Gyroscopic Investing

… but perhaps not in the way you might think.

http://www.salon.com/2013/12/15/poverty ... ork_swamp/

This article offers substantial and troubling evidence that expansions of the welfare state without simultaneous expansions of wage controls and pro-union laws have permitted private employers to underpay their employers relative to the value they produce, safe in the understanding that their poorly-paid employees will qualify for enough public benefits to survive and

It's a classic case of socializing costs while privatizing profits. And it's directly enabled by the federal government.

Pointedstick wrote: … but perhaps not in the way you might think.

http://www.salon.com/2013/12/15/poverty ... ork_swamp/

This article offers substantial and troubling evidence that expansions of the welfare state without simultaneous expansions of wage controls and pro-union laws have permitted private employers to underpay their employers relative to the value they produce, safe in the understanding that their poorly-paid employees will qualify for enough public benefits to survive and

It's a classic case of socializing costs while privatizing profits. And it's directly enabled by the federal government.

As I understand it, without welfare Target wouldn't be able to find any of those people with the red shirts to work in Target stores without paying much higher wages.

An added bonus for Target is that with the employee discount the employees tend to spend their entire food stamp allotments in Target stores.

In other words, rather than having to pay an employee $1,700 per month in wages, Target might pay an employee just $1,200, and the government would kick in $500 in the form of food stamps, bringing the total for the employee to $1,700.

So think about how sweet the deal is for Target: They get a $1,700 per month employee for just $1,200, AND each of those employees comes with an extra $500 in monthly revenue for the store they work at in the form of the food stamp card that they will spend in that store.

So it sounds like a win-win, right?
(Note for the sarcasm impaired:  )

Essentially, our welfare systems have become "income replacement" programs and employers have deduced from this that they don't really have to pay their employees so much because the government will probably make up the difference.

Unintended consequences in action...

Pointedstick wrote: Essentially, our welfare systems have become "income replacement" programs and employers have deduced from this that they don't really have to pay their employees so much because the government will probably make up the difference.

Unintended consequences in action...

I think that when people think about "wealth redistribution" in the context of government programs, they visualize a simplistic process of a bureaucratic Robin Hood taking from the rich and giving to the poor.

The truth is that the redistribution happens in myriad ways and in many cases the redistribution is going from poor to wealthy.

The Target employee example would basically be a case of food stamp disbursements being used to help prop up Target's revenue figures at the cost of its employees earnings less than they would earn in the absence of funds from welfare programs.

So if we get rid of the welfare programs,the market will sort this out ?

annieB wrote: So if we get rid of the welfare programs,the market will sort this out ?

Another option is more sane welfare programs that aren't co-opted by the private sector so easily. But congress seems totally incapable of doing that these days.

Pointedstick wrote:

annieB wrote: So if we get rid of the welfare programs,the market will sort this out ?

Another option is more sane welfare programs that aren't co-opted by the private sector so easily. But congress seems totally incapable of doing that these days.

What do you mean by "welfare programs that aren't co-opted by the private sector so easily"?

In terms of government redistribution efforts, I thought this was interesting from Mish's website the other day:

Income Group:  Market Income + SS/Medicare + Other Transfers - Fed Taxes = After Tax Income

Bottom 20%      $8,000 + $14,200 + $8,500 - $0 = $30,800
2nd Quintile:      $30,700 + $10,300 + $4,900 - $2,500 = $43,400
3rd Quintile:      $54,800 + $7,900 + $2,900 - $8,100 = $57,400
4th Quintile:    $87,700 + $5,500 + $1,900 - $16,100 = $78,900
Top 20%:    $234,400 + $5,200 + $1,300 - $58,900 = $181,900

60% of Income groups see net benefit of government programs...

Where is the motivation for change?

I'm not sure that Walmart,Target or McD made all these people poor.

PP67 wrote: In terms of government redistribution efforts, I thought this was interesting from Mish's website the other day:

Income Group:  Market Income + SS/Medicare + Other Transfers - Fed Taxes = After Tax Income

Bottom 20%      $8,000 + $14,200 + $8,500 - $0 = $30,800
2nd Quintile:      $30,700 + $10,300 + $4,900 - $2,500 = $43,400
3rd Quintile:      $54,800 + $7,900 + $2,900 - $8,100 = $57,400
4th Quintile:    $87,700 + $5,500 + $1,900 - $16,100 = $78,900
Top 20%:    $234,400 + $5,200 + $1,300 - $58,900 = $181,900

60% of Income groups see net benefit of government programs...

Where is the motivation for change?

  The challenge with economics is to see the unseen. All but the violent sociopaths who succeed in a non-free market would be better off with freedom and respect for individual rights. 99.9% of people on the receiving end of a government check will never understand that and will never be convinced of that.

Therefore....the lawless and immoral democracy affecting the economy will lead to more dependance and more theft and culminate in fascism or communisim. 

Democracy is of course two wolves and a sheep voting on what's for lunch. What motivation would the wolves have to vote against eating the sheep?

I am a business owner/operator in a low-wage, low per-employee profit margin business.

I can definitely agree that this is a legit phenomenon.  I would say around half of the employees in our business get some sort of assistance and it's probably higher than that. 

I wish that I could pay my employees more and in fact I know that we do pay them well relative to our competitors and peers, but it's still not enough for them in most cases.

If we did raise our compensation to a "livable" wage, we would be out of business within months.  I feel like much of this has to do with the evaporating post-war manufacturing edge that the US once had.

clacy wrote: I am a business owner/operator in a low-wage, low per-employee profit margin business.

I can definitely agree that this is a legit phenomenon.  I would say around half of the employees in our business get some sort of assistance and it's probably higher than that. 

I wish that I could pay my employees more and in fact I know that we do pay them well relative to our competitors and peers, but it's still not enough for them in most cases.

If we did raise our compensation to a "livable" wage, we would be out of business within months.  I feel like much of this has to do with the evaporating post-war manufacturing edge that the US once had.

Maybe if the price of stuff was a lot lower they would be able to live on the wages. Maybe the work is not high skilled enough to merit anything more than a stepping stone job.

But but....I thought inflation was supposed to help the poor......

What a scam. The ultra wealthy create money out of thin air and hand it over to their buddies and say they need to do it to help the poor. It's a sick joke.