Dear Regal theaters: It’s the customers, stupid

Regal Entertainment Group — the corporation that runs the Regal theater chain — employs corporate accountants. It needs to hire some economists.

Company accountants can keep track of the company’s books. That’s useful and important, but if it becomes the only thing the company looks at, then it becomes profoundly misleading. Not only will the company fail to see the bigger picture and the bigger context, but they’ll have a distorted picture of even the company balance sheet over which they’re obsessing.

This is why Regal Entertainment Group is mistakenly freaking out about health care reform:

Several major companies in the fast food and service industries have dug in their heels against Obamacare, deciding that they would rather protect their bottom lines than provide their employees basic health benefits. On Monday, Regal Entertainment Group — which operates Regal Cinemas, Edwards Theaters, and United Artists screens in 38 states — joined the war on health reform, announcing it will cut back non-salaried workers’ shifts to 30 hours per week in order to avoid giving them basic coverage.

The theater chain claims that it is simply trying to “manage [its] budget … in accordance with business needs.”

That’s the kind of dumb move that comes, in part, from listening to accountants without also listening to economists. The myopic bean-counters in Regal’s corporate accounting department saw the basic health benefits in health care reform as a new expense for the company and only as a new expense for the company. Thus, for Regal, the Affordable Care Act came to be viewed as a law that has one and only one effect on Regal’s theater chains: A slightly higher cost per-employee for the thousands of non-management workers for whom the company had previously refused to provide those basic benefits.

The workers who made these Model T Fords were paid enough that they could afford to buy Model T Fords. The people who work for Regal Entertainment can’t afford to go out to the movies.

Yes, yes of course, there’s also an obvious moral element here that Regal Entertainment Group is refusing to acknowledge. Only a company run by odious jackwagons would think that denying employees basic health care is an acceptable way to keep down costs — particularly when that company’s executives are also paying themselves lavish salaries and bonuses. But there seems to be little point in trying to reach the executives who run Regal Entertainment — or Hobby Lobby, or Darden restaurants, or any of the other chains opposing the “cost” of Obamacare — with an argument based on morality. These are morally stunted people for whom such arguments are meaningless. They attend morally stunted churches where they listen to sermons preached by morally stunted pastors and sing morally stunted praise songs to a morally stunted god.

I suppose we could try to convince them that treating their employees fairly is also in those executives’ own best interest — to recast the moral argument as a complement to their selfish pursuit of self-interest. That’s a slightly more promising approach. If convincing these folks not to be odious jackwagons is a futile endeavor, perhaps we could at least convince them that it’s in their best interest not to appear to be odious jackwagons. This is the RDL Factor.* Karoli of Crooks & Liars highlights the disastrous backlash against the theater chain from potential and/or former patrons who would prefer not to spend their entertainment dollars at Regal so long as the chain thinks denying health benefits is an acceptable way of doing business.

The anti-Regal Facebook postings Karoli samples, as well as those in this Huffington Post piece, are an expression of solidarity. That’s a Christian virtue and a Christian duty, by the way. Solidarity is not optional. Anything less is an attempt to dodge the great commandment by pretending that our neighbor is not our neighbor and that we are not our brother’s keeper.

We’ve yet to see how formal this nascent Boycott Regal movement will become. It’s possible it will grow into something that might get the attention of the chain’s executives and maybe even force them to change course. It certainly should grow into that. We’ll see.

In this post, though, I’m not mainly concerned with the futile attempt at moral persuasion or with the obligation of moral coercion. Here I just want to suggest that Obamacare might just be the best thing that’s ever happened to the Regal Entertainment Group.

Right now, all that the Regal executives can see is what their accountants see: the slight additional cost per employee that Obamacare will mean for the company. Fine. Write that down in the company ledger. Health care reform will increase the company’s costs per employee.

But if Regal execs could look beyond what their accountants see, they might notice that this is not the only thing that health care reform will do. It will also result in tens of millions of otherwise uninsured Americans getting affordable health insurance. And tens of millions more will save lots of money every year in household health-care expenses.

That’s tens of millions of potentially movie-going Americans who will now be able to afford movie tickets they would not otherwise be able to afford.

It’s the customers, stupid. Obamacare is good for Regal’s customers. And therefore Obamacare is good for Regal.

