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> If costs go up, companies must raise prices to maintain normal profitability. That is only true if salaries make up a significant amount of production. My f

by 6510 3y ago

> If costs go up, companies must raise prices to maintain normal profitability. That is only true if salaries make up a significant amount of production. My favorite example was a job at a cookie factory. A hall full of giant machines, multiple production lines. Mine, counting 5 humans produced FIVE HUNDRED THOUSAND boxes of cookies per day that cost 99 cent in the store. In a 5 hour shift I earned 35 euro. 5 X 35 = 175 500000/175 = 2857 euro for each 1 euro worth of salaries IOW salaries make up 0.035% of what customers pay. Would the cashier or the truck driver be earning 100 k per day? The 30 ish people in the office? Would they get 100k for "running" multiple production lines? It is frankly insulting we pay people to talk economic rubbish like that. The giant building, the ovens & production lines, the trucks and the ingredients must be handed down by the gods for free? In my current job I clean trains for ohh something between 5000 and 20 000 people per day. Assuming a 20 k day each traveler pays me 0.0075 euro while a ticket costs [say] 50 on average. THREE out of TWENTY THOUSAND pay for my labor. They need multiple people to clean and drive the train of course. It quickly adds up to.... nowhere near a million euro. Building a train, train stations and laying track involves a lot of people but it isn't that (to put it scientifically) the workers are pulling the rails out of their ass or are hammering out the components on an anvil. It involves a ton of equipment. So they put down tracks 50 years ago using machines build 60 years ago in factories build 70 years ago using tools made 80 years ago in factories build 120 years ago. etc Lots of labor, it took very few economists. They sit in the train, eating cookies, complaining about how expensive the ticket is. One says it must be labor, they are still talking about this to this very day and will continue to do so until the end of time.

Closi 3y ago
That's true at a microeconomic level (i.e. single company), but at the macroeconomic level we are talking about aggregate wages as a percentage of all company costs. As an aside, I think you might be underestimating the percentage of costs that staffing take - Take your example of train operations. The report below shows that Staffing Costs are approx. 28% of a train operators costs within the UK (NB: this would not include costs maintaining the rails). https://www.orr.gov.uk/sites/default/files/om/toc-benchmarking-report-2012.pdf https://www.orr.gov.uk/sites/default/files/om/toc-benchmarki... In your job with the cookie factory, you are also underestimating the amount of labour - I assume there were office staff, people who transported the cookies, people who made the raw ingredients, shopkeepers who put it on the shelf, all of whom have to be paid for within the ultimate retail cost. At that scale of production you will also require technical managers, maintenance engineers, marketing teams, QAs...
- 6510 3y ago
  if you'll allow it: Long long ago there was a bakery, the owner baked cookies and sold them. People were able to buy the cookies. He made a living doing that. We've somewhat upgraded the process from there. We went from factories full of people producing many cookies to halls full of machines. We went from really expensive custom machines to unbelievably cheap ones. The maintenance engineer works many lines, he has to do some work when something breaks but between those repairs tens of millions of cookies are produced. The designer does his job every 1-2 billion boxes of cookies but only if it is a custom job. If it is a generic machine it will be many billions more. He costs 20-30 boxes of cookies per day. If they pay him 15 or 45 it changes nothing. Ford wanted his employees to drive cars. Do you think 35 euro per day is a budget with room for cookies? Do you think it is justified for anyone to complaint about my salary? Show me the man brave enough to say it to my face? Each of these jobs involves someone having to tell you your salary. The body language is roughly that of a doctor telling you you have 1 week to live. I just needed work asap, this was what was available. Not very surprising, no need to ask why the last guy left. I cant say I didn't enjoy it, it was a marvel of engineering that few get to see from the inside. I remember a time in the 80's when manual labor paid really well. About 4000 vs 700 per month and purchase power was infinitely greater* People were proud, they cared about the company, they made an effort to keep things running, meet deadlines, run the extra mile. No one asked if they wanted to work overtime, it was obvious when the job had to be finished. People had a sense of duty. Now the cookie factory has 5 job agencies with ~50 people looking for the next idiot to enslave in the factory only for the victim to vanish unexpectedly creating a constant state of panic and increased pressure on the recruiters. It was hilarious how they shouted at me over the phone when my time to vanish came. Apparently they lost 3 that morning. During the call I looked up his salary online. I told him 3600 seemed nice but I wouldn't take a job shouting at people over the phone. I've done cold calling too, I know shouting at people is not very likely to get you what you want. It is hard to convince a recruiter to increase the salary if his salary depends on not understanding it. The spiel is obvious, they want to throw money at it until they find a stable pool of useful idiots that they won't have to pay. It's been 8 years and the job offer is still plastered all over the job websites. They promise at least one 5 hour shift, you will be on call all week for all 3 shifts 7:00 till 23:00, have to be there in < 15 minutes. In a context like that should we really blame those damn cashiers with their 5 euro salary? Oh wait, it is all self checkout now. Strange, the cookies are still 99 cents? I read UK Railway workers earn wages 70 per cent above the national average. 28% / 1.7 = 16.47% Then they are "overpaid" 11.53% already. You get 70% more purchase power for shall we say 7% more expensive tickets? (guestimating maintenance this time) How much extra disposable income would that 70% produce? 1000% ? 2000% ? It's probably a lot of cookies, cookies every day! I think the economy would like it.

