Is Corporate Greed Causing Inflation?

In reply to bobzilla :

Again, it's not just about me, I don't want it to be about me. I've tried steering the conversation away from that, addressing it and moving on, I'm running out of ideas to try to keep it from being about me.

If you see any factual errors I've made that you haven't pointed out before please do so, I try my best to avoid them. If you think I'm ignoring facts that disprove anything I've said I'd like to have a look at those as well.

In reply to GameboyRMH :

You are misinterpreting and cherry picking facts to describe a normal situation as a problem. Percentage cost of labor is going to be pretty constant in any stable economy. It's not a problem.  It's a function of the market place.
Moreover, it probably isn't measured how you think it is. As an example, if you look at a large green field project, aka a new factory, the engineering ratio will be 10% or less. In other words only 10% or less is engineering labor. The larger the project, the smaller the engineering ratio. Now that isn't realistic, they just ignore the cost of engineering all the equipment in the building and consider it to be capital cost of equipment. A $2M piece of equipment might show up as zero labor on a balance sheet, but there is really hundreds of thousands in labor wrapped up in that capital expenditure. A small project, $500k or less might be 50% engineering and labor to modify an existing system or build a small system. In other words the numbers that you are quoting, probably don't mean what you think they mean.  Hopefully, that is clear as mud for you. 

I've ignored this a few weeks and don't care to read to catch up. My company is being bought out currently, we were told that our new boss is a big fan and follower of Jack Welch, be prepared. 

"The vitality model of former General Electric chairman and CEO Jack Welch has been described as a "20-70-10" system. The "top 20" percent of the workforce is most productive, and 70% (the "vital 70") work adequately. The other 10% ("bottom 10") are nonproducers and should be fired"

In reply to johndej :

I believe GE went through a phase where they were effectively cutting that bottom 10% loose.

There's a reason GE moved away from that ( at least the division I was in), but as we see people don't always look at all the data especially when it contradicts what they want to do n

In reply to No Time :

What HR is conveying is our team of 20 will likely be down 2 people in the next 6 months. A couple of my reports are already asking where they stand. They all do great work.

In reply to johndej :

That's unfortunate since it creates a work environment where you're no longer trying to improve your work, but trying to do better than your coworkers. Collaboration becomes competition, and allowing coworkers to crash and burn helps with self preservation. 

In reply to johndej :

The 20-70-10 theory is actually pretty realistic IME. Some places it's 25-50-25, others it's 30-40-30 etc. There are some people that should literally pay the company for being there because they screw so much stuff up that the workers who actually know how to do their job then need to go back and correct. Sometimes the screw-ups are the new low-level workers and sometimes it's the CEO, or some mid-level manager. 

I was always an above-average top performer the first 15yrs of my career until I realized that my pay was based more on my position than my production capacity. So I quit giving 120% and doing the job of 2 or 3 people. Now I give maybe 70% effort and just worry about my job and still get the same pay but less stress. 

I am currently working on side-income streams that can eventually replace my needing a FT job. 

Corporate Greed is not the cause of inflation, and is a very small contributing factor at most. The main reasons are due to [not going to actually say, since I don't want to be patioed]. The have-a-lots will always have more than the have-somes, and the have-nones will always complain that they can't be part of the have-somes because of the "evil" "unfair" etc have-a-lots, when in fact it is usually their self-defeating mindset that is keeping them in the have-none category. The system is far from perfect, but it is the best-functioning system that we have. Pushing ideas that are not going to work on a car website to fix a problem that is not even the cause of the main problem is entertaining, but rather futile.

In reply to GameboyRMH :

Yes. The concept of being asked to start accepting "human advancement" in lieu of an economic share of increased productivity, and to ignore the fact that all the gains of increased productivity are going to a few at the top at the same time, is a new and silly idea. In the past people got human advancement and economic advancement at the same time, and without an ever-increasing share of it going to the top too. There wasn't and still isn't any hint of some mechanism that would produce a tradeoff between the two. Where on earth did the idea that there should be some "balance" between having access to new technology or a modern society and increased pay come from? It seems like a flimsy excuse for a robbery in progress.
 

Let me see if I can explain it better, I think you are missing an important part of the concept. Let's use cars as an example. 
 

An automotive manufacturer becomes more productive over time. Computers aid design, and improved manufacturing techniques cut costs. They can make the same car for less money. They can make more cars with less labor. Productivity has improved. They can...

A) Sell the cars for the same money and keep the extra profits. Nothing wrong with this option, as that is the purpose of business.

