The history of company towns is not what your are representing it to be. See this article http://eh.net/encyclopedia/article/boyd.company.town . The latest research found that company stores only charged about 4% more than stores in cities and that most of that was because of transportation costs.
Your math is off. You are ignoring several things like the profit for companies like Foxconn in addition to the cost to ship the phones over here. People have done the work, and it seems the cost of an iphone would only go up about $65, about 9% of the cost.
As the article states, cost is not the reason Apple makes their stuff in China, it’s because they have access to a far more exploitable, expendable, and scalable labor pool.
To support my earlier point, the article quotes a labor dept. economist:
Again, I don’t think it’s just greed, but rather that the world, and the business environment has changed dramatically.
I’m a little dubious about “average” income for sports.
To illustrate (note I am just making up numbers for illustration):
If an NBA team has 12 players and one earns $50 million/year and the rest earn $1 million per year you would be able to say the average salary is a bit over $5 million per year which is a 500% increase over what most of the players actually earn.
In the end though there is no denying that if you have a unique (or at least rare) skill that is in demand you will get paid well for it. Nothing new there.
The vast majority of workers do not fall into the category of having a very specialized and rare skill though. We hear about attorneys who charge $1,000/hour or more but I am willing to bet most attorneys can only dream of being able to command such a wage (and attorneys are definitely a skilled profession).
I sketched out a story of how this might happen in response to your story, as was requested, but then nobody responded to it…
It goes beyond what prices they charged.
The point is many employees were in debt to the company. Want to strike over unsafe working conditions? Get kicked out of your house.
Want to quit and go somewhere else? Fine, just pay up your outstanding debt. Can’t do that? Well here’s your pickaxe…go work yourself out of debt.
But they do! Just not for everyone.
20 years ago a small company might have employed 4 people whose sole job it was to keep the books, manage HR, etc. Quicken or Quickbooks or even just VisiCalc or Excel comes along and the owner of the company has the “brilliant” idea of using one of these products to manage the office. It now only takes 1 person to do the job of those 4, so the other 3 get let go. Let’s say that the owner isn’t a dick, so he doesn’t even let them all go right away, but over the course of 5 years they leave through normal attrition. At each step he realizes that first 3, then 2, then 1 employee can handle the job, so he doesn’t hire any new employees.
He’s now saved the company something on the order for $150,000 a year, simply by using some software that every other business is also using. Does he give some of that money to his sole office employee as a bonus? Of course not. After all, the employee isn’t working any harder, they just have better tools. Does he pass the savings on to the consumer? Maybe, if the market demands it.
In all likelihood he just pockets the money, though. Buys a boat, a bigger house, that Z06 he’s always wanted. This is how I see things playing out in the real world – small business owners who would have been living normal middle class lives in the 50s, 60s, and 70s are now doing extremely well for themselves thanks to automation and technology improvements. Sure, they take on the risk, and sure, the idea to buy a copy of QuickBooks Pro was their idea, but at some point you have to wonder if that stroke of insight was really worth an extra $150k a year. If you’re me, you wonder if the office worker could have stepped up and said, “Hey, I noticed that I’m now able to do the work of 4 people. Double my salary please.” That’s not going to happen for several reasons, though.
The same thing happens in the corporate world, but instead of QuickBooks it’s a new inventory tracking system or something. Executives implement these practices that are standard operating procedure across the industry, increase productivity by 1000%, and instead of the CEO saying, “Well, duh, it’s about time,” he says, “Holy shit! 1000%! Have a million dollar bonus!!!” Meanwhile, 90% of the workforce gets cut and the other 10% gets no raise.
Long story short, computers and robotics have made workers vastly more productive over the last 30 years. You’d think this would make life better for everyone, but in practice, it’s only made life better for upper management. I don’t think that’s right, although I know many would disagree.
This is really not a new story. See The Overworked American: The Unexpected Decline of Leisure, by Juliet Schor (1993).
I concede the first point and agree with your second.
You should have read the link “Fishback also found that the use of scrip, or advances by the company, used to finance living expenses was limited. Companies seldom carried debt longer than two weeks. Furthermore most miners had no more than 60 percent of their pay deducted as a result of the use of scrip. This meant that miners were not tied to the company through exorbitant debt. In addition he found that rents on company housing were normal in comparison to rents in independent communities. He also found that companies that offered exceptional sanitation, such as flush toilets, paid lower wages (roughly 3.4 percent less). This suggests that wages adjusted to differences in amenities offered by different company towns.”
I think your story is very problematic because it assumes implicitly that group interests and individual interests are the same. I’ll spare you the nitpicking and offer an idea instead.
The labor-leisure trade-off is more complicated because the more money you have, the more valuable your leisure is. So I might rather work more hours per week and enjoy less leisure if that leisure time itself were higher value. Work hard, play hard.
Substitute Visicalc or Quickbooks for the cotton gin, movable assembly line, or plastic and you have the history of the industrial revolution. That is the reason we are not all working on the family farm for 10 hours a day and dying at 25 of consumption.
