Jobless Rate: The Truth Bubble?

[Sharky]

Re: Jobless Rate: The Truth Bubble?

This is actually not quite true. Let us take the California Minimum Wage $8.00 per hour -- and transport that to somebody in India -- the living standard of that person earning $8 per hour (in purchasing terms and standard of living) is equivalent to that of somebody earning $80 per hour -- in other words >$160,000 per year, and would be in the top 5% of income earners in India just as $160,000 would be here in the US.

You say -- how is that possible -- it is because the exchange rate is determined purely by Internatonal trade and the printing of money by the FIRE sector -- it does not reflect the realities of life on the ground. The markets in this regard are extremely imperfect and subject to externalities. This another way for FIRE sector to shift money from the 90% of the US population to the the top 1% -- an empoverishment of the US population by the US financial elite.

So what you have asserted is untrue and quite misleading.

Actually, what I specifically said is absolutely true: there are many people in the world who are paid less than the US minimum wage, and yet survive just fine.

However, some of what you said answers part of the question I posed as to why that works: it's because the cost of living varies considerably from one part of the world to another. As you said US$8/hr in India buys a lot more than in the US--just as US$0.25/hr buys a lot more in rural China than it does in the US.

The cost of living also varies considerably from one region to another in the US. US$7.25/hr buys a lot more in rural Mississippi than in NYC, yet the minimum wage is the same in both places.

Part of the argument I'm trying to make is that purchasing power is what's important, along with individual rights and the freedom of choice. If I could create jobs that paid less than minimum wage in rural Mississippi, where the purchasing power of the dollar is higher and where unemployment rates are higher and people clearly want and need jobs and would voluntarily work for a lower wage, I am currently legally forbidden to do so. That strikes me as incredibly immoral -- and yet others claim that voluntarily working for a lower wage is somehow akin to slavery, when in reality it's the complete opposite.

Again, it's not the choice between a low-wage job and a high-wage job that faces most unemployed people: it's a choice between no job and a low-wage job; between food on the table and starvation; between government assistance and maintaining their self-esteem. I'm also not advocating any force or coercion, as implied by slavery; I'm suggesting simple, free choice.

It's odd to me that so many people these days seem to equate free choice with evil and government-sanctioned theft in the form of taxes and wealth redistribution as moral.

[Sharky]

Re: Jobless Rate: The Truth Bubble?

Two separate ideas but related. One is specific. Employees should be paid a living wage. The second idea is more broad philosophical concept. The strong will prey on the weak. In the financial relationship between business owners/managers and employees, the owners generally have the upper hand unless the employee is the "talent". If you don't think so, possibly you could explain how a checker at Walmart is not weak in comparison to the store manager, much less the major share holders. As a business owner, I try to be aware that the structure is not equal so we have to incorporate a structure that rewards everyone fairly. Without it, business, especially business which requires little talent, devolves easily into a feudal structure.

I don't understand why the strong should necessarily prey on the weak. That doesn't make sense to me, and it doesn't fit with my life experience at all. Perhaps you have an example that doesn't also involve breaking the law?

To me, preying on someone implies taking advantage of them. Do you consider offering someone a job at a fair wage as being taken advantage of? The strong people I've known (and I've known quite a few) have all, to a person, had a very high level of respect for the "weak" around them.

A checker at Wal-Mart is not weak in comparison to their manager. A checker is working there voluntarily. If they don't like the pay or the work conditions, they are free to leave at any time. Their manager cannot force them to stay; the power to leave is fully in the hands of the employee. Most companies invest a fair amount in training employees. Assuming they perform well, they become valuable to their employers. If they leave, it costs the employer money to find and train a replacement and can cause gaps in work coverage or production or earnings; once again, the power is with the employee. Employers are not free to arbitrarily fire employees; they must show cause (except in the events of layoffs, which is when the employer no longer has a need for a particular type of employee). If an employer refuses to pay their wages, courts are strongly biased to favor employees. Employees are free to create or join unions; employers are not. Etc, etc.

The only powers an employer really has are hire/no-hire, direction regarding what the employee does in return for their wages, and potentially the threat or reality of layoffs. Wages are a two-way negotiation, so they don't count.

FWIW, I ran my own small business for quite a few years, with a dozen or so employees. I also worked in my family's business, which employed hundreds of people -- so I'm speaking from personal experience, not some theoretical.

