Henry Ford built a Strong Middle Class with Nonunion Labor

Posted by PITHOCRATES - February 9th, 2014

Week in Review

President Obama’s new message is the horror of income inequality.  As his friends on Wall Street and in Hollywood make so much more money than the ‘folks’ do.  Of course, if it weren’t for his abysmal economic policies the ‘folks’ would be able to get a better-paying job.  Since he’s been president his policies have destroyed some 11,301,000 jobs (see The BLS Employment Situation Summary for December 2013 posted 1/13/2014 on PITHOCRATES).  The Affordable Care Act, new taxation, costly regulatory policies and his support for union labor all help to kill jobs.  Forcing a lot of people to work a couple of low-paying part-time jobs to pay the bills.  While his friends on Wall Street and in Hollywood have never been richer.

The economy wouldn’t as bad as it is if President Obama didn’t attack business so much.  And, instead, embraced it.  Like Henry Ford (see The Internet Is the Greatest Legal Facilitator of Inequality in Human History by Bill Davidow posted 1/28/2014 on The Atlantic).

In the past, the most efficient businesses created lots of middle class jobs. In 1914, Henry Ford shocked the industrial world by doubling the pay of assembly line workers to $5 a day. Ford wasn’t merely being generous. He helped to create the middle class, by reasoning that a higher paid workforce would be able them to buy more cars and thus would grow his business.

Yes, Henry Ford did want to pay people enough so they could afford to buy his cars.  But this did something else.  It attracted the best workers to his company.  Because of the incentive of the higher pay.  And if they were lucky enough to have gotten hired in they busted their butts so they could keep those high-paying jobs.  It was a meritocracy.  If a worker wasn’t performing they got rid of that worker.  And offered that job to another person willing to bust their butt to keep that job.

Of course, the unions changed all of that.  The Keynesians will point to Ford to justify their consumption policies (putting more money into consumers’ pockets as the be-all and end-all of their economic policies).  And NOT on how attracting the best workers with the best pay helped make Ford the most efficient.  Allowing Ford to produce cars at prices working people could afford.  Once the unions came in they decreased efficiencies.  Slowed down those assembly lines.  And raised the cost of cars.  So only unionized working people could afford them.  While most other working people had to settle on used cars.  Unless they had a relative that worked for one of the automotive companies that could give them a car at an automotive worker’s discounted price.

Surprisingly, the much-vilified Walmart probably does more to help middle class families raise their median income than the more productive Amazon. Walmart hires about one employee for every $200,000 in sales, which translates to roughly three times more jobs per dollar of sales than Amazon.

Why do some vilify Wal-Mart?  Because like Henry Ford was in the beginning they are nonunion.  Helping them not only to hire the best workers but to provide goods at a lower price so those not in a union can afford to buy them.  So Wal-Mart helps middle class families in two ways.  They help to raise the median family income.  And they allow that median family income go further.  Perhaps the greatest weapon in the arsenal to fight income inequality.  As they help those not in privileged jobs (such as a UAW job or a government job) to live as well as someone in those privileged jobs.

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Washington D.C. and Detroit say ‘No’ to Wal-Mart because they don’t need Jobs or Shelves full of Low-Priced Goods

Posted by PITHOCRATES - July 20th, 2013

Week in Review

The Democrats hate Wal-Mart.  As do unions.  Because Wal-Mart stores do not have union labor.  Unions hate that.  And because Democrats and unions are joined at the hip, Democrats hate what unions hate.  Which is why you won’t find Wal-Mart stores in big Democrat cities.  Because the Democrats do everything they can to keep them out.  Even writing laws specifically targeting Wal-Mart (see Trouble in store: Why Walmart has failed to woo Washington by Rupert Cornwell posted 7/21/2013 on The Independent).

Walmart has been wooing [Washington D.C.] for years, and in 2010 announced plans to open four stores there, a number subsequently raised to six. Everything was going swimmingly, with work already started on three of the sites, until earlier this month, when the council passed its Large Retailer Accountability Act, otherwise known as “Get Walmart”.

Under it, non-unionised stores with a commercial space of 75,000ft or more – ie Walmart – will henceforth have to pay employees at least $12.50 (£8.20) an hour, compared with the city’s existing minimum wage of $8.25, and the national one of just $7.25 an hour. The company retorted by threatening to scrap three of the planned stores at once, and perhaps abandon the three where construction has begun too, causing the loss of up to 1,800 new jobs…

The case for Walmart is strong – that its stores provide working-class Americans (and many wealthier ones too) with good service and a broad selection of goods “at the lowest prices possible”, to use the words of old Sam Walton, who opened his first store in Rogers, Arkansas, in 1962. And it provides jobs: 1.4 million of them in the US alone…

Nor is Washington DC alone in feeling that way. Five of the country’s other largest cities – San Francisco, Detroit, Seattle, Boston and, above all, New York – have also said no. “As long as Walmart’s behaviour remains the same, they’re not welcome in New York City,” says Christine Quinn, the New York City council speaker who may well be the next mayor. “New York isn’t changing. Walmart has to change.”

Not by coincidence all those cities, like DC, are Democratic strongholds where unions are strong. They are liberal, socially “progressive” and, by definition, urban, while Walmart’s genes are southern, conservative and suburban.

Detroit said ‘no’ to Wal-Mart?  The city that just filed the largest municipal bankruptcy in history said they don’t need jobs or low prices on food, clothing, pharmacy and household goods?  If you’re looking for the answer to why Detroit is in the mess it is in this is your answer.  The Democrat stronghold in Detroit got so anti-business that it chased all the jobs out of the city.  Once the jobs left the people soon followed.  First the whites.  Accelerating their ‘white-flight’ following the Detroit riots.  While the blacks held on.  But after 20 years (1974 – 1994) of Coleman A. Young they gave up, too.  For they don’t come further left than Coleman A. Young.  And when you’re that far left you’re no friend to business.  So businesses stay away.  As do their jobs.

