This is part 2 of the series and will discuss the cost of increased spending, focused on wage to service imbalances in our economy as well as the consequences of living unbalanced existences.
Since the presidential primaries the idea of terms of wealth and taxes were being buzzed around in the press like mosquitoes around our ears. Campaign promises of ‘Robin Hood’ style taxation and corporate punishment for success were lauded as noble and honorable and even patriotic (Joe Bidden is a blessing to us political pundits). Now our economy has stumbled and fallen flat on its face, thanks to the housing market falling like pants on a running man who enviably trips, the real problem is brought into clear and blinding light.
Our problems boil down to one simple, pure, intrinsic yet all encompassing word, greed. From Wall Street to Fannie May and Freddie Mac, from Exxon to Congress, from main street to state capitals, our society is awash in the foul stench of greed and excess. No I did not get up on the wrong side of the bed or in a foul mood, I am instead bluntly pointing out that the 300 pound gorilla in the corner is there and ensuring those in earshot of me know this too. While the focus was placed on credit, or lack of obtaining it, the real problem is why it seems we all need access to so much of it?
Illinois Governor Rod Blagojevich was unable to make ends meet on his measly little $177,412/year salary so he wanted to double his salary and get his poor wife a like paying position to better his family’s financial security. The average wage of a governor is $124,398 by the way so he is better off then most; California, New Jersey, and Tennessee governor’s currently refuse their salaries. UAW concessions help to shave down GM’s and Ford’s production overhead, but at levels of $78/hour per worker of overhead compared to Toyota’s $43/hour per worker the concessions will not be enough to keep the company solvent, GM’s Chinese factories are so profitable they are the only thing keeping the company afloat, until the Chinese economy began to shrink this coming year. So what does all this talk about pay have to do with anything? Simple fiscal sense. We have to live in our means.
Real Americans, most of us, work for a wage for a year, not a salary. Wages are based off of a 2000/hour per year estimation (we have 6 federal holidays per year and expected to take 4 sick days per year which equates to the true 2080 hours or work time per year). Hourly wage earners have only 2 options to increase their pay, raises are few and usually small percentages in good times and frozen in bad times. These options are; overtime or get another job. Minimum wage was just increased to $6.55/hr this past June, when I was working it was half that at $3.15/hr. Has the cost of living doubled in these 20 years? For most of us its all about the time and hours spent working, our pay is dictated by our per hour rates. If you make $20/hr your annual gross income is $40,000/yr. If you make $50/hr your annual gross income is $100,000/year.
Salaried employees, managers, executives, board members, contracted employees, all get a set rate. They get paid if they are at work or if they are home sick. They get paid the same if they work 9am to 5pm or 7am to 11pm. Their vacation and time off rules are much different and they usually get different compensation packages if fired, due to the intimate knowledge of the company they worked for, as a way to keep them from going to the competition out of spite. Their responsibility is much greater and expectations much higher so they are paid accordingly. Most people considered ‘rich’ work for salaries, including government officials. Remember, the worker pyramid applies here, fewer people work salary at the top then the majority of workers at the bottom who make hourly wages.
Paydays are the happiest days of the week, well when we all got checks on Fridays (if you remember this ancient ritual and the subsequent getting it cashed at the bank or grocery store then your second high-school reunion us due if not just past or even third). In our daily lives we have commodities and services we have to pay for. Food, transportation, dry cleaning, entertainment, clothing, etc. its all part of daily life in a consumer driven economy. All of these items employ people like us who are paid wages we support by our purchases. Business has to pay rent, insurance, utilities, and the like to offer these goods and services and are expecting to make a profit at the same time (remember the main purpose of all businesses is to make money). If we only support low priced items, we only support low wage paying businesses. Service, commodity, and goods businesses, as well as their supporting businesses, all are in the hourly wage category. So are the manufactured goods, like cares, appliances, and machinery producers. Low prices on any of these items means low paid employees.
Our social problems of the current 10 year period are focused on; education, health care, and governmental agencies (military, political, and agencies like Social Security, DMV, Child Services, Police, etc.) Many of these positions are salaried, fewer hourly then in the private sector. So what is the point of all this and how does it relate to the main point of increased spending, wage imbalance, and unbalanced fiscal social norms? Its half the problem. Let’s take a quick look at the top 3 items on my first list.
