Archive for the ‘Labor’ Category

Chipotle profits by investing in employees

April 12, 2014

The Chipotle Mexican-style restaurant chain enjoys good profits and good growth, while paying its employees generously and promoting from within.

220px-Chipotle_Brandon_Its current policy began about nine years ago when founder Steve Ells and then-COO Monty Moran visited the restaurants, and notice that the one that were best-run were all managed by employees who had started as restaurant crew members and worked their way up.

They decided to make that into a system, and reward restaurant managers, not for achieving set targets of holding wages and other costs down, but for mentoring employees and training them to be managers.

Click to enlarge.

Click to enlarge.

Why do so many managers ignore the examples of Chipotle, Costco and other companies and instead grind their employees down instead of building them up?  

I am reminding of a saying Bertrand Russell once made about human nature, When people are mistaken as to what is in their interest, the course they believe to be wise is more harmful to others than the course that really is wise.

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Who represents the interests of wage-earners?

March 26, 2014

After the election of President Obama, a tiny economic elite is still in charge.

http://www.salon.com/2014/03/16/there_is_no_meritocracy_its_just_the_1_percent_and_the_game_is_rigged/

Wall Street’s influence on the Democratic Party goes back a long way.

http://www.counterpunch.org/2014/03/21/the-missing-link-to-the-democratic-partys-pivot-to-wall-street/print

And nowadays the so-called progressives represent the views and interests of college-educated professionals rather than those of wage-earners.

http://www.salon.com/2014/03/20/college_educated_professionals_could_doom_progressive_politics/

The rising tide no longer lifts all boats

March 20, 2014
Click to enlarge.

Click to enlarge.

President John F. Kennedy used to say, “The rising tide lifts all boats.”  What he meant was that economic growth benefits everyone.   The chart above shows that this once was true, but is no longer so.  The links below give some possible explanations as to why this is the case.

http://houseofdebt.org/2014/03/18/the-most-important-economic-chart.html

http://www.nakedcapitalism.com/2013/08/productivity-rose-7-7-post-great-recession-workers-have-seen-none-of-it.html

Why franchisees should organize

March 19, 2014

I’ve written about low wages and poor working conditions at fast-food restaurant chains, but the fact is that a humane business owner who is a franchisee may not be in a position to treat employees humanely.

Franchisers of fast-food restaurants impose strict controls on franchisees, including the prices that they charge.

So if McDonald’s (to take a hypothetical example) says the price of a double cheeseburger is a dollar, and it costs more than a dollar to make the double cheeseburger, the “owner” of the individual McDonald’s restaurant loses money.

I put “owner” in scare quotes because a franchisee does not have the self-determination of a true owner.  Under a truly independent business owner, the franchisee is not free to raise or lower prices in response to supply and demand.

The effect of unionization of fast-food workers or a higher minimum wage will be to squeeze franchisees while the effects on franchisers at the top of the economic food chain will be minor and indirect.

The answer, as Martin Longman wrote in the Washington Monthly, is for franchisees to unionize to protect their own interests.   As Longman pointed out, franchisees typically pay thousands of dollars just for the right to the franchise, basic business decisions such as prices are made for them, and they often have to buy basic supplies from suppliers designated by the franchiser.  They are in much the same situation as sharecroppers in the Old South in an earlier era, and have just as little ownership rights.

Everybody who is in a position to be squeezed by giant corporations — employee, franchisees, suppliers — has a right to organize collectively to equalize the bargaining power.   It is not in the interest of franchisees and suppliers to be shock absorbers between these giant corporations and the workers who make their profits possible.

If franchisees organize, their organization would of course not be called a “union” [1].  It would be called an “association” or “federation” or something like that.  But the purpose would be the same.

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Why the economic recovery is so slow

March 6, 2014
Current job losses compared with previous recessions

Current job losses and recovery compared with previous recessions

The chart shows how slow the current U.S. economic recovery is compared to recoveries from  previous recessions.  When and if the number of U.S. jobs returns to the pre-recession level (the 0.0% line on the chart), the jobs recovery will not be complete because the number of working-age Americans will have increased in the meantime.

Why is the current economic recovery so slow?  Here is what I think:

  • Almost all the benefits of economic growth during the past 20 or 30 years have been flowing to a tiny minority of the population — the upper 1% or 0.1% of the population.
  • These segment of the population spends less of their income than most Americans do.  Instead they save their money so that they can become even richer.
  • Contrary to what “supply-side” economists hoped in the 1980s, they have not been investing their money in enterprises that create American jobs.  People don’t invest money just because they have money or just in order to create jobs.  They invest money in a business because they have reason to think there is a market for that business’s products and services.
  • Prior to the 2008 crash, U.S. economic growth depended on the willingness and ability of the American middle class to take on debt in order to maintain their spending power.
  • Since the 2008 crash, banks, wisely, have tightened their requirements for lending.
  • Since the 2008 crash, middle class Americans, wisely, have been paying down their debts rather than taking on more.
  • These leaves us with the situation that John Maynard Keynes wrote about — an economy that does not grow because people have no money to spend, and people without money to spend because the economy is not growing.

I don’t believe in government spending money for the sake of spending money, but there are a lot of things that need to be done that in the long run will add to US economic strength, and this would be a good time to start.  One useful way to increase jobs is for governments at all levels to start to repair our deteriorating bridges, water mains and other physical infrastructure.