Just consider one small piece of the health reform law that has already taken effect. Millions of young adults in America have taken advantage of the law’s provision that says they can keep their health coverage under their parents plans until the age of 26. That’s millions of 18-to-26-year-old Americans with more money in their pockets.

I’m not an expert on the movie business, but my impression is that young people aged 18-26 are kind of an important demographic when it comes to ticket sales.

How big a boost to Regal’s bottom line will health care reform provide? I’m guessing it will be large. Much larger, I think, than whatever new costs-per-employee the law entails for the company. That calculation is a job for the company’s economists.

Unfortunately, the company doesn’t have any economists, only accountants. That’s short-sighted, misleading and counter-productive. They need to hire some economists.

Regal Entertainment Group isn’t alone in this blindered approach of allowing accountants to pretend they provide the whole picture. Peter Bensen, the top accountant for McDonald’s, said that Obamacare will cost the company $120-$420 million a year to provide benefits previously denied to its workers. And since that is the only thing Bensen is looking at, that is the only thing Bensen sees. He hasn’t looked at — or even imagined the possibility of — the ways in which Obamacare will benefit McDonald’s customers. He is an accountant, not an economist, so he has forgotten that what’s good for McDonald’s customers is good for McDonald’s.

It’s the customers, stupid.

David Overton, the CEO of The Cheesecake Factory, is worried that health care reform will involve new costs for new benefits for his factory workers. But Overton — who is allegedly a business-man — hasn’t even glanced in the direction of considering what health reform will mean for the customers and potential customers of his business. Obamacare is good for the restaurant’s customers, and therefore it is good for the restaurant.

It’s the customers, stupid.

(My guess is that the hostile reaction of both McDonald’s and The Cheesecake Factory is also partly due to health reform’s provisions involving the disclosure of nutritional information. “Would you like me to Super-size that for you?” may be an exception to the principle that what’s good for the customers is good for the company.)

In 1914, Henry Ford made a bold move to reduce turnover and attrition in his workforce, announcing a new wage of $5 for an 8-hour day. This “more than doubled the average autoworker’s wage.”

Henry Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them.** The $5 day helped better the lot of all American workers and contributed to the emergence of the American middle class.

Regal theater workers should be able to afford to go out to the movies once in a while. People who work for The Cheesecake Factory should be able to afford to go out to dinner once in a while at places like The Cheesecake Factory. It might seem cheaper, from an accountants-only perspective, if every company kept its costs down by not providing workers middle-class wages and benefits. But the more companies take this accountants-only view, the fewer customers there will be for every company.

It’s the customers, stupid.

- – - – - – - – - – - -

* Earlier this year, the City of Seattle passed a law requiring paid sick leave. One local coffee chain proclaimed its opposition to the new law by putting signs on all its cash registers announcing a new “Sick Leave Surcharge of 1.5 percent on every order.”

The people of Seattle thus learned that this chain had not previously provided paid sick leave — meaning it was likely they were serving up steaming cups of contagion from sniffling workers who couldn’t otherwise afford to stay home for the sake of their own health and the health of their customers. Yuck.

That led to this memorable comment from one never-shopping-there-again former patron:

“There were many ways [Cherry Street Coffee owner Ali Ghambari] could have dealt with this. He could have upped prices slightly to compensate, for example.” But instead, says Whitney, “he chose to call himself out as a royal dickhead for life, because now we all know he wasn’t paying for sick leave before forced to by law.”

Companies should keep the RDL Factor in mind when they publicly try to keep their costs down by harming the well-being of their workers and customers. Rebranding your brand “as a royal dickhead for life” is a self-inflicted marketing wound that well-run companies avoid.

** Googling for that story, I came across this 2012 column by Tim Worstall of Forbes, which is so perniciously obtuse it requires a response. Worstall and the barons of Forbes are so eager to dismiss any argument for middle-class wages that they were willing to write the following nonsense, in public:

There’s an argument you see around sometimes about Henry Ford’s decision to pay his workers those famed $5 a day wages. It was that he realised that he should pay his workers sufficiently large sums to that they could afford the products they were making. In this manner he could expand the market for his products.

It should be obvious that this story doesn’t work: Boeing would most certainly be in trouble if they had to pay their workers sufficient to afford a new jetliner.

