Rebuilding the Middle Class

[fleabird]

I do enjoy your ideas, Rota. But however much I would like to agree with them, I just can't. I just can not agree that it would be fair to tax business owners even further so that they "fully utilize" their employees.

My main concern is this: How could anyone without a huge amount of capital go about starting a small business? I worry that no matter the greatness of their ideas/innovations, the dedication of their time, the fairness of their prices, they would just never be able to afford to pay an employee in order to grow a business. Many small-businesses can only afford to grow in small increments, first hiring one part-timer, then maybe two. After a few years, they may have enough work for full-time employees. Long-term consequences: less innovations, less competition, and more McDonalds and WalMarts.

It should be up to the owner of a business to decide how best to fully utilize the resources of said business, because they have invested their money, time, mental and physical energy into creating it. If it profits, they profit. If it fails, they lose. In a rational world, they would do everything to ensure the most efficient use of all resources, including labor, without the use of government coercion. Of course, I realize this is not the way things are done in our current irrational system and agree the current system is broken. For some reason, it seems a benefit to employers to under-hire, fill their ranks with part-time high-schoolers, and discard educated "over-qualified" applicants in favor of social-security recipients who need to supplement their meager income so they can pay their electric bill. I too am a recovering college student.

I would really like to know your thoughts on laissez faire capitalism. I believe if we lived in a truly laissez faire society, you would already be in charge. But instead of being hired as ruler of the world, you are only offered a job as a bank teller. I find this to be the greatest tragedy of our current economic system.

Once again, I thoroughly enjoy your writing Rota. Keep it coming!

[Alzar]

Good question.
The social security payment burden is now being taken entirely by the employer, so every employer has a legitimate reason to cut everyone's pay by 7.5% when this new system is implemented.

If the baker in question made $50k gross, then the employer could reasonably change that to $46,750 without affecting the take-home pay. The 50k + 7.5% cost of his pay now is $53,250. The new cost of his salary to the employer would be $46,750 + 12,588 = 59,338 under the new system.

If the baker in question made $50k take-home, then the employer could reasonably change from $53,250 to $50k without affecting the take-home pay. The 53,250 + 7.5% cost of his pay now is $57,244. The new cost of his salary to the employer would be $50k + 12,750 = 62,750 under the new system.

In my youth I actually worked at a bagel shop. We made them the old fashioned way, no par-baked garbage that you just need to heat up. Every morning our baker showed up at 3am to start making the bagels. If the salary of the baker cost an extra $5,500 or 6,000 it would not have affected the cost of food. If the owner had to live with $100 less profit per week, he would still be able to afford his 5 bedroom house.

The new system would not affect anyone else in the shop, since the rest of the staff was part-time service employees that all qualify as "registered students" for the rebate.

Will the new cost structure take some adjustments? Yes. The whole point is to change behavior to fully utilize employees. If we tweak the new system to have the same costs as the current one, then nothing will change. I would hope that the new system would prompt changes like the one that actually occurred in that bagel shop.

Here is what happened...
The baker who had some sort of food-type associate's degree got hired by a local nursing home to be their nutritionist. She plans and organizes all the menus and prepares special meals for special needs like diabetics. She also got a healthy raise. The new system rewards this nursing home for fully utilizing her.

The owner took over baking 2 days a week and hired a part-time baker for the other 4 days. She was a single mom, so she would qualify for the "rebate" as well. It was nice for her to spend the wee hours working and have the whole day free to be with her kid.


Will adjustments have to be made? Yes
Can adjustments be made? Yes


As for your tax comment, I am totally in support of some tax increases on the upper class and some reductions to the lower/middle class tax burden. But that's a subject for another thread. I think this plan in conjunction with some income tax changes could do wonders for the economy.



You should read my other thread then. The solution to poverty.
Economic fixes are going to take many changes to many parts of the system. This thread is only about one possible tweak to one part of the system. You can't expect one magic button to fix every issue.

The last time i argued with Rota about how to solve poverty... he gave me this.... ^

Thnx for the advice Wn1 now i know who not to mess with!! I had enough lectures in my childhood i am good.

[Rota]

I do enjoy your ideas, Rota. But however much I would like to agree with them, I just can't. I just can not agree that it would be fair to tax business owners even further so that they "fully utilize" their employees.

My main concern is this: How could anyone without a huge amount of capital go about starting a small business? I worry that no matter the greatness of their ideas/innovations, the dedication of their time, the fairness of their prices, they would just never be able to afford to pay an employee in order to grow a business. Many small-businesses can only afford to grow in small increments, first hiring one part-timer, then maybe two. After a few years, they may have enough work for full-time employees. Long-term consequences: less innovations, less competition, and more McDonalds and WalMarts.

It should be up to the owner of a business to decide how best to fully utilize the resources of said business, because they have invested their money, time, mental and physical energy into creating it. If it profits, they profit. If it fails, they lose. In a rational world, they would do everything to ensure the most efficient use of all resources, including labor, without the use of government coercion. Of course, I realize this is not the way things are done in our current irrational system and agree the current system is broken. For some reason, it seems a benefit to employers to under-hire, fill their ranks with part-time high-schoolers, and discard educated "over-qualified" applicants in favor of social-security recipients who need to supplement their meager income so they can pay their electric bill. I too am a recovering college student.

I would really like to know your thoughts on laissez faire capitalism. I believe if we lived in a truly laissez faire society, you would already be in charge. But instead of being hired as ruler of the world, you are only offered a job as a bank teller. I find this to be the greatest tragedy of our current economic system.

Once again, I thoroughly enjoy your writing Rota. Keep it coming!

Excellent feedback.
You're right about this hitting small businesses fairly hard.

I will point out that truly small business like that bagel shop, which employ less than 20 people account for less than 20% of the total employment in America. Also, these businesses contain a hefty portion of part-time employees that would qualify as "exceptions" for the rebate(students and whatnot).

I don't doubt that if this idea was implemented, there would be quite a lot of griping from small businesses(legitimately). Big business would hate it too. This plan does not improve the position of the "employer" in almost any situation. But, I think the good for the vast majority of the country(the employees) outweighs the pain that employers will feel.

There are plenty of valid employer-biased arguments against this plan. I don't deny that.


Thanks again for the well thought out response. +reps for you.