Ethics of Real Estate Investment, NIMYism and the Housing Crisis

Boost_Crazy said:

Ignoring that- for the sake of this discussion, let's assume wages have been stagnant. And by stagnant, we mean just keeping pace with inflation on average. All that means is that the same job pays the same. Why should that be any different? Do we really expect to take a job at 20 years old, do the same job in the same position until we retire at 65, and somehow be better off at 65 than we were at 20?

Wages should grow because profits grew. Later on the same job is done in a more productive way, often because of technological advances, the job produces more so the worker should see a greater share of the wealth they're producing. But they don't, instead the increase has all gone to business owners and execs/upper management, who are happy to take all the credit for the increased productivity:

It's actually a bit misleading to even call it a productivity-pay gap, what we're really looking at is most worker's pay stagnating vs. upper management and executive incomes continuing to increase. Why? I posit simply because upper management and executives have the power to make it so.

https://economicsfromthetopdown.com/2020/01/17/debunking-the-productivity-pay-gap/

Edit: One more interesting thing to consider about that graph, if there hadn't been a divergence, worker pay would be 2x higher than current. Maybe it would be easier to afford houses that are about 2x the cost they were at the time of the divergence that way?

So, what if profits and productivity grew because investments were made in new technologies and equipment and processes, and the workers literally did no more work?

Let's assume factory A changed its entire production line and increased its capacity from 1000 widgets per year which were manually produced to 100,000 which are largely automated.  They spent millions on improving their processes.  In doing so, they recognized they would need to massively increase their reach and market share to sell 100X as many widgets as they used to.

Before the upgrades, they employed 50 people who were highly skilled widget makers, and an office staff of 10 people to support them.  Their skilled people were paid $50,000 per year, and their office accounting staff was paid $30,000 per year. Payroll was $2.8 million per year.

After the upgrades, they were able to reduce their production staff to 20 people (who are largely pushing buttons).  Each of them are paid $35,000 per year (very generous for unskilled production line workers). They also upgraded their office systems- computers now do most of the work instead of bookkeepers and ledger books.  They reduced their general office staff to 6 people.  4 of them are data entry techs who are paid $25,000 per year (and are thrilled with it), and 2 of them are now paid more for their higher knowledge of accounting and computer systems. $70,000 each.  They also had to hire 3 full time sales people to handle the increased load @$80,000 each.  They eventually realized that selling so much through computers and automated systems required a computer guy, so they hired GameboyRMH to do cyber security and IT. They pay him $120,000 per year.

Now, their sales have increased 100X, but their payroll has been cut in half to $1.42 million. They had to drop their prices a little to capture the larger market share and invest a lot in the technology, but they also saved a lot on payroll.  Unfortunately 34 people lost their jobs (but 6 new high paying jobs were created, and everyone is now paid above market rate)

My question...

Why should the workers share ANY of the profits?  They didn't actually DO anything, except benefit from the higher than market rate salaries. 
 

That's what real world business investment looks like over time. It NOT a graph of numbers showing income trends. (A graph would show wage decreases due to the lost jobs). 
 

Note that this is a pretty good description of what has happened to most businesses in the last 40 years (the timeframe you are referring to)

In reply to SV reX :

Improved technologies don't always mean less or easier work. Sometimes it means more efficient but more intense work. My current job which often involves talking on a phone while doing a jillion things at high speed on an array of computer screens, all day long on really bad days, is a prime example. Look at how often "fast-paced environment" is on modern job ads as well.

Whether the technology made the job easier or harder in the process of making it more efficient, the workers did the work that produced those profits and continue to make more profits for the company with the new technology, so it's only fair to pay them an equal share. Management can hoard all the profit for themselves, that's legal and feasible but simply unfair. I think the only way to prevent that is through a democratically-controlled workplace, so that the purse strings aren't controlled by people who have both the power and an incentive to concentrate as much pay as possible on the most powerful people in the company.

they hired GameboyRMH to do cyber security and IT. They pay him $120,000 per year.

If I was making anywhere near that much I might have some incentive to innocently whistle and look away from where the money comes from!

In reply to SV reX :

If that happens hundreds or thousands of times, what happens to all the laborers who lost their jobs? How do they survive or thrive?

In reply to pheller :

It sucks for them. THAT'S the problem you are seeing. 
 

But greed isn't the cause. 

In reply to GameboyRMH :

I guess you missed the point that the workers WERE compensated better. 
 

pheller said:

In reply to SV reX :

If that happens hundreds or thousands of times, what happens to all the laborers who lost their jobs? How do they survive or thrive?

Serious proposal for a solution: Decrease the threshold for full-time working hours so more people can be hired to work different shifts to cover the same business hours, this will also spur demand for goods and services related to leisure activities and entertainment. Right now workers' (lack of) free time is a major bottleneck for those industries, with the developers of Fortnite finding that their main competitor was Netflix for example.