The Model T Ford was a mass-produced automobile intended to be sold to consumers. A Boeing jetliner is not. Boeing doesn’t need to pay its workers enough that they can all buy huge passenger airplanes. But Boeing does need to pay its workers enough that they can all afford to buy an airplane ticket once in a while. With no middle class, no one can afford plane tickets. If no one can afford plane tickets, no airline can afford to buy planes.

But Worstall, at least, acknowledges that Ford’s higher wages did in fact have the desired effect of reducing turnover in his Model T factory. That was a benefit for the company.

This is something that the accountants, as accountants, have failed to account for at Regal Entertainment, McDonald’s, et. al. Providing better health care benefits for their workers costs more, but it also saves money by reducing turnover. That’s something the accountants are supposed to be including in their accounting, but they’re not. So not only does Regal Entertainment need to hire some economists, they also need to fire their accountants and replace them with some competent ones.

  • Carstonio

    Only one omission from Fred’s excellent entry – Regal will benefit economically when its workforce has more reliable access to health care.

  • hidden_urchin

    If you want to reduce turnover then you also need good managers. Anyway, I go to the movies only about once a year but I’ll go somewhere other than Regal.

  • http://thatbeerguy.blogspot.com Chris Doggett

    My one and only accountant/economist joke:

    So a firm back in the 50′s decided to send it’s top three accountants and top three economists to a conference in the nearby major city. They gave the accountants and the economists cash to pay for their train tickets there and back. The accountants went to the ticket window, and bought three one-way tickets. The economists went to the ticket window, but bought only one ticket, (one-way) which puzzled the accountants.

    Everyone climbed on board, and as soon as the ticket-taker started checking tickets, the accountants each pulled out a ticket to be punched. The economists went scrambling down the train, and all three crammed into a single bathroom. When the ticket-taker went by the bathroom, he knocked on the door, a single ticket was thrust out, the ticket-taker punched it, and went on down the train. A few minutes later, the economists piled out of the crowded bathroom, and bought some very nice sandwiches with their extra money.

    On the way back from the conference, the three accountants walked up to the ticket counter and purchased one ticket, smirking at the economists… who strangely were boarding the train without buying any tickets at all! The accountants piled onto the train, and as soon as the ticket-taker climbed on, they rushed to the nearest bathroom and all three piled in. There was a knock at the door, and one accountant thrust his hand out the door with the ticket, but instead of the ticket being punched, someone took the ticket away. The three accountants, panicking, all looked out the door to see the three economists running towards the next bathroom with their one ticket in hand.

  • LL

    Ecch, these assholes aren’t worth a long, outraged comment. They’re just stupid. Where do they think people go when they can’t afford to go to a doctor in a regular doctor’s office?

  • Nirrti

    This is almost movie villain level of evil. These corporations must be run by sociopaths. That has to be the explanation for such a lack of human decency or empathy.

  • Lee B.

    I worked as a projectionist for many years, and in my experience I have yet to see a movie theater chain that wasn’t run by odious jackwagons.

  • TheBrett

    But Worstall, at least, acknowledges that Ford’s higher wages did in
    fact have the desired effect of reducing turnover in his Model T
    factory. That was a benefit for the company.

    That was the point of Ford’s raise, although he cloaked it in a noble-sounding paternalism (one that was quite common in American history from factory owners). Ford’s plants were run under Taylorian-style management where workers are more or less treated as animate machinery, and were suffering from high turnover, strikes, and sabotage. Raising wages helped to ameliorate that.

    But Ford could only do that because of the higher profit margins on autos, and because he was having issues with retention. It’s not clear that Regal is having those same issues – and no, higher executive pay does not mean they have plenty of profit to spare (they have to compete with other firms for executives). I don’t see a lot of people refusing to work at Regal because they didn’t have health care benefits.

    It’s the customers, stupid.

    Only if they’re actual customers for the company itself. A big theater chain’s key customers are teenagers, who only represent part of the work force at these places.

  • Nirrti

    Oh, not stupid. They know damn well what they’re doing. They just don’t care..period.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    As saith Robert P. Murphy, economist,

    But American workers were paid more by their employees because they produced more. No matter how “enlightened” business leaders in Mexico were, they could not possibly have given their employees the same purchasing power as their counterparts to the north… If more stuff is produced the America than within Mexico, obviously Americans are going to have a higher standard of living, regardless of “wages policy… If the auto workers received total wages equal to the total prices of all the cars that passed through their hands, then the firm in question would have no money left over to pay its suppliers. But this in turn would mean no demand for the products of the tire producers, and hence no way for the tire manufacturer to pay his workers.

