Tuesday, December 06, 2005

But is it Fair?

A blogger I have been discussing fair taxation with, appears to have a position that the Capitalistic system is unfair. Since True Capitalism is based upon the oldest form of enterprise known to man, called the “Barter System”, I thought it worthwhile to discuss it in a post.

When you go to the store and buy a can of beans for $2.10, is the price that you paid “fair?” Yes, it must be, because you paid it.

Lets examine the transaction. You voted with your dollars that you would rather have the can of beans than the $2.10. That is what establishes the value of the can of beans. If enough people don’t buy the can of beans, the price will be lowered until enough people vote for that price.

When you show up to ask for a job, you listen to the work required and then usually you are told that the job either pays “x” amount or you are told it is based upon experience.

Now, you can either just accept their offer, if one is made, or you can ask for more. The trick is to know how to ask for more without it sounding like a demand. Usually I say something like this, “I was hoping for a little more…say “x” amount?” It never hurts to ask, but most people feel too intimidated. Only ask if the job is offered, but don’t hesitate to ask. The two most advantageous times a person is in a good barter position for their wages is “going in, and going out.”

There are two components of a “free market” society. Capital, (money), and Labor, (Workers.) One of these two components is more valuable than the other, and the one that is more valuable is Capital. So, why is Capital more valuable than Labor?

Let’s suppose you want to go into business for your self. You usually need a few things to get started. First, you need something to sell, as every business sells something, be it service or a product.

The next thing you need is usually “seed” money. This is money to invest in your “sunk costs” or “float costs.” Sunk Costs are those that you have to make in order to have a business. They are things such as Office Furniture, phones, etc.

Float Costs are the amount of money you need to have as a “cushion” or “emergency” funds, such as when you don’t have enough sales yet to pay all of your bills, because the “fixed costs”, things like house payment, car payment, etc. that are always there, need to be paid even when you are loosing money. And most new businesses fail, so the owner gets to loose all or most of his investment. That fact also makes the Capital side more valuable.

So, now how do you get this initial money to start your business? You save up, borrow, or seek additional investors.

If you saved up so that you can have 100% of the business, then you have deprived yourself of current gratification for future gratification. Since this is a difficult task for most people, it is the main reason that people get ahead in life. They learn the value of saving and the multitudes of benefits it brings.

In any case, funding is the difficult part. There are always people who will volunteer to work for you at whatever they feel is a fair wage. Will a President of a Company work for $10.00 per hour? No. Will a Finance Officer work for $10.00 per hour? No. Each position has an established “market value” based upon the single most important item in a Laborers toolbox, and it is called his “skill set.”

This is the most important part of this post for all to understand, and that is this, “The only Job Security anyone has that works for others, is his “skill set.”

A person should be trying to figure out what he or she can learn or what inherent skill he or she has that will always be valuable to an employer. Also becoming more versatile also makes you more valuable.

What makes a persons “wage” fair is the amount of effort that the person applying for the job has spent in improving his or her skill set. That perceived skill set is what the business is bartering for. The more effort put into your skill set, the more you can ask for during the bartering session.

Back in the 1980’s I was offered a Job as a “C” Programmer for $25,000.00 and I said that I was hoping for $40,000.00 and they said, “O.K.” In my mind I said to myself, wow, I should have said $50,000.00, but needless to say, I was very, very, happy.

My goal was to eventually make a six-figure income. I asked around how could I do that and was told in my profession, A Software Engineer, I needed to go into consulting. It would need to be as an owner or work for a consulting company.

I eventually felt I was skilled enough that I applied to many consulting firms and eventually was offered a job. I told my boss that I didn’t want to work there unless I was guaranteed the ability to earn six-figures was available. He said that he had two other Software Engineers working there with that income. I asked him for the criteria, and he told me. Initially I turned down the job because it was only $35.00 per hour, and he kept upping the offer $5.00 per hour at a time, until I could no longer refuse. This was in the early 1990’s.

So, there you have it. A socialist will say that the Capitalist is living off the fruits of others, but in reality, a business is made up of a team and each has something to offer to reach the goal of the team. Some contributors offer more to the enterprise and therefore they rightfully get more in return. The ones that have more invested also have more to loose.

