JW wrote:
Most people, especially those who have never built a business, never seem able to grasp the simple idea that what a job pays is not a measure of the employee's worth but of the Job's worth.
What determines a job's worth is equally simple to grasp, if you bother. One person decides to open a store. He has to come up with the money to equip the store and he has to bear the cost of keeping the equipment working or replacing it. He has to pay for all of the inventory items he will stock. He is risking his assets and his future to take on the task. Some equipment he will be unable to secure except by leasing it so he must plan monthly expenditures for rent, leases, repairs, etc.
He must hire at least three people, one full time and two part time workers. He will do the management and the maintenance himself. He will plan the sales and the pricing. He will also be called upon to do and pay for any number of spontaneous tasks as they might suddenly appear necessary.
He will also be required to keep the operation financially viable for however long it takes to develop a reputation for good products and good prices.
Most of the repeating costs he cannot control. Rent, leased equipment, utilities, supplies and incidentals all must be paid every month whether he has any customers or not.
After doing all of the immediately necessary calculations, he arrives at a fixed minimum operating cost of $4,500.00 per month. Over and above those costs will come personnel. He looks at the prevailing wage for retail workers and decides to pay $10.00/hour and he will take the same for now. He hopes he will do much better down the road as the business prospers... if it prospers. Until it does, he must limit his full time worker to hours to 40 hours per week. One part timer for 20 hours per week and the other part timer to 20 hours on the week end. Adding the obligatory employment taxes to his draw and the wages he will pay, he can add about an additional 35% per dollar of wages paid. In reality, each employee, including himself, is costing him $13.50 per hour. That adds an additional $7,000 to fixed expenses, now, $11,500 per month. (Numbers are being rounded.)
His estimated average sale will be about $10.00 so he sees that his minimum clientele served must quickly get to 1150 buyers per month to break even. Operating 7 days per week, that means he must have at least 39 sales per day.
If he raises his wages paid to $15.00/hour, now $20.25 tax included, his fixed costs now approximate $15,000 per month.
He now must have minimally 1500 sales per month, 50 sales per day. He either has to increase his sales or his prices. There is only so much that can be done to raise sales and the market determines what prices goods can bring. He is between a rock and a hard place.
Wages constitute 70% of his fixed costs and he has minimal staff and does most of the work himself. He pays himself exactly what he pays his employees.
The amount of money an entrepreneur has to work with is determined by his ingenuity and the market place. There is a reason most businesses fail in the first five years.
Ingenuity, in this age of technology, means figuring out how to accomplish the task without hiring people. McDonalds restaurants, Taco Bell and many more are replacing counter help with electronic kiosks for ordering.
Entry level jobs are disappearing.
Most people, especially those who have never built... (
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The retail industry is not "hi-tech" but certainly mass production, robots and self-service should be increasing production, lowering the cost of goods and services, and lowering the cost of living, which is good.
ZIP Codes at the post office revolutionized mail delivery, and now we can even avoid the post office altogether by printing stamps at home. But the cost of a first class stamp since 1960 went up from 5 Cents to 55 Cents. Go figure!
Do you think it has anything to do with Karl Marx's government central bank instituted under President Woodrow Wilson and the KKK? The Federal Reserve prints way too much money beyond what we manufacture, devaluing our dollar to a dime since 1960, bailing out every failing socialist dictatorship on earth, "peace through placating our enemies"! This foreign policy is NUTS.
We are now surrounded by an armed madhouse that would k**l us in a heartbeat.