    -The Politically Incorrect Guide to the Great Depression and the New Deal, pages 35-6. Emphasis not added.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    It might.

  • Vermic

    Man, some serious accountant-bashing going on in this post! I agree with Fred’s points, but as a corporate bean-counter I feel rather wounded professionally. So, lest my peers and I be stigmatized as the devil on the shoulder of corporate America, whispering “cut … cut … cut …” into the ears of guileless CEOs, I want to remind everyone that we’re a good bunch, less nerdy than rumored, and the bulk of us are cubicle-dwelling drudges who have about as much say in company policy as the guy who comes and refills the water cooler.

    My job involves performing analyses, organizing data, and preparing and verifying reports so that the mucky-mucks can make informed decisions. The decision still rests with the mucky-mucks, though. When they make it, I sure hope they consider other factors besides the cold, impersonal numbers I provide, but that’s not up to me. My job is to provide accurate cold, impersonal numbers when the actual decision-makers ask for them. Policies like Regal’s come from the top (and that includes, of course, the executive-level accountants like Mickey D’s Peter Bensen).

    No doubt I’m being overly sensitive, but it’s been a rough day.

  • http://thatbeerguy.blogspot.com Chris Doggett

    Psst!

    While they claim might once have been true (and keep the joke about economists in mind) American workers are no longer being paid more because they produce more.

  • http://thatbeerguy.blogspot.com Chris Doggett

    My day job is as an accountant as well, so let me offer a few thoughts…

    The actual discipline of accounting is historical or “backward-looking”. I can tell you what has happened with a great deal of accuracy. In fact, large parts of accounting are dedicated to making sure that the financial records accurately reflect the business activity that has occurred.

    The part of the business world that deals with projections, with future plans and forecasting is not accounting, but Finance. Finance is a lot like accounting, but is ‘forward-facing’. An accountant wants to take historical data, and compile it into information about the present. Financial analysts need accurate information about the present based on past data to forecast to the future. The two disciplines are very complimentary, but still quite different.

    Here’s the rub: companies need accountants. Publicly traded companies, corporations, and pretty much any business larger than a one-person operation needs to have a bookkeeper, and an annual audit by an accountant. You can’t get away from writing checks and reconciling the bank statements, and that’s what accountants do.

    Financial analysts, on the other hand… well, there’s no corporate charter or law anywhere that forces a company to perform forecasting. Cost-benefit analysis is useful, and businesses need budgets, but when the economy is bad and money is tight, management gets those jobs, and if it isn’t as precise, well, as long as its not horribly wrong, that’s OK. When the economy went sideways in ’08, companies looked at what they could lay off, and the speculative, future-looking, optional analysts got the boot a lot more than the GAAP-required accountants.

    All of which is a long-winded way of saying that the executives have lots of people who can tell them about the past and the present, but not many who are looking to the future.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    Then why are they being paid more [than Mexican workers]?

  • Magic_Cracker

    I suppose we could try to convince them that treating their employees fairly is also in those executives’ own best interest…

    Not sure if this is currently possible. These people get paid no matter what, and even in cases where they are eventually fired or the company actually goes out of business, they’ve got plenty of money saved up, as well as handed over in severance, to soften the blow, unlike someone making $7.25, $14 or even $30 an hour.

    And it’s not like they’re not going to be able to find work again despite demonstrably poor performance. Corporate culture is such now that the C-suite executives are expected to maketake as much money as they can convince the Board to give them, so if you ruthlessly pillaged your former company and drove it into the ground, that’s the Board’s problem, not yours. You were just more savvy player at the table. In fact, we admire your chutzpah! Here’s 10 mil to maximize our synergistic efficiencies!

  • http://twitter.com/shay_guy Shay Guy

    What were you told the last time about books with “politically incorrect” in their titles?

  • http://twitter.com/shay_guy Shay Guy

    Kind of an MMO prisoner’s dilemma.

  • Stone_Monkey

    I do find it interesting that these rabid capitalists appear to not be all that good at actual capitalism. It’s almost like they’re more eager to screw over their employees than they are to make their companies (and hence themselves) more money.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    I do not care what I am told by those who do not give reasons to back up their statements.

