will hear the word “no” to these offers. If the performance of that CEO is as abysmal as the one’s now, then fire that replacement and ask his second in command if he would like the job at half of his superior’s salary. If this doesn’t result in superior performance, it will certainly reduce overpayment of the CEO.

And, this is just a manifestation of the “disruption” all of the business experts say is so good for the growth of companies, just applied to top management … for once.