It's the Economy, stupid - Languishing & Lingering after the Great Recession

The premise as you presented it is incorrect. There have been correlated issues discussed. On some of the correlated issues I have made assumptions. There is no mystery in what I posted and my responses to you have been on point. To suggest otherwise is something is a bit misleading.

 

I believe markets require regulation, controls and a judicial process. I further agree that when the term "free market" is used that it should not be taken literally. In regard to regulation and government involvement in markets, I think government should strive to be neutral.

Generally I agree that emerging global markets are having growing pains. There are problems and inefficiencies in some regards and the opposite is true in other regards. My point is that corporations will make an assessment and act in a manner that suits their needs. Corporations continually assess their circumstances and act. The expectation that corporations have some other motive (to be unfair in paying wages for example, or to relocate jobs with intent to harm people and communities, etc.) is incorrect.
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What you don't get is based on your expectation of corporate behavior.

First we know that corporate behavior is the sum total of human behaviors that make up any given corporation, and that under the corporate veil the behavior of a corporation will morph and not be totally consistent with individual human behaviors.

With that said, the expectation that corporations, on a macro level, will care/be empathetic/loyal/love people as unique human beings, is equal to expecting a rock to car/be empathetic/loyal/love people as unique human beings. Corporations do not define their role as being responsible for "fair" livable wages. Based on a faulty expectation some will always be disappointed by corporate behavior.

Again, I though I made it clear that paying lower wages is not necessarily correlated to increased profitability. Why don't you get this? Any review of the most profitable corporations in history will never show that those companies paid the lowest wages, generally very profitable companies pay top tier wages. Do you need me to point to some current company financial reports of highly profitable companies?

 

At one point I stated my view was based on my assumption or speculation. I arrived at this view point based on interacting and reading arguments similar to what you have presented here.

The difficulty with you is that you seem to forget what was previously written. Does every new post require a complete restatement of everything written before?

How about this. Maximizing profits do not have anything to do with keeping wages low.

Like water flows, capital flows. Corporations will always seek efficiencies, including efficiencies in wages. All other things being equal why pay 100 when 90 can be paid? Rational expectations tell me corporations will always seek wage efficiency. This leads me to believe that you expect corporations to act in a manner that is not rational.

In addition from a practical point of view, all other things are not equal. Paying lower wages has consequences - could be positive could be negative. Your focus is on only when lowering wages benefits the corporation. I can point you to the top 100 corporations in terms of profitability (margins or gross) and they will be companies that pay high wages and are more than willing to pay high wages for the benefits derived from a highly productive workforce..

 

My response upon reading the premise you posted was that it was a bit misleading, that intuitively the premise seems to be correct. Then I explained why I thought it was misleading and in fact wrong. Your counter points lead know where.

True I got to a point where I clearly stated my assumptions and what conclusions I derived from my assumptions. For example, I believe that many attribute human emotional expectations of corporations and are disappointed when corporations, on a macro-level, do not respond in a manner of caring and concern for human beings as individuals. This is very different from showing how the initial premise regarding profits and wages is misleading and incorrect.

I think you either fail to fully read what is written or your pride interferes when you know I am correct and take a path of obfuscating. What I write is clear and to the point.

I do not know what you are referring to, can you be more specific. What assumptions are you talking about? I have no idea of what you intent was, I stated that the premise you posted is misleading. I tried to be careful to avoid saying your intent was to mislead. I have read and discussed the premise you posted many times from many different people. I wanted to explore the issue in more depth here.

Go back and read what I actually wrote. I did not write statements concerning profits and wages in absolutes.

I am getting frustrated. Again, your statement regarding profits and "keeping wages low" are not connected and should not be connected. When they are connected in the manner in which it is done here, it is misleading!

First, "keeping wages low" lacks context. It is vague. It implies an intent to harm. Corporate behavior is based on mathematics not sociology. Consider two types of costs - wages and rents. Corporations view them both as costs and will respond to these costs in the same manner. We can superficially say that maximizing profits requires corporations to keep rents low. Intuitively, this appears to be correct. However, it is clear that a good location with high rent can lead to more profits. The real issue is in regard to the efficiency of the cost - what is the return on the cost - what is the margin on the cost. Corporations have no emotional motivation to keep rents low, however, they are motivated to efficiently control the cost.

I am explaining the same point over and over in different ways - you either see it or you don't I am not being argumentative.

I stated to look at the most profitable companies and look at their wages compared to less profitable companies.

In many instances the bank teller position is an entry level job. The industry as a whole pays well, has excellent benefit packages, pleasant working conditions, and plenty of upward mobility. Surveys of the best companies to work for often include some banks.

Do a search!

Oil and gas industry pays three times national average - Telegraph

It took .53 seconds.

 

Maximizing profits and keeping wages low are not correlated. You consider that an absolute. What I do not consider an absolute is low wages can mean high profits - high wages can mean high profits - low wages can mean low profits - etc., etc.

Please! Help me understand why you seemingly twist what i write, take it out of context, making interactions so difficult?