  • http://thatbeerguy.blogspot.com Chris Doggett
  • http://mordicai.livejournal.com Mordicai

    The thing that is so great about ethics is that it IS the rational choice. I mean, personally I don’t care about morals either, though I guess I would argue that morals are a side effect of rational altruism.

  • http://thatbeerguy.blogspot.com Chris Doggett

    But Ford could only do that because of the higher profit margins on autos, and because hewas having issues with retention. It’s not clear that Regal is having those same issues – and no, higher executive pay does not mean they have plenty of profit to spare (they have to compete with other firms for executives).

    Employee pay is a factor in the profit margin of cars.
    BUT executive pay is not a factor in the profitability of movie theaters!

    Improving employee benefits might improve recruitment and retention of employees, but that isn’t necessarily an advantage for movie theaters.
    Keeping executive pay at astronomical levels will improve recruitment and retention of executives, which is absolutely a necessary advantage for movie theaters.

    High-paid executives rule, poor people drool. Got it.

  • Turcano

    It’s not that it’s necessarily run by sociopaths so much as the fact that a corporation is legally obligated to maximize its bottom line. If it doesn’t, it risks a lawsuit from its stockholders. In the end, it leads to the same behavior.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    Executives might invest in the company for which they work for.

  • Gotchaye

    There’s a lot I like here, but “businesses have a significant interest in their own employees being able to buy stuff from them” isn’t really plausible. If that was actually Ford’s motivation, then that was a fairly stupid decision, business-wise. My understanding is that it really wasn’t, but that it sounded good.

    So, yeah, obviously the Boeing analogy is silly. But Fred’s version of it is also pretty silly. Boeing doesn’t employ a significant fraction of the population; if Boeing pays its employees more, some of them will buy more plane tickets, but Boeing’s employees represent <.1% of its customer base. So if it raises wages by 10% and miraculously sees a 10% increase in ticket-purchasing from its employees (realistically, they would spend a lot of that raise on other things too), its labor costs will have just gone up by 10% while its revenues will have gone up by less than .01%.

    This sort of thinking only makes much sense if we're talking about a monopsonist employer (like a monopoly, but instead of being the only seller of some product, it's the only buyer of labor – it employs almost everyone). But no one's in this position except for the government, which actually does have the power to do things like raise the minimum wage. That's why we have to have the government doing it. It's not that it's irrational for business owners to pay as little as possible; it's that business owners should see it as suboptimal for all business owners to pay as little as possible (provided they're concerned about having stuff and not power). But they'd face a collective action problem in doing something about it.

  • http://thatbeerguy.blogspot.com Chris Doggett

    I guess I would argue that morals are a side effect of rational altruism.

    The problem is that people aren’t rational. Business aren’t rational, because they’re run by people. Markets aren’t rational because people are participating on all sides.

    Human beings are deeply, profoundly irrational. Entire disciplines (logic, ethics, game theory, etc.) have sprung up to try and counter the known cognitive flaws of the human mind. Not only are humans irrational, but we’re really really bad at long term projections, especially cost-to-benefit estimation.

    Contraceptive coverage as part of health care means fewer unplanned pregnancies, which means lower pregnancy-related health care costs. Insurance companies know this, and aren’t fighting it. Lower health care costs means lower premiums to purchasers of insurance, but Hobby Lobby isn’t a rational actor.

    Employee sick time means a healthier, more productive workforce with less employee turnover. Offering six days of sick leave a year amounts to a 2.5% increase in cost for hourly employees*; if an employee with sick leave takes one day off sick instead of working slower for two days because they’re sick, it’s a net gain. But the owner of Cherry Street Coffee, Ali Ghambari, isn’t a rational actor: “I don’t want my employees calling in sick when they’re not sick to get a day off”.

  • http://thatbeerguy.blogspot.com Chris Doggett

    Any employee might invest in the company for which they work for. There is nothing about the executive class other than disproportionate compensation which would suggest they are more likely to invest than any other category of employee.

  • banancat

    To me, it seems like that there is just too much short-term thinking in businesses in general. I don’t know if this is new or if it has always been this way, and I’m hesitant to reminisce about the “good old days”, especially since I wasn’t part of them.

