Organization: Computer Science Department,  Stanford University.
Newsgroups: bit.listserv.politics
Date:         Tue, 15 Dec 1992 09:43:14 -0800
From:         Andy Freeman <andy@SAIL.STANFORD.EDU>
Subject:      Re: more responses to andy f.'s comments

>>That's all well and good, but either O'Andy is ducking the question
>>or he's equating "out of proportion" with "a lot".  His choice.
>
>Given a number of observations that I've made previously (and supported
>with stats) regarding the increase in individual productivity among
>workers and the rising pay inequity between top management and workers
>(ratio of 12:1 in the early 60's, 93:1 in the late 80's) I beleive
>that "out of proportion" is a valid terminology.

Those observations don't tell us WHY the productivity increased.
If the increases are due to management activity ....

>Beyond that, keep in mind that we are discussing the basis for
>a tax code, which *may* encourage businesses into making decisions
>that have positive social ramifications in addition to raising
>revenue.

Yet, O'Andy has yet to demonstrate that the social ramifications are
POSITIVE.  His argument for "they make too much" is "they make more".

>>Really?  What if the cause for the increasing productivity is
>>MANAGEMENT activity.  More stuff, lower costs - most people think
>>that's "good".  Does O'Andy disagree?
>
>You think that productivity is "more stuff, lower costs?" Or are
>you just obfuscating?

Actually it is.

>Productivity (individual worker output) increased

See what I mean.  "Output" = "stuff", "worker" = cost.

>while real wages decreased in the 80's. Also the size of the workforce
>decreased since less workers provided more output.

So?  That doesn't imply that the "workers" are responsible for
the productivity increase.

(BTW - I wonder how O'Andy is measuring "output".  After all, marrying
one's house-keeper lowers GNP.  Similarly, a shift to less vertical
integration increases GNP even though the total output doesn't
change.)

>>What social good justifies this extra tax?
>
>Collecting a fair share of taxes from the corporate sector,

The taxes are paid by the customers.

>increase tax revenue. This boon to the economy could be put to
>any number of uses, paying down the debt, lowering overall tax
>rates...

So, O'Andy is claiming that increasing tax rates necessarily increases
revenues?  Maybe he should take that up with boat makers.  How much
would he work if the tax rate was 100%?  How much more if the rate was
90%, or even 75%?

>>No, it isn't.  O'Andy wants to cap the salaries of poor but skilled
>>managers.  He doesn't want to admit that, but ....
>
>No, I want to give managers a stimulus to raise the salaries of
>workers; in essence giving the workers a raise gives them a tax
>break.

Suppose management figures out how to produce cars with janitors, a
few programmers, and a few robot supervisors.  The key personnel are
the robot personnel and there are lots of janitors.  Precisely why
should the janitors in that industry make more than janitors in other
industries?  The alternative is that the robot supervisors won't make
all that much, even though they're the ones who make $1000 cars
possible.

>Your argument, however is completely irrelevant; if either of the
>two managers in your example invest money in their company, it does
>not increase their salary.

No, it's quite relevant.  The poor manager doesn't have money to
invest.  Given a cap on salary, stock participation is the only way
for her to benefit from his skill.

Why does O'Andy think that poor managers shouldn't get what they're
worth?

>>>Industry wide, they will naturally be somewhat arbitrary, but,
>>>in general it should not be difficult to come up with an average
>>>ratio of management/supervisors/workers.
>
>>So?  Why is the AVERAGE "correct"?  Why should it be tax-advantaged?
>
>>It looks like O'Andy is confusing coming up with a number with coming
>>up with a number that has the relevant properties.
>
>For tax purposes "avaerage" will be good enough, companies will adjust
>to attain maximum advantage from whatever rules are made. The current
>tax code has any number of bizzarre variations and companies do
>just fine with whatever arbitrary rules that Congress comes up with.

O'Andy confuses "doing the best with what they've got" with "doing
well".  If we decided to execute CEOs every couple years, companies
would "adjust", but that doesn't mean that that policy is "good".
Does O'Andy really think that crippling the Golden Goose is fine as
long as you don't kill it?

>>>A worker is a non-supervisory person whose labor creates or adds
>>>economic value.
>
>>That's a rather useless definition in many high-tech occupations.  In
>>many cases, the "supervisors" are the low-paid employees.
>
>So what? Don't like it? Come up with a better one for your field. I
>would remind you though that the high tech field is still (and likely
>will remain) a lot smaller than the fields that my defn. applies
>to.

I claim that there isn't a useful defn that has the properties that
O'Andy assumes.  O'Andy claims that there is.  We can't make policy
using existence proofs, we have to actually construct the desired
entities, so all I have to do is point out that O'Andy can't produce a
useful defn.

BTW - I wasn't thinking of my field - I was thinking of information
manipulation professions; I make information-tools.  (There's a
difference; the former is a huge fraction of the economy even though
the latter is small.  It's not unlike the fact that there aren't many
hammer makers, but lots of hammer users.)

>>Moreover, is the appropriate salary for a supervisor correlated with
>>the number of people supervised?  (In some cases, I'd argue that
>>the more people supervised, the more valuable the supervisor while
>>in others, the fewer the better.)
>
>Salary is not as important an issue for supervisors as is the sheer
>number of layers of them; their salaries will not exceed those of top
>management so as long as they fit into the ratio then market
>pressures will set their salaries.

Wrong.  Some of the biggest differences happen in very shallow
companies.  (BTW - O'Andy continues to assume that people at the top
of the management hierarchy always get the most money and he's still
wrong.)

>>Why does O'Andy want to use measures other than "bottom line"?  That
>>is a direct measure of the effectiveness of an organization in
>>translating inputs to outputs.  What does he want from GM besides
>>decent cars at a low price?  Why isn't he willing to pay for those
>>other things?
>
>I want GM to pay it's fair share of the total tax burden.

What defines that share?

>I want it to offset its share of the costs of educating and training
>the work force, building and maintaining the infrastructure,
>government services that it receives.

Really?  That's ALL O'Andy wants from GM.  If so, he owes it a refund.

First of all, GM pays for all of its training and then some.  It
compensates workers enough to pay for their general education and then
does the rest in-house.

Remember, govt can't subsidize everyone.  It has to transfer resources
from somewhere, and GM is one of those places.

>What I was noting is that one of the prime reasons for the outrageous
>growth of corporate debt is the rewritten rules (1978) regarding
>chapter 11, which make "failure" less of a bogeyman than it used
>to be for managers... they can drive their company into bankruptcy
>and keep their jobs now.

Really?  How much salary do bankrupt companies pay?

>Factoid: In the 1980's one in every three businesses filed to reorganize;
>this is 3 times the rate prior to the rewriting of the bankruptcy laws.

So?

-andy
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