Why Wages Are Low Part 2

Introduction

This is the second part of the article Why Wages Are Low Part 1

Why Employees Are At Short End of the Stick

As explained above, employees are at the losing end. They had to work long hours (assume average 40 hours week); many times for longer hours, and sometimes without additional compensation for the longer hours, in return for little pay because business owners have to pay for their rent or lease first.

In addition, employees had to take out loans to buy their own home in the cities, that could be on fixed term lease (for example 99 years lease) and they have to work for 25 to 30 years just to pay for their home.

Neil Jenman: Real Estate’s Worst Mistakes: Housing Debt Hangover

Labor Costs is an Expense

If you look at financial statements, property, buildings, plant and equipment appears as assets in a balance sheet but labor wages appear as a cost in the income (profit and loss) statement.

For your interests, Jim Jotter wrote a paper titledPutting the People Component of the Business Entity on The Balance Sheet”.

HR Practitioner’s Contributions to the Business

As HR practitioner, the economy and political situation is largely outside our control. When the economy is in recession, HR management is the last resort for employees. We are in position craft HR policies regarding the management of excess manpower and survival strategies during economic recessions before they happen.

Likewise, for those us who also perform general office management, such as the management of lease agreements. You can negotiate for clause to adjust the lease payments downwards in times of recession. This is to keep costs at bay, with the hope to retain staff.

The Solution Proposed By Economists

Economists like Milton Friedman, Bruno Moser proposed property tax based on property value. Personally, I do not see this as an effective measure from escalating rent and property prices due to property speculation. It also impact the majority of citizens who are employees negatively in terms of home ownership. The problem is that Government usually put out a broad policy but fails to look at the details at the grassroots level.

Rent Control

Rent control is part of a system of rent regulation, administered by a court or a public authority, which limits the changes that can be made in the price of renting a house or other real property. The objective of controlling the prices of rent is usually to counteract the inequality of bargaining power between landlords and tenant, as part of a minimum set of rights to make the market fair.

My personal opinion is that rent control is the solution but it is a sensitive subject. I do not think that Government should look at land value tax for additional income to run the State. State enterprises that had been created, built from taxpayer’s money, are usually monopolies. Government gradually recognizes that they can be privatized for profitability, efficiency and productivity. Again, I am not an expert in this area and I recognize that I do not have all the information and views.

However, this is a sensitive, not necessarily unpragmatic control measure. The Government is the biggest land owner. It is also the tax collector, law maker and provider of public services. As a law maker, it makes laws regulating banks, real estate agents, landlords and tenants.

Singapore has a National Wage Council (NWC) that was set up to formulate wage guidelines to moderate wage expectations as well as control wage levels in time of economic recession. I have yet to hear of a National Lease Council of or a National (Bank Loan) Interest Council.

It would take a Government leader who has the vision and conviction to implement bold (radical) changes in society. It is not a matter of guts but rather strong character to stomach the difficulties to take bold actions. It reminded me of Margaret Thatcher, the former Prime Minister of the United Kingdom.

Note: You may be interested in the book “Margaret Thatcher: The Autobiography”  written by Margaret Thatcher

Margaret Thatcher: Death of a Revolutionary

Margaret Thatcher – Capitalism and a Free Society

Martin Wolf: Why We Must Halt the Land Cycle

Martin Wolf, Associate Editor and Chief Economics Commentator, Financial Times He was awarded the CBE (Commander of the British Empire) in 2000 for services to financial journalism. He said ruinous trust in land speculation as the route to wealth has led to expensive houses and inefficient taxes but, far worse, it ended up destabilizing the entire global economy.

Inspiring Words: Society is Created By Man

Steve Jobs said: “Everything around you which you call life is made up by people that are no smarter than you. You can change it. You can influence it. You can build your own things that other people can use. The moment that you realize that you can mould life….. that is really the most important thing. The important thing is to shake off this erroneous notion that life is there and you are just going to live it versus embrace it, change it, improve it, make a mark in life.”

REFERENCES

Wendell Fitzgerald, President of the Board of the San Francisco Henry George School talks about the concept in Henry George’s book.

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

Part 7

Part 8

 

Pun Pun Thailand

http://www.punpunthailand.org/

Free Gifts of Nature: Land

http://www.wealthandwant.com/themes/underpop/free_gift_of_nature.htm

Land: 10 Characteristics of Land Economics

http://www.yourarticlelibrary.com/land/land-10-main-characteristics-of-land-economics/10811/

Neil Jenman: The Inside Secrets of Real Estate (Neil Jenman talks about unethical practices in the real estate undustry)

The Labour Theory of Value: Economics or Ethics Written By Peter C. Dooley

http://www.compilerpress.ca/Competitiveness/Anno/Anno%20Dooley%20Labour%20Theory%20of%20Value.htm

The British Empire

http://www.britishempire.co.uk/

Largest Landowner

http://www.whoownstheworld.com/about-the-book/largest-landowner/

Jim Otter: Putting the People Component of the Business Entity on the Balance Sheet

http://donaldhtaylor.files.wordpress.com/2007/03/puttinghumanassetsonthebalancesheet.pdf

Dave Wetzel Interview on Land Value Tax

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