Is the Capitalist society a zero sum principal? No. If people produce goods with their labor, then sell it; they have increased the wealth of the nation. That is why the GNP goes up most years. In a zero sum society, a person only gets richer by making someone else poorer and the GNP will always be the same. It is easy to prove that it doesn’t happen in a Capitalist Society, but I will leave that to another post.

My philosophy is to have a really great profit sharing plan so that the employees can do well when the company does well, and when the company doesn’t do well, then it doesn’t pay any bonuses. This gets the employees to do their best to help contribute to the bottom line as it directly benefits them.

So, what is a “fair” wage? It is whatever two consenting adults decide is fair, which is usually somewhere around market value for the given skill set.

Want more money? Make your skill set more valuable to your employer. Simple.

Is Capitalism fair? You bet it is. See Matt 20: 1-13 as an example of Christ saying essentially this very fact! When the laborers found out that some were paid more for less work, he basically says, "Your deal is your deal, and someone else’s deal is their deal. You were happy when you made the deal, or else you would not have made it, so be happy now."


At 9:37 PM, Blogger Tex said...

Now that Capitalism is safe for us once again, tell me more about that 1 lost sheep theory some more. I've been thinking about it for over a week and it intrigues me greatly.


At 9:41 PM, Blogger Roseville Conservative said...

Awesome Post... FAR, Reminds me of my own business...

At 9:58 PM, Blogger Free Agency Rules said...


It was something my sister said. She said it had nothing to do with the Church she belongs to, she is a Methodist, but she was reading a book at the time called "The Jesus Factor" and she just came out and asked me...

"What if there were 100 earths in our Universe and all are populated with God's children, and this earth was the only one that was wicked enough to crucify Christ?"

She then said that her thought was based upon the "one sheep that went astray" quote in the Bible.

I went, Wow, what a concept and that was the end of our conversation. But, I have never forgot it, and my inner heart felt it could very well be true.

I also think that there could be infinite Universes, but then I am somewhat of a maverick thinker.

I don't get into specific religions because I don't want to try to convert anyone, I only like to discuss ideas.

As soon as you tell someone your religion, you are automatically put in a box and they then have your all figured out and begin to tell you that they are the expert in your religion and that you believe a mirid of things you don't.



At 11:47 AM, Blogger Stalin the Shark said...


this is yet another interesting straw man, but you seem to miss my central point, which is this: is it moral to deprive laborers of a part of the value they produce to aid an enterprise? According to your own criteria, this is theft, because you disdain pragmatism, informed-consent or 'greater-good' arguments when you're talking about your taxes.

So, whence the discrepancy? You're rationalizing theft from workers - the difference between the value they create and the amount they receive - by pointing to the benefits that accrue to the person that hires them - an individual transfer payment, which you decry as immoral.

:-), StS

At 1:51 PM, Blogger Mahndisa S. Rigmaiden said...

12 07 05
FAR: Good post, I agree and disagree with your analysis. Me and II once got into it about protectionism, the role of business in our society and matters of so called fairness. I need to think further before I comment more. Also, I am now blogrolling you:)

Stalin: Now, you are espousing communazi rhetoric (don't get upset, this is my poetic license word use ha ha ha) but seriously, fairness is a construct. Life isn't fair and fairness is a matter of perspective. Here is the age old question: "Do you value equality of opportunity, or equality of outcome?" Workers didn't come up with the idea for which they are working. The business managers and owners came up with the concpets (or bought them) so they are entitled to money from their ideas. If workers don't see that as "fair" (less workplace abuses) then those workers need to leave and come up with their own idea! What I like about Capitalism is that individual ambitions can be shaped and realized in this system. My only grievance with the concept of capitalism is that it has no inherent moral basis. I feel as though COMMUNALISM should be the moral basis for capitalism with individual rights as the balance. And STS I am clearly differntiating betwwen Marxist communazism and family, community centered capitalists! Good post and discussion@

At 4:23 PM, Blogger Free Agency Rules said...


Said: "is it moral to deprive laborers of a part of the value they produce to aid an enterprise?"

Yes, because both parties agree that it is.

If there were no profit motive, then I would just stay a worker bee. I have make over 2 million dollars, (I think, never added it up), in my life and that is without having 100% ownership in a business.

I went into business in order to make a better living, and to help others. Help the customers get what they want for a fair price, and help the workers get what they want at a fair price.

