Greedy Goblin

Tuesday, September 29, 2015

High cost of living destroys low income work

Were you ever thinking about why there are no sweatshops in the USA and Western Europe? I mean it's obvious that T-shirts and shoes are made in South-East Asia by lowly paid workers. Yes, I'm fully aware that most people in the Western world have better jobs, so wouldn't work in such factories for such salaries. But clearly not everyone. There are unemployed people and there are even homeless ones. There is poverty in the Western world, so why nobody built a sweatshop for them?

The answer is in the cost of living. The price of housing, transportation, clothes, food are optimized to the high-earning Western average. If you can sell a meal for $10, you'll sell it for $10, even if you could create it from $1. And you can't because the rent of your kitchen is high, the surgeon general fines you if you use low-quality equipment, the transportation is expensive and you must pay your employees who have expectations influenced by the income of their surroundings.

The purpose of working is to provide income for yourself and your family. Any job that doesn't do that has no point. I mean if your rent is $15 per day, working for $10/day makes no sense. You are better off not working at all and leaving the area. Even if you have no other options, working for less than the living costs is pointless: why be tired and hungry when you can be just hungry? But that's a theoretical question, as you always have another options: crime and leeching. Since people around you have money and many wants illegal drugs or sex, you can be a dealer, a prostitute or a member of the crime organization providing these. And you can always steal and rob. But you usually don't have to, as there is welfare.

The point I want to make is that welfare and minimal wage don't create idleness as hardliner capitalists claim: "if you can't create $20 value a day but must be paid $20, you won't be employed" or "why would anyone work for $20/day when he can earn $15 without work". Don't get me wrong, they are true, but I believe welfare and minimal wages merely reflect to and acknowledge the fact that "there is no point working for less than $20/day, since you need that money to live here".

Before you'd think I had a communist revelation and now believe that high minimal wages and welfare to the unemployed are necessary, I'd point to the fact that the mentioned sweatshops do exist just not here. The cheap T-shirts are created by workers who earn a few dollars a day and still be able to support their families. (observed fact as they aren't starving to death despite no welfare). How can the same thing be possible in Malaysia that is impossible in Germany?

In cheap countries the services needed to keep living are of lower quality, but much cheaper, providing a higher utility/price ratio in poorer countries. I mean the train on the right is a much better transportation than walking 100 miles and a ticket costs 1/10 of the ticket of the left side train. The profit expectations of the providers of these services are also lower, due to lower standards: you can find a cook for $3/day to an African mass-kitchen. Since the living expenses there are low, getting a few dollars make the difference between being OK and being hungry and cold. My point is that low-productivity people when placed between other low-productivity people have reason to work, but if placed between high-productivity people they will be criminals or leeches.

This is the tragedy of the current migrant crisis: the people who left their poor countries for Europe in hope of a better life will find a worse life as their action decreases the total GDP of the world. As they decrease the pie, the slice of everyone will be smaller and they'll be hated for that. While they were productive people at home, they will be unemployed in Germany, creating no value.

Noticing this allows designing an (anti-)utopia which maximalize the production of the people: create a series of territories which have the same currency, free movement of people and goods but different taxes and government spending. The taxes wouldn't be percentages, but simple poll taxes: "you must pay X/day to stay in this territory". For that money you get the services that territory can provide. If you can't pay it, you must leave the territory for a less expensive one. If you made enough money and expect higher standards of living, you can move to a more expensive territory. Cheating tax is practically impossible while have near-zero administration costs and don't punish productivity as 100% of your income increment is yours. In this system everyone could work and support himself on the appropriate level and has the goal to "level up".

27 comments:

Anonymous said...

"Before you'd think I had a communist revelation and now believe that high minimal wages and welfare to the unemployed are necessary, I'd point to the fact that the mentioned sweatshops do exist just not here"

How about zero hours contracts? No holiday pay? No sick pay?

You are cutely suggesting that Germans should live at the standards of living in malaysia, where you seem to think the only difference is that Germans want more expensive things.
Did you take a look at the living conditions of sweatshop workers? When will you be volunteering to live in those conditions, or even those of skilled IT workers like yourself in developing nations?

No? Thought not.

Anonymous said...

