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Response to hfojvt (Reply #75)

Thu Mar 28, 2013, 02:43 PM

77. No I'm making this point because this is part of the research I am doing for my degree.

Last edited Thu Mar 28, 2013, 03:31 PM - Edit history (1)

For the past year, for my capstone paper for a degree in Business Economics I have been studying to find a the "sweet spot" between wages, labor categories, and employment trends to balance with community costs of living and economic opportunities while accelerating and stabilizing a recovering local economy.

(Yeah, yeah - should have gone Systems Engineering, but I'm at the level I'm going to be trying to be manager or manage my own business, it's cheaper and quicker to both work and get a business degree with minors in economic growth and emerging technologies.)

The area I have been surveying is a zip code that consists of approximately ten different neighborhoods. Those neighborhoods consist of a 2011/2012 baseline survey of median households per the 2010 Census in which there are four neighborhoods income is pretty much pegged at $24K a year, three neighborhoods where the median household income is $53K (plus or minus $4K) a year, one where the median income is $97K a year, one where the median income is $123K a year, and one well-established "old school" neighborhood where the median income is $372K a year.
In the previous census (2000), this was a poor zip code with more than half the neighborhoods at an average household income of $11K (neighborhood dependent upper tail standard deviation of the mean of between $5K) a year, two around $60K, and that one ritzy neighborhood with $233K a year.
Need I mention that most of the neighborhoods in this zip code are minority, on welfare/TANF, SSDI, SSI or were workers in the shipyards, warehousing, or in small local manufacturing and retail?

The reason I picked this neighborhood (other than I live here) was that half of these neighborhoods have just gone through or are currently experiencing "gentrification" - where stable working families of the middling wages (the $50K to $100K level) have bought distressed/vacant properties and have rehabilitated them to live in. Or flippers had done the same and sold to those same families.

I have been finding a trend, almost to the point of correlation, that an increasing the gap in wages across all labor categories leads actually to less business development, while a more equitable wage balance, with the lower wages up and less profit on at the upper limits of income/revenue, are present in the more successful businesses and promote community development.

Customer Base -

Interviews with several small community retail owners have proven that for non-bodega (or convenience store) businesses, the loss of 2% of customers, or one regular (> $50 spending every two weeks) monthly customer is noticeable and when there is a loss of 10% or five regular customers that cannot be recovered over a six month period, there is a significant enough loss in revenue that at least one employee will need to be cut, or if there are no employees, they risk losing the business.

Wages -

The small retail businesses I survey also pay their employees after a trial employment period of 3 months at minimum wage (CA - $9.00) to around 15% above minimum wage - generally around $10 to $10.50 an hour for the first year for part-time and up to $15 for full time after the first year. (Even IGAs will practice this wage structure) When compared to the Targets/Kroger, Incs/Walmarts or other big box stores, for strictly retail or support employees, small businesses usually end up paying more and have less employee turnover at those employment levels.
A few businesses add commission to those wages. The owners of those businesses - the ones that are serious and not hobby businesses - tend to realize an income of between $60K and $140K a year; usually that income is the profit margin of 5% - 7% after costs (for purposes of this survey, costs include employee wages).
For small service and manufacturing/installation businesses that are successful (lasting over 10 years with a minimum revenue/profit margin level of 15% after all costs, to cover future business expenses) have a median entry pay at $12.50 for support (driver/clerk/janitorial) work and either $15.00 + 20% commission or straight $17.35 for work that is either skilled labor or requires interaction with customers. This is at the first year entry level, and 95% of these businesses regularly (usually annually) provide for an increase of wages to their employees.

Observations -

Where these businesses are struggling, cutting wages doesn't really help them stay afloat. Cutting workforce can help, but cutting wages or hours doesn't. There doesn't seem to be a difference between lowering the wages of five people by half or leaveing them where they were and how it affects the success of the struggling business - other than how much more income the owner can claim, that really isn't really much once taxes kick in.
The real difference in business revenue comes in balancing the labor force with the level of customers or orders, which is why I point out that having more $25.00 an hour workers in relation to $8.00 an hour workers helps community business and adds to jobs within that community. And in neighborhoods where the small businesses regularly pay their employees more than minimum wage, they consistently see better revenues than in neighborhoods where businesses regularly pay minimum wage.

