In these troubled times, the Republican mantra is that we must make sacrifices. Shared sacrifice, they call it. Except they expect the sharing to begin at the bottom and move up just far enough to envelop all those who’ve sacrificed for the past 30 years, whenever right-wingers have been in charge.
Heaven forfend anyone in the upper economic classes would ever have to cut back on luxuries. In fact, the GOP policy is to take whatever is saved by cutting benefits and services to the poor and middle classes and reward their rich cronies with lower taxes and higher corporate salaries and profits.
Meanwhile, the economy is in the toilet and no one seems to know the way out. Worse, by cutting educational funding, among other services, the GOP is not only hurting society now but stunting future economic growth.
Danger signs have been obvious for years, even when Republicans claimed things were great. While they worked well for politicians and their rich buddies, policies that also seemed to benefit folks closer to the bottom contained hidden booby traps.
For instance, when the Bush administration claimed they’d led the nation into the greatest era of home ownership in history, banks were giving lower-income people complicated loans deliberately designed to collapse later on. At the same time, corporate leaders plotted to lay off hundreds of thousands of those new home owners and reward themselves for their crimes.
When the multitude of foreclosures struck, the ensuing costs of unemployment and poverty quickly destroyed the consumer market that their much-touted capitalist economy needs to function. Their greedy plot to grab as much gold as they could as quickly as possible was destined to destroy the economy, first in this country and finally throughout the world.
That’s just the tip of the problem, and it’ll continue as long as Republicans stubbornly impede change. Still, the solution is simple. The journey from this point to prosperity could be short. We just have to agree on the goals, plan the steps, and get to work. Consider this blueprint:
RE-TEACH: Education is the basic building block of a successful society, but too many young people are poorly trained in reading, math, science, and the entire range of skills necessary for 21st century jobs. Besides streamlining primary and secondary educational methods, we must establish a comprehensive public-private system to train people of all ages for today’s jobs.
RE-SOURCES: Plenty of jobs are waiting to be done, from rebuilding aging infrastructure to providing services to people and communities everywhere. All that’s missing is the resources to make it happen. Step One, above, would provide well-trained workers; governments from the local to federal levels, must plan and organize projects; and businesses, from small companies to multibillion-dollar corporations, should sign up to lead projects, even investing resources when and where they can realize eventual returns. Rather than treating this plan as a short-term stimulus, it should be viewed as a firm policy for the long term.
RE-TURN: This is the most controversial step, but if done correctly, it’ll be temporary. Taxes on high-income earners must return to 1990s levels to provide seed money to implement the plan. As I explain in Step Four, below, success would mean these funds would eventually be replaced by revenue from a newly active work force.
RE-WARD: The payoff is win-win-win for workers, governments, and companies. Well-trained, fully employed workers return wages in the form of taxes and payments for goods and services needed to enjoy a dignified lifestyle; tax revenues allow governments to provide necessary services; and sales ensure that companies thrive. This is truly vibrant capitalism--the direct opposite of the reward-the-rich-at-the-expense-of-the-lower-classes system that Republicans have touted for three decades.
This idea isn’t new. Even as the Bush administration claimed things were fine, I began writing articles explaining the plan in detail. I compiled 47 of those essays into The World I Imagine: A creative manual for ending poverty and building peace. The book can be purchased from online bookstores, including Barnes & Noble and Amazon.com, as an e-book from Outskirts Press, and downloaded to Kindle.
As bad as things seem, planning and implementing simple positive steps could turn the economy completely around. All it would take is the political will to organize governments, companies, and citizens into a work force for the future, a future in which prosperity and peace are the norm, rather than the exception.
Showing posts with label salaries. Show all posts
Showing posts with label salaries. Show all posts
Tuesday, August 23, 2011
Sunday, March 13, 2011
The real economic value of the privileged: Working hard or hardly working?
In the first article in this series, I suggested we need to take a close look at the real value to our economy of people at different income levels. In the second article, I explained why people at middle and lower income levels return a greater percentage of their income directly to the economy than do the highest earners, which keeps both government and business machines turning efficiently. Still, there’s another factor to consider when determining the value differences of people at each income level.
