Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you: No adverts like this in the forums anymore. Times and dates in your local timezone. Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance. Email notifications for threads you want to watch closely. Being a part of the oldest wargaming community on the net. If you are already a member then feel free to login now.

 sebster wrote:
One of the weirdest things about travelling around the US is that the listed price out the front, or even the price on the menu, had nothing to do with what you end up actually. Over here, when it says the steak costs $22 then $22 is what you actually pay. You get to look at a menu and know what you're going to pay for a piece of food.

In the US, you see $22 for a steak and you think that's a pretty good price, but then you get the bill and you've got a whole bunch of other stuff on top of that, to which you add a tip. It was a running joke when we were over there - "I wonder how much this will actually cost? Let's find out!"

I know! When I went on vacation in the UK it was refresing that if the price was 5 pounds it was actually 5 pounds! In Canada you have to add the sales tax which is made up of two diffrent taxes then the tip then there may be other taxes like an alcohol tax. I admit the Brits have it right on this one and apparently the Aussies too if you're like that.

 Frazzled wrote:
Its an excellent way to cover up how much tax you are paying. Its like paying for gasoline. You see the end price and think "evil oil companies" You don't see that half of it is taxes.
Thanks Obama!

Only if you've got a hopelessly designed tax system that applies all kinds of different rates to mildly different goods. Have a single goods and services tax at say 10% and you know every good you buy the tax is 1/11 of the price paid.


Automatically Appended Next Post:

 whembly wrote:
The point I was trying to make Seb is that many Service Oriented Unions generally peg their base-line wages to the minimum wage.

That's all I was pointing out.

I know. You make that point in all of these national minimum wage threads

The point I was making is that the political motivations of anyone involved is irrelevant. Outside of a handful of nutters on each side, most of us agree that less people in poverty is bad and also that job losses are bad. So the only question is whether any particular change in minimum wage will deliver enough of the former to justify the latter, and that's essentially a technocratic question, answered by econometric analysis.

:shrugs: we'll definitely see what sort of impact, for good or ill, this will have rather quickly.

Well, my guess is that the cost of living will be high in Seattle either way, and the overall improving macroeconomic conditions will make it very hard to pick out the jobs impact of this law. So instead anyone trying to make a story of this in a year or two will pick out anecdotes to make the political point they'd already decided on before they set out to make a story - either they'll talk about a business or two that has closed down, or they'll talk about someone who used to be going backwards who is now able to just keep their head above water.

And there's a fair chance those stories will get posted on dakka, and the debate that follows will have the same people making all the same arguments all over again


Automatically Appended Next Post:

nkelsch wrote:
An 8.5% increase on a 5$ meal is 42 cents... Define 'marginal'? And why raise prices when you can fight back and put a surcharge on to shift the blame and responsibility?

Because the consumer at the end of the day is driven by what he paid in total for the product. You could sell an 8c burger and add a 'because you've got dreamy eyes' tax of 99c and ultimately the consumer will know he just got stuck paying $1.07 for the burger. If the guy over the road is selling a burger of the same quality for 99c... well figure who's going to have growing sales, and who's going to have declining sales.

That's the reason business don't just charge more. I mean, think about it, if the business could just choose to charge more, why wouldn't it? Because of competition. That competition exerts a downward pressure on prices whether policies you're politically opposed to exist or not.


Automatically Appended Next Post:

 Asherian Command wrote:
Yep yep! I agree with you, but personally it would be better if there was a maximum wage. For all workers. All workers. That would fix the rich problem. Permanently.

This was tried, sort of, by Clinton. Executive pay over a million bucks was only tax deductible if performance criteria was met. It was a disaster that promoted executive remuneration in to bonus schemes, and led to a massive blow out in executive pay.


Automatically Appended Next Post:

 easysauce wrote:
yes, lets limit sucess and also limit the reward factor that drives the best of us to perform to the best of their abilities...

Behavioural economics tells us that the material motivation past the first few million is basically zero. The best and brightest aren't working harder because they hope they can go from $10 million a year to $11 million a year, and add another supercar to the fleet.

Instead, we learn that the drive at point is either from the work itself (love of the game, so to speak), or from status - earning more than other people.

