Connected Wages

[Paradoxum]

I have this same argument with my very liberal daughter. I tell her that anyone (any one person) can succeed in America. She hears everyone should succeed. Not the same.

There is much more new 'old money' in our economy as businesses mature and their wealth increases. This money isn't idle, it continues to purchase more and more assets, right out from under the noses of most people. For example,

I bought an apartment building in 1994, paid it off in ten years, and could have leveraged the equity to buy several more buildings on the same street (I didn't as I only needed one to provide for my later retirement). If I had been a younger man I would now own every apartment building on that street, and be one that you are criticizing, with net worth in the millions.

Those other buildings have been bought by other investors, who had prepared themselves for ownership by saving money over the years, or by leveraging assets already owned. Something that anyone can do. My building was bought by a Korean fellow who along with his wife had amassed $100,000 for that purpose, and waited for a 'down' market to look for an investment (I sold below what I wanted but I wanted out. I also had bought the building in a down market).

I have a friend who over the past ten years has bought fully twenty distressed 8 and 16 unit apartment buildings in a troubled neighborhood. He is a carpenter and along with one other employee does virtually all the maintenance work. His Latina wife does the books and the renting, mostly to Mexican families, who both they and I have found to be very good tenants overall. He already has a net worth in the $millions from these properties.

Just to flesh out this story. My friend learned basic carpentry and masonry skills working for a friend who started a small "sunroom addition" business (that has since flourished). Seeing that an ordinary man could do these things he bought an old country school building and along with his wife remodeled it into their first home. He later sold it for a modest profit and moved into a small apartment (they had no children). He then bought a beautiful wooded country hillside lot and over a period of five years or so built a beautiful 3000 sq. ft. home. As soon as the roof was on they moved into it and pitched a tent on the main floor and slept in sleeping bags until the house was insulated and the furnace was installed. He leveraged the equity in that house to buy the first of those 20 apartment buildings.

In the meantime his wife had started a successful house cleaning business that she only gave up when the rental business needed her full time. Both drove older vehicles for years, she a VW Beetle, he an older pickup truck, while they were building up these businesses.

Now that his rental business is running well he has branched out again, buying a farm, actually farming it, and collecting and restoring vintage tractors, of which he has about two dozen. He is building a large pole building to house his 'tractor museum' (shades of Jay Leno).

That is one way you get rich in America (and although he is not religious the value of a dedicated 'helpmeet' isn't lost on him either).

Of course my point is that anyone, any one person, who had saved enough money could have purchase one or more of these properties and started down the path to substantial wealth. Sadly (or happily for my friend) no one came forward to compete with his bids (the banks were more than happy to get rid of those foreclosed properties). Not surprising at all. Few want to do the work needed to make such an enterprise successful.

Didn't read, too long. Didn't come to read essays. No offence.

Most people won't accumulate wealth working one job for current wages. They need some kind of investment apart from their job, but most just won't make the sacrifices needed to do this. They plod along on just wages while at the same time enriching others by buying every shiny new widget that comes down the pike. It is the failure of workers to make the sacrifices needed to become wealthier, not the supposed injustices of the economic system.

Maybe people shouldn't have to sacrifice to have a decent wealth. Maybe jobs should pay well.

 

[OldWiseGuy]

Didn't read, too long. Didn't come to read essays. No offence.

It was a 'primer' on wealth building.

Maybe people shouldn't have to sacrifice to have a decent wealth. Maybe jobs should pay well.

Many do, but they too have a 'success track' that one must follow. However, working for some else alone usually won't provide the level of wealth desired by most.

 

[DogmaHunter]

Perhaps that means something to professionals, but to a lot of people, if they are paid badly they wont be offered a better job. Lower paid workers.

It goes for everyone.

If company A treats people with function X better then company B does for the same function X, then the of B will surely try to get into A.

You don't need to be in a high education job for such a thing. If as a toilet cleaner you earn more at McDonalds then at Burger King, why would you stay loyal to Burger King and not attempt to get a job at McDonalds?

The job market is a free market just like any other. I mean, we're not talking about sweatshops in China here...

 

[DogmaHunter]

That's the point of capitalism. That employers gain, and employees demand more.
That is literally how how system is supposed to work. It's not supposed to be slaves and slave masters.

Overpaid workers is not the alternative to slavery, nore is it the point of capitalism.
An employee has no right to more pay just because the employer happens to be making monster profits.

An employee at apple isn't going to make x-fold of the equivalent at HP just because apple's profit happens to be x-fold that of HP. Employees are not shareholders.

A salary is determined primarily by experience, skill and level of responsability.
Not by what happens to be the current profit margin.

If my business starts booming, I'm not going to give everyone permanent raises.
I might hand out some bonuses if and when it makes sense to do so - specifically to those who directly contributed to the booming.

But aside from that, for all intents and purposes and in general, there is no connection between the amount of profit the company makes on the one hand and the salary the employees earn on the other.

I'ld be open for it, if it were a two way street: if profits drop, then so do wages.
But while workers would gladly take (or demand) raises when profit goes up, I'll bet they'll go very quite when profits go down and they wouldn't think it is "fair" then if wages drop if it's the other way round. Right?

 

[DogmaHunter]

It's not simple maths

Except that it is and I don't get how you don't understand that.