    But here’s an example. I’m an engineer at Big Company. Big Company has a product going off patent this year, and also an impending strike of the people who work on the production floor. So I’m a contractor instead of a permanent employee. For everyone below management level, about 60% of us are contractors. Work that always needs to be done is mostly done by contractors. My job title even says “contingent worker”. But I do the exact same work as the permanent employees and I’m expected to do it at the same level and continue to do it indefinitely.

    On paper, this seems like a money-saving solution. Contractors cost a lot but the company doesn’t have to invest anything in us. But wait. Why the hell should we stick around forever? Because of this, there’s a very high turnover rate. I have no intention of committing to a company that won’t return the favor, and I’ll be out of there as soon as I can find something permanent at a competitor company. So congratulation, Big Company. You’ve just managed to waste tons of money on constantly recruiting and training new people. Someone decided that it’s better to just constantly pay for those things instead of maybe providing some incentive for people to stay around longer. Because in the short-term, it looks cheaper.

  • LL

    Yes, they know what they’re doing, but they think it’s not costing them because they’re not paying for it directly (the healthcare). But I bet they (and people like them) bitch about the taxes (all the taxes, federal, state and local) they pay, that seem to increase constantly. To pay for things like hospitals that don’t get to charge all the indigent patients they treat in the ER. I guess they think America would be a glorious paradise if hospitals could turn away sick people because they don’t have insurance or money to pay for their asthma attacks and broken bones.

    They are definitely stupid. Because only stupid people think that they’re not already paying for the working poor to have healthcare. They’re paying (like we all are) for the working poor to have the crappiest, most expensive healthcare on the planet.

    So yeah, they’re very, very stupid.

  • http://thatbeerguy.blogspot.com Chris Doggett

    There’s a lot I like here, but “businesses have a significant interest in their own employees being able to buy stuff from them” isn’t really plausible

    To quote the old motto, “it’s more complicated than that”.

    Companies that do business with the general public (versus doing business with other companies) have a vested interest in the general public having discretionary income to spend. That’s true whether you’re Regal Cinemas or Costco or whomever.

    So, yeah, obviously the Boeing analogy is silly. But Fred’s version of it is also pretty silly… This sort of thinking only makes much sense if we’re talking about a monopsonist employer

    No, the straw-man version you’re presenting is pretty silly. Ford’s workers didn’t put all their extra money into buying more cars. Some of that money did go back to Ford that way, but a lot more of it went to local butchers and clothiers and other businesses, who in turn had more money that they could spend on clothes and meat and even brand new cars. The extra money didn’t return immediately and 100% to Ford. It returned gradually, through a growth in the consumer base, and it was well more than 100% returned.

    . But no one’s in this position except for the government, which actually does have the power to do things like raise the minimum wage. That’s why we have to have the government doing it.

    Oh how delightful. “I should not pick up litter on the street in front of my house, because there are other streets with litter that are not not in front of my house, so only the government cleaning all the streets at once should do it.”

    Yes, the government is the largest single agent in the economy, so when it decides to spend money or cut back on spending, the economy is more affected than if smaller actors do so. That doesn’t change the reality that businesses cutting employee hours, dropping employee benefits, and effectively reducing employee discretionary incomes doesn’t have a negative effect on the economy as a whole.

    But they’d face a collective action problem in doing something about it.

    Except that even when the government tries to mandate something for all business owners, specifically to eliminate the collective action problem, (Obamacare) companies like Regal still try to shit in the Commons.

  • Turcano

    Okay, how about the fact that the series contains this little gem?

  • Gotchaye

    I agree entirely with your first paragraph. I thought that was pretty clear.

    Huge, huge [citation needed] on “The extra money didn’t return immediately and 100% to Ford. It returned gradually, through a growth in the consumer base, and it was well more than 100% returned.” That strikes me as wildly implausible given that Ford was employing a tiny fraction of the population, while selling a tiny fraction of all products (not all cars, to be clear) to a nationwide market.

    Re: Litter
    Picking up litter in front of my house benefits me. It is worth the cost to me of picking up that litter. That’s almost certainly not the case for a single business raising wages in order to stimulate demand. I was obviously not saying that if a problem can’t be solved entirely by a person acting alone then it’s irrational for that person to contribute to a partial solution. It’s hardly controversial to say that there are such things as collective action problems.

    Again, I agree that when businesses squeeze employees this has a negative effect on the economy. I was explicit about this in the post you replied to, so I’m not sure what point you think you’re making. To quote myself: “business owners should see it as suboptimal for all business owners to pay as little as possible”. The question is whether one business can improve its own bottom line by unilaterally attempting to increase demand by raising the wages it pays its employees.