Where will the money for that come from? Well, you see that gap up there?

In reply to GameboyRMH :

I am strongly of the opinion that in the last 40 years the largest influence on the shift on profits and pay scales is not greed, but technological changes.  It's NOT possible to compare business processes today to processes in the '70's, or the '40's.

Greed has always existed.  Computers have not.

That would mean the business YOU are in is a root cause. 
 

I know you disagree.

Probably why economists agree that true full employment is a myth and that we'll also need unemployment benefits of some sort. 

Lets take this one step further - lets say that not only do people lose their jobs, but not the vast majority of people who retained their jobs get paid less, as you mentioned. 

After awhile our economy looks pretty similar. Lots of people potentially not making much, struggling to get by, struggling to thrive. 

Do we tax the rest (equally) so that the majority of folks can live a good life? 

Do we make it easier for competition to exist so that maybe those unemployed folks will find new jobs? 

In reply to pheller :

We have to create a culture that encourages workers to want to excel. 
 

Starts with the mindset. Then proceeds to education. 
 

NO, taxation is NOT part of the solution. That just creates dependencies, and devalues workers.  Taxation is punitive. It punishes people for succeeding. 

SV reX said:

In reply to GameboyRMH :

I guess you missed the point that the workers WERE compensated better.

Only a few very specific workers, and all the workers on the lower end of the org chart are now making less, this is exactly the problem. Overall pay and staff were halved, pay inequality at the office went through the roof, where's the good part for workers? Meanwhile all the remaining gains from this fantastically efficient labor presumably went to the execs and owners?

In reply to pheller :

Your approach is very paternalistic. "We" should fix something for someone.

Its the difference between a parent telling a kid what to do, and a parent who shows their kid the opportunities, then gives them freedom. INCLUDING the freedom to fail.

In reply to SV reX :

Very well said. Unless you work for a Co-op, profits are irrelevant in relation to employee pay. I believe it was you that pointed out earlier that when businesses lose money, they don't deduct it from employees' pay checks. 

I'll point out that it's easy to get hung up on wages and salaries. We really want to talk about compensation. Total compensation has increased substantially over the past few decades. An employee costs their employer about 1.25 to 1.4 times their wage after taxes and benefits are added. The increases in this rate is often left out when comparing historical wages. 

In reply to GameboyRMH :

Every worker in my scenario received increases. 
 

The introduction of the technology meant different skills were needed. NONE of the skilled widget fabricators are needed any more, but the operators and data entry persons are all paid above market rates (to attract the best people for THOSE jobs)

Yes. The business profited. That's their job. 
 

...although, honestly it's highly likely the execs also took a pay cut or got fired. The business didn't need tech savvy execs or people who were well versed in international sales before the changes.

SV reX said:

 

My question...

Why should the workers share ANY of the profits?  They didn't actually DO anything, except benefit from the higher than market rate salaries. 
 

If they dont do anything, why have the employees? They absolutely contribute to creating that profit, and we all know it, even if you wont admit it, otherwise they wouldn't be there.

How about we look at your widget factory like this, it was expanded using money that was supplied by the bank. The bank note was paid back from profits generated by an employee that marketed the widgets, employees that produced the widgets, employees that packed and shipped the widgets. What did the company owner actually provide? What value did he add? 

SV reX said:

In reply to pheller :

We have to create a culture that encourages workers to want to excel. 

Excell at what? 

Technology will continue to make some jobs irrelevant to the point where there are no more jobs to excell at. The only time a job opening exists is when someone retires or suddenly dies. The people who "excell" slowly reduce the need for their own jobs. 

Eventually, people will need to survive for free. Yep. They'll need food, water, shelter, maybe for their entire lives - just given to them. Whether or not they contribute is irrelevant. They may be exceptionally talented, but they will wait around for that job. Just as hundreds, thousands, millions of other will wait around for that job. 

SV reX said:

In reply to GameboyRMH :

I am strongly of the opinion that in the last 40 years the largest influence on the shift on profits and pay scales is not greed, but technological changes.  It's NOT possible to compare business processes today to processes in the '70's, or the '40's.

Greed has always existed.  Computers have not.

That would mean the business YOU are in is a root cause. 
 

I know you disagree.

Actually I don't totally disagree. I could try to argue that computers are neutral and our society merely used them as an excuse to squeeze workers harder instead of letting them share in the gains from computing, and that greed is ultimately at fault rather than the computer. That computers don't rob people, people do. But no, technology is not neutral, and it might've been a foreseeable consequence.