Again: production cost + profit margin = product price.
If you raise production costs, then what happens to product price?

Anyway, profit should decrease, if it means standard of living increases.

Haaaaaa. There we go again.
Taking away money from the shareholders / business owners / the business itself, to raise wages of employees.

The point of economics is to improve lives, not money for monies sake.

The point of founding and building a business, is to make money and maximise profits.
My company is not a charity.

 

[OldWiseGuy]

Maybe people shouldn't have to sacrifice to have a decent wealth. Maybe jobs should pay well.

Many do, most don't. Them's the facts.

The keys to success are well known. People are lazy and don't want to do the work, or make the sacrifices, needed to really achieve. Most of us in the top 10 percent of income have worked long hours and sacrificed much to achieve this. I put every penny from my rental property back into the building and into savings, for 18 years. Now I get to enjoy it.

One of the closely guarded secrets of becoming wealthy is that........it's actually fun. More people should try it.

 

[bhsmte]

Didn't read, too long. Didn't come to read essays. No offence.



Maybe people shouldn't have to sacrifice to have a decent wealth. Maybe jobs should pay well.

Jobs pay in accordance with the skill required to perform them. Higher skills required, more money.

It ain't rocket science.

 

[DogmaHunter]

Maybe people shouldn't have to sacrifice to have a decent wealth.

Why?

Again, if I'm the one who's risking it all by taking the plunge to build a company and working twice the amount of hours of my employees by doing so, why on earth wouldn't I earn x-fold of what the 9 to 5'ers earn working for me who are taking none of the risks and even have unions protecting them with every step they make?

Make no mistake, I totally respect those who don't want any of those risks, who don't want to think about work between 5 and 9 and who purposefully choose for the security of an employee's guaranteed pay every month.

But those 9 to 5'ers should also understand that choosing that "easy path" is not a path towards wealth / being rich. Instead, for most, it is just a path to common middle-class.
Which, again, is more then fine. But don't complain about it then, that people who don't choose that easy path, get to be rich if and when they are succesfull.

And just so you know, you know who currently earns the least of all in my startup? Me.
That's because all of the revenue currently goes to my workforce and the rest is reinvested in growth. I pay myself just enough to live somewhat comfortably. Basically, I'm investing in the future - my future.

In a good year or so, my little "empire" will have reached what-I-call "critical mass" in terms of recurring income. That's the point where I'll quadrupple my paycheck. And if all goes well, that paycheck will double every year for the next 3-4 years also.

To the point where I'll only work 2-3 days a week for 20-30 grand a month while the company basically "runs itself".

And that will be my hard earned reward for 4-5 years of working day and night for almost no pay. 8 years, if I also count the 4 years of "preparation" of this business project while I had a normal 9 to 5 job.

So, yes,... for those of us who's last name isn't "Trump" or "Gates" or "Buffet" or whatever, wealth doesn't come for free - nore does it come from doing a 9 to 5 job.

It takes hard work and plenty of sacrifice and risk taking.

 

[Dave-W]

Jobs pay in accordance with the skill required to perform them. Higher skills required, more money.
It ain't rocket science.

Not really. Jobs pay by market forces like supply and demand.

If a very highly skilled profession has no almost demand, is that going to pay well? No.

 

[DogmaHunter]

Not really. Jobs pay by market forces like supply and demand.

If a very highly skilled profession has no almost demand, is that going to pay well? No.

I disagree to an extent.
I'll speak from my own field of expertise of software engineering / programming.

The vast majority of skill demands you'll encounter in the (B2B) ICT market are languages like C#, Visual Basic (still, amazing...), Java,...
Those 3 already cover most of all programming jobs.

One of the LEAST demanded languages today is Cobol.
Best paying job in all of software engineering land today? Cobol programmer.

 

[Dave-W]

One of the LEAST demanded languages today is Cobol.

My point exactly. I have a good friend who is EXTREMELY skilled in COBOL. Other than a brief panic coming up to Y2K, he has not had a decent paying job in 25 years.

Best paying job in all of software engineering land today? Cobol programmer.

Not so much.

 

[DogmaHunter]

My point exactly. I have a good friend who is EXTREMELY skilled in COBOL. Other than a brief panic coming up to Y2K, he has not had a decent paying job in 25 years.

I acknowledged that demand is extremely low. That was kind of the whole point. Yes, there are (likely) more Cobol programmers then Cobol jobs.

Not so much.

Talking specifically about enterprise land (and thus not consumer facing public projects where java/javascript and other dialects are king at the moment), specifically financial sectors (since most of these legacy software runs in the financial sector, primarily big banks), you are pretty much guaranteed a premium pay if your function is maintaining the millions of lines of Cobol legacy on giant dinosaur servers that most don't even dare to touch - let alone migrate to new systems.

I know a few people who do this with both Fortran and Cobol (I was a .NET engineer at the headquarters of the biggest bank in the country for several years). Every single one of them earns 3 to 4 times the pay of their .NET and Java peers.

 

[bhsmte]

Not really. Jobs pay by market forces like supply and demand.

If a very highly skilled profession has no almost demand, is that going to pay well? No.

Agree to an extent. If there are hundreds of other people capable of doingna job, pay will typically be lower. If there are few that can perform the job (higher skills) that means the cost to replace for the employer and lost productivity, would be high.