Tea Party Must Be Doing Something Right

[djAdvocate]

Oct 23, 2013 9:57:29 GMT -5 deminmaine said:

Or put another way- the total cost of an employee is a single line item made up of salary, benefits, cost of compliance

Actually it is not- a single line item.

Standard Accounting practice does divide quite clearly where costs go here.

COGS (Cost of Goods Sold) is determined before Gross Profit, and includes direct production employee cost.  (production in a manufacturing co)
Salaries are typically considered either as overhead or as COGS, depending on the function of the employee, but more often fall under Overhead Expense.
Employer portion of FICA is typically found under Overhead Expense, and like Salaries, are typically figured after Gross Profit and before Net Profit (bottom line)

I could easily keep my employees pay rate the same if I no longer had to pay half of the cost of SSI, at least in the short term.  What I have to pay in the long term really depends more on the overall local market than anything else.  I certainly agree that in the long term this could be influenced by whether or not FICA was still a factor, but it is absolutely NOT a direct factor in pay rates, at all.

thank you, dem. 

so, i guess it is not "everyone" that does things the way that several people here have suggested.

[workpublic]

for example, i had all of my production guys working 8-10 hours per week extra. they get paid $25-40/hr. my new hire came in at $14/hr (probationary wage). at that wage, i could hire 2-3 guys, and still have lower payroll than i had before hiring.

too bad the public sector "employers" can't figure that out.

[Deleted]

Dj, you also seem to be in a business that has far more pricing power than the typical business. As is typically the case, it probably affects low skilled workers the most. But the whole reason the federal govt produces the employment cost index is because employers really do care and need that data. It's more important than you think it is, especially in more competitive labor markets. Your market seems to have a lot less competition simply because you are already able to pay high wages and have no trouble absorbing those costs. You're both lucky and not the norm.

[Sum Dum Gai]

At my previous job each production worker was paid X and billed their hours to a government agency at Y. X included their entire cost to the employer, and Y was determined by the contract with the agency. Non production employees, like HR were a loss to the company. My job was to motivate my team to pursue certifications and degrees so we could charge more for their time (raise Y on future contracts) and keep X low enough that the company hit their profit goals. I don't know how accounting looked at it, but the company knew to the penny how much every employee cost them and they included FICA, insurance benefits, unemployment insurance, etc in X. During review time any raises given had to keep X far enough under Y that the company hit their margins.

[Deleted]

Oct 21, 2013 21:47:37 GMT -5 djAdvocate said:

Oct 21, 2013 21:37:38 GMT -5 @gdgyva said:

so again we get back to the same thing Virgil was saying earlier

some people live frugally, save their ducats, and are responsible

some arent....they overbuy, spend more than they have, and live high on the hog

now 2 couples with exactly the same earnings in their lifetime....say average of 80k annually over 45 years

one has built a nice nest egg from doing all the right things

the second couple doesnt have a proverbial pot to piss in

but you want to take money from the first, and give it to the second?

assuming their income is the same, no.  money would be taken from both (or neither).

Surely the assumption - the absurd assumption - is that the income and assets of the prudent savers are the same in retirement as those of the spendthrifts...

It seems obvious to me that the couple who plan for a self-financed retirement, who end up having to subsidize the feckless couple who planned to "free ride" through retirement, are being penalized. And that systemically there is a rational disincentive to save. 

[djAdvocate]

Oct 23, 2013 10:44:00 GMT -5 @investorbob said:

Dj, you also seem to be in a business that has far more pricing power than the typical business.

i already said i was in a "niche market".  are you familiar with that term?  the rule in a niche market is that you can raise prices until they become an issue for customers.  80% of our work has no competitive bidding.

As is typically the case, it probably affects low skilled workers the most. But the whole reason the federal govt produces the employment cost index is because employers really do care and need that data.

i am not sure what you are talking about right now.  if you are talking about setting up a business, or running comparables, this data is very valuable.  ie- my OLD production manager told me the other day that PM's get over $100k, and that if i want to hire someone to do that job, i should be prepared to pay that.  turned out he is full of sawdust.  PM's get a max of $110k per year in Houston, with 20+ years of experience.  a PM trainee gets paid half that, which is 20% more than i am paying my trainee now, and well within my range. 