Now, that doesn't mean we should start capping high incomes. For a start it would just shift the money from the CEO to the company owners, which is counter-productive when the really big income earners are the owners of capital, and not the skilled labour. And it's also a near impossible thing to do - if a company wants to find a way to reward its CEO it will figure out how to avoid any government limits.

But we do need to move away from that very simple idea that people work purely for material reward and therefore any challenge to that will automatically lead to less work being done, because it is so much more complex than that.


Automatically Appended Next Post:

 Grey Templar wrote:
You have zero clue how business works do you?

That 20 million isn't going straight into executive pockets. It gets split among the executives, any company expansion, retained earnings, stock dividends, and overhead. It goes away fast.

I'm sorry, did you just challenge someone else's understanding of business, and then claim that profit gets eaten up by overhead? Because wow that's a really basic error.


Automatically Appended Next Post:

 easysauce wrote:
you may as well post a chart that lists the average movie star's pay rate compared to the average workers pay rate....

pretty sure americain actors and pro sports players are ALSO disproportionatly paid compared to the rest of the world,

at least CEO's actually employ people instead of merly being a face on the screen or hitting a ball around...

First up, whenever the extreme inequality in incomes get mentioned someone always mentions movie stars and sports stars. But the pay of even the highest paid athletes and actors is dwarfed by the incomes of the biggest earners. In fact the entire payroll of all major league baseball teams is less than what three or four hedge fund managers took home in 2013.

If you want to understand how it works here's a handy chart for you;

http://www.bloomberg.com/image/iLZTyTbv6NhQ.jpg

The second point is that CEOs don't employ anyone. A CEO isn't an island of jobs that we attach ourselves to. In fact the CEO is just another guy working in a job, albeit earning a lot more than most of us. What actually creates jobs is demand for a product or service - which companies will form to meet that demand in order to make product. Which produces a feedback loop, in which jobs created by the company in order to meet that demand in turn generate new demand, as the employees look to spend their incomes, creating new companies and so on. The CEO is merely just one piece of specialised labour in that process - this thing about job creators is simplistic political nonsense.

I think it's also important to differentiate movie/sports stars from CEOs due to the inherent different reason they make money.

A sports star makes money because people want to pay to see that star. Consider baseball, and I'm probably underestimating the numbers, but with 80 home games, and 30,000 people in the crowd with an average ticket price of $30, they're generating 72 million dollars. (This discounts other sales, like concessions, souveneirs and parking, as well as TV contracts). That's in ticket sales alone. If the players aren't getting a substantial portion of that money, something's wrong.

(you can compare this with similar figures from minor league teams and see exactly how much value stars add. )

Same for musicians. If you're one of the lucky fraction of musicians to make it big, you're generating a lot of cash on tour, because 70,000 people will pay $200 a seat to see the Rolling Stones, in each city they visit. If Mick and Keith don't deserve the lion's share of that cash, I don't know who does.

Most musicians, however, have no where near this level of success. Watching a video by a newer band that I like, talking about their tour, they basically said their goal is to make enough each night to pay for the next show.

CEOs on the other hand, are responsible for remarkably little of a businesses success. They can establish long-term strategies, and try to implement them, but, with the exception of a few notable individuals, they're not doing anything particularly impressive. The problem is that they all want to think they're rock stars, while most of them are just musicians. I'm willing to believe that a Steve Jobs was worth what he was paid, but Meg Whitman? CEOs want to convince you that they do a lot, but watching how they come and go at different companies, there's really not a huge impact to be found there.

Again, pointing to a company that I think 'gets it', the CEO of Costco doesn't believe he's a rockstar, and while he makes a very nice salary of about $350k, is certainly not making many multiples of what the average worker there is making, nor putting his own good well before the good of the employees under him.

CEO salaries are impacted by this rockstar mentality. Each board wants to believe they've got an above-average CEO, and so each board approves an above-average pay package for their CEO. No one wants to think they hired the bargain-basement guy. (http://www.newyorker.com/talk/financial/2013/10/21/131021ta_talk_surowiecki)

So, while the top-level athletes and musicians are superstars, and it can be easily shown how they justify their salaries, most CEOs are not superstars, and we should stop treating them as such.

 Redbeard wrote:


So, while the top-level athletes and musicians are superstars, and it can be easily shown how they justify their salaries, most CEOs are not superstars, and we should stop treating them as such.