I understood what you wrote, and it is wrong. You have not added any clarification or support for what you originally wrote. It is wrong, you know it is wrong - what you wrote is a populist cliche that appears to be correct on the surface.

 

An apple is not an orange. A short declarative sentence, written as an absolute. I am male. A short declarative sentence, written as an absolute. You are brilliant - you got me - I said I was not writing in terms of absolutes - but I do it all the time (OMG another absolute). In context, I stand by my statement - my position regarding keeping wages low and corporate profits has not been presented in terms of absolutes - If you want to take statements out of context to try and score points, save your time - you can have as many points as you want. I don't keep score.

On a macro basis there is no correlation. A study of profits in markets will show a consistent range, a pattern over time. In the long-term, in relatively free and open markets profits act more like a constant.

It is clear you have not given these subjects much study or thought, yet you attack me for pointing out what is obvious. Over time wages, as a cost, get reflected in prices.

How about you thinking this through. When and how have profits been affected over the long-run due to wage fluctuations?

No. You won't acknowledge simple core concepts, i.e. wages are a cost and that corporations respond to wages as a cost the same as corporations would respond to any other type of cost. The basis of your point of view seems to be based on the notion that wages are a special type of cost and that corporate behavior should reflect the special status of wages relative to other costs.

You should be more specific in regard to the above if you want a response.

 

No. But, your question has an improper focus that leads to an unclear answer.

It is the efficiency of wages that is correlated to profits. Cheap labor is a vague concept - there is no value in cheap labor for corporations, if the labor lacks a measurable return. Cheap labor absent a measurable return for corporations does not compete with more expensive labor with a measurable return. An extreme example a third world cultural "doctor", one with no formal modern training, is not in competition with medically trained, certified/licensed US doctors - regardless of how cheap the third world wage rate is. Given your question, it commands the answer given - but can easily be ms-understood.

When we talk about the efficiency of wages (there are various metrics we can use to quantify the efficiency of wages) conceptually there is a point where increase in marginal wages contribute to increase in profits or marginal profits - then there is a point where this is no longer true. When marginal wage increases fail to increase profits or marginal profits, the demand for marginal wage increases goes to zero or goes negative.

Another example, fast food restaurants can be profitable in high wage areas and profitable in low wage areas - the market for cheap labor and the market for more expensive labor will not compete on the basis of relative wage differences - but do compete in regard to capital allocation - so again the answer to your question demands the answer given, but can easily be misunderstood.

I believe you conflate wages with wage efficiency. In my mind there is a big difference and in my study and observation corporations behave based on wage effeciency - and again there are various ways to quantify this - put simply, cheap wages are not always best for profitability.

 

From my perspective it seems like the problem is you're both right.

@Aceventura companies can be profitable paying a living wage to their employees, even giving them insurance.
My brother works for a bike shop that does just that.
Well, he also owns it since everyone who works there owns the company but that's a different story.
There are plenty of regular companies who choose a business model that is not based on screwing their employees, Costco for example.
So you are right.

On the other hand, most companies have taken the McWalmart business model of keeping labor costs as low as possible and cutting insurance to everyone but management.
So, @Baraka_Guru is right as well.
These companies see labor only as a commodity that must be cut to the absolute minimum.
I run a board for Target employees so I see it everyday.

Yes, there are careers that don't fit in my statements but Chris Rock said "That's why they're called careers. I'm talking about jobs.".

 

One of my points is that corporations (taken in general in terms of macro behavior, there are exceptions) have absolutely no concern for living wages, fairness, loyalty, or other emotive human concepts. For corporations (taken in general in terms of macro behavior, there are exceptions - I fear if I fail to put this in here once...well we will see when I fail to do it) - it is about mathematics not sociology.

If we have 1 unit of labor at a cost of $1, generating $2 in revenue for a corporation, resulting in $1 in profits, assuming these are the only variables - 1:1:2:1. Corporations will act to maintain or improve the $1 in profits. Manipulate the other variables, add other variables all you want - the result for the corporation is a focus on the final number. Corporate behavior is motivated by the final number. Introducing the concept that corporations should care in emotive subjective terms about wages or any other cost, is setting up an argument to be disappointed. Why do people do this? Corporations are not going to feel guilt - if a corporation acts it is ultimately going to be in connect to the final number - profits. I do not judge this it is neither good or bad, it is simply the nature of corporations. Corporations serve a role in capitalist systems - being anti-corporation to me is like being anti-computer or some other object that responds in predictable ways to inputs.

If your brother is earning a living wage, it is because of his wage efficiency in the context of his lifestyle choices and where he lives.

 

My brother earns a living wage because the company he works for routinely figures out what that is for the area (pretty high since it's in Berkeley).
They then pay their employees accordingly.
As I said, it makes it easier that the company is owned by the employees and everyone is paid the same.

This is a multi million dollar store and at the end of the year they decide how much needs to get put back into the company and divide up the rest.

Once people start there they never want to leave.

 

In regard to costs or more specifically wages - what are the characteristics of corporate behavior when there is increasing levels of pricing power? Pricing power meaning the ability to increase prices to consumers as costs increase.