Let's assume you're correct and a person was, to the best of their ability, creating a business which would only be viable if they under-pay their employees. The classic example is slavery - You don't pay your employees at all. Your defense is that not paying employees is the only way you can make a decent living at the business you've started. In your unregulated free market world, this is a reasonable course of action. I can only assume you missed your calling by about 200 years.

Slavery is nowhere close to an example of what I'm talking about, because it involves coercion. I'm talking about an environment that involves free choice.

I'm also not talking about "under-paying" employees. Saying that implies that they are being paid less than market value, or that they are somehow being coerced. No, I'm talking about paying people their fair market worth, taking into account the vast array of factors that any businessman does, such as market conditions, cost of living, supply and demand of both the product they're selling and the skills they are hiring, employee turnover, etc.

In a free market, if someone is being paid below market rates (all things considered), they will quickly figure that out, and simply leave to work for someone who is paying a fair wage. In fact, that dynamic is precisely what prevents the original wages from being unfair in the first place.

That is not a great question. Maybe you can read the Jefferson Bible. That might help.

I'm not religious, but my parents were, although they were closer to deists like Jefferson than to modern Christians. The main thing they taught me about Judeo-Christian ethics is that if you work hard, you should expect to be rewarded accordingly. Everything I've said and advocated is fully in alignment with that way of thinking.

What I don't agree with is not working hard and still expecting to be rewarded, or, worse yet, expecting the government to steal from my neighbors to pay me for doing nothing. In fact, those actions would seem to directly conflict with Judeo-Christian ethics as I understand them (though I'm certainly no expert).

[Rajiv]

Re: Jobless Rate: The Truth Bubble?

Yes you are getting close to the answer. But the problem is systemic in nature, and unfortunately individual actors can do little to correct it other than to act in their own best interests. However doing that often results in things actally worsening (often because everybody else is doing the same thing!)

Some of this has been brought out in EJ's latest article - The Bucking Bronco Job Market – Part I: Unemployment by industry - Eric Janszen. However, he does not address the issues that have caused the shift in jobs from the US to China. In my opinion, this shift is another artifact of the monetary system, and the decimation of the regulations of the banking system.

Globalization of the World economy has worked to the detriment of American citizens. Relocalization is a must, and has to take place if we are to have healthy communities. The example you give of Missouri vs California is symptomatic of the problem.

[santafe2]

Re: Jobless Rate: The Truth Bubble?

I don't understand why the strong should necessarily prey on the weak.

A checker at Wal-Mart is not weak in comparison to their manager. A checker is working there voluntarily. If they don't like the pay or the work conditions, they are free to leave at any time.

In a free market, if someone is being paid below market rates (all things considered), they will quickly figure that out, and simply leave to work for someone who is paying a fair wage.

You may just be more idealistic than I am.

I'm not religious, but my parents were, although they were closer to deists like Jefferson than to modern Christians.

I find the Jefferson Bible to be a work of philosophy cut from a work of religion.

[Rajiv]

Re: Jobless Rate: The Truth Bubble?

A checker at Wal-Mart is not weak in comparison to their manager. A checker is working there voluntarily. If they don't like the pay or the work conditions, they are free to leave at any time. Their manager cannot force them to stay; the power to leave is fully in the hands of the employee. Most companies invest a fair amount in training employees. Assuming they perform well, they become valuable to their employers. If they leave, it costs the employer money to find and train a replacement and can cause gaps in work coverage or production or earnings; once again, the power is with the employee. Employers are not free to arbitrarily fire employees; they must show cause (except in the events of layoffs, which is when the employer no longer has a need for a particular type of employee). If an employer refuses to pay their wages, courts are strongly biased to favor employees. Employees are free to create or join unions; employers are not. Etc, etc.

Since you specifically cite "Walmart" here is an article from Sept '09 - Wal-Mart CEO faces union push from workers

But if there is one threat to Wal-Mart’s success, it may come from a desire on the part of its own employees to live better — with higher pay and more affordable health insurance. When that desire leads to talk of a union, Wal-Mart fights back hard.

Since its earliest days, the company has succeeded in keeping unions out. But that could soon become more difficult.

Sen. Tom Harkin, D-Iowa, has proposed a federal law — the Employee Free Choice Act, or EFCA — that would make it easier for workers to form unions and harder for management to block them.

"We are introducing legislation that puts power back into the hands of the people who are truly the backbone of our country," Harkin said in March when the bill was introduced.

If EFCA were to become law — which is far from certain — it could, over time, upend the low-cost, low-price model that Wal-Mart is built on.