I think that it's also important to look at where many CEOs and CEO types come from... IIRC, the CEOs of many European companies (such as BMW, Audi, Mercedes-Benz, etc) started at the "bottom"... ie. they got their college degree in something, got a position in the company, and have been climbing the ranks proving through their work ethic and products that they are worth having higher up the company... Many/most CEOs in America.. were CEOs at another company before moving to the one theyre at now.

 Ensis Ferrae wrote:

 Redbeard wrote:


So, while the top-level athletes and musicians are superstars, and it can be easily shown how they justify their salaries, most CEOs are not superstars, and we should stop treating them as such.

I think that it's also important to look at where many CEOs and CEO types come from... IIRC, the CEOs of many European companies (such as BMW, Audi, Mercedes-Benz, etc) started at the "bottom"... ie. they got their college degree in something, got a position in the company, and have been climbing the ranks proving through their work ethic and products that they are worth having higher up the company... Many/most CEOs in America.. were CEOs at another company before moving to the one theyre at now.

But they had to have not been CEOs at some point. Just because they swapped jobs at some point doesn't mean they were always at the top.

And their decisions certainly matter for the profitability of the company. Otherwise what company would bother having a CEO at all?

dereksatkinson wrote:

 Asherian Command wrote:
Agreed it does. But it still does not mean they do not have their uses. The Surgeon should be given more benefits, but to be honest money should be the least of your concerns. Maybe they get other benefits for being a surgeon.

Communal ownership of the means of production doesn't have to mean that a surgeon gets the same amount of money as a burger flipper.

 AlmightyWalrus wrote:

dereksatkinson wrote:

 Asherian Command wrote:
Agreed it does. But it still does not mean they do not have their uses. The Surgeon should be given more benefits, but to be honest money should be the least of your concerns. Maybe they get other benefits for being a surgeon.

Communal ownership of the means of production doesn't have to mean that a surgeon gets the same amount of money as a burger flipper.

But the regional supervisor makes the same as specialized surgeon maybe

 Grey Templar wrote:
And their decisions certainly matter for the profitability of the company. Otherwise what company would bother having a CEO at all?

I think the main issue I find with this statement is the idea that you can do away with something just because it doesn't make an obvious difference. I could just as easily say that the janitorial staff for the HQ of a company probably don't make much of a difference in terms of the company's profitability, but no one is saying to get rid of all the janitors, or that the job they do isn't needed.

Someone needs to be the boss, even if it's just a figurehead. Someone needs to have final sign-off on things. Someone has to be the guy to go play golf with the vendors... But, that's not a particularly difficult job, especially not in a company that has many divisions and trusted department heads. How many CEOs really understand every aspect of their business? There's some evidence that suggests that the primary job of a CEO isn't even handling the business, but it is in managing stockholder expectations.

I don't think that CEOs, in general, add no value. But I do think that the CEO, in specific, does not add so much more value that their salaries in the US system would indicate. I think the ratio for CEO to worker pay as seen in Europe is far more in-line with the actual added value a CEO creates. And, I think that most CEOs are largely interchangeable, the idea that every company both has, and pays for, an above-average CEO is pretty silly when you spell it out.

Most CEOs seem to really be more of a steersman, not making the ship go, but making go where you want.

The path of the most teef's

 Redbeard wrote:

 Grey Templar wrote:
And their decisions certainly matter for the profitability of the company. Otherwise what company would bother having a CEO at all?

I think the main issue I find with this statement is the idea that you can do away with something just because it doesn't make an obvious difference. I could just as easily say that the janitorial staff for the HQ of a company probably don't make much of a difference in terms of the company's profitability, but no one is saying to get rid of all the janitors, or that the job they do isn't needed.

Someone needs to be the boss, even if it's just a figurehead. Someone needs to have final sign-off on things. Someone has to be the guy to go play golf with the vendors... But, that's not a particularly difficult job, especially not in a company that has many divisions and trusted department heads. How many CEOs really understand every aspect of their business? There's some evidence that suggests that the primary job of a CEO isn't even handling the business, but it is in managing stockholder expectations.

