ameircans love to save money. not save in the bank, but find products cheap and low cost wise. the problem is this is a big part of the reason wages and benefits are shrinking, and jobs are being sent overseas to china, etc. how you ask....it's simple....
a company who makes goods has two major variable costs they can control somewhat. materials and labor. well if you cut back on materials you end up with what happened in the american suto industry in the late 70's, 80's, and 90's. you end up producing junk and poeple will find other brands that fill this gap. brands like honda, toyota and the like. so once you've beaten down your supplier on quality materials and value engineered all you can do this cost cannot be lowered without afecting quality. whihc in the long run costs you sales as pissed off customers won't buy your product ever again. i have simplified it on purpose to make it easy to follow...
let's move on to labor. labor is a huge expense. meaning not only the wages, but work comp, 401k or pension contributions, health care benefits, and the like. it costs allot more than you realize to employ you. contrary to most people's beleifs, healthcare is extremely expensive. i'll give you an example. i had to switch to cobra since i was on my wife's insurance and she quit. well in florida you can keep your insurance if you pay what the compnay pays for your coverage. now we all kno we pay so muhc out of our paycheck each week for coverage. waht most of us don't realize is that is peanuts compared to the real cost. in cobra youpay what the company pays. we went from around $240 bucks a month in cost, when she was employed to over $1800 bucks a month on cobra paying the full amount. yeah big bucks!!! we have great insurance that covers eveything and almost no co-pays...but it costs money and allot of it.
anyways...labor is expensive. now to cover amterial, labor, and overhead costs and produce a small profit to keep the door of the business open...you have to price what you sell to cover all of that. if you rpcie the items too high people will hunt for cheaper versions of the same quality. so contrary to popular belief. companies don't make huge money per item. it's the volume that makes the numbers people toss around without really understanding how it all works.
let's take hamburgers for an example and use mcdonalds. their sales are in the billions a year right? but how many $1.00 hamburgers does it take to get those sales figures? more than billions. becuase you have to pay the suppliers and maintain the locations and pay the staff and pay the electric company, and the list goes on and on.
in business you have two basic angles to make money. either sell high volume at low margins, or low volume at high margins. that is dictated on what the market (aka customers) are willing to pay.
so my favorite example of a business which is brilliant in business at scraping together rpofts from low margin sold items in volume is walmart. love them or hate them they are very smart and innovative. they use many strategies to "trick" customers. they will move into a small town and sell everything at a loss or break even. they do this to get customers to shop at their store and not the local owned hardware and grocery, etc. once they are out of business...they slowly, but sometimes qucikly raise the prices to the top of what the market will pay. that depends on the income levels and cost of living as well as what competition (other stores) is left.
they also are most manufacturers biggest customer. when you are the biggest customer it gives you lots of power and pull. they have forced manufacturers to lower the quality of the items they sell in their stores to help add more monye to the bottom line as well as make customers think they are getting the best deal. truth is whatever the product..itcomes in the same box, but it's made cheaper and of lesser options or cheaper materials. this is a well known fact, not conspiracy. walmsrt admits it, but they spin it to say they are making the manufacturers do a better job of helping to save their customers money. this is hardly true.
they also continue to lower workers wages and benefits. as they run off and put out of the business the competition...they can quickly lower the market wages and benefits. people will work for less rather than starve or end up homeless. likewise walmart is advising their workers to use govt benefits to make ends meet like wic for babies, govt housing assistance, medicaid, you name it. they are pushing the costs of their employees back on the tax payers of that state. this frees up big bucks. you are paying these costs in your taxes. you may be saving money on bread, milk, and a vaccuum cleaner at walmart on the front end, but you are paying for that couple of bucks and more in your taxes. so it's pay now or pay later.
they also strong arm small cities and counties into giving them tax breaks to locate their stores in their district or if the city refuses they will put the store right across the city/county limits and then the city gets no taxes from them. they also force the city/county into expanding public
roads to accomidate them, things that normal businesses have to pay for themselves.
there are so many tactics they use to save money and post bigger profits. for good reason too. let's look at why. it's a publicly traded company. that means stock holders own the company. yeah the big one sare the family of the walmart founder...but also 401k holders make up a big ownership batch as well as things like teacher pensions and state run pensions and even union pensions. so it's held by lots of people like us. last time i looked no one was happy losing money in the 401k. so there is lots of pressure to make money at any cost. if they don;'t people wills ell their stock and buy other stock and without good stock prices to raise cash a bsuiness is in big trouble. this is ownership pressure from regular americans to make these ceo's figure out a way to cut costs and increase profits.