It's more important than you think it is, especially in more competitive labor markets. Your market seems to have a lot less competition simply because you are already able to pay high wages and have no trouble absorbing those costs. You're both lucky and not the norm.

i am sure that is true.  but if you look at what i have been saying, ib, i am mainly contesting the idea that EVERYONE does cost comparison a certain way.  they don't.

[djAdvocate]

Oct 23, 2013 10:52:21 GMT -5 @thatmojoguy said:

Oct 21, 2013 21:47:37 GMT -5 djAdvocate said:

assuming their income is the same, no.  money would be taken from both (or neither).

Surely the assumption - the absurd assumption - is that the income and assets of the prudent savers are the same in retirement as those of the spendthrifts...

It seems obvious to me that the couple who plan for a self-financed retirement, who end up having to subsidize the feckless couple who planned to "free ride" through retirement, are being penalized. And that systemically there is a rational disincentive to save. 

Mojo- i have asked for ANY evidence that we are planning on "means testing" assets.  i see no evidence that this is true.

[djAdvocate]

Oct 23, 2013 10:45:03 GMT -5 Sum Dum Gai said:

At my previous job each production worker was paid X and billed their hours to a government agency at Y. X included their entire cost to the employer, and Y was determined by the contract with the agency. Non production employees, like HR were a loss to the company. My job was to motivate my team to pursue certifications and degrees so we could charge more for their time (raise Y on future contracts) and keep X low enough that the company hit their profit goals. I don't know how accounting looked at it, but the company knew to the penny how much every employee cost them and they included FICA, insurance benefits, unemployment insurance, etc in X. During review time any raises given had to keep X far enough under Y that the company hit their margins.

yeah, external labor would be a way different situation.

actually, i can think of another one- one i HAVE looked at- and that is hiring from a temp agency.  this sort of "total cost analysis" would definitely come into play for that- for COMPARISON.  but once again, the need to hire is primarily revenue driven.  HOW you choose to hire is another matter entirely.

[Sum Dum Gai]

We didn't make products. The employees were the product, so employee costs were a big deal. A good chunk of the labor force works that way so employers FICA taxes directly impact employee pay. Businesses that do make products are competing for the same workers, so the salary you have to pay is somewhat determined by employer costs as well.

[billisonboard]

Oct 23, 2013 10:52:21 GMT -5 @thatmojoguy said:

Oct 21, 2013 21:47:37 GMT -5 djAdvocate said:

assuming their income is the same, no.  money would be taken from both (or neither).

Surely the assumption - the absurd assumption - is that the income and assets of the prudent savers are the same in retirement as those of the spendthrifts...

It seems obvious to me that the couple who plan for a self-financed retirement, who end up having to subsidize the feckless couple who planned to "free ride" through retirement, are being penalized. And that systemically there is a rational disincentive to save. 

However, the spending done by the feckless couple helped create a portion of that self-financed retirement. If we are all good little boys and girls and save our pennies, then consumer demand is seriously diminished. Not good for an economy built on consumption.

[Deleted]

Mojo- i have asked for ANY evidence that we are planning on "means testing" assets. i see no evidence that this is true.

"Means testing" ought properly to be a test of the person's available means, just on an ordinary-language construction. As usual, we're coming at the question from utterly different perspectives, and the objection you're answering from yours is not the one I was raising from mine.

There could well be no intention for "means testing" to actually test people's means - nothing seems more likely, honestly, given the political calculus of genuine means testing vs ersatz "means testing." The practical effect remains, in this as in all other socialization-of-risk scenarios, that prudence is both penalized and disincentivized. For some of you, a species of compassion trumps prudence - you're quite happy personally to do others' due diligence for them, and disregard the moral hazard of universalizing that approach by mandate. That is your privilege.

Nevertheless, rational incentives are what they are, and, to the extent that people are rational in their economic decisions (I don't mean that compassion is irrational in any loaded sense, just that it necessarily runs counter in most cases to even extrapolated rational self-interest), they will be more inclined to rely on the sacrifice of others than make the sacrifices themselves - and there is definitely an upper bound to the proportion of the people who can feel that way without creating serious socioeconomic strains.

[Deleted]

However, the spending done by the feckless couple helped create a portion of that self-financed retirement. If we are all good little boys and girls and save our pennies, then consumer demand is seriously diminished. Not good for an economy built on consumption.