Community Infrastructure Support and Cost of Living -

City councils and infrastructure organizations pay attention to these standard of living trends, and the services provided to these neighborhoods are both more regular, plentiful, and cheaper - the costs to purchase food and necessary sundries (shampoo, OTC meds, diapers, underwear...) to the average households are consistently lower by at least 12% in the mid-economic range neighborhoods than they are at the poorer and the wealthier neighborhoods. Gasoline prices are also lower in the mid-economic range neighborhoods.

To reiterate - I have consistently been finding proof that maintaining the same "high wages" of similar to that found in the unionized communities of the past lead to a better standard of living and opportunities for employment at the lower level of the economic ladder. When people are paid an equitable compensation for the amount of work, both physical and mental/social, the community is better off.

So yeah, looking at the job positions you list in your post, I will agree (and my research is proving) that you and your community are being screwed royally - because apparently, the jobs in your location were either not protected by a strong community interest base (not just a union, but employer/employee relations recognizing benefits of better wages), or that the business leadership culture is more interested in big-dick comparisons at the local country club than the quality of work in their actual businesses, their customer base (especially if they are providing a local service) and balancing their wages with the cost of living in their communities.

And to "change the topic" - I'm not saying this to put you down or try to justify wages, but I really am curious as to why you think the ability to pay bills and not be falling behind every other month is "big money".

Do you think that making only enough money to pay the rent, keep the utilities on and food on the table, pay for medical bills and maintenance on a used car is big money?
The issue I've been discussing with you is the concept of equitable pay for equitable work across the board - $50K on the West Coast, or in areas where the cost of living is high is not the same as $50K in, say, where my sister-in-law lives in Demopolis, Alabama - and even then is not "Big Money". $50K a year there gives one the same style of living as $85K does here in San Diego.

Big Money to me - even when I was out of full time work for two years, saving what little I was making and living out of a p.o. box and a van conversion, taking showers at the base gym because I was still a reservist - is a comfortable, professional desk-sitting type of job, typically "white collar work" where the "employee" is not really an employee but an owner, co-owner, or associate of a business that takes a percentage of revenue rather than a wage that will be part of the cost of doing business.

The other definition of "big money" is when you can afford to max out deposits into all available retirement accounts and a few annuities, pay the mortgage on a vacation home, send your kids to a $30K+ a year private school without taking loans, and still be able to take both take an out of state summer vacation and skiing vacation every year. Yeah, I work two levels down from someone who does that. They can do that with at least one spouse making $217K a year. I don't know what the other spouse makes, but Mr. VP was sure pushing us to "max out our 401Ks" and get into company stock, because he was concerned about our retirement - and the company stock.

That level of money is something far different than making enough to put aside 2% in a 401K, pay the year lease on a rental home, maintain a used car, shop at Sears rather than WalMart for new clothes and thrift stores for "fashion", and still have enough left over at the end of the month to take the kids to a dinner out or the local museum or zoo.

And I know that even that is far different than:
-going to work after showering at the base gym,
-hoping your clothes can seem decent enough for another day before you need to find the quarters to do laundry,
-make due with a granola bar for breakfast, a scammed salad for lunch ("hey,good work-buddy - are you going to finish that?") and a PB&J for dinner
because you're only making $8.50 an hour working part time/full days at a "skilled trade" (and can't take time off during the day to find a better paying job, so you hope your friends and your resume will get you the job you are really qualified for).
And that small 4x4x6' storage room with all "your stuff" - what little you couldn't bear to yard sale when you lost the first job and a little bit of furniture "just in case" - costs $100 a month, insurance and gas for the vehicle you live in and go to work with has shot through the roof, and the state and local taxes your employer takes out of your paycheck are seriously regressive to single people who aren't making very much and they aren't able to claim they're paying rent or a mortgage.