LINKS

FORGET THE 1% by J.D. Alt for New Economic Perspectives.

Inequality and the Weak Recovery by Joe Weisenthal for Business Insider.

Americans Shut Out of Home Market Threaten Recovery by Pashant Gopal and John Gittelsohn for Bloomberg Business News.

Inequality, austerity are enemies of meritocracy

February 27, 2014

A smart economist named Tyler Cowen has written a book entitled Average Is Over, in which he foresees a world of advanced technology in which maybe 15 percent of the population will have the ability to keep up and grow rich, while everybody else falls behind.

He said new technology will make the population more legible to the job creators, so that those who have merit will rise more quickly, but those who make bad choices early in their lives will be marked forever.  He has no problem with this because, like many economists, he thinks anything is all right if it is the result of market forces.

I don’t have standing to criticize Cowen’s book because I haven’t read it, but I think that, as a general principle, the greater the degree of inequality and the fewer the openings at the top, the less likely that these openings will be allocated on the basis of merit.  Rather the gatekeepers will first make sure that their families and loved ones are taken care of, and then will look to do favors for those who can do favors in return.

Equality of opportunity entails risk for those at the top, but that risk is minimized when prosperity is widely shared, and people who miss out on one thing have a fair shot at something else.

Why the U.S. can afford to raise minimum wage

February 24, 2014

fat-cat-index-minimum-wage

The U.S. minimum wage has failed to keep up with inflation and productivity, and adjusted for inflation (which you always should do) is lower than it has been in the past.  So there is no good reason to fear that current proposals to increase minimum wage will result in higher unemployment.

The following link has good background information.

http://www.addictinginfo.org/2013/10/05/federal-minimum-wage-productivity/

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Supply, demand and minimum wage

February 24, 2014

One of the big arguments against raising the minimum wage is based on an over-simple understanding of the law of supply and demand  — that if employers have to pay higher wages, they’ll hire fewer workers.

If that were true, then the long-term decline in the minimum wage and in median workers’ wages (adjusted for inflation, which you should always do) would have resulted in full employment.  Obviously this hasn’t happened.

A rational employer will hire as many workers as necessary for the profitable operation of the business, and no more.  The law of supply and demand sets limits.  The employer will not pay so much that he can’t operate profitably, nor so little that nobody will work for him.  But, as is shown by the difference between Costco and Walmart, there is a broad range between those two limits.

Suppose I have a franchise to operate a McDonald’s restaurant.  I would not raise wages to the point where higher costs forced me to charge more for a hamburger than the Burger King restaurant across the street.  But if the minimum wage was raised for both of us, we could pay higher wages and still be on a level playing field.

In theory, minimum wage could be raised to the point where I charged more for hamburger than people were willing to pay.  But there is no evidence that this has ever happened with minimum wage in the United States.

One economist, for example, compared employment in adjoining counties of adjoining states with different state minimum wages.  There was no evidence of any difference in unemployment rates or job availability.

A higher minimum wage could have a positive effect on employment.  If low-wage workers have more money to spend, there is a greater demand for goods and services, and could result in new hiring.

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Jenn’s Words: “Living in poverty is like being punched in the face over and over and over on a daily basis. “

February 24, 2014

Originally posted on Poor as Folk:

words

Thank you to Jenn for sharing her personal story of living in poverty right now….

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Today, I did something I never thought I’d do. I yelled at my son for being hungry. Oh sure, there are many parents nodding in agreement because they’ve done the same thing. Many have yelled at their kids for asking for one more snack right before dinner was served or for wanting to eat junk food out of boredom. That’s not why I yelled. I yelled because I didn’t have extra food to give him and I was taking my frustration out on him. He wasn’t doing anything wrong. He’s just a kid, a 7 year old who is full of energy and constantly growing. Of course he’s hungry often. That’s what kids do. However, I didn’t have enough food for anyone to have extras. Everything has to be rationed out over a week…

View original 4,062 more words

On being afraid to speak like a free American

February 21, 2014

0803_freespeech_630x420

When I was reporting on business for my local newspaper in the 1980s and 1990s, I encountered a lot of people who were afraid to speak their minds and be quoted by name.

They weren’t afraid of the FBI, the CIA or any governmental or police agency.  They were afraid of employers — not just their own employer, but any potential future employer.  As one said, “I don’t want to be known as a bad employee.”

If you had to choose between evils, an oppressive government is worse than an oppressive employer.  In the worst case, the former has the power to take away your life and freedom, while the latter has only the power to take away your livelihood.  But a (comparatively) lesser evil can still be a great evil.

http://www.businessweek.com/articles/2012-08-03/where-free-speech-goes-to-die-the-workplace

Almost all the people I ran into in those days who were unafraid to speak like free Americans fell into one of the following categories.

  • Tenured college professors.
  • Civil servants
  • Union members with strong unions and good contracts
  • Independent professionals such as physicians, lawyers and accountants, not employed by a larger firm.
  • Independent craft workers such as plumbers, electricians or handymen, not employed by a larger firm.
  • Independent business owners not dependent on a single customer.

It might not be a coincidence that the proportion of people in all these categories is declining.


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