B) Keep profits the same and pay employees more. This only makes business sense if it leads to even greater productivity and profitability, or if it is needed to gain or maintain a competitive advantage. This is unlikely, because otherwise they would have been doing it already. 

C) Use the extra productivity to improve the product. Either to gain a competitive advantage, to keep up with competitors, or to comply with stricter standards. Improve performance, fuel mileage, emissions, safety. 
 

D) The increased productivity offsets other increases in business costs. Energy costs, insurance, EPA compliance, etc.. 

E) Increase the pay of upper management, attract leadership that is expected to increase profitability. This is not much different than deciding how much to pay the production workers. The company wants to get the most return on their dollars. As mentioned many times previously, this is a very small percentage of the business's expenses, but leadership has an outsized influence on the success or failure of a business. 
 

"A" doesn't make any sense. They would be beaten by their competition and increased regulations would soon prohibit the sales of the current cars. 
 

"B" is what you have been focusing on, but it's not really related to increased productivity. The employees should already be at the optimum part of the pay/performance curve prior to the increase in productivity. This option has the least benefit to the business. 
 

"C" is where most of the money goes, because it has to. Market forces and government regulations push the manufacturer to invest most of their productivity gains back to this option. But this is also where the payback goes to the average person. The product is better, more efficient, safer, and more features. This example is about cars, but it applies to just about everything you buy from food to medicine to consumer goods. If we put the increased productivity back into the workers pockets, we would lose all of that. That is why it's a trade off. But it's mostly a false choice, because outside forces dictate that it's not really an option. 
 

"D" is a real issue. These costs are increasing, and need to come from somewhere. This directly affects the productivity/wage variance, but does provide some real world benefits that are overlooked. We all like cleaner air and water. It's not free. 
 

I get why "E" appears to be controversial. But making the correct decisions on A through D can make the difference between a strong company and one that fails, which is why an investment into E important. 
 

You keep making comparisons to the past. But the present day is not really comparable of the past. Advancement has not been linear in the past few decades, it's been exponential. No amount of money a few decades ago would buy the life we have today. But since you believe today is worse, that means that a previous time was better. If so, you should be able to give an example of a time that was better. Can you pick a spot on your wages vs. production graph and tell us why life was better then? 

I don't think its greed or malicious intent on anyone's part. We were all introduced to the game 90 years ago and we all know the rules and the endgame. I used to love playing because the game could go on for a loooooooooonnnggg time and was exciting and fun while you were in play.

Of course there was always that one sore-loser who dumped the board when they were about to go broke. And I never did trust the banker cause we knew he was stealing. 

Of course; major wars, the recession of 2008 and subsequent plummeting interest rates, a pandemic and lockdowns, sanctions against Russia, manipulation of oil prices by OPEC, all have nothing to due with current inflation. I think I avoided political comment, sort of.

In reply to GameboyRMH :

We agree. Those things are different. Those  changes have happened.

However, blaming business is a huge mistake. Business does the exact same thing it has always done... it seeks to make a profit by offering people what they are willing to buy.
 

The VAST majority of people now live beyond their means. WAAY beyond their means.  People don't even consider the price of houses or cars any more- just the monthly payment. We want stuff. Stuff we don't need, and we are willing to put our future and our children's future at risk to have the stuff we want NOW.

Business just lets us make our own stupid decisions.

I don't borrow money for cars. I drive what I can afford. I save every month. I invest. My parents did the same thing. So did my grandparents. And I have a pretty good retirement in front of me because of it. I am responsible for my own financial future.
 

People who live beyond their means are also responsible for their own financial futures. 

In reply to GameboyRMH :

In the 50s the income to home price ratio was over 6x. It went down from there and hit it again in 2007 and 2020. 
 

Ahh, the good old days, when people had it better, amiright?

In reply to GameboyRMH :

That's a really good list. Obviously in real life companies almost never choose just 1 option, they make partial selections of different options on the list. Any R&D spending is a allocating some budget to C, D is pretty unavoidable and often needed to meet new regulatory requirements, etc.

Now here's the issue, in the past, equitable amounts of budget were spent on B and E such that everyone's wages rose about equally with productivity improvements. So for a long time they were both ubiqitous and equally popular options. But at some point in the '70s, suddenly a collective decision was made to reallocate all of B's budget to E for the rest of time and never look back.

Yes, they chose a mix of the above options, along with many others. 

