Tax breaks meant to make jobs? New report finds that they're destroyed

Also wages are not set by value add for the most part but by labor market conditions. And yes, jobs with such low value add are supposed to be phased out. If you can't do that, the job is probably a lot more valuable than you think.

Democracy is the process in which we determine the government that we deserve

x4

actually, for one, its mostly small businesses that pay above minimum wage. Corporates are the ones more likely to pay bottom line employees as little as they possibly can. They dont have any incentive to actually retain employees when they can just hire more at the drop of the hat and fire the old. Not to mention small businesses are more personally run, and an owner that genuinely knows and respects his employees will want therm to live comfortably as he can while still turning a profit. Corporates dont give a shit about the guys on bottom because theyre impersonal.

For two, higher minimum wage means they have more money to spend on products, which means while you might have to raise prices on somwe items, overall you have people with more luxury money to buy stuff with.

For three, your entire business model is not only flawed, but its basically a cheap excuse corporations dreamed up to hand all the hiring power to themselves and take employees power out of their hands while making people think theyre protecting Uncle Jim's Chocolate Emporia.

For 4, the way things are going is unsustainable. When someone gets a job at mcdonalds, they arent going to make enough cash to afford even a decent standard of living. at best theyll hve no health insurance, be unable to afford anything but a singularly awful diet, and weddings will be out of the question for the most part due to cost issues. More than one person cannot survive on a single mcdonalds paycheck, and frankly, the only way for most poor people to live in the way things currently stand is either hope the local charity isnt underfunded or work 3 jobs.

edited 12th Oct '11 8:44:23 AM by Midgetsnowman

Basically, small businesses have to compete for employees, while big businesses do not *

— they can dictate the terms of the labor market. Therefore small businesses tend to offer more competitive wages.

Also, a business whose model cannot be sustained by paying its workers decently does not deserve to be in business.

edited 12th Oct '11 8:39:31 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

This is the argument for unionization, in a nutshell. Especially in towns dominated by a single employer (Remember that old song that goes 'Sold my soul to the comapny store'? That was about company towns), you have a monopsony market in labor (Where monopsony means one buyer of a product as opposed to a monopoly - one seller/producer of a product.)

In the labor market modeled by monopsony, would-be laborers have to compete with one another for employment. They do so by bidding down wages, which is good for the business but bad for the collection of employers as a whole.) The idea of a union is to provide a mechanism that converts a competitive - monopsonistic market into a monopolistic - monopsonistic market, with the idea that this market will produce results (read: wages) similar to those of competitive - competitive markets.

But I digress here.

I maintain that tying corporate tax rates to unemployment rates is, at least from a game-theoretic standpoint, a worthy alternative that deserves to be tested.

Jobs that don't pay a living wage are worthless to the adult economy, they're only good for teen labour.

Operating under a hypothetical scenario where you presume that increasing minimum wage puts a worker to earning a living beyond the value add of the corporation/business he is working for has to take one more thing into account; how did such a situation happen? You're basically saying that a labourer's work is SO worthless that it's not even worth paying him a living wage. So you're talking about an economy where people are either so inept or incompetent that they cannot earn a living wage were they to work. I think your problem is that you apparently have a population of bumbling fools.

Alternatively, you have employers undervaluing skills to save money since they know that they have all the leverage and it's a choice between no work (no pay) and not being paid a living wage.

Or basing that value on the average wages paid in third world countries, and then justifying it by saying that first world country workers are overpaid (but not their CE Os).

Furthermore, I think Guantanamo must be destroyed.

One wonders why we've so thoroughly lost track of the principles of Henry Ford.

Incidentally, specialized labor markets do show signs of wage competitiveness. One example of this is in the company I work for, where our sales representatives are paid very well compared to the "office drones" because they are required to have a very specialized skillset that you can't just grab off the street. For that reason, there is competition between the limited number of businesses in this industry for the same pool of sales talent.

edited 12th Oct '11 9:22:48 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Because corporations make better short term gains in profit by bleeding workers dry. Shareholders dont want long term gain via short term loss. they want gain gain gain.

I think what happens in these cases in terms of low-wage advocates, is that they often mix up concepts of value add as it suits their purposes. They'll say that well, because they'll do it in some far-off country sweatshop for pennies a shirt, that's the value add. No, that's the value of the labor, not the value of the work. The value of the work is dependent on the value out of the output. Let's take the case of a shirt, and the assembly line of sorts for that shirt is over 5 people who all spend about an equivalent amount of time on it.

You have your basic costs.

You have your transportation costs, packaging costs, etc. You have the cost of the fabric. All these other costs. Then you have the actual value of the shirt itself. One could argue that the people who actually make the shirt have quite a large share of the value add. So does the designer, who probably has LESS of a value add than the people actually making the shirt, but makes up for it in volume (and that goes for the entire management structure as a whole).