Education is a huge problem in the United States. From public primary school quality to the accessibility of colleges we all know there are massive problems in our school systems. Primary and high schools report high drop out rates, low college entrance exam scores, low college admissions, and massive teacher quality issues all in the news. Teachers are not paid well, their unions protect the inept and bankrupt their districts constantly (property tax increases), and school facilities are deemed lacking by most people’s standards. College tuitions are outstripping family incomes at 5 to 1 over the last decade. The latest reports stated that by the end of our first decade in this centaury college tuition for 1 child will cost 30-40 percent of a family income for the 4 years it takes to graduate. Politicians pose solutions of offering more aid and scholarships to close the gap. Closing the gap does not fix the problem, the problem IS the gap. Top NCAA football coaches at public universities make 7.5 times the pay of the governor. Some of this comes from alumni, the lion’s share comes from tax payer who fund federal grants, loans, scholarships, etc. The problems is the cost of the employees and the facilities of the universities, their overhead costs. Primary schools funding is too little because it is governed by elected school boards, university funding is too much because of boards of trustees and political appointees who glad-hand and favor collect their way up the food chain, most of these people are salaried.
Health care in the United States is still world leading in quality, access to this health care is the problem. Growing up my grandparents had private health insurance, known as Blue Cross and Blue Shield. It was known as the Cadillac of healthcare at that time. They paid premiums each month and saw the doctors they wanted. Now we have HMO’s, employer based health plans, co-oped managed health services and the such. Why? Healthcare costs skyrocketed in the 1980’s because malpractice insurance premiums, lawsuits, and managed healthcare systems being hired to make hospitals profitable. In the 1980’s and 1990’s there were a rash of hospital closures, many of them run by churches or trust funds, and their overhead costs became too much to sustain. The result were business approach health industries and self sustaining organized groups who offered lower premiums if you agreed to stay in their circle. Doctors had to pay to participate, in addition to their high insurance premiums, and the decisions of medical procedures were plugged into business models and profit based matrixes for decisions. Most of the people in these industries are salaried.
Government agencies are the lest efficient workplaces on the planet. Tax payer funded and bureaucratically run their efficiency rating is through the floor. They get more holidays then private business, their have hiring practices that hamper hiring qualified individuals and favor quotas. Their retention rate is near 100%, due to inability to fire lazy or incompetent staff. Their hours are less then regular business and their breaks and non-work times are excessive to get efficient work completed. Anyone who has ever went to any government agency to get anything done will attest to this, from the DMV, county clerk, circuit court, SSI, tax bureau, etc. its always dreaded because of the inability to handle the work quickly and efficiently (add in bad attitudes and manners for good measure just to keep the customers away as long as possible). College professors, college staff, political staffers and aids, public works organizations, and even the military are all included in this group, all salaried and only the military has any efficiency, from my years in there this is not as high as it should have been because of the civilian components running the support agencies. There are reasons people love to get government contracts, ask Lockheed, Boeing, and McDonald Douglas.
The common thread here is that the price for production of all goods and services is higher then the cost increases passed onto the people who purchase and use them. Increasing pay of employees will always increase the pay of the product produced, its part of the value of the items equation. It does not matter if it is an iPod or a high school biology class, the cost of the service is mostly made up by the labor used to produce it and the overhead of the facility it is produced in. Our expectations of pay and ratio of pay per item is all out of whack. Add to this the expectations of employees to increase their buying power without advancing in their fields, raises over advancements, and you end up where we are. Public school teachers being paid less then a Ford auto factory worker who is paid the same as a US Congress member but they are both paid less then a public university professor who is paid less then a public university football coach is only paid less then top executive at a financial institution.
For most workers their pay is fair and not too inflated, the problems are the vicious cycles our society has placed on some areas over others all in the name of competition. Backsliding is the effect of digression from a previously held spot. When taxes increase and the cost of living goes up but our pay remains the same we backslide in our finances. We have less to use and have to pay more for what we need and want. Increasing minimum wage, while good, creates inflation in the service sector, the business area that relays heavily on this labor market. Increasing student aid to pay high tuition creates inflation in taxes to fund the aid and even causes tuition to inflate because the money is now there. Paying top executives, or football coaches, 7.5 times the salaries of the top elected official in a state causes inflation in that business rippling down to the consumer dependent on that good or service. Capitalism has run amuck and created a dragon like problem with no knights or kings around willing to slay it. As these salaries increase the money has to come from somewhere. Government taxes to pay its workers, Business raises prices to pay its workers. We all work, but we all consume too. If you consume more then you work you are backsliding.
