I think that this is perhaps the problem. There is a responsibility for management to adhere to stakeholder interests. Also if one competitor pays less you have to to stay competitative.
do you believe in capitalism? you should review the concept of free markets. there are winners and losers. you sound as if you could have been comfortable in Indira Ghandi's India with its protected markets and a fossilized economy. governments provide overpaid jobs which is one of the main the reasons that both the US and Europe are near bankrupt under a mountain of debt. " There is a responsibility for management to adhere to stakeholder interests" a major part of the problem in the US. shareholder's and management's interest are not the same. management, in many cases, is short sighted caring only by itself inc. big salaries and bonuses. it makes peace with big labor i.e. gm , Chrysler and the shareholder be damned. in some cases it ends in bankruptcy or more likely a deflated stock price. for various reasons management is rarely voted out. the typical scenario is that shareholder's vote with their feet by selling the stock and moving on to a more attractive investment.
Essentially these businesses have expectations that taxpayers and society will share in their labor burden. It extends beyond the usual suspects, I am seeing factory jobs in my area (southern middle Tennessee) paying 8 dollars an hour at some of the local auto suppliers. These workers qualify for the "earned income tax credit" even if they are single. They qualify for food stamps if they have children, free breakfast and lunch for their children at schools and "Tenn-care" for their children (State low income health insurance). While these employers offer health insurance plans when you are grossing 1385 dollars a month it is unlikely you will pay the typical employee premium when you are barely earning enough to keep a roof over your head and eat. This results in "uninsured" hospital visits that increase the cost for everyone else. Why should business have expectations that everyone else pick up the tab for their workforce? Why Should someone who is working full time be a burden on society. There used to be a time in America where these subsistence jobs were filled by high school and college students, now they are "Career" positions and the workforce is a long term burden on society. I would have no problem with these jobs if they did not rely on the rest of us to cover their payroll savings.
I agree with this. In addition, these low paying jobs rarely offer more than 30 hours a week. What then happens is even if someone wants to work 40 - 50 hrs a week, It's not available, also the blocks of time the cos schedule make it impossible to work two jobs. Almost by default, the employee automatically qualifies for aid (heat, food stamps health care). On top of all this, these employees usually qualify for a tax refund, in spite of paying no tax. So yes, labor is subsidized by fed & state programs to the benefit of the Wall marts and MCD's.
It's not the businesses that expect everyone to subsidize labor costs, although I definitely agree the subsidization is taking place via social services. But instead it's the globalization of the world economy that is causing it. Businesses exist to make money. There is no way in most of our industries to pay a single male worker enough to support a family of 4, like existed in the 50's. The profit margin simply no longer exists because other countries will no longer pay us a premium to make their stuff. For decades the US had a virtual stranglehold on manufacturing in the world. That was likely due to a number of reasons including: -Immense natural resources -Free and innovative economy -Lack of competition from most of the 1st world countries after WWII -A large, skilled labor pool -Great infrastructure to support our economy -The $USD reserve currency status -Strong financial system to support business expansion Those advantages and others resulted in a premium that we were able to charge the rest of the world for our goods...... and the money flowed into this country, thereby creating a very strong middle class. Now due to the fact that most countries no longer need to send us a premium for the same products that they are able to produce much cheaper, money is actually flowing out of the country. The only advantage that we still possess is the $USD. That at least allows us to borrow massive amounts of money at low interest rates to offset the account deficits from import/exports. So most US businesses have no choice but to pay low wages (in the interest of survival in a global landscape). That is where the US government comes into play. They have to subsidize the lower wages in the service sector and the reduced amount of wages available from manufacturing.
2 issues: High standard of living for all is an untested economic theory. You may need the poor class, to have a middle class, like how the Romans needed slaves, to create emperors. The real balance may be a lower standard living for all, and Americans have been living on a higher standard for 50 years which is not feasible when you have too much outsourcing. Economy is unstable due to a huge ponzi scheme debt bubble. This is a seperate issue, but important nonetheless. No matter the minimum wage, the ratio of Debt to GDP has become too high. It shall correct, leading to a Depression. Experimenting with minimum wage is useless in a Depression, when 30% are unemployed and rioting.
Oth, suppose the corps do take advantage of the fed susidizing labor. Why not? The Fed has turned the corp into a social services institution and demanding social responsibility from the comapnies. Provding day care, sensitivity training, etc to name a few. Why are profits eroding? Why is it a corp job to determine citizenship of its employees? Why are corp tax collectors (not just sales tax but any tax you name it is collected and forwarded, why do companies have to provide that service without compensation?
Great post. The restaurant business is one of the best barometers of the REAL economy. Not only do you gain meaningful insight into the clientale (what they are ordering, average total, etc), but you also witness firsthand the REAL inflation in foodstuffs, utilities, rents, various taxes, licensing, insurance, etc, etc... IMO, these are the types of businesses that are becoming fodder for the monetary experiments. Lowered demand from the clientale with rising input prices. I've seen it myself in various other economic cycles.
Even though you've become like the "boy who cried wolf", your posts are usually right on target. I've contended for years now that the most prudent manner to deal with the wage gap and the inability for many, many individuals to even subsist without government aid is to actually ALLOW prices to revert to affordable levels. Obviously, we all have different opinions as to what those "levels" might be, but it's crystal clear that continued attempts to distort the price via either subsidies or "teaser rates" has worsened the problem. Whether it's tuition prices (all levels of education), property taxes, real estate prices, insurance costs, food prices, gasoline prices, etc, etc... In an attempt to "inflate away" the bad debts, CB's are creating an ever greater percentage of people who fall beneath the poverty line, thereby creating an every greater percentage of people who currently require social welfare and WILL continue to grow in size and scope in the years to come. Let's not even get started on how many senior citizens and/or baby boomers will go BK with ZIRP and a decimated real estate market.
There's more money from liquidity for solving the principal agent problem than all of the world GDP for the next 1,000 years. Put nations onto a level playing field through global currency. Flatten accounts through technology and redistribute for goods worth a similar value. Begin a stock exchange that isn't interested in maximizing price but concerned with fairness.