From: Dehede011@aol.com
Date: Sun Apr 06 2003 - 07:00:18 MDT
In a message dated 4/5/2003 11:21:14 PM Central Standard Time,
rafal@smigrodzki.org writes: As usual with such schemes, those who are
burdened so, will attempt to reduce the payout, e.g. by substituting
mechanized labor, stopping to patronize businesses which have to increase
prices to comply with the transfer demands, and the total amount
redistributed to the poor will be greatly reduced.
Rafal,
Back in the 60s and 70s I went through a number of these campaigns
either through raising the minimum wage or through raises given as a result
of collective bargaining. BTW, in my experience bargaining goes on
informally even in the absence of a formal bargaining agent.
Usually, in my experience, the reality was slightly different than
what you described. Mechanization seems to go on constantly and does not
have much or any relationship to minimum wage.
However, there is always some slack in any system and, in my
experience, there will be enough to cover any increase in the minimum wage.
So what happens? When the increase in the wages occurs management
will calculate how much the increase is costing them. Management then tells
its industrial engineers and production supervisors to eliminate that much
labor. The designated individuals go into the production area and start
investigating who they can cut out of the work force.
Given the productivity level in the factories I have seen, it was
never very difficult to eliminate enough labor to keep the total payroll at
the same level.
However, let me give you what I consider a more intelligent viewpoint.
Suppose a modern factory splits its manufactory costs this way.
Labor 20%
Material 40
O'head 40
Now different factories will vary somewhat but those numbers should do
for ball park numbers.
In addition let me tell you the most productive factory I was ever in
was Ford Motor Company. My boss and I estimated that Ford was operating at
70 (my boss) to 80% productivity. At the low end of the scale companies
frequently operated at an estimated 40 to 50%.
Suppose you decide you have to cut labor 10% to pay for a payraise?
If you look at the numbers above you can see you will only cut 2% from the
manufacturing dollar.
However, pretend you cut labor 10% and then instead of firing your
junior workers you find ways to produce & sell 10% more. In that case you
will pickup a per unit saving of 20% in the overhead assigned per unit. That
is equal to 4% in the manufacturing dollar. Of course we are assuming that
overhead is fixed and is relatively independent of throughput volume.
Figuring here on the back of my envelope I will lose the savings in
labor as that is lost due to the payraise.
Ron h.
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