so they do things we talked about in this entry. tey do it because americans have this preconceived idea that it is stupid to pay too much for anything. which is true, but there is a price to be paid. we are paying it. when a company can't get fair market value for it's goods...it means they lower wages, send american jobs overseas, sometimes cut materials and quality. so directly we (consumers, stock holders in our retriement funds) are a big part of the problem. they could charge mre for the itesm they sell, but america is very competitive and it's not long beofre someone else comes in and does what walmart does and sells well below the market value and does it because they can sell a crap load at low margins and make a bundle. keep in mind a bundle for a small few, not for 100,000 employees.
now i always hear the ceo makes too much give his pay to the workers. well it sounds good, but truth be told it wouldn't raise their pay by much at all...even if the top management worked for free...which they wouldn't. take the number of employees from store staff to headquarters like secretaries and file stuffers and then take the top managements bonuses and pay and spread it evenly. this is public record on these numbers. it's not hard to find out. when your done you'll see no one is moving up the pay scale with that ceo money. no the truth is the ceo's need to earn less, but it's not solving the problem, rather only addressing a symptom.
so when shoppers shop at place like walmart and other lowest priced, best deal places...they are directly contributing to lost american jobs, but pay rates, lowered benefits, jobs sent overseas and to mexico, a overall lowered standard of living for everyone.
now i'll move on to unions and how unions are helping make america poor. first off i support good liveable wages and benefits...but these unions demand more. thsi is not a debated issue. they ask for much higher than fair market prices and added jobs to add more ranks paying into to the fat cats pile of money. they demand ridiculous pensions and medical coverage. i'll give you an example of ridiculous. one of my old man's buddies father in law..worked for gm. he worked there for 25 years. he retired at age 55. he never spent one dime of his own money for medical coverage or co-payment...anything for the restof his life. he is dead, now, buthe got decades of free coverage. he aslo recieved a pension that paid him over 55k a year every year. now he worked 25 years...but that means the company paid him over $1.6million in just salary for 30 years...30 years of retirment not working. that isn't including medical benefits. now that is silly. in fact these types of silly union demands add over $2800 bucks per car you buy from gm now. so if you own a chevy or pontiac you can thank these retirees for that 2800 bucks you had to overpay.
so i understand what unions are trying to do, but they aren't see the forest through the trees. if you have to raise prices so high to cover all this silliness...then no one can afford it. not even the union members themselves. this would assume tney could get foreign makers blocked from selling much better and cheaper priced cars like toyota, honda, and the like. as salaries and income rise, so do the prices since the price of the items has to cover the high labor prices. so there it's not as easy as everyone thinks it is to just raise workers pay and benefits.
so ultimately you have to find a middle ground. which means fair market prices. the only way to accomplish this is for the consumers to support and spend their hard earned moeny at businesses that provide decent pay and benefits to their employees as wel as fair pricing. thye won't be the cheapest, but you also won't be sending jobs overseas and cutting pay and benefits of american workers. if everyone did that you'd see companies change quickly as if we don't buy their items, no matter how much they cut the price, they'd have to change.
so let's be smart shoppers and rather than looking for the drop dead cheapest price...be a svay shopper and look for a business that sells the prodcut and provides good pay and benefits for it's workers, but alos is competitive in price. even if you end up paying a little more...you are stopping yourself from saving yourself poor.
the only exception when shopping is some sneaky businesses know that their are some very smart shoppers out there who won't entertaitn the lowest bid, because of what i jsut discussed. you have to do your research when hunting down service providers. like a/c guys, electricians, plumbers, and the like. make sure they are licensed by your state, carry work comp insurance, carry libaility insurance so you are not responsible if their guy gets hurt at your home and they sue you and your insurance. also get referrals from trusted and business smart friends and family. all referrals are not equal. i've gotten great referrals from people and i went to look at the work done at their home and i was shocked at how badly it was done and great they thought it was...but i work in construction and i know the right ways and the wrong ways...and allot of people don't. so be wary. it is a harsh market out there. you ahve t be smart and take your time. it never pays to rush through things without doing research. whether it's service work or retail. think things through. don't shop at the walmart and places like it. you are truly saving yourself poor overall.