The Paradox of Thrift . Spoken like a good Keynesian, bill (a comment that merely identifies a commonality of thought, and doesn't imply a label).

There are, of course, several criticisms of the paradox. One of the more obvious is that people don't forego essentials to save; they simply place a higher value (correctly in my view) on their retirement income than that fifth TV or that holiday in the Seychelles. They still operate in the economy; they still maintain cars and homes and wardrobes and diets and children. Products purchase products, and the consumption-investment ratio matters more in terms of economic growth than aggregate demand. Which latter we are artificially propping up with $85 billion a month poured into a liquidity trap, in any case.

[djAdvocate]

Oct 23, 2013 11:08:07 GMT -5 Sum Dum Gai said:

We didn't make products. The employees were the product, so employee costs were a big deal. A good chunk of the labor force works that way so employers FICA taxes directly impact employee pay. Businesses that do make products are competing for the same workers, so the salary you have to pay is somewhat determined by employer costs as well.

yeah, i can see that.  thx for the explanation.

[djAdvocate]

Oct 23, 2013 11:49:39 GMT -5 @thatmojoguy said:

Mojo- i have asked for ANY evidence that we are planning on "means testing" assets. i see no evidence that this is true.

"Means testing" ought properly to be a test of the person's available means, just on an ordinary-language construction. As usual, we're coming at the question from utterly different perspectives, and the objection you're answering from yours is not the one I was raising from mine.

ok

There could well be no intention for "means testing" to actually test people's means - nothing seems more likely, honestly, given the political calculus of genuine means testing vs ersatz "means testing." The practical effect remains, in this as in all other socialization-of-risk scenarios, that prudence is both penalized and disincentivized. For some of you, a species of compassion trumps prudence - you're quite happy personally to do others' due diligence for them, and disregard the moral hazard of universalizing that approach by mandate. That is your privilege.

i don't think the argument is that simplistic, but it DOES contain elements that you have described.

Nevertheless, rational incentives are what they are, and, to the extent that people are rational in their economic decisions (I don't mean that compassion is irrational in any loaded sense, just that it necessarily runs counter in most cases to even extrapolated rational self-interest), they will be more inclined to rely on the sacrifice of others than make the sacrifices themselves - and there is definitely an upper bound to the proportion of the people who can feel that way without creating serious socioeconomic strains.

i think people are quite irrational about money.  strike that.  people are quite irrational about money, irrespective of what i think.

[Deleted]

Oct 23, 2013 10:59:55 GMT -5 djAdvocate said:

Oct 23, 2013 10:44:00 GMT -5 @investorbob said:

Dj, you also seem to be in a business that has far more pricing power than the typical business.

i already said i was in a "niche market".  are you familiar with that term?  the rule in a niche market is that you can raise prices until they become an issue for customers.  80% of our work has no competitive bidding.

As is typically the case, it probably affects low skilled workers the most. But the whole reason the federal govt produces the employment cost index is because employers really do care and need that data.

i am not sure what you are talking about right now.  if you are talking about setting up a business, or running comparables, this data is very valuable.  ie- my OLD production manager told me the other day that PM's get over $100k, and that if i want to hire someone to do that job, i should be prepared to pay that.  turned out he is full of sawdust.  PM's get a max of $110k per year in Houston, with 20+ years of experience.  a PM trainee gets paid half that, which is 20% more than i am paying my trainee now, and well within my range. 

It's more important than you think it is, especially in more competitive labor markets. Your market seems to have a lot less competition simply because you are already able to pay high wages and have no trouble absorbing those costs. You're both lucky and not the norm.

i am sure that is true.  but if you look at what i have been saying, ib, i am mainly contesting the idea that EVERYONE does cost comparison a certain way.  they don't.

Well I would never say "everyone" does anything.  But it does happen and it is true that on average, other forms of compensation would go up if the employer tax were eliminated.  Also, I guarantee you we have PMs that get paid more than $110k with bonuses of 20%+ as well as long-term incentives.  Generally they have less than 20yrs experience.  And counting bonuses and incentives, we don't have any PMs (including those recently out of college) that make anywhere near half of $110k.  Probably $80k minimum including bonus and lt incentive.  Now we are probably on the top end of the curve given the business we are in....