by 6510 3y ago

Closi 3y ago

That's true at a microeconomic level (i.e. single company), but at the macroeconomic level we are talking about aggregate wages as a percentage of all company costs. As an aside, I think you might be underestimating the percentage of costs that staffing take - Take your example of train operations. The report below shows that Staffing Costs are approx. 28% of a train operators costs within the UK (NB: this would not include costs maintaining the rails). https://www.orr.gov.uk/sites/default/files/om/toc-benchmarking-report-2012.pdf https://www.orr.gov.uk/sites/default/files/om/toc-benchmarki... In your job with the cookie factory, you are also underestimating the amount of labour - I assume there were office staff, people who transported the cookies, people who made the raw ingredients, shopkeepers who put it on the shelf, all of whom have to be paid for within the ultimate retail cost. At that scale of production you will also require technical managers, maintenance engineers, marketing teams, QAs...

6510 3y ago
if you'll allow it: Long long ago there was a bakery, the owner baked cookies and sold them. People were able to buy the cookies. He made a living doing that. We've somewhat upgraded the process from there. We went from factories full of people producing many cookies to halls full of machines. We went from really expensive custom machines to unbelievably cheap ones. The maintenance engineer works many lines, he has to do some work when something breaks but between those repairs tens of millions of cookies are produced. The designer does his job every 1-2 billion boxes of cookies but only if it is a custom job. If it is a generic machine it will be many billions more. He costs 20-30 boxes of cookies per day. If they pay him 15 or 45 it changes nothing. Ford wanted his employees to drive cars. Do you think 35 euro per day is a budget with room for cookies? Do you think it is justified for anyone to complaint about my salary? Show me the man brave enough to say it to my face? Each of these jobs involves someone having to tell you your salary. The body language is roughly that of a doctor telling you you have 1 week to live. I just needed work asap, this was what was available. Not very surprising, no need to ask why the last guy left. I cant say I didn't enjoy it, it was a marvel of engineering that few get to see from the inside. I remember a time in the 80's when manual labor paid really well. About 4000 vs 700 per month and purchase power was infinitely greater* People were proud, they cared about the company, they made an effort to keep things running, meet deadlines, run the extra mile. No one asked if they wanted to work overtime, it was obvious when the job had to be finished. People had a sense of duty. Now the cookie factory has 5 job agencies with ~50 people looking for the next idiot to enslave in the factory only for the victim to vanish unexpectedly creating a constant state of panic and increased pressure on the recruiters. It was hilarious how they shouted at me over the phone when my time to vanish came. Apparently they lost 3 that morning. During the call I looked up his salary online. I told him 3600 seemed nice but I wouldn't take a job shouting at people over the phone. I've done cold calling too, I know shouting at people is not very likely to get you what you want. It is hard to convince a recruiter to increase the salary if his salary depends on not understanding it. The spiel is obvious, they want to throw money at it until they find a stable pool of useful idiots that they won't have to pay. It's been 8 years and the job offer is still plastered all over the job websites. They promise at least one 5 hour shift, you will be on call all week for all 3 shifts 7:00 till 23:00, have to be there in < 15 minutes. In a context like that should we really blame those damn cashiers with their 5 euro salary? Oh wait, it is all self checkout now. Strange, the cookies are still 99 cents? I read UK Railway workers earn wages 70 per cent above the national average. 28% / 1.7 = 16.47% Then they are "overpaid" 11.53% already. You get 70% more purchase power for shall we say 7% more expensive tickets? (guestimating maintenance this time) How much extra disposable income would that 70% produce? 1000% ? 2000% ? It's probably a lot of cookies, cookies every day! I think the economy would like it.