I don't think that CEOs, in general, add no value. But I do think that the CEO, in specific, does not add so much more value that their salaries in the US system would indicate. I think the ratio for CEO to worker pay as seen in Europe is far more in-line with the actual added value a CEO creates. And, I think that most CEOs are largely interchangeable, the idea that every company both has, and pays for, an above-average CEO is pretty silly when you spell it out.

Personally, and I may be somewhat off on this... but I'd look at it similar to the US presidential campaigns... In the past, we've seen candidates make statements like "I'll lower the price of a gallon of gas"... Well, the President doesn't actually have any real ability to do this. He/she can make policy that people under them follow through on, which may or may not have any impact on their earlier statement. I see many CEOs as being the same way. They'll say "We are going to produce a product that is of higher quality and lower cost than any of our competitors" ... Well, they can't directly do that, unless they are also the only engineer/manufacturer/tester, etc. They will make company policy that the people under them will carry out and they'll either succeed in that statement of higher quality/lower cost, or they won't.

If the shareholders/Board could find someone to do their CEO's job for cheaper, do you honestly thing they would not?

why would they choose to make less money on purpose?

the reality is, its a far more involved job then most of the people here are giving it credit for,

and no sebster, the "profit motivation" does not magically cap at 10 mill.

if you already make 10 mill, and someone offers you 11mill for the same job, you are very much motivated to take the higher offer.

the only problem with giving them mo money, is that is also creates mo problems.

 easysauce wrote:
If the shareholders/Board could find someone to do their CEO's job for cheaper, do you honestly thing they would not?

Absolutely.

The thing is, a CEO isn't a job like other jobs. The actual work is a small part of it, a lot more of it is being a figurehead.

I posted this link earlier today, read it to understand why companies actually go out of their way to pay their CEOs more than they need to. http://www.newyorker.com/talk/financial/2013/10/21/131021ta_talk_surowiecki

 Redbeard wrote:
I don't think that CEOs, in general, add no value. But I do think that the CEO, in specific, does not add so much more value that their salaries in the US system would indicate. I think the ratio for CEO to worker pay as seen in Europe is far more in-line with the actual added value a CEO creates. And, I think that most CEOs are largely interchangeable, the idea that every company both has, and pays for, an above-average CEO is pretty silly when you spell it out.

Yep. The ultimate point is that we have little idea how much value a CEO adds. The number of CEOs is too shallow, and the skillsets of various potential CEOs too dissimilar for us to simply assume that what the market pays must be the marginal return and therefore what they contribute to the company. And companies themselves will freely state that it is near impossible to assess how well a CEO has performed until years after their appointment, because accounting returns can't predict future growth, and stock price is decided more by market forces than company return.

The simple fact is we have a vague idea at best of how valuable CEOs on the whole tend to be to a good company. Assessing the value of one CEO in specific is almost impossible, even in hindsight. Assessing how valuable a CEO will be in future is basically just guesswork.

As such, the only justification for CEO pay is that the board of the company felt that was what the right man was worth, and they're at least somewhat confident they've got the right man. And to an extent that's good enough, because free market and all that.

But any attempt to claim that person is worth that much and therefore society can't step in and take a reasonable portion of that income in order to fund social programs... well that's just nutty.


Automatically Appended Next Post:

 easysauce wrote:
and no sebster, the "profit motivation" does not magically cap at 10 mill.

if you already make 10 mill, and someone offers you 11mill for the same job, you are very much motivated to take the higher offer.

You don't understand what I'm saying. No-one is saying that people just stop chasing more money at 10 million*. Look at the term I used - material motivation. That part is the material reward you gain from each new dollar. So for instance, going from $40k to $44k might mean you can go out for dinner a few times a month. From $400k to $440k it might mean you can now buy a membership in an exclusive club and eat there when you please. From $10m to $11m it doesn't mean much at all, there's really no material experience that's denied to you.

Now, there is another part of income that matters - status. People like to earn more to beat other people, make more than the Joneses, have a nicer house than the Joneses and so on. That effect doesn't go away.

And still present is the other important motivating factor - the work itself. People work for more than just their pay, they work because they enjoy the work, and enjoy what their work has produced. CEOs will work upwards of 80 hours a week, and spend many nights away from their family. They don't do this because they hope that with a little more work they might move their pay from 10m a year to 11m a year. They do it because they are engrossed in the work, in making the company a success.