And you do this day after day for months because the cost of living on your own in a crappy studio apartment (which allows you to ditch the storage room and allows you to sell the van and get a more cost-effective vehicle to get to work with) and pay utilities requires that you make at least $13.00 an hour, and because you need to have a downpayment to move into that crappy apartment, you need to find at least $50 a month to put asideso that maybe in a year - and if you get that better job you're angling for - you have the down-payment to move into that crappy apartment.

That was San Diego in the early 1990's. It's far worse now.
When you're young and single, that's a "grit your teeth and get through it" situation. When you're older or have a dependent to take care of...it's a hell that's easy to just not be able to get out of.

Again, I'm sorry jobs are so fucked in your location that the majority of the community around you are are making minimum wage.
But despite what you may personally believe, "trickle down" does not mean that the the working folk making a little more than the very poor are the ones who are grabbing opportunity from those who are on the bottom. "Trickle Down" is not the guy spending more than 90% of his or her monthly paycheck to pay taxes, maintain his or her business, and spend in the community. The government - state, federal and local - gets a whopping 47% of my gross pay, which pays for federal, state, and local services - including jobs that pay living wages and support for those who aren't making enough to survive. (BTW, that's not counting FICA and Social Security tax, which I count as paying to myself).

The property manager gets almost 50% of our monthly net income. That's the owner of the business, seven employees, and four contract maintenence people taking 40% of the rent, and the owner of the house getting 60%. They're not that big a management company, so it is important to keep rent revenue going.
The IGA market which has a gas station down the street gets 10% of our family net income.
The Commessary gets another 5% of our monthly net (2 adults, 3 kids) Okay, that doesn't employ as much in the local community as the IGA does, but it allows us to spread more money around.
Two food trucks get 1% of our family montly net because we like their food and want to keep them in business. Another 1.2% probably goes to the local drive throughs.
Various vendors at the farmer's market get a total of 5% of our monthly net.
The local Tru-Value hardware store (which is also a feed store) usually gets an average of 3% of our annual net. (old house, elderly owner with little money, baby in the house, poor property management - and they have good prices on cat and bird food)
Our local veternarian gets 2% - 3% of our annual net income. (four cats, one bird, one turtle)
And on, and on, and on
So that's "trickle down" to the poorer below me? (Don't mean to make it personal, but this does seem to be

Trickle Down is when tax and regulatory policy gives advantages to the wealthy owners of capital who will allow whatever is left after they take everything and lock it away out of the local economy to "trickle down" to the workforce.

When I was down, I've gotten far more help - in job references, in opportunities, in price breaks that inconvenienced them, in just plain help - from those who's income is in the middle, those who remember what it's like to be dirt poor - than I ever had from the "beneficial rich" or charities set up by those who liked to pretend they were helping.
Now that I'm better off, I do the same for those who need help, because it's the right thing to do.

And I'm hoping that my research will lead other businesses to recognize that doing the right thing by their employees, by returning to more equitable wages and closing that gap, will help their business and their own standard of living, their community far more than just raking profit off the backs of the workforce and walling themselves off in their own little fantasy world.
Because they have to deal with the real world sometime. And history shows that maintaining a large living standard gap between rich and poor never ends well for the rich.

I'm not a angry person, but I do hope that all those bastards who are poisoning the working classes against each other by threating the remaining cookies rather than encouraging sharing so they can grab more are going to rot in the same hell they are creating for those who work for a living.
And I'm tired of people mis-applying the term "trickle down" to other workers. It suggests that there's only two classes - the vituous poor and everyone else are greedy assholes who are stealing from them.

Haele
- Second edit was because I realize I'm blocking out the abstract for my paper. Never too early...(No More edits)

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LineLineLineLineLineLineLineLineLineLineNew Reply No I'm making this point because this is part of the research I am doing for my degree.
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