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The boss who put everyone on 70K

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Re: The boss who put everyone on 70K

#21

Post by wyager »

fsloth wrote: post #16
bufferoverflow wrote: post #5

This is very nice of the owner, but extremely inefficient economically. Which means most companies can't afford to do something like that. Only if your profit margins are huge.

Ineffficient? It would depend on the total value add of each employee. As stated, the performance of the company increased. The capability of individual employees increased. Now, without exact numbers, I can't say economically this or that. But effectively this was not a zero sum game. The company was not paying more for the same outcome, they were paying more for more output. The output of the company increased. Thi…

You have no skin in the game, so you should discount your (displayed) confidence a bit.

Obviously if paying more money was a guaranteed way to increase net productive output, the people with skin in the game who think about this every single day would do it.

> This is how investments are usually supposed to work, you put money in, and reap profits.

You are using cargo-cult reversed-causality reasoning. Just because you put money into something doesn’t mean you should expect to get more money back out. If I dig a big hole in the ground and throw wads of cash into it, I don’t expect market returns.

Re: The boss who put everyone on 70K

#22

Post by benreesman »

bufferoverflow wrote: post #5

This is very nice of the owner, but extremely inefficient economically. Which means most companies can't afford to do something like that. Only if your profit margins are huge.

Can you elaborate a bit about what you mean by inefficient? People mean a lot of different things when they use the word “efficient” in a financial/economic context.

Re: The boss who put everyone on 70K

#23

Post by domlebo70 »

benreesman wrote: post #22
bufferoverflow wrote: post #5

This is very nice of the owner, but extremely inefficient economically. Which means most companies can't afford to do something like that. Only if your profit margins are huge.

Can you elaborate a bit about what you mean by inefficient? People mean a lot of different things when they use the word “efficient” in a financial/economic context.

Well would you pay 10 dollars a liter to fill your car up, when you can get perfectly good fuel for $1.50 a liter?

Re: The boss who put everyone on 70K

#24

Post by fsloth »

wyager wrote: post #21
fsloth wrote: post #16

Earlier quoted context omitted.

Ineffficient? It would depend on the total value add of each employee. As stated, the performance of the company increased. The capability of individual employees increased. Now, without exact numbers, I can't say economically this or that. But effectively this was not a zero sum game. The company was not paying more for the same outcome, they were paying more for more output. The output of the company increased. Thi…

You have no skin in the game, so you should discount your (displayed) confidence a bit. Obviously if paying more money was a guaranteed way to increase net productive output, the people with skin in the game who think about this every single day would do it. > This is how investments are usually supposed to work, you put money in, and reap profits. You are using cargo-cult reversed-causality reasoning. Just because y…

I think your reasoning is too atomic. Think about the call center worker who was stressed out. How well will he respond to out of script situations when he's stressed? When he's in top shape, fully emotionally invested in his work? What about his colleagues? In out of script situations he likely needs the selfless assistance of other employees. How well will this interaction go if the persons are co-operating in a friendly manner, fully invested in the customers problem, whereas if they are both stressed and unable in any high level thinking?

I would guess customer satisfaction is greater if the call center interaction in exceptuonal situation is handled by a better performing team.

This same analogue applies to most functions in a company who's output depends on the co-operation of it's employees and is not trivially automated.

This is not cargo cult reasoning. Self guided teams are recognized to be a highly effective form of organizing a workforce. If you make everybody motivated and emotionally able to reach out as well as respond, you effectively create a situation where the team self organizes dynamically around incoming problems.

Like I stated, this depends on the nature of a company. A lone logger has somewhat of a constant output. You can't increase the output of loggers suddenly by paying them more.

Re: The boss who put everyone on 70K

#25

Post by luckylion »

primitivesuave wrote: post #12
travbrack wrote: post #4

Earlier quoted context omitted.

Huh? Inflation calculator says 70k in 1950 is worth 754k today. Edit: I did the calculation backwards. Thanks to everyone who pointed that out.

By the other interpretation of $6500 dollars in 1950 (roughly equivalent to 70k today), it would be much higher than the average family income of 1950 of $3,300 and put you in the top 10-20% of earners, which is probably not as far as 70k gets you today.

Comparing family income 1950 with a single income in 2020 though. Have two incomes of that size in a family, and you'll be at 140k, which will put you in in that range.

Re: The boss who put everyone on 70K

#26

Post by eru »

TomMckenny wrote: post #20
eru wrote: post #6

Earlier quoted context omitted.