*Actually 10 million is just a convenient cut off. The tendency begins long before then, arguably from dollar 2 if you want to draw the trend line back far enough. 10 million is just a nice convenient figure at which the trend has long since hit zero and we can comfortably say there is no longer a material element to income.

 sebster wrote:
Look at the term I used - material motivation. That part is the material reward you gain from each new dollar. So for instance, going from $40k to $44k might mean you can go out for dinner a few times a month. From $400k to $440k it might mean you can now buy a membership in an exclusive club and eat there when you please. From $10m to $11m it doesn't mean much at all, there's really no material experience that's denied to you.

its 1 million "material motivation" difference...

Rewards are not subject to the diminishing returns you are claiming they do, if they did, no company/person would bother making more the X amount...

you claiming that gaining and extra 4k a year makes more difference then gaining 1 mill a year is ludicrous... going from a few nights out at dinner, to a few more nights out for dinner? YAWWWNNNNNN thats not motivating at all...

an extra house, or 1 million in extra philanthropy, a down payment on VTOL craft, a nice picasso, taking a trip to paris for dinner, heck go buy a presidency or political office,

all those things sound way more materially motivating then whatever a few K will buy.

there is also the whole "my family and all my descendants can use the money" factor.

so yes, indisputable fact, more money, allows for you to do more, and is more motivating, the diminishing returns, if any, are completely subjective based on the individual, not on any amount of $.

a theory that is total, utter, hog wash, to claim the materiel motivation of a few thousand matters more then a million, just because you already have a few million.

in reality, money is the only reason most people go to work in the first place, ask anyone, if they would be more motivated to go to work if they were given more money to do so, and 99% will say yes...

 easysauce wrote:
its 1 million "material motivation" difference...

Yes, and 1 million on top of the 10 million a person is already earning gets relatively little more utility. Go read about declining utility. Please don't waste time trying to argue when you know nothing about this.

Rewards are not subject to the diminishing returns you are claiming they do, if they did, no company/person would bother making more the X amount...

They still attempt to earn more money, this is for reasons I have already explained this to you. Please read what I am fething explaining to you.

"Now, there is another part of income that matters - status. People like to earn more to beat other people, make more than the Joneses, have a nicer house than the Joneses and so on. That effect doesn't go away.

And still present is the other important motivating factor - the work itself. People work for more than just their pay, they work because they enjoy the work, and enjoy what their work has produced. CEOs will work upwards of 80 hours a week, and spend many nights away from their family. They don't do this because they hope that with a little more work they might move their pay from 10m a year to 11m a year. They do it because they are engrossed in the work, in making the company a success."


Anyhow, you're actually trying to reject the idea of declining utility. That is fething incredible. I mean here I'm just explaining a concept that's been a cornerstone of economics for generations, which has been studied and expanded on for a decade through behavioural economics, and you're just saying 'nuh uh'. I'm almost tempted to respect your moxie.

you claiming that gaining and extra 4k a year makes more difference then gaining 1 mill a year is ludicrous... going from a few nights out at dinner, to a few more nights out for dinner? YAWWWNNNNNN thats not motivating at all...

an extra house, or 1 million in extra philanthropy, a down payment on VTOL craft, a nice picasso, taking a trip to paris for dinner, heck go buy a presidency or political office,

all those things sound way more materially motivating then whatever a few K will buy.

Yes, a VTOL would be lovely. But if that's what the person wanted, then that's easily within reach with the first ten million. Or the ten million they'd earn the next year.

there is also the whole "my family and all my descendants can use the money" factor.

Actually, behavioural economics has shown very little evidence of people earning money in order to leave it for their children. This was cleverly studied by comparing people with immediate inheritors and those without, and they found no behavioural difference between the two groups. In other words, people with no direct, important descendants will focus just as much on asset accumulation up until they die as those with loved ones whom they intend to inherit their fortunes.

Which I thought was actually pretty surprising, to be honest. Though it does explain all those stupidly rich people who die with no will, or who leave their fortunes to their cats.

so yes, indisputable fact, more money, allows for you to do more, and is more motivating, the diminishing returns, if any, are completely subjective based on the individual, not on any amount of $.

Of course they vary by the individual. The issue is that across a population you see trends emerge.