For several reasons, the person at the top of the income ladder is also the one whose labor contribution makes him the biggest drain on the economy. To begin with, there’s that large chunk of his income that doesn’t go directly back into the economic machine, at least not right away. Then there’s a more ephemeral measure, the economic value of production from his labor when compared to that of the folks who work lower down the corporate ladder. That’s where the “protect the rich and they’ll take care of the rest of us” philosophy really goes astray.
What is the millionaire’s real economic value to the company that pays his salary when compared to the value of folks working on the line? To put it another way, how much effort would the CEO have to put into his job to be worth a high percentage of the millions dollars he receives each year? If he doesn’t deliver enough to provide a profitable effect on the company’s real income--and I’m not talking about creative bookkeeping here--then he’s stealing a huge chunk of dough that he never earns.
In any well-run company, workers produce products or services at a rate that makes them worth more to the company than the value of their salary and benefits combined. The extra money earned above their take-out is called “profit.” In a well-run business, the more efficient employees the company has, the more profits the company is likely to make. But the profit value per employee tends to be lower at the higher levels. That’s been the accepted norm because executives are traditionally expected to provide leadership and creative ideas.
Leaders or Charlatans?
The problem with paying inflated salaries for people at the top to lead is that the real production leaders, that is, the people who make sure the work gets done, are usually the workers themselves and their immediate supervisors. As people move up the chain, their value comes less from leading people and more from setting policy and providing creative direction so the company can move forward into the future. That’s where higher-paid executives in many American companies have been dropping the ball in recent decades.
For policy, consider two issues regarding employee behavior: bullying and sexual harassment. Effective leaders in these areas will set and enforce rules that protect the rights of every employee and client. If problems arise, good managers provide a means of discreet reporting and investigation, and any judgment against wrongdoers is handled quickly and efficiently in order to ensure the behavior is not repeated and victims, real and potential, feel completely safe.
Unfortunately, companies have been more interested in protecting their reputations instead of stopping the bad behavior and protecting victims. In a shocking number of cases, the person who suffers most at the hands of management has been the victim who dares to report the problem in the first place. In the long run, this lapse costs companies money, which further diminishes the true value of any executive involved in such a crime.
It also means value is lost in any employees who are victims of harassment of any kind. If justice ever does prevail, the company loses by having to pay the victims, who usually take the cash and don’t return to work at that company again. That means the company must hire one or more new employees, train them, and possibly lose them later on for the same reason the earlier employees left. So, real leadership skills are too often lacking in many of the high-paid “big brains” who receive tons of money to lead companies into an expensive legal ditch.
Creators or Dinosaurs?
Then there’s the need for creative thinking, delivering new ideas that move a company forward in the market. One of the best examples--or worst, depending on your point of view--of the lack of creativity has been the American automobile industry in recent decades. While auto manufacturers in Europe and Asia were designing and building more and more efficient vehicles, stodgy U.S. companies continued to turn out gas-guzzling behemoths that cost a mint to operate and blew tons of filthy carbon into an already polluted planet.
As sales of American autos went down each year, these companies cut back on workers’ benefits and eventually their jobs. But contrary to economic logic, even as they were running their companies into the ground, the salaries and bonuses of executives at the highest levels mushroomed. Like the bankers, most of these miscreants finally came crawling to Congress with their hands out to grab the taxpayer green that would keep their operations afloat. Only when they’d received this new capital from the public trough did they finally begin turning out the green products they should have been producing since the first oil crisis in the 1970s.
The conclusion, then, can only be that many of the highest-paid corporate “leaders” need to overhaul their attitudes and start moving their companies in the right direction, in both policy and creative management. If they won’t do that, the only honorable thing for them to do is take advantage of those “Golden Parachutes” that were assured them when they came on board and let somebody with real brains take the helm.
Self-made or User?
And while I’m on the subject, this is an excellent time to explain one more thing about millionaires and billionaires: Have you ever heard the term “self-made” man? Or woman, since success certainly isn’t limited by gender, especially these days. Fact is, there is no such thing.
No one could ever build a successful business without depending on the efforts of hundreds, or even thousands, of loyal hard-working employees. The lower-paid workers deserve as much credit for a company’s success as the person at the top. Even someone who’s spent his life in a cave in the woods while turning a creative idea into tons of cash needs some kind of help to do that. Maybe it was the animals that did it, but it certainly couldn’t be that one person alone.