> This is the tragedy of the current migrant crisis: the people who left their poor countries for Europe in hope of a better life will find a worse life as their action decreases the total GDP of the world. As they decrease the pie, the slice of everyone will be smaller and they'll be hated for that. While they were productive people at home, they will be unemployed in Germany, creating no value.

Nope, your logic is flawed. First, tragedy is a word that implies certain social sensibilities. If you accept them, you must accept all their implications. The tragedy here is that innocent people are being forced to beg for an opportunity to survive somewhere other than where they come from. The tragedy is in the inevitable cases of extreme suffering among the migrants.

Second, the birth rate of Germany (and the rest of the developed world) is not sufficient to maintain the population. Immigration is the only way to change this. The value being created is that these people (who, for the most part, were middle class productive people in Syria before the war) will rent houses, do work, pay taxes, raise kids, send them to school, and generally be what countries are made of.

Anonymous said...

as a logic experiment your idea has potential.

some possible flaws

sociality - unfortunately I love my family. my deadbeat brothers cant level up at the same rate I can. do I leave them behind? the current model, in Australia at least, if for refugees to send their bright, hard working youth to get a foothold and then use family reunion immigration law to bring grandma a few years later. or at least send cash back to the third world to support those left behind.

networking - we are stronger as a tribe. leaving behind our friends colleagues and business contacts means building more relationships in the new home. I have a network built over the course of my career throwing that away is part of the reason I would not change industries let alone city / country.

Gevlon said...

No, I don't think working Germans should live in Malaysian conditions. They created the German conditions, why should they leave it. I think German unemployed should live in Malaysia, while Malaysian IT guys should live in Germany. And guess what: living in Malaysia as middle class is better than being a homeless in Germany.

When the migrants will be unable to find work and starve and conclude that the Imams were right and the West is evil, that WILL BE a tragedy.

You are already leaving your dumb brother behind, since every day you go to work and he doesn't. Then you move to another city following a better job and you'll see him on family weekends anyway. Being a couple countries away and having to take the plane isn't much difference. Your business network will likely stay with you as colleagues are on the same earning potential as you. Your whole workplace will move at once or not at all. Also, remember that "leveling up at $25/day" doesn't mean that everyone at $24.99 is in country A while everyone at 25.00 in at B. You can already move with $20 as you can already pay the tax, just have to save on everything else, while you can stay even at $50 if you are fine with the lesser services and rather want a slower life with less working hours.

daniel said...

actually, living in malaysia with a western middle.class income is way better. rents are cheap, so you have a bigger house, labor is cheap, so you have servants, etc pp.
being homeless is shit anywhere, though better here in germany because of more welfare, allthough in southeastasia there is no winter.

2nd anom: not all immigrants comming are syrians.

Gevlon said...

@Daniel: you can only live in Malaysia with western middle income if you are a pensioner or living off investments/savings. If you have to work, you are either in a West where your job is, or just earn Malaysian middle class income. My point is that it's better to live in Malaysia having Malaysian middle class income than living in the West as an unemployed homeless.

John said...

Germans aren't have kids mainly because it costs too much to turn them into competent adults. If your population is supplanted by people who don't have the desire to cross the achievement gap between themselves and German, then the dilemma should reverse.

Ultimately, we in the west are doing a poor job of selling the idea of achievement. We should look for the most leverageable ways of cultural salesmanship. It's not any different from cultural imperialism, but with better public relations.

We only have to ask the question of why stock in theocracy is trading higher than in liberal democracy? It should be fairly achievable to induce a market correction there.

Anonymous said...

You are aware of the fact that a very large part of the current refugees arrive here because they'd like to live somewhere where they will not get randomly bombed/shot/raped/robbed ever if it means they earn less than they did at home?

Not to mention that it is generally easier to work somewhere where your workplace exists?

Ðesolate said...

Germany has other problems than welfare. Mainly it is a) supporting Birth rates that overcome our pensioner costs (since Birth rates are low, well children are very expensive) and b) the Cooperations failing to see, that supporting higher wages will support the volume of sales (and by that the development of our cooperations \o/ )

"We need Immigrants" is a tale in our country, told by those who fucked up some parts of our education. 10 - 20 Years ago you had to literally fight for a career training after school (and the existing education system was cut to shit, because of "effiency"). And now every Cooperation cries about the lack of qualified workers in Germany (whom they would have trained 10 Years ago).

