Around the turn of the century, financial markets provided capital to business and consumers at a cost of about 2% of the total economy. By 2013, that cost was up to 9%! (By contrast, the entire internet sector is about 5% of GDP!)
For perspective, if we were to go to a healthcare system like Canada’s and achieve similar efficiency in terms of GDP%, that excess 7% of the economy siphoned off by the finance sector in the past fifteen years would cover more than 2/3 the cost of universal healthcare.
In fulfilling its mission of monitoring the current and future financial status of the Social Security program, SSA’s Office of the Chief Actuary conducts extensive research. We evaluate short-term and long-term demographic and economic trends and analyze experience in mortality and morbidity rates. The results of much of this work are made available to the public through the publication of reports and special studies on many aspects of the Social Security system.
Here’s an idea: If you owned a business, and a worker created less value than they cost you in wages, you’d get rid of that worker. By definition, employees create more wealth for their employers than they receive in wages.
If this was less true, the poor would be richer, but alas, the rich would also be poorer.
“By definition, employees create more wealth for their employers than they receive in wages.”
Untrue, according to the original article. When employer wealth is keyed into things such as stock price, employers can drive a company into the ground and run at losses as long as they can manipulate conditions to increase stock value. Meaning company health and profit is not as important as perception in the market in such conditions.
“If this was less true, the poor would be richer, but alas, the rich would also be poorer.”
And that would be a bad thing? Not at all. Employee wealth stimulates economic growth in a way employer wealth does not. Money going in the direction of the poor buoys the economy in a far greater effect as they are more likely to be safely spending possible surpluses buying goods and services at better quality and cost efficiency than previously possible. Money going to the rich tends to be hoarded and taken out of the general economy. “Trickle down” has never worked.
When it comes to the ‘investing the surplus’ part, it is probably very worth it to read the section on the ‘financialization’ of the economy and the growing percentage of GDP consumed by financial services entities carefully. And probably the bit about consumer debt as well.
Even if you are, in fact, running a surplus, the degree to which keeping your investments ahead of your middlemen has, gotten rather chillingly harder despite the fact that information technology has pretty much cratered the cost of shoving numbers around across every area of the economy it has worked its way into.
There are (nontrivial numbers of) people so poor that their inability to beat the market doesn’t even come into the equation; but that’s not what has the skilled-professionals-but-not-executives/startup-founders-made-good that these guys are writing about are suffering from.
That leads to the managerial myopia that classifies departments as “cost centers” vs. “profit centers” and gives short shrift to the former on account of “they’re not bringing in any money!”
That’s a separate issue. Compliance departments, for example don’t being in revenue, but they prevent fines and lawsuits. Nobody would see them as a charity for useless workers. Well, almost nobody.
But in most large companies nobody pays attention to the work “back office” such as accounting, logistics, or human resources until money starts to get tight. When companies are profitable, they seldom ask, “where the money is coming in from”, “what are we spending it on”, “is it all being accounted for”, or “how long its going to last”.
Its only when they hit tough times they start worrying about all the little inefficiencies, waste, and potential lawsuits their actions have created. Of course nobody ever really looks hard at executive compensation except when it comes to middle management.
Some organisations have simply renamed their QA departments “Compliance” and completely stopped doing any sort of formal quality control. No, I’m not going to name anyone, sorry.
The idea being that if a product is of poor quality, that merely provides opportunity to sell version 2.0, but failure to monitor compliance with HIPAAA/HITECH/GLB/SOX/FDA etc. (and/or cover up violations thereof) can lead to loss of future sales, particularly now that there are legal requirements to notify news media of certain violations.
Not a charity for the useless, but an expense to be minimized. Salespeople get two-hour three-martini expense account lunches while IT goes begging for scraps. I used to see it a lot more often, in non-tech companies; I don’t know if there’s been a general wising up or I’ve just been luckier recently working for places that don’t nickel-and-dime about the tools I need to do my job.
There is a reason I got out of QA and that’s because people don’t pay for QA anymore at their rinky dink companies. The profession has no future in the software world.
That is $1.3 Billion. Frankly I would love nothing better than to see payday lenders roasted over the fire of regulation. Those guys are parasites on the poor. One of many ways poor people pay more for things that are far cheaper for the middle class and wealthy.