Whenever I hear the term “self-made,” I’m tempted to look for the big guy’s footprints on the backs of a horde of “little” people. No one can build a multimillion-dollar business alone. There is no such thing as a self-made person. Period.
Next, I’ll discuss the real meaning of several economic terms that are woefully misunderstood and misused in current political discussions. Stay tuned.
For several reasons, the person at the top of the income ladder is also the one whose labor contribution makes him the biggest drain on the economy. To begin with, there’s that large chunk of his income that doesn’t go directly back into the economic machine, at least not right away. Then there’s a more ephemeral measure, the economic value of production from his labor when compared to that of the folks who work lower down the corporate ladder. That’s where the “protect the rich and they’ll take care of the rest of us” philosophy really goes astray.
What is the millionaire’s real economic value to the company that pays his salary when compared to the value of folks working on the line? To put it another way, how much effort would the CEO have to put into his job to be worth a high percentage of the millions dollars he receives each year? If he doesn’t deliver enough to provide a profitable effect on the company’s real income--and I’m not talking about creative bookkeeping here--then he’s stealing a huge chunk of dough that he never earns.
In any well-run company, workers produce products or services at a rate that makes them worth more to the company than the value of their salary and benefits combined. The extra money earned above their take-out is called “profit.” In a well-run business, the more efficient employees the company has, the more profits the company is likely to make. But the profit value per employee tends to be lower at the higher levels. That’s been the accepted norm because executives are traditionally expected to provide leadership and creative ideas.
Leaders or Charlatans?
The problem with paying inflated salaries for people at the top to lead is that the real production leaders, that is, the people who make sure the work gets done, are usually the workers themselves and their immediate supervisors. As people move up the chain, their value comes less from leading people and more from setting policy and providing creative direction so the company can move forward into the future. That’s where higher-paid executives in many American companies have been dropping the ball in recent decades.
For policy, consider two issues regarding employee behavior: bullying and sexual harassment. Effective leaders in these areas will set and enforce rules that protect the rights of every employee and client. If problems arise, good managers provide a means of discreet reporting and investigation, and any judgment against wrongdoers is handled quickly and efficiently in order to ensure the behavior is not repeated and victims, real and potential, feel completely safe.
Unfortunately, companies have been more interested in protecting their reputations instead of stopping the bad behavior and protecting victims. In a shocking number of cases, the person who suffers most at the hands of management has been the victim who dares to report the problem in the first place. In the long run, this lapse costs companies money, which further diminishes the true value of any executive involved in such a crime.
It also means value is lost in any employees who are victims of harassment of any kind. If justice ever does prevail, the company loses by having to pay the victims, who usually take the cash and don’t return to work at that company again. That means the company must hire one or more new employees, train them, and possibly lose them later on for the same reason the earlier employees left. So, real leadership skills are too often lacking in many of the high-paid “big brains” who receive tons of money to lead companies into an expensive legal ditch.
Creators or Dinosaurs?
Then there’s the need for creative thinking, delivering new ideas that move a company forward in the market. One of the best examples--or worst, depending on your point of view--of the lack of creativity has been the American automobile industry in recent decades. While auto manufacturers in Europe and Asia were designing and building more and more efficient vehicles, stodgy U.S. companies continued to turn out gas-guzzling behemoths that cost a mint to operate and blew tons of filthy carbon into an already polluted planet.
As sales of American autos went down each year, these companies cut back on workers’ benefits and eventually their jobs. But contrary to economic logic, even as they were running their companies into the ground, the salaries and bonuses of executives at the highest levels mushroomed. Like the bankers, most of these miscreants finally came crawling to Congress with their hands out to grab the taxpayer green that would keep their operations afloat. Only when they’d received this new capital from the public trough did they finally begin turning out the green products they should have been producing since the first oil crisis in the 1970s.
The conclusion, then, can only be that many of the highest-paid corporate “leaders” need to overhaul their attitudes and start moving their companies in the right direction, in both policy and creative management. If they won’t do that, the only honorable thing for them to do is take advantage of those “Golden Parachutes” that were assured them when they came on board and let somebody with real brains take the helm.
Self-made or User?