“Thousands of businesses are opposed to the Employee Free Choice Act, and Wal-Mart would be opposed also,” said Duke.
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Also - No Union Please, We're Wal-Mart - How the retail giant fought back when labor got a toehold in a Quebec store

And yet Wal-Mart's abandonment of this north Quebec outpost in the spring of 2005 made news from Tokyo to São Paulo as an object lesson in the lengths to which America's largest company will go to throttle the threat of unionization. Wal-Mart closed its store here a few months after it was certified by the Quebec government as the only unionized Wal-Mart in North America

[Chris Coles]

Re: Jobless Rate: The Truth Bubble?

Savers place their savings into very large funds to reduce individual risk. By the same token, the financial institutions should not prosper at their expense? Again, local community prosperity is much more than the local business owners making a profit. Employee savers do not provide their savings simply for the recipient of those savings, existing employers, including government, to prosper at their expense. That prosperity of the entire community is the primary aiming point and that requires competition. Yes, competition drives prices down. But there is another function that is not being recognised and that is competition for the use of the employee.

When savings institutions restrict access to the capital to compete, it prevents both a potential new employer to undercut the final sale price, but also to drive further prosperity by preventing access to the employees. Over many decades, the Finance, Insurance and Real Estate, (FIRE), economy has restricted local access to capital and created a feudal mercantile economy. IMHO this is a result of insufficient competition driven by a lack of access to the capital required to permit anyone new; from entering the local marketplace, to compete against local employers, and thus drive up the local income to attract new employees.

That real prosperity comes from competition, not just on price of product, but of even more importance, competition to drive up the incomes of the employees; in turn driven by a much higher level of access to the capital required to enable that competition. To achieve that, savings must be directed towards new, privately owned, competitive, job creation; not more government spending.

It is surely the absolute responsibility of government to promote competition, even against the likes of Walmart? To fulfil that responsibility; they have to have well thought out rules for such local community investment of savings and a clear duty accepted by all parties to promote such competition.

[c1ue]

Re: Jobless Rate: The Truth Bubble?

That real prosperity comes from competition, not just on price of product, but of even more importance, competition to drive up the incomes of the employees; in turn driven by a much higher level of access to the capital required to enable that competition. To achieve that, savings must be directed towards new, privately owned, competitive, job creation; not more government spending.

Chris,

Again, laudable goals. But your view is still that the 'invisible hand' of the market will make everything right - and as noted before this is the same argument used by libertarians: "Real" capitalism wouldn't be like what we have now.

But the use of lobbyists to sway government is "real" capitalism. It is perfectly acceptable for a corporation to use any and all tools to its own betterment: lobbying for anti-competitive laws is not illegal. Neither is systematically underpaying employees. Nor again is it illegal to use legions of lawyers to avoid unionization and/or provision of benefits.

I do not believe in 'Big Brother' government.

I do, however, believe that one of government's roles is regulation. This does not have to be all encompassing - but there are clear examples where government must step in to prevent a greater public disaster including 'shared commons' abuse, product safety, common public goods like education, common public services like law enforcement, and so forth.

Some of these activities are necessarily non-profit because it is exactly the profit motive which encourages abuse. Some of these are necessarily government because the scale is too far above and beyond individuals or even corporations.

Your goal is wonderful, but really there is no reason whatsoever why such organizations as you envision cannot exist now. If your goal is to start such a pool of money for savers to place their money and which in turn said pool will responsibly invest it - you can already do so.

It is called a hedge fund.

For smaller investor contributions, this is a bank.

Sure, the latter has significant regulatory costs while the former has a large entry requirement, but the structures already exist to do what you desire.

How the subsequent organization acts - whether hedge fund, bank, or non-profit, or whatever, that's where the dirty messy thing called people comes into play.

[Chris Coles]

Re: Jobless Rate: The Truth Bubble?

Chris,

Again, laudable goals. But your view is still that the 'invisible hand' of the market will make everything right - and as noted before this is the same argument used by libertarians: "Real" capitalism wouldn't be like what we have now.

But the use of lobbyists to sway government is "real" capitalism. It is perfectly acceptable for a corporation to use any and all tools to its own betterment: lobbying for anti-competitive laws is not illegal. Neither is systematically underpaying employees. Nor again is it illegal to use legions of lawyers to avoid unionization and/or provision of benefits.

I do not believe in 'Big Brother' government.

I do, however, believe that one of government's roles is regulation. This does not have to be all encompassing - but there are clear examples where government must step in to prevent a greater public disaster including 'shared commons' abuse, product safety, common public goods like education, common public services like law enforcement, and so forth.