Now, I'm not arguing that paying people less than the true value-add is stealing from them. First, by and large that's impossible to tell, second, I don't think it's feasible. I'm not a strict socialist, I prefer a mixed economy of sorts. BUT. That doesn't change the fact that generally speaking, arguments that value-add is below the minimum wage simply doesn't hold water.

It's funny. You compare prices in boom and bust locations (when they're available). Boom locations have to have higher wages, but often, especially in terms of chains, prices are very similar if equal. Especially in things such as fast food. But their still highly profitable.

This should tell you something about the real world labor market.

The interesting thing about that (or sad, or scary, or whatever) is even that is slowly going away, as management is taking more of a view that those very specialized skills can more and more be trained.

And believe it or not, they're probably right.

edited 12th Oct '11 9:23:58 AM by Karmakin

Democracy is the process in which we determine the government that we deserve

It would tend to indicate that value-add is not the key factor in compensation for "interchangeable" workers. It's the size of the labor pool relative to the number of jobs available.

There is also a general perception that "management" inherently deserves to be paid more than the people they manage, something that I have absolutely no idea how to fix.

Regarding your edit, the tendency I'm observing — in my little chunk of the technology industry, anyway — is toward stricter management of how the salespeople do their jobs, but in terms of compensation we have to be keenly aware that if we screw them over, our competitors are waiting to snap them up. We budget every year for commissions, which comes out to be a percent of gross sales. That pool of money then gets split up among the sales force and is paid in addition to a fixed base salary. Therefore the competition among the reps is for the most productive sales territories.

edited 12th Oct '11 9:30:02 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

It's more telling to see that as value add of labour (productivity has skyrocketed over the past few decades) has gone up, wages have actually fallen. But the rich have gotten substnatially richer. Average CEO salaries in Canada went from 1 million in the early 90s to 10 million by 2010, straight through the dotcom busts and the current recession. They're actually earning even more during the recession, their wages have gone up.

So there's capitalism for you. The people causing all the job losses, making bad business decisions? Guess what, they're earning more money.

What's the rational response? Apparently to lower corporate income taxes and retain tax cuts for the rich.

Yeah that doesn't get my blood boiling.

It's also telling that profitability at big companies has gone up while GDP overall has decreased; this indicates that a supersaturated labor market is good for bottom lines because they can get away with cutting wages. Big businesses absolutely love times like these because they don't have to compete for workers. Again, it's a symptom of being responsible to shareholders instead of to society as a whole.

Governments have few tools to control these tendencies. The biggest one is tax policy. Regulation is another. It's no wonder that the plutocrats on the right are targeting these two things and calling them bad.

You bypass all of this with direct stimulus — putting money straight into the hands of consumers. What's interesting about this solution is that businesses ought to be all for it; stimulus = more sales = more profits. But in this case it's being held up by the "moral hazard" folks.

edited 12th Oct '11 9:36:43 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

I originally posted this in the other thread, but this is what is going on:

http://m.motherjones.com/politics/2011/06/speed-up-american-workers-long-hours

In short, employers are laying off people, and forcing the remaining workers to cover the existing work with no increase in pay. I've been saying this for a year now, but the current economic failure is a result of the financial sector meltdown providing a nice cover for firms to "cash in" on productivity growth over the last decade or so.

This is something outside of all the existing economic models, to my knowledge, which is why the difference between models is about being less wrong. Not that I'm blaming well-meaning economists like Krugman or even Geitner or Summers, as it must be impossible to change on a dime what you've spent a lifetime learning and exploring, but it doesn't change the fact that the models are wrong.

Edit: And yes. The lack of reaction to the "Great Recession" as they're calling it, is mostly due to people terrified about "moral hazard", especially when it comes to the little guy.

edited 12th Oct '11 9:37:58 AM by Karmakin

Democracy is the process in which we determine the government that we deserve

I'm pretty sure that Krugman covered and predicted exactly this.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

You know he probably has, as he has his ear to the ground much more than most of those intellectuals (which is a big reason why a lot of said intellectuals don't like it), but I know in the past he has dismissed productivity gains as being a potentially negative economic factor.

Democracy is the process in which we determine the government that we deserve

Well I remember working through the numbers with a friend, just big ticket items. And we managed to reduce the deficit to 50 billion without any cuts to Social Security or Healthcare or any such thing. It was mostly dropping some military spending, some defence measures, stopping the wars, eliminating the bush tax cuts (which actually was the largest money maker of all) and eventually it got whittled down to a 50 billion dollar deficit... which is nothing. Economic growth would blow that away.

America's problems are all political, there's nothing fundamentally broken about the economy. It can be fixed and the solution is not tax cuts.

I mean, I think everyone has repeated shown that statistics agencies in USA and abroad have shown that a dollar in corporate tax cut results in roughly 0.2 to 0.3 in GDP growth, making it totally worthless (you spent a dollar to get 20 to 30 cents of economic growth).