The only reason Germany (Merkel) lets in all theese Refugees is, because they don't know how they could decline them. As 90% of all declined immigrants of the last 10 years still live in germany.

Oh and beeing Homeless in Germany is by choice. General welfare supports you with the needed money to rent "minimal" living space.

Ael said...

There are indeed actual sweat shops (and equivalent) in North America.

Particularly in rural areas, or among the imprisoned.

Camo said...

Anon 04:15: "The value being created is that these people (who, for the most part, were middle class productive people in Syria before the war) will rent houses, do work, pay taxes, raise kids, send them to school, and generally be what countries are made of."

Except the Germans won't let them work. They have to live in improvised accommodations like schools, gyms or any other big hall where you can stack beds.
Even if they wanted, they are forbidden by law to create value for the first three months and other limiting restrictions are lifted after another year.

I think the reason why there are no sweatshops in the West is because there is no reason to work there thanks to welfare.
As you said: "if your rent is $15 per day, working for $10/day makes no sense. You are better off not working at all and leaving the area."
That is where welfare intercepts and keeps you in the area. Therefore you won't be forced (in order to survive) to move to the area where you could create $10 a day working in a sweatshop.

My stance is to cut ALL welfare and to open ALL borders, allowing free migration to find a place where you can create value according to your abilities.

maxim said...

At which point do you start kicking the sick/old people, who previously contributed a lot to society, but now do not have the capacity to make even minimal payments?
If you do not kick these people out, then there is a massive window for corruption in your system. If you do seriously propose to kick even these people out, then i will question your humanity.

dobablo said...

Unfortunately there are sweat-shops in all countries. Google modern slavery.

It is not the people that are low-productivity, it is the lack of opportunities to find productive work. In the situation of a new-coming to a country they are double-limited because they have fewer resources to start their own gainful employment.

My personal opinion is that the best way to make more of those low-pay jobs worth doing is by pushing down the cost of living as opposed to bumping up minimum wages. The method of driving down those costs is a different debate; be it providing subsidised social housing, healthcare and food (therefore removing those costs from the CoL equation) or through increasing housing supply, energy production, and transport efficiency (reducing general costs).

Gevlon said...

@maxim: Everyone who can't pay the poll tax must leave, just like everyone who can't buy a cinema ticket can't go to cinema. Old people were young so could save money in their pension fund and could have children who support them in their old age. If they failed to save money and failed to raise decent children (who can and wants to support them), they deserve nothing but a kick to their butt. The sick could pay health insurance before they got sick. If they didn't, it's their problem.

About humanity: what is more inhuman? Kicking the sick and old to bad countries while letting hard-working third world people to come to Europe or the current system: if you was born in Europe, you'll live in luxury, if you were born in the third world, you are out of luck.

maxim said...

There are plenty of people even in Europe that were in no position at all to save money.

Kicking the sick and old to the curb is more inhuman than generic inequality of luxury distribution. Being able to take care of sick and old is simply more important to human condition than being able to amass luxury on top of that.
I have plenty anthropological research backing me up on this.

Gevlon said...

@Maxim: nothing stops you or others to give charity to the sick and old, so they have enough money to stay. If enough productive people share your sentiments, no sick and old will be kicked.

Amarr-Zon said...

Of course, one can say something like that ("Pay for your needs all by yourself. And be smart about it, by saving in good times for the bad ones.").

But you just can't switch from 'with care system' to 'make your own business/luck'. In Germany we now have a generation, that has to pay into the care system AND save money for their own needs when being old.
But this will take another generation or two.

Additionally, there are many people who simply cannot effort to save money from their monthly income (because of it being too low). Or who are not to blame for their misery (e.g. car accident, breast cancer, ...).
I, for sure, want those people to get help. And so far, it's the "job" of the system - incl. providing the needed infrastructure.

nightgerbil said...

problem is your way leaves me one unfortunate accident away from poverty and starvation. Life on welfare can't compete with my income as it is, but to have no safety net at all? wow thats a long way down. No thanks I'd rather give 5-10% of my income to know I'm not gonna have to beg homeless on the streets from your new syrian worker who took my job after my back went thanks.

Camo said...

Gevlon 11:43: "If enough productive people share your sentiments, no sick and old will be kicked."

Excatly this. The important difference: the people themselves and not the state decide if they want to keep you (because you provide knowledge, great company, get paid back what you invested in them as a parent, ...).