I wasn't around for the beginning of the issue and I don't think working in the field inherently perpetrates or worsens it, but working in certain parts of the field does (the gig economy most prominently). I do want to correct the issue, and I think that fixing the distribution of the profits produced by computers is a better and easier solution than a Butlerian Jihad.

In reply to GameboyRMH :

It's actually a bit misleading to even call it a productivity-pay gap, what we're really looking at is most worker's pay stagnating vs. upper management and executive incomes continuing to increase. Why? I posit simply because upper management and executives have the power to make it so.

Or because the upper management and executives have rare, valuable, marketable skills that workers lack and the company deems necessary for their business. 

Edit: One more interesting thing to consider about that graph, if there hadn't been a divergence, worker pay would be 2x higher than current. Maybe it would be easier to afford houses that are about 2x the cost they were at the time of the divergence that way?

Play that out. If workers made 2x the pay, do you think houses would cost the same? Do you think those with more rare and valuable skills will be okay where they are at now while everyone below them gets a boost? The only way up the ladder is to climb it. Making it shorter doesn't get you any farther off the ground. 

Boost_Crazy said:

In reply to SV reX :

Very well said. Unless you work for a Co-op, profits are irrelevant in relation to employee pay. I believe it was you that pointed out earlier that when businesses lose money, they don't deduct it from employees' pay checks.

Sometimes they do, you shouldn't generalize just because most businesses provide some buffer between profits and worker pay. Businesses where tips and commissions and profit shares are part of pay will absolutely pass those losses on. Businesses will also eventually lay off workers...some sooner than others. It's also likely that the job will get harder for the people working there, especially after a round of layoffs, and the workers won't see any pay increase from that, so again there are 2 sides to the coin.

If workers worked at a co-op where pay was just a profit share, losses would come straight out of their pay...but they'd be making 2x as much to start with.

In reply to gearheadmb :

So, you are suggesting that they deserve MORE than above average wages for their work, JUST because the company was profitable?

Yeah, I strongly disagree.

The increased profits were related to the cash investment the company made. The employees did not contribute at all to that. 

That's like telling me that my stock portfolio increased in value, so I should have to share it with everyone who didn't invest anything at all. 
 

I spent 10 years of my life volunteering (full time- no salary at all) to help some of the poorest people in the world. But I am strongly opposed to giving handouts. I'll happily give hand ups.   I'd be happy to help anyone who wants to learn with skills and knowledge so they can have their own business, or investment portfolio. But no, they don't get to take what is mine just because they want to.

Governmwnt efforts to do so are just vote buying schemes at their core.

SV reX said:

In reply to gearheadmb :

So, you are suggesting that they deserve MORE than above average wages for their work, JUST because the company was profitable?

Yeah, I strongly disagree.

The increased profits were related to the cash investment the company made. The employees did not contribute at all to that.

Oh really? How did those cash investments get turned into greater profits? Not worker effort?

So, everybody gets a piece of the profits...

Do they share in the losses too when there are losses?

Do they pay for a portion of the expenses?

What happens to workers who work for a company that is less profitable than others?  Are we supposed to redistribute ALL of the wealth, or just give it to the fortunate few employees who happen to work for profitable companies?

GameboyRMH said:

SV reX said:

In reply to gearheadmb :

So, you are suggesting that they deserve MORE than above average wages for their work, JUST because the company was profitable?

Yeah, I strongly disagree.

The increased profits were related to the cash investment the company made. The employees did not contribute at all to that.

Oh really? How did those cash investments get turned into greater profits? Not worker effort?

In my scenario?  Nope. 
 

So, take it to the extreme... a fully automated plant with NO workers. Who would we split the profits with?

You are incentivizing corporations to minimize the workforce. The fewer employees they have, the less they'd have to share the profits. 
 

I'm paid well for what I do, and I am content. 

The company IS sharing the profits with the employees by paying more than market rate for their labor. 

SV reX said:

So, everybody gets a piece of the profits...

Do they share in the losses too when there are losses?

Do they pay for a portion of the expenses?

 

What happens to workers who work for a company that is less profitable than others?  Are we supposed to redistribute ALL of the wealth, or just give it to the fortunate few employees who happen to work for profitable companies?

Sharing the wealth out as a smaller base salary + larger profit share could be one solution. There's nothing inherently wrong with letting workers share in the losses, again my theoretical super-egalitarian co-op that pays everyone a profit share would do this. Expenses would be part of the budget that pay would also have to come out of just the same as today. There's nothing radical or new in here as a worker pay system, similar pay structures are common in upper management.

SV reX said:

What happens to workers who work for a company that is less profitable than others?  Are we supposed to redistribute ALL of the wealth, or just give it to the fortunate few employees who happen to work for profitable companies?

Is that a problem now? Workers can try to switch companies, same as today. Maybe not ideal, but in no way worse.