The Sears near me just closed for this very reason...

[deborahkla.livejournal.com]

When workers don't make enough money in a consumer-based economy, this is what happens. When they make enough money they buy things and keep the economy afloat. This is NOT trickle-down economics--it's the opposite, and it truly works.

Comments

[geezer-also.livejournal.com]

Well gee, the solution, based on the "cartoon" is simple all retailers should just pay their employees more money, then perhaps they will have enough to spend.

As to the closing of your local Sears, I'm pretty sure that's part of Sears' restructuring of their business model. It appears that the only entity that can operate at a loss year after year is government (altho my business has been giving it a good shot ;()

[johnny9fingers.livejournal.com]

Hello, fellow old-timer...

...just a simple look at things. (Which normally means I'm going to go off on one of those insanely long digressive diatribes. Apologies. I think it begins somewhere near your points and ends many leagues away.)

1. The free market in a consumer-based economy will always rule out paying higher wages.
2. Paying higher wages benefits society in a consumer-based economy.
3. Head'splody...or maybe the government can set the initial and continuing conditions to benefit society, the nation-state's overall prosperity, and indirectly the businesses which are benefitting from trading in the nation-state. Sort of what a legislature is for in a modern complex nation-state.

Sometimes lightly-fettered capitalism isn't fettered enough. The only entity capable of fettering capitalism even marginally is the government of a nation-state.

As an aside, conglomerates and multinationals are not monopolies, but they might as well be: and in the US you've given them the freedom to act with little restraint. They own your opinion-making conduits of news and information, and they are breaking America. I speak as an English Americanophile, if that's not minting a neologism out of an inclination: and like we here in Blighty, you have let the folk spouting "freedom" equate with what sometimes appears to be the criminal neglect of your polity.

And when I think of this whole States Rights business...I misunderstood and thought you guys were one nation undivided and what was true for all Americans is that you have rights that apply from sea to shining sea irrespective of race, wealth, religion, sexual or political orientation. (I realise that I would not care to be a young black man in America, nor would I like being poor. Mind you I'd hate to be poor anywhere, but that's true for all folk. In some countries, however, poverty is more bearable than in others.)

At some point in a frontier culture it must accept that exploitation of resources and land, sophistication, and urbanisation must modify the cultural dynamic driver that is rampant individualism, to something more co-operative. You have frontiers, true, but you are no longer a frontier culture, however much the folk unwilling to understand this would wish otherwise.

The minimum wage thing is an interesting barometer of just how much actual real world results and data affect folks' thinking.

[geezer-also.livejournal.com]

Well, while I am old, I'm not really an old timer, in the sense that many of you were involved in "fun" forums years before I ever got on the internet (I think the first political forum I ever read was in late '08...but I digress).

To be honest, I'm not sure I actually made a point (altho I did in my reply to peristaltor) at least not overtly...and that being in re Government; however, it's cool since I always enjoy what you write, and I always understand your points and someday I may agree with you on something ;D (side note: can you give me an historical reference where there has been a nation state weith a free market system?)

The thing is, in the end game you are always going to have people at the bottom and at the top. The difference, at least as I see it, in a society that tends toward somewhat free market capitalism leaves more wiggle room in the middle.

As to the "state's rights" conundrum, all I really have to say is one size does not fit all. From all the discussions I have read on this very forum, it seems that it is impossible to explain to Europeans the diversity that exists in the corporate whole that is the U.S. and how for the most part (at least those of us who are center right, which according to what I read on political forms (a truly reliable source) includes the current President, so which means most of us) we like it like that...I guess it's because, at the very least, gives us an illusion of "freedom" we don't see any where else in the world :D

I did not understand your comment on minimum wage,

At any rate I had best go earn some money to help pay my ridiculous corporate salary...

[peristaltor.livejournal.com]

Maybe. . . .

I'm sorry, but I fail to see how a high-level executive "earns" his millions each year. The president of Honda is less well-paid than the president of Sears, and Honda actually makes things.

[geezer-also.livejournal.com]

Oh I agree, they probably don't, but then it doesn't really bother me, and I don't really care ;D

A little more seriously: My first thought was OK I the EO of Sears makes 11 million a year and there are 50K
employees, what differene would it make if he was only paid a million, If the money was evenly distributed every employee would get an extra 200 a year. Then I thought, what if I was way off, so I did a little googling (which I am very poor at, but I had as little spare time this morning) It turns out that in 2012 (yes, I understand the person in question is a new CEO, and the restructuing is happening now) the CEO earned less than 5 million (on a salary of one dollewr a year, that's not bad), but the real tell is that there were over 250,000 employees. (average pay, in the mid 40s).
I dunno, but if the restructuing by the new CEO (who WILL be making closer to the 10 mill) works to save the majority of those jobs, then I say he's worth it...of course being as how our "end game" economic philosophies are so far apart and we are hoping for different out comes; we can never agree on the path :D I'm just content to be able to disagree agreeably with someone again!

[peristaltor.livejournal.com]

Your math is not the problem, I think. For me, it's the assumption that someone who makes an extra 5 mil can do anything that's worth 5 mil. Let me explain.

