Wednesday, March 5, 2014

Higher income fixes the economy - Henry Ford

For the most part I have been pushing for better pay for people.
As things are now with a food stamp cut and inflation going up.
It's clear there has to be a wage increase. Small towns sales are going
down as the many poor in town just has no money and have less help.

The poor should pull everyone down with them, with the light of such
inequality. Wealth not making it to the workers from the few that has
enough money. Commonly this usually ends in a natural selection
on the side of the rich, being towns will go broke do to lack of sales.
Ending in better pay as a means to get better sales.

Over all that is a good way to get your pay up being inequality is so high.
There is much greed out there and for me I see the lack of sales needed
to grow to better sales as the wages goes up.
Really you can make it but can they afford it with their pay as it is?

~~~DEAR AMERICAN COMPANIES: Here's How To Fix The Economy
The story you hear frequently about why Henry Ford made this decision was that he
wanted to allow his workers to be able to afford to buy his cars.
The wage increase certainly made the cars (and many other products) more affordable
for Ford employees, but the historical consensus is that Ford actually made this decision
for a different reason: To reduce employee turnover--and, in so doing, reduce recruiting
and replacement cost.

Regardless, it worked. Thousands of people immediately lined up to get jobs at Ford.
Employee turnover plummeted, and recruiting and training costs dropped.
The new wages allowed Ford employees to live middle-class lives, instead of being poor.
And it presumably made Ford, Ford's senior executives, and Ford's shareholders even
more proud of what they had created. In short, instead of viewing "shareholders"
and "customers" as the only two corporate constituencies that matter.

Ford introduced the idea that great companies should also serve a third
constituency: Employees. And because one company's employees are another
company's customers, Ford's decision helped spread the country's wealth to
more citizens and expand the purchasing power of the country as a whole.
And, in so doing, it helped the overall economy.

Henry Ford's story is highly relevant today.


Because we are facing a very similar economic problem as the country did in the
early 20th century. A glut of labor was allowing companies to pay a pittance for a day's
work, leaving most of their dedicated employees destitute. Business owners and executives
(the equivalent of today's 1%) did fine, but most rank-and-file workers did not.
And this lack of spending power in the middle class crimped overall economic growth.

If we want to fix today's ailing U.S. economy, we need many of our large
corporations to do what Henry Ford voluntarily did:

Share more of their vast wealth with their rank-and-file employees.

If the companies don't eventually see the benefit of doing this and do it voluntarily,
the government (an extension of the people) will likely the mandate that they do it either
through taxation or by radically increasing the national minimum wage.

And given that government solutions are often terrible solutions, it would be best for
everyone if we persuaded corporations to do this voluntarily.
So what follows is an initial effort to do that.


1. The health of any business or economy depends on the health of its customers,
and most American customers (consumers) are strapped or broke.
Consumers account for about 70% of the spending in our economy, and the other 30%
is tied to consumer spending (when consumers are broke, businesses don't spend because
there's no one to sell to.)

2. Most American consumers are strapped or broke because most of the income gains
in the past 30 years have gone to the top 10% (and especially the top 1%).

3. This increasing inequality has many causes, including globalization
(cheaper labor overseas), a decline in the minimum wage, the decline
of private-sector unions, changes in the tax code
(tax cuts for the highest earners), and other factors.
But the bottom line is: Average hourly earnings in America (adjusted for inflation)
have not increased in ~50 years.
(Total compensation, which includes health insurance, vacation time,
and other benefits has increased, but workers can't spend those things).

4. At the same time, earnings for the highest-income Americans have gone
through the roof.

5. Importantly, the problem here is NOT the weak health or profitability of
American companies (which was a problem in the early 1980s).
American companies are earning more as a percent of the economy than
they ever have.

6. One of the reasons American companies are earning so much money is that they're
paying very little to their rank-and-file employees. This is also why average earnings
 have been stagnant for 50 years and most American consumers are broke.
Wages as a percent of the economy are at an all-time low.

7. Meanwhile, a lot of Americans don't even have jobs, so they're not earning
anything. The employment-to-population ratio is lower that at
any time in the past 30 years.

Put all this together, and the problem in the economy becomes clear:

    * Too few jobs
    * Too little pay

HOW TO FIX THE ECONOMY? Think Like Henry Ford

Some people argue that the way to fix the economy is to give tax cuts to the highest
earning Americans the "job creators" so that they can invest in new companies
and create jobs.

Well, we'd all like to pay fewer taxes, but unfortunately, the "tax cuts for the rich"
approach almost certainly won't work. Here are a few reasons why:

The richest Americans and companies already have plenty of cash.
The reason these rich Americans and companies aren't investing and "creating jobs"
is that most American consumers (customers) are broke.
Rich Americans actually don't "create jobs" the whole economy creates jobs.
We've been trying the "tax cuts for the rich" approach for three decades, and it is
making the inequality problem worse, not better.

And... Read on:

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