How can we change it? You won’t like the answer, seriously you will not like it one bit. The problem, on the surface, is the exorbitant pay, but in reality the problem is all our expectations. We sent a loud and clear message to Wal-Mart and others in the 1990’s when we refused to buy their “Made in the USA” campaign goods over the cheaper foreign made ones. At the time people blamed the foreign workers for working for mere pennies on the dollars of wages, its not their faults as they are only trying to climb up out of third world poverty. When we stopped buying our own produced goods in favor of less expensive items made domestically we put thousands of factories and their workers onto the unemployment lines, what was the year could you buy an American made TV and who made it? No, we can blame the Merrill Lynch and Goldman Sacks CEO’s but in reality when we kept buying their products and services we were telling the companies we were fine with their CEO wage structure and how they ran their business and totally approved. The only way to change this is to change our own views on wealth, value, and ratio of work to services obtained. Ever since TV flooded homes with distorted perspective TV shows like; Dallas, Dynasty, Falcon Crest, Knots Landing, Melrose Place, Beverly Hills 90210, Lifestyles of the Rich and Famous, and the eventual reality TV fixation spawning such things shows like Who Wants to Marry a Millionaire, the Bachelor and Bachelorette series, and others showing extravagant settings and people doing whatever possible to “win” access to it. For 20 years Hollywood bombarded houses with prime time shows flaunting wealth, excess, and rich lifestyles eventually distorting our values on what comfort and success really were.
The real truth is many of us live really boring lives devoid of the rich excitement and intrigue we see on TV and in movies. Our distractions are influenced by ad agencies who entice us to consume their client’s products because rich and successful people do, so therefore if we do we are more like them. Kids grow up seeing this on MTV, in teen magazines, on WCW wresting and the such, even in their video games the theme of obtaining luxury items and wealth is the measure of success. We all want to escape the drab and dull existence of our 9-5 worlds and we all wonder, “why can’t I have a hot tub like the character in this or that TV show”. Instead of doing what people did 40 years ago to entertain themselves we invite industries into our home to distract us from our world and fill us with ideas and suggestions that are not in our best interests. Don’t get me wrong, 40 years ago parents would lavish a fancy item on the family every now or then, but they would scrimp and save before doing so, and the whole family was told time and time again how much it cost and was worth. We don’t participate in our society now day like we did before cable TV, DVD and TiVo, iPods and cell phones, PC’s and internet messaging. We connect to our friends through Face Book and My Space and not Tuesday night dinners, weekend BBQ’s, or Wednesday night Bible study. We have become addicted to instant gratification and materialistic ideals that place success as surrounding ourselves with luxury and objects instead of accomplishments and connections with family, friends, and community. We have to re-align our outlook and viewpoints first to resolve this problem. Then we need to demand those who accept gross pay for their jobs take reductions to more realistic levels.
Only when those on the top tiers cut their costs and re-align their pay to match reality and not TV fantasy land can we expect to see education and health care return to affordability. Congress and Politicians pay is, in my opinion, not too far off as they are responsible for a great deal and must work long hard hours. We need to live in our means, stop accepting other’s views of success and value, and be more realistic in our approach to live, success, and contentment. Most Americans earn honest wages for honest work, but the few who don’t, who make excess should not be our ideals or goals in measuring success. Why is it the CEO of any company would make exponential times the wage of the leader of our country? Does this CEO have more responsibility, more time needed to run the enterprise, more at stake if he fails? Does a political lobbyist need to make exponential times the wage of the person to whom he is soliciting for support on this or that legislation? Will the quality of the leaders of these or any other position suffer if they stop paying such insane amounts? If a NCAA university offered a head coach $150,000/year would they really get an inferior candidate as apposed to the national average of $900,000/year when now most coaches last less then 5 years in their current employ? The problems are all pay related. Hourly wage earners support salaried employees and their industries through the price of their goods and services. If the cost of this out steps that of wage earners they all will backslide to the point of the economy collapsing as it prices itself out of the market. Basic services like health and education have to remain affordable, only the best should get pay raises and insensitive to reward them and encourage them to work harder, not because its an annual occurrence or the union put it into their contract. The real solution is in our outlook of the world and our measurement of success. If we insist on materialism and object collection as success then we all have to become CEO’s, but then who makes, distributes, and sells the objects? We all can’t be rich. Being rich is a reward for sacrificing your life for your career. Most rich people will tell you how hard, long, and scary the trip was and none of them will tell you they spent their way into being rich, they scrimped, saved, and starved their way in. Even the sports stars and music industry wonder kids all made huge sacrifices to get where they got. We can’t spend our way out of debt, and you can’t spend your way into sucess or becoming rich.