Some of these activities are necessarily non-profit because it is exactly the profit motive which encourages abuse. Some of these are necessarily government because the scale is too far above and beyond individuals or even corporations.

Your goal is wonderful, but really there is no reason whatsoever why such organizations as you envision cannot exist now. If your goal is to start such a pool of money for savers to place their money and which in turn said pool will responsibly invest it - you can already do so.

It is called a hedge fund.

For smaller investor contributions, this is a bank.

Sure, the latter has significant regulatory costs while the former has a large entry requirement, but the structures already exist to do what you desire.

How the subsequent organization acts - whether hedge fund, bank, or non-profit, or whatever, that's where the dirty messy thing called people comes into play.

In a very real sense C1ue, you have misunderstood what it is that I am trying to get across. So let me try again.

First of all I am not trying to create a structure that takes in any money for onward investment. What I am saying is that each local community has to take responsibility for the employment of their own people. Up till now, we have a system that places all their savings into a central fund. The problems start because there are no systems in place to reinvest those savings back into the local communities.

You say that anyone can do that now. I say that is not true. A careful look at the rules for the onward investment of savings by any form of fund absolutely rules out their reinvestment back into the local community. Instead the whole system is entirely predicated towards keeping the flow of funds on into government treasuries and the like.

The way around that is for the local people to create the likes of a local investment club and to make those investments themselves. What I have done is create a set of rules, so everyone has a clear understanding of their respective responsibilities.

This not about any form of Bank; it is instead about savings used as equity capital for investment directly into new job creation.

As for anticompetitive actions by a corporation; the only method available to prevent their total domination of a market is for someone to invest in a competitor. At present, the financial system is predicated against such competition. You place your savings into a "Fund" and all you get is anticompetitive corporations as you so well describe.

The only way forward is for the funds to be invested by the people themselves. To enable that; I have described a set of rules that everyone may abide by. Not unlike the Ten Commandments. Yes, no one has to abide by them, but the community will have the deciding vote, not some faceless fund or corporation.

[c1ue]

Re: Jobless Rate: The Truth Bubble?

First of all I am not trying to create a structure that takes in any money for onward investment. What I am saying is that each local community has to take responsibility for the employment of their own people. Up till now, we have a system that places all their savings into a central fund. The problems start because there are no systems in place to reinvest those savings back into the local communities.

I understand what you are trying to say, but again barring government intervention, it is impossible for each and every community to create such an entity.

At the same time, each and every community has the capability to create a bank, a hedge fund, or any number of other investment vehicles expressly for the purpose of what you describe.

What is missing are the people willing to forgo greater incomes in order to staff them; equally missing is the possibility that a profitable small enterprise will be left alone either competitively or acquisitively.

Which brings us again back to the regulatory issue.

[Rajiv]

Re: Jobless Rate: The Truth Bubble?

The enormous advantage that banks have is the power to "create money" and the power to leverage. This advantage is not there with the entities that Chris Coles seems to be thinking about.

See also Money as Debt and Money as Debt II Promises Unleashed

It is a misconception that banks lend the savings of people who have put there money into the banks. With Bernanke proposing to eliminate the reserve ratio, the situation becomes even worse.

[Chris Coles]

Re: Jobless Rate: The Truth Bubble?

I understand what you are trying to say, but again barring government intervention, it is impossible for each and every community to create such an entity.

At the same time, each and every community has the capability to create a bank, a hedge fund, or any number of other investment vehicles expressly for the purpose of what you describe.

What is missing are the people willing to forgo greater incomes in order to staff them; equally missing is the possibility that a profitable small enterprise will be left alone either competitively or acquisitively.

Which brings us again back to the regulatory issue.

You have failed to read the book. You simply do not have a proper grasp of what I have created. It certainly is not impossible for each and every community to create such an entity. There are investment clubs all over the planet.

Again the small enterprise owns itself under my rules and are completely free to remain so. The whole idea is to prevent acquisition. Read the book.

[Chris Coles]

Re: Jobless Rate: The Truth Bubble?

The enormous advantage that banks have is the power to "create money" and the power to leverage. This advantage is not there with the entities that Chris Coles seems to be thinking about.

See also Money as Debt and Money as Debt II Promises Unleashed

It is a misconception that banks lend the savings of people who have put there money into the banks. With Bernanke proposing to eliminate the reserve ratio, the situation becomes even worse.

Precisely; I am not talking about any form of lending, I am talking about equity capital. But instead of the bank taking back more than loaned as further interest, further draining the local prosperity; all the money stays circulating in the local economy.