And while I’m on the subject, this is an excellent time to explain one more thing about millionaires and billionaires: Have you ever heard the term “self-made” man? Or woman, since success certainly isn’t limited by gender, especially these days. Fact is, there is no such thing.
No one could ever build a successful business without depending on the efforts of hundreds, or even thousands, of loyal hard-working employees. The lower-paid workers deserve as much credit for a company’s success as the person at the top. Even someone who’s spent his life in a cave in the woods while turning a creative idea into tons of cash needs some kind of help to do that. Maybe it was the animals that did it, but it certainly couldn’t be that one person alone.
Whenever I hear the term “self-made,” I’m tempted to look for the big guy’s footprints on the backs of a horde of “little” people. No one can build a multimillion-dollar business alone. There is no such thing as a self-made person. Period.
Next, I’ll discuss the real meaning of several economic terms that are woefully misunderstood and misused in current political discussions. Stay tuned.
Friday, March 11, 2011
Comparing real economic values of people by their income
In my previous article in this series, I introduced the fact that varying income levels of people has a lot to do with their impact on the economy. Understanding these differences can help people decide whether the current political policy of favoring the rich at the expense of the poor is a valid economic model.
Recent history provides an unmistakable clue to the facts: Policies of the past decade almost totally devastated our economy. We need to understand the financial realities if we’re ever going to turn things around and climb out of the recessionary hole we’ve been trapped in for the last few years.
Worth Millions, Maybe
First, consider arguments for continuing to let the rich wallow in piles of man--uh--money: When they get their fat paychecks, they dine at the finest restaurants, stay in five-star hotels, frequent luxury-car showrooms, and buy lots of real estate, from mansions to vacation homes to investment property. The economic advantage here is that lots of “little people” work at all these places, catering to the demands of wealthy patrons. That arrangement boosts employment numbers and allows some money to trickle down from the wealthy to the masses.
The rich also invest lots of money in stocks, bonds, and other financial instruments. But many of them also tend to move a significant chunk of their wealth to banks in other countries, especially places where they’re less likely to pay taxes. The combination of tax deductions, loopholes, and offshore banking means the best return, in spending, investment, and taxes, that the U.S. economy can expect from people who are worth more than a million dollars is about two-thirds of their income.
Middle Class, Middle of the Road
Next, consider the schlub who schleps to work every day so he can bring home around fifty thousand dollars a year. He can’t treat his loved ones to a meal at the Four Seasons, at least not often. McDonald’s is more his style--or Subway, if he’s watching his calories and carbs. He has one house, and these days he’s more apt to take a “staycation” than be seen sunning on a beach in Acapulco. That’s good news for The Home Depot, bad news for Hilton Hotels. And he will spend a higher percentage of his money, in taxes, groceries, rent or mortgage, insurance, and so on, than the aforementioned rich guy. In the end, this middle-class earner will return close to 90% of his paycheck directly back to the economy.
Since these middle-income earners greatly outnumber the wealthy, the value they return to the economy creates significant working capital for both the government and businesses to keep on providing goods and services for other customers. By earning money and spending a big chunk of it, this middle-income guy is a basic, average member of both the “public,” as far as the government is concerned, and the “market,” according to Wall Street’s point of view.
Poor but Valuable
Now, let’s look at the poor--and I do mean poor--fellow who barely earns fifteen thousand dollars a year. If this person has any family at all, he--or she, because many such families are headed by single women--can barely make ends meet on that amount of money. The family will usually require extra help from the government and/or private charities, such as food stamps and food banks, to make it through each month.
Then there’s the medical help. A shocking percentage of people in this range have no medical insurance. They’re more apt than the average middle-class person to have chronic health problems, especially because what care they do get isn’t the kind of comprehensive support that helps them improve and live as well as they could. Any care they do get is most likely delivered through some sort of public assistance program.
Another area where services are hit and miss is education. Schools in such low-income areas as inner cities and rural communities rarely have enough resources to serve their students as well as they should. Add the fact that a high percentage of low-income parents are likely to work long hours, if they’re around at all, and too many lack the education to provide the kind of help and guidance their children need to succeed. There are exceptions, in students, family members, and schools, but those are notable because of their rarity. That’s the biggest reason economic problems tend to continue from one generation to the next, ad nauseam.