Where do you get that 'middle-class income' from? The standard of living that 70k USD buys today is vastly better than what the median income bought in 1950. (Of course, Seattle is rather expensive. The 70k USD would go much further in a city that didn't restrict residential construction so much.)

You can not even buy a house built on the 1950s on 70k a year. And while most quality claims (which usually lack actual numbers) certainly look subjective, the quality of a dirt lot or vial of insulin has obviously not changed while their adjusted inflation price has sky rocketed. At any rate, the claim that "stuff" is more expensive because it is better implies that decades of technical improvements have resulted in…

Dirt has become enormously more expensive. The more dignified term to use here is 'land prices have increased.' One could argue that the quality of the dirt has improved a lot; or at least the quality of its location. The US in 2020 is a much richer place than the US in 1950; so we'd expect land to cost more.

(But in addition, there are those restrictions on housing supply that I already mentioned.)

You are right about insulin probably not having gotten much better. There's a few other goods like that as well. Some of those problems are self-inflicted. Eg education is much more costly these days, too.

Who claimed that stuff is more expensive because it's better?

Taking hedonic adjustments into account when producing inflation numbers is the proper thing to do. Productivity improvements would then show up by decreases in the price level measured like that. We can see that for eg computers. A good enough desktop computer today costs less in nominal dollars than in the early 90s, despite being enormously more powerful.

Yes, you are right that we can not buy many of the crappier things any more. That's partially down to regulation, but also down to there just not being enough demand for lots of crappy stuff to keep production at scale running.

So that makes calculating the price level harder. The usual work-around is to only look at adjustments from one year to the next, and chain them.

Another workaround is to go with the Big Mac index. (https://en.wikipedia.org/wiki/Big_Mac_Index) That index is a bit of a joke, since it just measure the price of a Big Mac. But it's surprisingly useful for what it is.

Re: The boss who put everyone on 70K

#27

Post by 5350-uiop-1130 »

domlebo70 wrote: post #23
benreesman wrote: post #22

Earlier quoted context omitted.

Can you elaborate a bit about what you mean by inefficient? People mean a lot of different things when they use the word “efficient” in a financial/economic context.

Well would you pay 10 dollars a liter to fill your car up, when you can get perfectly good fuel for $1.50 a liter?

very bezosian. not sure you could, or should, apply this analogy to a human being though.

Re: The boss who put everyone on 70K

#28

Post by benreesman »

domlebo70 wrote: post #23
benreesman wrote: post #22

Earlier quoted context omitted.

Can you elaborate a bit about what you mean by inefficient? People mean a lot of different things when they use the word “efficient” in a financial/economic context.

Well would you pay 10 dollars a liter to fill your car up, when you can get perfectly good fuel for $1.50 a liter?

I’m not sure I follow the analogy, but I certainly pay extra for high-octane gasoline when I’m filling up a performance automobile.

Re: The boss who put everyone on 70K

#29

Post by nbp160130 »

mzi wrote: post #17
eru wrote: post #10

Earlier quoted context omitted.

I think you'd need to do the opposite: take 70k today, and figure out what the inflation calculator suggests about it's value in 1950 dollars. Just using your numbers, that would be about 6.5k. Now compare with median annual incomes in 1950. Asking Google about '1950 median american income' gives 'Average family income in 1950 was $3,300.' Not quite what I wanted to know, but close enough. (We are looking at per work…

I found this link[0] that tells us that the median income - adjusted for inflation - seems to be rising since 1967. https://www.davemanuel.com/median-household-income.php

This is measuring household income, not individual income. Real household income isn't increasing because wages are rising, it's increasing because more people in a household are working.

Re: The boss who put everyone on 70K

#30

Post by fsloth »

domlebo70 wrote: post #23
benreesman wrote: post #22

Earlier quoted context omitted.

Can you elaborate a bit about what you mean by inefficient? People mean a lot of different things when they use the word “efficient” in a financial/economic context.

Well would you pay 10 dollars a liter to fill your car up, when you can get perfectly good fuel for $1.50 a liter?

There is a difference between a team of people, and the set of people working individually.

An extreme example - there is a reason a SEAL team is called a team.

This is the problem with wage discussions. People equate a measurable commodity like gasoline to the number of hours worked at a specific job.

Sometimes this is a sufficient analogue, but often times reward mechanisms are more complex than that. There is a good reason rewards mechanisms in jobs are a lively field of academic study. People just forget this does not only apply to top managers.

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