We have crafted a mythos that people earn what they deserve, when this is not the case. That's why I referred to the CEO of Honda; he doesn't even make a million a year, but he is highly paid by Japanese standards. Why? The Japanese have yet to adopt our Conspicuous Consumption Assumption which says that the more you earn, the more you are worth. The Japanese are, by contrast, far more egalitarian, far more team spirited in their business endeavors. They realize, at least tacitly, that a company leader who makes more than 2 orders of magnitude more wealth than his lowest paid employees is less a leader than a dictator.

And let's not forget that the new dude at Sears is surrounded by a bunch of likewise overpaid executive flunkies and yes-men that syncophanticly praise the new Dear Leader's every fart and belch. They have to be overpaid, because otherwise the dynamics of human relationships would not permit the Dear Leader even to deign speak to them! Only after several layers of this, each layer making significantly less than the first, do we get people who tote the barges and lift the bales, the people who do the work.

We are not rewarding any given leader's ability to make decisions. We are rewarding people who happen to be at the right place at the right time. Sure, in office it is natural that some good decisions might be rewarding. But one cannot look at Sears and Honda in the same light and see that the CEOs deserve the windfall from a good decision. It is a cultural choice each culture makes, purely and simply.

[geezer-also.livejournal.com]

"We have crafted a mythos that people earn what they deserve."

Wait, what? Perhaps I misunderstand as you have stated it, but I don't think I have ever heard that. I would agree that people deserve what they earn, if that would constitute a base for agreement ;)

I may not understand correctly, but if a CEO comes in with a Salary of a dollar a year, and what he earns is based on the profitability of his restructuring then to me he has earned his money. It's kinda the same as when a union boss gets a raise for his members, then he earns his salary and perks.

Here is an interesting thought: does the guy who comes in to restructure, closing stores, laying off people, etc, actually "earn" his money because he ruined the lives of 25% of the workforce in order to make the stock holders more money; or because by doing so he saves the company from bankruptcy and 75% of the work force their jobs?

[peristaltor.livejournal.com]

I would agree that people deserve what they earn, if that would constitute a base for agreement ;)

What would be the fun in that? ;-)

As to the rest of your examples regarding a CEO's decisions and the "relative" worth thereof, consider the quotes I took from Picketty. He has evidence that the theory of Marginal Productivity Theory of Wages—an offshoot of the Marginal Productivity on Investments—should simply not be applied to a person with a unique position, such as the CEO. Once you remove that justification, what is left? Nothing, really, except for the painfully obvious fact that the holders of such unique positions negotiate their salary.

If the cultural norm is for such people to be highly paid, they will probably be able to negotiate high pay. If the cultural norm is for a more egalitarian pay, that's what they will get. This is why I brought up the president of Honda (or any Japanese firm, for that matter—Japan is a much more egalitarian country than the US right now).

This use of a theory to justify what really does not apply to the theory is not new. Henry George pointed out in 1879 that employers and economists were completely distorting the Malthusian theory (http://peristaltor.livejournal.com/243652.html) to deny people a greater share of the profits of enterprises in their wages. Then as now, theories were used to justify actions, even though the theories did not apply. Over time, assumptions that the theory behind the assumption were true grew.

(NB: I edited a boo-boo.)

[peristaltor.livejournal.com]

Also, beyond the scope of my first response, consider this. The CEO is brought in, as you say, by the stockholders of a company (through their board of directors). If that CEO lays off a bunch of folks and avoids a bankruptcy, he is doing the bidding of those who hired him, the stockholders. This is the law, actually, established in the Dodge v. Ford Motor Co. decision of 1919 (http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company). The president must "enhance shareholder value," even if that means working against the long-term goals of the company or wrecking the lives of the employees.

What if the President were actually beholden to the employees? Instead of slashing and burning through the employee base like a primitive farmer wrecking a forest for a temporary patch of farmland, he could present the situation and ask the employees what everyone could do. Don't laugh. After WWII, GIs imposed just such a system on Germany. The GIs were the most labor-oriented group in our US history at that time. The system they imposed on German industry has morphed to be even more labor oriented. Right now, many German companies have a system where 50% of the board is comprised of employees sitting on a one-year basis.

When the economy crashed, these employee/management hybrids made very different decisions on how to weather the crisis. Instead of laying people off, many opted for reduced hours. This way everyone sacrificed temporarily; but no one lost their jobs. This meant that the company was in a far better position when the time to ramp up production returned, because they didn't have to retrain any workers! Apply that solution to your theoretical CEO "saving" the company; if he tried the German solution, the company would be stronger in the long run!

The fact that such solutions are often rejected by economists blathering on the news far too often is probably a reflection of how economics itself has morphed into a academic discipline beholden to corporate sugar. I'm happy to report this is changing. Books like Picketty's give me hope.

[peristaltor.livejournal.com]

Purely by coincidence, I am taking notes on a book I have to return to the library soon. Check out the latest excerpts!

Why is inequality of income from labor, and especially wage inequality, greater in some societies and periods than others? The most widely accepted theory is that of a race between education and technology. To be blunt, this theory does not explain everything. In particular, it does not offer a satisfactory explanation of the rise of the supermanager or of wage inequality in the United States after 1980. . . .