If I gave the workers the full value of their work, I could not pay enen one penney of overhead, period. How would that make any sense?

Do you not see that businesses need to also save so they can replace worn out equipment as needed?

Do, you not see that it makes absolutely no sense what so ever to pay the full value of a workers output. Also, what about the value of the Owners part? How do you measure the value of the workers when they are involved in synergy?

Do you not see the synergy part?

You use very clever points, I must hand it to you. But being clever is not being accurate.

I don't want a mob called government to take money from me for a use which is not laid out in Article 1 section 8 of the Constitution. In that section, are all of the things the founders thought were legal and necessary for the government to do. No where in there does it mention discrimination aginst one class of citizen for the benefit of another class.

My workers on the other hand, have never said to me that they don't want a portion of thier output to be paid for the use of capital.

I am left with little choice to go along with Big Brother saying that government should be responsible for helping others with other peoples money.

I do have a choice to participate in a business enterprise where it is clear that the purpose of working for a company is to be "Working for a company!" Otherwise I would be working for "myself!" This is the position of all who work for a company. They choose to not work for themselves, or to allow others to piggyback on an enterprise so that they might benefit with things like profit sharing plans, etc.



At 7:49 AM, Blogger Free Agency Rules said...


Let me see if I can be as succint as I can.

First in one sentence..."The value produced by the company is not just what the workers produce, therefore your initial premise is invalid."

There are at least 3 ways for a business to increase their value beyond what the wage earners contribute to that value.

1. Increase sales. This is often done by the owner by spending money on advertising. This additional contribution to the output value of the company, means the owner should get some of the value for that contributionl.

2. Decrease costs. Again, usually the owner is the one who either directly or indirectly is responsible for increasing output value by reducing costs and therefore he deserves value back for that.

3. Increase throughput or efficiency. Changing the process or the logistics is usually because of the effort of the owner as well, and he deserves a return on this contrubition as well.

I am a working owner and receive a portion of the output value for my labor as well.

The owner contributed to the existance of the business in the first place, and that should be part of the return pie as well.

And finally the owner contributes Capital and risks loosing it all, and that deserves compensation as well.

Now, you can say that in your opinion none of the above is deserved, but that would just be an opinion and would not be supported by the plain facts stated above.



At 9:27 AM, Blogger Stalin the Shark said...


pragmatic reasoning as to why something is desirable are all very well and good; in fact, that is what I base my reasoning in support of transfer payments on.

But you're the one who keeps on saying that what you define as 'moral evil' trumps all pragmatism. So once again: is it right to steal from workers?

:-), StS

At 11:25 AM, Blogger Free Agency Rules said...


To answer directly "No, it is never right to steal from workers."

The discussion is not whether stealing is right, the point is whether or not paying workers less than what they produce is stealing.

Let's focus on that, O.K.

I say that it is not stealing to pay workers less than what the company produces, because the company produces more than what just the non-owners produce.

Will you admit that the company produces more value that just what the non-owners produce?

I answer your questions directly, please do the same for mine.



At 11:38 AM, Blogger Stalin the Shark said...

Hmmm, interesting point. I'd say that a company produces what its workforce produces. It's pretty clear that 'workforce' usually includes owners and non-owners, but tht the value produced by the owner is less than what the owner actually receives and what the business retains. Therefore, again, under your own criteria, this is theft.

:-), StS

At 11:43 AM, Blogger Free Agency Rules said...


said:"but tht the value produced by the owner is less than what the owner actually receives and what the business retains."

Who says that the value produced by the owner is less?

How does one determine the value of the owners work?

What anything is worth is based upon agreed to items. Since the owners and workers agree to the employment contract that they get "x" for their part in the deal and the owner gets the rest, is an implied agreed to contract.

Please tell me why the value of the owners part is not that and how you arrive at your conclusion.



At 11:49 AM, Blogger Free Agency Rules said...


Under your logic all workers, both non-owners and owners should get the same pay.

Presidents and Managers get more pay because they contribute more value than a blue collar worker by virtue of the fact that the owner is required to pay more based upon the fact that they won't work for blue collar wages. Why, because they have made themselves more valuable, not because of some government mandate that Mangers must be paid more. The same applys to owners, they get what they get because that is their part of the deal or employment contract with all others in the workplace.

Everyone makes what their skill level and their negotiation abilities provide.




Post a Comment

<< Home