[djAdvocate]

Oct 23, 2013 12:15:30 GMT -5 @investorbob said:

Oct 23, 2013 10:59:55 GMT -5 djAdvocate said:

i am sure that is true.  but if you look at what i have been saying, ib, i am mainly contesting the idea that EVERYONE does cost comparison a certain way.  they don't.

Well I would never say "everyone" does anything. 

i know.  that is one of the reasons we get along.

But it does happen and it is true that on average, other forms of compensation would go up if the employer tax were eliminated.  Also, I guarantee you we have PMs that get paid more than $110k with bonuses of 20%+ as well as long-term incentives.  Generally they have less than 20yrs experience.  And counting bonuses and incentives, we don't have any PMs (including those recently out of college) that make anywhere near half of $110k.  Probably $80k minimum including bonus and lt incentive.  Now we are probably on the top end of the curve given the business we are in....

yeah.  i am thinking $60k would be a good starting salary for a junior PM.  agree or disagree?

[djAdvocate]

Oct 23, 2013 13:14:29 GMT -5 deminmaine said:

Pay also depends on your location and economic circumstances.

I hired a junior PM in 2010 at 45K to replace someone who had been paid 70K.  Of course there was little work anywhere, and times were grim.  He is still with us, as General Production Manager.

that title is way more administrative than what i am looking for.  my guy might hand off instructions to a few production people and monitor the schedule.  that sort of thing.

[Deleted]

Oct 23, 2013 12:23:15 GMT -5 djAdvocate said:

Oct 23, 2013 12:15:30 GMT -5 @investorbob said:

Well I would never say "everyone" does anything. 

i know.  that is one of the reasons we get along.

But it does happen and it is true that on average, other forms of compensation would go up if the employer tax were eliminated.  Also, I guarantee you we have PMs that get paid more than $110k with bonuses of 20%+ as well as long-term incentives.  Generally they have less than 20yrs experience.  And counting bonuses and incentives, we don't have any PMs (including those recently out of college) that make anywhere near half of $110k.  Probably $80k minimum including bonus and lt incentive.  Now we are probably on the top end of the curve given the business we are in....

yeah.  i am thinking $60k would be a good starting salary for a junior PM.  agree or disagree?

Honestly, I don't really think I'm sufficiently qualified to give a decent opinion.  If it's someone with an engineering degree, probably not.  But some of the other relevant degrees, probably so.  And again, total compensation package matters.

[Deleted]

Oh, heck.  DJ, just ignore everything I just said about PMs.  I thought for sure you had said project manager, not production manager. 

[djAdvocate]

Oct 23, 2013 14:13:59 GMT -5 @investorbob said:

Oct 23, 2013 12:23:15 GMT -5 djAdvocate said:

yeah.  i am thinking $60k would be a good starting salary for a junior PM.  agree or disagree?

Honestly, I don't really think I'm sufficiently qualified to give a decent opinion.  If it's someone with an engineering degree, probably not. 

it is someone with NO degree, a really good attitude, and some smarts.

But some of the other relevant degrees, probably so.  And again, total compensation package matters.

yeah, well- total compensation for us is wage + 3% matching retirement and 50% health benefit.  measly.  we pay well, but our benefits package is pretty minimal.

[djAdvocate]

Oct 23, 2013 14:18:20 GMT -5 deminmaine said:

Well, I guess it depends on the size and structure of the organization.  We are rather small, so we really only have one Production Manager for the Plant.  I used the term "Junior" because I needed to train him in many aspects of our business.  He had management and CAD experience, but not in our specialty.  His real strength coming in was drafting, which I needed immediately.  While I was showing him the ropes I did or oversaw all of the ordering, scheduling minutia, production orders, etc.

yeah, this guy is a good MECHANIC.  he can take stuff apart and fix it.  he has a good head for machinery.  he has a LOT to learn, but other than that, he has no formal training.  just a good head and a good heart.

and he is YOUNG.  which is super helpful given that senior management is all 50+ at this time.

[djAdvocate]

Oct 23, 2013 15:15:23 GMT -5 deminmaine said:

YOUNG- I hear you there, loud and clear.  Many of us are in our forties and fifties.  It is going to be a big problem in the next few years- from management right down through.

As for training, if he has smarts, good attitude and aptitude...... those are the magic ingredients right there. 

i like the Mr. Fixit thing too.  it drives me nuts when four welders are standing around saying "it broke".