The black middle class followed the whites out of Detroit.  In pursuit of greener pastures.  And jobs.  Leaving Detroit with half the population it once had.  Impoverished.  And more anti-business than ever.  Which is why they said ‘no’ to Wal-Mart.  Because Wal-Mart isn’t union.  And the two largest employers in the city, the City of Detroit and the Detroit Public Schools, are union strongholds.  So they protected their high pay and benefit packages.  By keeping nonunion jobs out of the city.  While thinking nothing of the unemployed masses in the city.  Helping to keep the unemployment rate in Detroit well above the national average.  While the unemployed masses would have loved to see up to six new Wal-Mart stores (or more) opening in the city.  The 1,800 new jobs (or more) that would have came with them.  And shelves full of food, clothing, pharmacy and household goods at low prices that their Wal-Mart paycheck could easily afford.  But no.  Wal-Mart is not union.  So the people of Detroit have to stay unemployed.  And impoverished.

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Filmmakers don’t like the High Cost of Making Movies in California so they Film Elsewhere

Posted by PITHOCRATES - September 22nd, 2012

Week in Review

California provides a good example of what not to do.  That’s because they are a very liberal/progressive state.  Who like to live in a fantasyland of what could be.  Passing active, interventionist policies to try and change the way people think and act.  Unleashing a wave of unintended consequences.  And chasing filmmakers out from the film capital of the world (see California lost $3 billion in film crew wages from 2004 to 2011, report says by Richard Verrier posted 9/18/2012 on the Los Angeles Times).

California lost $3 billion in wages from 2004 to 2011 because of film and TV production flocking to other states and countries, a new study concludes.

Burbank-based Entertainment Partners, the industry’s largest payroll service company, which specializes in advising companies on how they can take advantage of film tax credits around the world, says its own research has found that California lost 90,000 jobs and saw its share of overall production wages in the U.S. decline 10% during the period as film producers took their business elsewhere.

About half the lost wages went to New York, Louisiana, New Mexico, North Carolina and other U.S. states that offer film tax credits and rebates — states that added 45,000 production jobs during the same period. The other half of the lost $3 billion went to Canada, Britain and other foreign countries, according to the report.

Wow.  They lost 90,000 jobs to states and countries that were more movie-making-friendly than California.  The movie-making capital of the world.  Which has cost the state of California taxes on $3 billion in wages.  No wonder California is going broke.  Their high taxes and high regulatory costs chase their own movie-making people out of their state.  So the very tax rates and regulatory policies that were supposed to increase tax revenue have decreased tax revenue.  Who’d a thunk it?  Well, pretty much everyone but a tax & spend, Keynesian, liberal Democrat.

They call these results unintended consequences despite having the best of intentions.  We simply call it causality.  If you implement anti-business policies you will get less business activity.  And filmmakers will go elsewhere to make their movies.

The findings were recently shared with representatives of the Motion Picture Assn. of America, the state’s finance department and the office of Gov. Jerry Brown, who is weighing whether to approve bills that would extend funding for California’s film program two more years. The state sets aside $100 million annually to qualified productions under a program that is due to expire next year.

Goldstein noted that his company’s research also shows the California tax credit has had some effect in slowing the job losses and migration of film work since it took effect in 2009 and that California would see an increase in employment if the credit was expanded.

“If California does not extend the credit, there will be more lost productions to other states and jurisdictions,” he said.

So some admit that California is not business-friendly.  That if they don’t offer special ways to avoid their punishing taxes and regulatory policies even more film business will leave the state.  Of course, if it’s happening in the film industry it’s happening in other businesses.  Which again explains why California is going bankrupt.  Their anti-business policies are chasing taxpayers (i.e., employees) out of the state.  By chasing business out of the state.

The MPAA, industry groups and labor unions have argued that tax credits should not be judged by short-term revenues alone, and that the state program is necessary to keep California competitive with at least 40 other states that offer incentives.

Vans Stevenson, senior vice president for state legislative affairs for the Motion Picture Assn. of America, said Entertainment Partners’ findings underscored the need for preserving California’s film incentive.

“Entertainment Partners’ data shows definitively that the production tax incentives have helped to stem the flow of jobs and wages out of California, and that the incentives are vital to California’s competitiveness,” he said.

Apparently it’s just not just the high taxes and high cost of regulatory policies chasing business out of the state.  It’s also the high cost of union labor.  For the unions are admitting that they make the state of California uncompetitive in the film industry.  And want tax credits to offset their high costs to bring the film business back.  That is, they want the taxpayers to subsidize that portion of their pay and benefits that chases business out of the state.  So they can keep their jobs.  They want taxpayers to take a pay cut (by paying higher taxes) so they don’t have to.  That’s fair, right?

California is a liberal state.  They like to run and regulate business the way they want to.  Not how business would like.  And when these policies chase business away they want higher taxes to subsidize the high cost of their anti-business policies.  To help business escape their punishing policies.  And bring that business back.  Which further raises taxes.  And chases more business away.  In effect killing the golden goose that pays for their generous public sector pay and benefits.  Which are currently bankrupting the state of California.

We need to learn from California even if California cannot learn from their own mistakes.  Anti-business policies are bad.  And will encourage businesses to leave the state.  Businesses hire people.  Who become taxpayers.  Taxpayers pay all the government’s bills.  Governments need to understand this connection between businesses and paying the bills.  For there is no other way to pay the bills without businesses and their private sector jobs.

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