When you consider how much of his or her income this person will spend, that is, return directly to the economy, it comes as close to 100% as anyone can possibly get. Trouble is, that contribution is usually offset by the value of the help, in cash, goods, and services, that the family requires just to survive. So, they’re more of a drain on the economy, right? Actually, not when you consider that just about every cent of the value of those payments to the poor goes directly back into the economy.
So, who’s more valuable to the economy? We’ll look at the meaning of these percentages later in this series. Before that, I’ll discuss the actual economic value of the labor of one person who doesn’t have to labor as hard as the rest of us. Watch for it!
Recent history provides an unmistakable clue to the facts: Policies of the past decade almost totally devastated our economy. We need to understand the financial realities if we’re ever going to turn things around and climb out of the recessionary hole we’ve been trapped in for the last few years.
Worth Millions, Maybe
First, consider arguments for continuing to let the rich wallow in piles of man--uh--money: When they get their fat paychecks, they dine at the finest restaurants, stay in five-star hotels, frequent luxury-car showrooms, and buy lots of real estate, from mansions to vacation homes to investment property. The economic advantage here is that lots of “little people” work at all these places, catering to the demands of wealthy patrons. That arrangement boosts employment numbers and allows some money to trickle down from the wealthy to the masses.
The rich also invest lots of money in stocks, bonds, and other financial instruments. But many of them also tend to move a significant chunk of their wealth to banks in other countries, especially places where they’re less likely to pay taxes. The combination of tax deductions, loopholes, and offshore banking means the best return, in spending, investment, and taxes, that the U.S. economy can expect from people who are worth more than a million dollars is about two-thirds of their income.
Middle Class, Middle of the Road
Next, consider the schlub who schleps to work every day so he can bring home around fifty thousand dollars a year. He can’t treat his loved ones to a meal at the Four Seasons, at least not often. McDonald’s is more his style--or Subway, if he’s watching his calories and carbs. He has one house, and these days he’s more apt to take a “staycation” than be seen sunning on a beach in Acapulco. That’s good news for The Home Depot, bad news for Hilton Hotels. And he will spend a higher percentage of his money, in taxes, groceries, rent or mortgage, insurance, and so on, than the aforementioned rich guy. In the end, this middle-class earner will return close to 90% of his paycheck directly back to the economy.
Since these middle-income earners greatly outnumber the wealthy, the value they return to the economy creates significant working capital for both the government and businesses to keep on providing goods and services for other customers. By earning money and spending a big chunk of it, this middle-income guy is a basic, average member of both the “public,” as far as the government is concerned, and the “market,” according to Wall Street’s point of view.
Poor but Valuable
Now, let’s look at the poor--and I do mean poor--fellow who barely earns fifteen thousand dollars a year. If this person has any family at all, he--or she, because many such families are headed by single women--can barely make ends meet on that amount of money. The family will usually require extra help from the government and/or private charities, such as food stamps and food banks, to make it through each month.
Then there’s the medical help. A shocking percentage of people in this range have no medical insurance. They’re more apt than the average middle-class person to have chronic health problems, especially because what care they do get isn’t the kind of comprehensive support that helps them improve and live as well as they could. Any care they do get is most likely delivered through some sort of public assistance program.
Another area where services are hit and miss is education. Schools in such low-income areas as inner cities and rural communities rarely have enough resources to serve their students as well as they should. Add the fact that a high percentage of low-income parents are likely to work long hours, if they’re around at all, and too many lack the education to provide the kind of help and guidance their children need to succeed. There are exceptions, in students, family members, and schools, but those are notable because of their rarity. That’s the biggest reason economic problems tend to continue from one generation to the next, ad nauseam.
When you consider how much of his or her income this person will spend, that is, return directly to the economy, it comes as close to 100% as anyone can possibly get. Trouble is, that contribution is usually offset by the value of the help, in cash, goods, and services, that the family requires just to survive. So, they’re more of a drain on the economy, right? Actually, not when you consider that just about every cent of the value of those payments to the poor goes directly back into the economy.
So, who’s more valuable to the economy? We’ll look at the meaning of these percentages later in this series. Before that, I’ll discuss the actual economic value of the labor of one person who doesn’t have to labor as hard as the rest of us. Watch for it!
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