I have not seen any evidence that equitable amounts of the budget were applied to B and E in the past- again, you could give all of E to B and it still won't produce the results that you expect. But let's pretend that is correct. One, it wasn't a long time. It was a small slice of the last century, not coincidentally right after much of the rest of the industrialized world suffered catastrophic losses to it's production capacity and labor force. So was that time period the norm or the anomaly? Secondly, unions had a heavy influence during that time period, a period in which much manufacturing took place in the U.S.. That declined, largely due to the reduced prices consumers demanded and increased labor costs unions demanded. There is a point where productivity peaks, and no additional wages will increase productivity. Is it not possible that by that point businesses overall figured out how to get close to that peak? If I hand a man a shovel and pay him to dig, up to a point the amount he digs in an hour will be influenced by what I pay him. Eventually the point of diminishing returns is reached, more money gets less increased productivity until no amount of money will further increase productivity. There is a sweet spot in that curve where the employer gets the best bang for the buck. It varies by company, job, employee, and task, and it's not just the pay, but the overall satisfaction of the employee. People that can manage that complex interaction, and many others, are valuable to the company. I can't find any evidence that it was a collective decision. Companies that made the right choices prospered, those that made poor choices failed. It may appear that it was a collective decision because companies operate similarly, but that's just because the ones that didn't aren't with us any more. 
 

B might not look like an immediately profitable option but it was critical to the long-term health of the economy and society. The result is that we now have 2 generations of workers far less wealthy than previous generations and consumer demand issues - notice EV sales hitting a brick wall recently because everyone who can afford an EV has one now. That's not good for the global warming situation which will cause further economic issues. Sales of computers have also been in a slump over the last few years to the point that Microsoft is now artificially forcing people to buy new PCs through BS hardware requirements. Most people used to buy new cars every 5 years basically just because they could, and now we're 20+ years deep into a runaway average car age record streak.
 

Again, you are not interpreting the data correctly, or using flawed data. Your conclusions are flat untrue. If you look at per capita generational wealth by age, Baby Boomers, Gen X, and Millennials track pretty closely by age. By late 40's, Gen X'ers far surpass Baby Boomers, and Millennials are expected to do the same. They are very close in their 20's and 30's, despite the younger generations starting work later in life. 

EV sales did not hit a brick wall because people can't afford them. There in no shortage of people who can afford them that choose not to buy them at this time. PC's have largely been replaced by smartphones, smart TV's, and tablets. People used to buy new cars every 5 years because they were used up in that time. Cars lasting a lot longer is a benefit. 
 

As for no amount of money a few decades ago buying the life we have today, I disagree, the technological marvel that I can play multiplayer Fortnite on a cell phone in a forest is not that valuable. Co-op Doom on a desktop via dial-up was quite nearly as good. Most of the advancement has only enabled fripperies like this. If you brought a person from the '30s into the present with a time machine, the only things that would really blow their socks off would be our computer gadgets, batteries and telecoms. Aerospace stuff would be pretty impressive too but that doesn't affect the average person's life too much. Yes our cars have amazing gadgets, safety and performance in comparison, but they had cars in their time that could largely get the job of hauling around groceries and passengers done just as well. You'd have a hard time showing them how an ordinary modern house was much better without a printout of stats on average sizes and efficiency numbers - if you can do a showing in the summer, AC might be the most noticeable improvement. Today's health care is way more advanced, but also less affordable and probably not terribly noticeable unless you have a sufficiently complicated medical issue that can really show off those advances.

I think you are way, way underselling the advancements of the last 30 years. I don't think you have even a clue what life in the 1930's would have been like compared to today, otherwise you never would have suggested the comparison. Even ignoring all of the modern advancements and luxuries. The medical advancements aren't just for complicated medical issues. Quality of life has improved drastically, especially for people as they get older. That may not be important to you now, but it will be in the future. Safety is vastly superior. The air and water are much cleaner. 

So I think any time going back to the '50s would've been better for workers - better income to home price ratio, more affordable education and health care. If I had to pick an ideal time to be born I might go for the late '70s to early '80s, this is enough time to establish a lucrative career and settle down before the Great Recession does the opening act for a more or less uninterrupted economic trainwreck that continues to this day, plus you could still enjoy all of today's fun gadgets, and although social progress has nothing to do with the economy, you'd still get most of that too.

So, you just said that the best time to be alive was NOT the time when you believe it was the best for workers. I've been telling you that for who knows how many pages. You would chose to be born when the wage and productivity gaps diverged, putting your working years decades past the time when they were more closely aligned. 
 