The theory rests on two hypotheses. First, a worker's wage is equal to his marginal productivity, that is, his individual contribution to the output of the firm or office for which he works. Second, the worker's productivity depends above all on his skill and on supply demand for that skill in a given society. For example, in a society in which very few people are qualified engineers (so that the "supply" of engineers is low) and the prevailing technology requires many engineers (so that "demand" is high), then it is highly likely that this combination of low supply and high demand will result in very high pay for engineers (relative to other workers) and therefore significant wage inequality between highly paid engineers and other workers.

This theory is in some respects limited and naive. (In practice, a worker's productivity is not an immutable, objective quantity inscribed on his forehead, and the relative power of different social groups often plays a central role in determining what each worker is paid.)

(Thomas Piketty, Capital in the Twenty-First Century, President and Fellows of Harvard College, 2014, pp. 304-305, I underlined, I emboldened.)

"Relative power" is key here. It turns out the top managers negotiate their salaries with other top managers, all of whom think the more they are paid means the more they are worth. As I pointed out in the Honda/Sears comparison, this doesn't hold any water whatsoever:

In this narrower context, the main problem with the theory of marginal productivity is quite simply that if fails to explain the diversity of the wage distributions we observe in different countries at different times. In order to understand the dynamics of wage inequality, we must introduce other factors, such as the institutions and rules that govern the operation of the labor market in each society. To an even greater extent than other markets, the labor market is not a mathematical abstraction whose workings are entirely defined by natural and immutable mechanisms and implacable technological forces: it is a social construct based on specific rules and compromises.

(Picketty, ibid, p. 308.)

And thus:

To my mind, the most convincing explanation for the explosion of the very top US incomes is the following. As noted, the vast majority of top earners are senior managers of large firms. It is rather naïve to seek an objective basis for their high salaries in individual "productivity." When a job is replicable, as in the case of an assembly-line worker or fast-food server, we can give an approximate estimate of the "marginal product" that would be realized by adding one additional worker or waiter (albeit with a considerable margin of error in our estimate). But when an individual's job functions are unique, or nearly so, then the margin of error is much greater. Indeed, once we introduce the hypothesis of imperfect information into standard economic models (eminently justifiable in this context), the very notion of "individual marginal productivity" becomes hard to define. In fact, it becomes something close to a pure ideological construct on the basis of which a justification for higher status can be elaborated.

(Picketty, ibid, pp. 330-331, me again.)

In other words, they are paid more because they have convinced people to pay them more, because if they weren't paid that much they wouldn't be worth that much. Yes, it's a circular logic; but it's the only one that holds.

[peristaltor.livejournal.com]

Addendum: Forgot the closer:

It is only reasonable to assume that people in a position to set their own salaries have a natural incentive to treat themselves generously, or at the very least to be rather optimistic in gauging their marginal productivity. To behave in this way is only human, especially since the necessary information is, in objective terms, highly imperfect. It may be excessive to accuse senior executives of having their "hands in the till," but the metaphor is probably more apt than Adam Smith's metaphor of the market's "invisible hand." In practice, the invisible hand does not exist, any more than "pure and perfect" competition does, and the market is always embodies in specific institutions such as corporate hierarchies and compensation committees.

(Picketty, ibid, p. 332.)

[deborahkla.livejournal.com]

Did you ever stop to consider just why Sears is in need of "restructuring their business model"? Because they are in financial trouble. I used to work for a company involved in corporate "restructurings" and they always take place either when bankruptcy is looming or after a company has been taken over due to its financial failures.

[geezer-also.livejournal.com]

That's kinda obvious, so yep I did consider it...I mean really, one does not normally restructure a successful business that is making money ;)

Have you considered this: "Here is an interesting thought: does the guy who comes in to restructure, closing stores, laying off people, etc, actually "earn" his money because he ruined the lives of 25% of the workforce in order to make the stock holders more money; or because by doing so he saves the company from bankruptcy and 75% of the work force their jobs?" (quotes because that's from my reply to peristaltor)

Business models change, and you either adapt or "die". *shrugs*

[lafinjack.livejournal.com]

is this comic

[johnny9fingers.livejournal.com]

In the bleakest way, through very dark glasses, or maybe to the enemies of America.

[lafinjack.livejournal.com]

¯\(°_o)/¯

[moonshaz.livejournal.com]

It's comic, in a VERY bitterly ironic way. With emphasis on "bitter."

[lafinjack.livejournal.com]

[telemann.livejournal.com]

WalMart is now one of the biggest retail outlets in the U.S. Most of their sales are food, and to people on food stamps (maybe some are their own employees). Meanwhile sales at high end retail shops (Neiman Marcus, Saks 5th Avenue, Barney's of New York) are way up. Go figure.
.

The Middle Class is steadily eroding, just ask the business world. (http://www.nytimes.com/2014/02/03/business/the-middle-class-is-steadily-eroding-just-ask-the-business-world.html?_r=0)



All of which lends some credence to what Bill Maher has noted about the declining middle class in terms of retail outlets, etc.

https://www.youtube.com/watch?v=rwUf_UY0aBc