In the last thirty years median income has gone up at least 15% while median household size has fallen over 3%. This is at a time where the US has taken in more than 30 million immigrants.
So what you’re saying is, after the industrial revolution, the average worker got the benefits of not slaving away in the fields all day and not dying of shitty diseases at a young age. Progress!
Meanwhile, after the modern technological revolution, not much changed for the average person.
I’m not sure if you define “modern technological revolution” as the post-war boom up until the present, or simply the last 15 years of the Internet age; but it is a categorical fact that the standard of living has improved tremendously for Americans over the past half century. Just look at indoor plumbing: today 99% of residences have indoor plumbing, and in 1950, a third of American homes did not.
I view it as 1980 to the present, aka the personal computer revolution, but I may be biased based on my age. I think most indoor plumbing improvements were finished by then.
Food has gotten cheaper, life expectancy has grown by five years, infant mortality has decreased by 45%, crime is way down, and information technology is ubiquitous and affordable.
Things are clearly better for the vast majority of people today as compared to 1980. Not every single thing, but in general, life has improved significantly.
I’m not sure I understand your story, but it sounds like it depends on keeping production at the same level, paying employees the same, and then giving them the time off. But that’s not how successful businesses operate. They grow. And in growing, they gain economies of scale to compete against their smaller rivals. If they don’t grow, then they risk being put out of business by someone who does.
Or, the owner of the business decides to pocket the extra income and live a life of luxury. He was the one who invested in the company and took the risk in the first place.
But maybe I didn’t understand your hypothetical.
Well, it’s also possible that I didn’t think through my story, but let’s see.
The story was that the same number of employees would be employed, at the same hourly rate, but putting in only a tenth of their previous hours, to produce the same number of goods. And these goods would be sold at a tenth of their previous price.
The workers would be able to purchase the same number of goods as previously, for one tenth the work.
The business owner would be earning one tenth in revenues, and paying one tenth in labor costs, as they previously did. Thus, one tenth their previous profit. This, I didn’t think about… There’s no reason the business owner would do this, except insofar as the workers might force them into such a position. [Which is perhaps conceivable; the business owner does not have unilateral power over everything, or else they’d employ everyone for next to zero wages. They have to compete for/negotiate with people willing to exchange labor for money just as they have to compete for/negotiate with people willing to exchange money for goods.]
So what alternatives are better for the business owner?
Well, they could have the workers work at 100% time rather than 10% time. Now they earn… exactly as much as they did before the productivity improvements, but by selling 10 times the goods at 10% of the price. The workers are all employed at the same pre-productivity wage for the same pre-productivity hours. No one’s nominal earnings have changed, but everyone can enjoy 10 times the goods for those earnings. I suppose that’s closer to what actually happens.
Except no one got fired and your story setup implied that the business owner would fire some workers. It’s not clear why they would do so if we continue with the simplified arithmetic which supposes output scales linearly with labor input, but I suppose the “Partial but not total layoff of workforce upon automation” phenomenon arises from the fact that at some point, new workers bring in less new revenue than the previous ones did, no longer justifying their wages, and automation moves this point down, apparently (…Why is that?).
…I think I’ve cleared some things up for myself and brought up some new points on which I could stand to have fog cleared.
Another question I’d like to raise is that, supposedly, there WERE significant workweek reductions in the past. What was it that caused those to happen, and what has changed to stop that trend?
Ah, this is wrong. The 10% price was tied to 10% wages.
It should have been:
They could have the workers work at 100% time. Now they earn… ten times as much as they did before the productivity improvements, but by selling 10 times the goods at the same price. The workers are all employed at the same pre-productivity wage for the same pre-productivity hours and can enjoy the same number of goods. The business owner, however, can enjoy ten times the goods as before.
OR
They could fire 90% of the workers and have the rest work at 100% time. Now they earn… the same amount as they did before the productivity improvements, by selling the same number of goods at one tenth the price. The employed workers earn ten times the goods, but the fired workers are SOL. The business owner makes one tenth the profit, but this gets them the same number of goods as before.
Hm… Why is the latter better than the former? What is the incentive to fire? I suppose it has to do with the actual nonlinearity of business profit as a function of number of workers. And where do price reductions come in? I suppose they must be caused by wage reductions. What would cause wage reductions? I suppose it’s the fact that people are fired in the latter case, making the demand for labor smaller and thus desperate labor more willing to put up with lower wages. Is that correct? That doesn’t seem correct.
This kind of collective action is very, very hard. Suppose there were one person willing to work one tenth of his previous number of hours plus some arbitrarily small amount. If he didn’t value his leisure very much or valued his consumption quite a lot, he would have an incentive to deviate from a behavior that is collectively good (not working) in order to benefit himself. Imagine how wages would respond to this decision. Imagine if everyone, workers and employers, anticipated this and chose their number of working hours and the wage paid accordingly.