As for the cycle that you are only glimpsing a portion of- 
 

“Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times.”- Michael Hopf

Deleted, double post. 

In reply to Boost_Crazy :

Current life expectancy for a male in the US is 73.3 years. In 1930 it was only 58 years. 
 

Sounds better to me. 

In reply to Boost_Crazy :

The evidence that equitable amounts of budget were applied to B and E in the past can be found in the "productivity/pay" graph or inflation-adjusted pay by percentile graphs - you'll see than before the '70s pay divergence the lines all move nearly in lockstep with each other. If all of E were given to B you'd see the upper pay percentiles stagnate while the lower ones would increase sharply - remember not to underestimate how many people E applies to, it's somewhere between 5-9%.

The theory that the only time the system appeared to work well was an odd fluke of circumstances is...sadly plausible and worth investigation. I'll have to compare the income stats for the US vs. some European countries that were comparable before WW2.

For generational wealth data I think we're looking at different ways of interpreting the same data. What you're describing matches average generational wealth by age. The issue with using that is that inequality has also increased with later generations, skewing the mean wealth of those generations upward. If you look at generational wealth by age and income percentile, we can see that for the bottom 70% of incomes, all the younger generations have accumulated less wealth than Boomers by the same age:

https://asocial.substack.com/p/do-millennials-have-more-or-less

I admit that my ideal birth date was chosen through an "in before the lock" approach and it does sacrifice a bit of housing affordability for access to modern tech and society. Since incomes are essentially flat from the '70s to the present and were steadily climbing from the '40s to '70s, you can't get a significant difference in income by adjusting the birth date anywhere from the '70s to present, and if you choose a birthdate before the early/mid-50s so you could lose out on some earning potential. So it's mostly matter of choosing within the stagnant income era based on affordability of things that had major changes like housing and education, and avoiding the fallout of the problems that were being created over that time which mostly started to hit between 2000 and the Great Recession. An "Xennial" birthdate therefore seems ideal.

Regarding the idea of cars being bought every 5 years because they were used up, I don't think cars have had a lifetime that short in many, many decades. That may have been the case in the '70s, but this graph shows the largest upticks in car age happening after recessions, not after any changes you might expect to improve longevity like EFI becoming mainstream in the late '80s/early '90s or cars actually starting to keep the weather out in the early '80s. Notably there is no hint of the 2009 Cash For Clunkers program putting any dent in the growth of average vehicle ages here:

In reply to SV reX :

In 1930 he'd be saying it's the Great Depression, stockbrokers ruined it, etc. no matter when, he'd have an excuse. 

In reply to GameboyRMH :

You were born when you were born, so what will you do about it? There are plenty of people here that have posted they believed what you believed until they got tired of being broke and did something about it. Notice a pattern? They did something about it, not just say "woe is me". You've had the same story for years.

Ever read the thread Tired of being the ho? It was started 8/27/11 and the payoff was 4/12/24. That's almost 13 years to see the payoff. You've bitched for at least 1/2 of that vs doing anything about it. 
 

There were 24 recognized recession periods from 1836–1929. Remind me again what corporations were colluding with each other during that time. 

In the 50s, it wasn't normal for every household to have two cars.

In the 80s (when I was a kid) it wasn't normal for every household to have an RV, a motorcycle, two quads and go on a big vacation every year.

People's expectations have grown faster than their income. 

In reply to Steve_Jones :

The pattern you're seeing might come from a survivorship-biased definition of "doing something about it." Within the last 6 years I've moved away from my immediate family to look for work in a different country, saved up some money and started a business offering a totally novel service with my own cash. If you compare those tasks to developing a new medical device without knowing the outcomes, it should look like doing at least as much about it.

There were 24 recognized recession periods from 1836–1929. Remind me again what corporations were colluding with each other during that time. 

I'm not sure what that's related to, but the late 1800s-early 1900s was a really bad period of monopolism, union-busting and worker abuse, so, lots? The formation of Standard Oil and the Teapot Dome scandal come to mind?

GameboyRMH said:

In reply to Steve_Jones :

You might also expect a world war to have had some negative effects.

War is always good for the economy (the winners economy).

The great depression had just hit. 

I asked my grandfather why he and his brothers signed up. "It was the right thing to do" was down the list, below "nothing better to do" and "they paid me to go".

I was born in 1965.

The '70s were a socioeconomic hell hole. No one in their right minds would want to go through that again.