Gevlon said...

@Nightgerbil: get an insurance!
Also, being kicked out of the top tier country isn't a death sentence. Please remember that I'm myself living in a "second tier" country and even in third tier countries like African ones there are people having a life, love, children and so on. My point is exactly that if you'd get partially disabled, you could only have a North American lifestyle with external support (leeching). But if you'd move to Hungary and become a native speaker English teacher, you could have a middle class lifestyle on your own right.

Anonymous said...

Out of curiosity, who is kicking out all of the people that can;t pay? You say near zero admin costs, but you have 7 billion people many of which won't simply leave if they suddenly can't afford to pay their fee. So now you have the costs of monitoring who is paying and physically moving those who won't.

Also, crime wouldn't cease, so you'd still have problems with people stealing and murdering. You get robbed one day and lose loads, then what? You just get uprooted from your home because you can't afford to live there for a time?

How do kids work by the way? If you have a kid,then your income is spread, so does that mean you have to choose between hiving kids and being allowed into a given tier?

Gevlon said...

There is no tax administration. You obviously still need police who catch people who commit crimes including tax evasion. The rest is also handled in the today systems: what happens if you are robbed today? Kids never paid tax in any system. The only changes from the tax side is the taxed amount: today it varies on income, I suggest a fixed fee.

Smokeman said...

There was a movie loosely based on this premise, "In Time." Basically, time was the only currency, and if you were rich, you could buy your way into a better district, where if you were skilled, would be able to buy more time and thus be able to "afford" to live there.

I rather like your proposed concept. It's dystopic, and highly totalitarian, but it actually works. The only barrier to immigration is being able to buy your way into the new district. Of course, this will produce a horrific "brain drain" in the poor district as the people that CAN move up do, but how is that different than our world?

Anonymous said...

"There is no tax administration."
here has to be, otherwise how do you know when people aren't paying?

"You obviously still need police who catch people who commit crimes including tax evasion. The rest is also handled in the today systems"
So someone needs to do this job, which will be the same across all regions or in fact tougher the lower the income area you are in. The "today systems" don't work like magic. They are built out of all the constructs you hate.

"Kids never paid tax in any system"
No, but if you have kids you have to spend more to feed, clothe and house them, so you have less to spend on the arbitrary living fee. You also need to bring your partner with you to whatever region you live in, meaning that most people will be pulled down tiers simply by wanting to have families.

Honestly, it seems like this is a system set up to reward people who are shockingly antisocial and material driven, and doesn't really work for the continuation of a species.

Gevlon said...

Brain drain wouldn't be a problem, because lower districts are specialized on more blue collar tasks where high education is not needed. A nuclear physic is LESS useful in Somalia than a cop or a farmer. Sure, some manager and overseer are needed, but you'll always find a few who rather be king of a lower district than ordinary guy of higher. Also there are young people who are yet poor and it's a great opportunity to them to get on their feet working in a highly paid job in a low-cost district.

maxim said...

@Gevlon
Sure, but i'd rather not leave this matter up to fickle charity and have the government handle it by law.

99smite said...

Well, the fall or the warsaw pact and the USSR as well as the fall of the German wall brought a big change to european economy.
A lot of lowcost/high utility products were manufactured in these socialist countries, exclusively for export into the west. East german manufactures made millions of IKEA furniture for west German customers. Many many more goods were manufactured in the east for a fraction of the cost in the west. Western capitalism has ALWAYS depended on low salary economies to manufacture cheap goods. If capitalist countries would have to manufacture every consumer good themselves, they would be much more broke than they are already.
And not to be misunderstood, I know that there are hardly any countries with a pure capitalist economic system. Even the USA have afable for monopolies, market barriers, anything that protects their domestic markets (although protectionism is much more costly than free markets, but who cares...)

Since the beginning of the 90's the average salary in West Germany has declined from being one of the highest in the 90'S in Europe to one of the lowest in Europe now.
We have 25% of the "workforce population" that we cannot give properly paid jobs anymore so they get welfare, subsidies. There are millions of people who earn just enough to not pay taxes but to pay social security. Their pensions will not be enough for their cost of living when they quit their working carrerr.
German government prefers to give welfare to banks, insurance comanies and the automobile industry and other tycoons. This is so outright ridiculous...