Just a note on Wal-Mart: the people who are saying "hey, let's regulate Wal-Mart and make them unionize!" are forgetting that Wal-Mart's decision to close down whenever a town starts regulating them or the workers make union-related noises is, while dickish, not only legal, but an exercise of Wal-Mart's natural rights under a capitalist system. (I can't believe I'm agreeing with Tom here.) You can't force people to do business with you, and if Podunk, Idaho won't do business on their terms, they have a right to not do business with Podunk at all. The only possible countermeasure to this is coercive nationalization, which essentially amounts to "kill them and take their stuff, because we can." While Savage Heathen might approve of that, a revolutionary takeover is a violation of the rights of the bourgeoisie that he bashes.

Anyway, I think the way to make jobs is to expand entitlement funding, personally (along with making the minimum wage at least livable). "Let's slash entitlements!" has been a mantra of the Right since time immemorial, but the fact is that most people want to work; if an expanded dole encourages people to quit their jobs at all, then those jobs sucked terribly, and the fact that people will be above the poverty line and able to spend welfare money on some (limited) luxuries will make jobs in itself. Furthermore, welfare benefits should be structured so as not to cause moral hazard; people should never be in a situation where they lose money by working. Also, while I have nothing against illegal immigrants, they should probably be denied welfare checks (as it stands, it's not difficult for them to get welfare checks now), which leads into my next point.

Wal-Mart can still keep running the way it does, sure. But they'll be hiring people such as immigrants, teenagers and high-school dropouts; people who are either trying to climb the ladder or who are content with being on the bottom rung. It's a shitty job, but if the wages and entitlements put together can provide money and time to invest in one's personal capital (such as going back to get a degree, taking job seminars, or building one's résumé) and get out of that shitpit, then it won't damage either its employees or the economy as a whole.

thing is, they dont hire that way. I've known multiple people who were hired by walmart and specifically scheduled to make it as hard as humanly possible for them to also go to school.

The problem with that is the Right knows all about that, which is why they oppose taxes and/or limitations on investments; the reasoning that if it's dirt-easy to get a start-up off the ground, that's not only job creation, but also increased production, which can drive demand if it means offering something new, more affordable, or more effective for people to spend their scarce resources on.

And I totally agree on that measure. Where I disagree is that this necessitates an elimination of a social safety net; my wife's just now getting her freelance writing career off the ground, but she was on UI before that.

edited 12th Oct '11 9:50:28 AM by Ratix

Wal-Mart got where it did by using cheap labor and quasi-monopolistic purchasing practices (forcing price cuts on vendors in order to get their products stocked) to overwhelm local markets. They then get to set the standards for employment in that industry. It creates a self-fulfilling cycle: sell stuff cheap and pay low wages; people earn less so they have to buy stuff from you for your cheap prices; businesses offering better wages and lacking your mas purchasing power can't compete with you so those better wage jobs are lost. With high profit margins come rich investors and executives. It's the Company Store on a grand scale.

A surtax on low-wage jobs would be a way to directly attack one core element of the problem. This would, of course, force Wal-Mart to raise prices, but I see that as a necessary side-effect. Many commodity prices are too low — it's part of what's forcing production overseas.

Edit: To expand on that last, a significant rising wage cycle would inevitably lead to a net rise in consumer prices, but for the same reason it would lead to job reclamation from overseas as businesses no longer have to outsource labor in order to compete. Our goal is full employment, is it not?

edited 12th Oct '11 9:59:38 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

So from what I'm getting from this thread, the moral of the story is "Never stand up against mega corporations because the moment you ask them to pay their fair share or play fairly they'll pick up their toys and go home"

Gee, and people wonder why I'm anti corporations.

edited 12th Oct '11 9:58:42 AM by Thorn14

Never stand up against the MegaCorp unless you are ready and willing to fight and win a class war. Half measures make the problem worse, and the current spineless left is only capable of half measures.

edited 12th Oct '11 10:01:59 AM by SavageHeathen

You exist because we allow it and you will end because we demand it.

Or to be more generous, sic them on each other and alleviate their power via competition, by increasing entry. Which admittedly doesn't help economy of scale, unless you subsidize small businesses. Hmm...

edited 12th Oct '11 10:03:21 AM by Ratix

Rather than subsidizing small businesses to combat economies of scale, I think it makes more sense to have more aggressive and effective anti-monopoly regulations, until you get an environment that's naturally friendly to small businesses without needing to give them crutches. It seems more efficient to combat lopsided industry power distribution by attacking those with power directly rather than trying to help the underdog rise up in hopes that they'll knock the prize belt wearer down to size.

Although, politically speaking, it probably is more feasible to implement a pro-small business bill rather than an anti-large business one.

edited 12th Oct '11 10:13:19 AM by Karkadinn

Furthermore, I think Guantanamo must be destroyed.