    Except that even when the government tries to mandate something for all business owners, specifically to eliminate the collective action problem, (Obamacare) companies like Regal still try to shit in the Commons.

    Hence my aside about the people who control businesses perhaps caring more about power than merely having stuff.

  • http://tobascodagama.com Tobasco da Gama

    CEOs, VPs, and the other executives live and die by the quarterly reports. 3 months is way too short a cycle for any kind of rational decision making to take place. It’s all completely mad.

  • Michael Pullmann

    Who says workers need to be paid wages equal to the price of all the cars they work on? Answer: No one. But it suits Murphy’s purpose to pretend someone did.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    The PIG series contains a very wide variety of POVs. Bob Murphy (author of two PIGs) is a libertarian Christian anarchist, yet, there exists the PIG to the Vietnam War (arguing the Vietnam War was a success ruined by a Democrat-controlled Congress). The author of the first PIG (to American History) is also a libertarian Christian anarchist. The only consistent position in the PIG series is opposition to Godless Communism. PIGs vary in quality as much as they do in ideology.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    Where did Murphy say someone said that? He is using the tactic of reductio ad absurdum.

  • http://twitter.com/FearlessSon FearlessSon

    I did not know that about Cherry Street Coffee. I pass by their primary location every day as I walk to class, though I have never been in. I will probably avoid it from here on out.

    As for companies like Regal and employee retention, here is something I know from working at a minimum wage chain: the higher ups absolutely do not care about worker retention.

    From what I have been able to infer, as long as the job requires no particular education to do, they have absolutely no “bottom-line” reason to entice that employee to stay with the company, and only require only nominal incentive to get work from them. They figure that it is stupid scud work which can be done by anyone they pull off the street who could accept minimum wage, and they know that there are enough desperate people out there to fill it. For them, high unemployment is a good thing, because it means that employees can drop out of the company left and right and they will always have warm bodies willing to take their place. Heck, to a certain degree they have more incentive to gradually drive people out of the company by grinding down their enthusiasm and morale over a long period of time. An employee who sticks around and works their butt off will expect a raise after time and effort, while a new employee brought in to replace them will not.

    I agree with you that having a society where the average wage is higher and wealth disparity is lower will be better for business overall. However, somehow the business culture in this country has become fixated on the idea of externalizing costs. The idea that a company can reduce their expenses by making somebody else pay for them instead. The argument is sometimes made about society getting to dependent on other people paying for things for them, but we find that this happens to companies more than it does individuals. Productivity has costs, and the more a company tries to externalize those costs, the more they dig out their own foundation.

    Hell, look at the credit-default-swap fiasco that was part of the big banking crash. That was an example of the banks externalizing their costs, and they paid for it when the bottom fell out of the whole thing.

  • http://twitter.com/FearlessSon FearlessSon

    It is more that they measure success in relative terms. They do not want to make more money as much as they just want to have more money than the other companies. The total amount of wealth circulating through the economy is incidental.

    They do not want a bigger pie from which to take a bigger piece. They just want to make sure that their share of it is bigger than the next company’s share.

  • TheBrett

    Employee pay is a factor in the profit margin of cars.BUT executive pay is not a factor in the profitability of movie theaters!

    They can replace ground-level employees in mere days. Decent executives are harder to replace, so they get more pay – and a bad executive can do far more damage than a bad ticket counter person..

    Improving employee benefits might improve recruitment and retention of employees, but that isn’t necessarily an advantage for movie theaters.

    What, when they can replace those employees in days?

    There’s your problem. Ford had issues with retention and sabotage, so he raised wages. Regal did not have any serious issues that they recognized as being problematic in terms of employees, so they didn’t.

    Keeping executive pay at astronomical levels will improve recruitment and retention of executives, which is absolutely a necessary advantage for movie theaters.

    When everyone else is paying astronomical levels of pay for even half-decent executives, you’re stuck in deep shit on it. And a shitty executive can do more damage than a shitty ticket counter, as I said above.

    High-paid executives rule, poor people drool. Got it.

    Even more poor people are going to drool if Regal slashes their staffing to comply with the regulations.

    If you don’t like it, go ask your congressman to lobby for more fiscal and monetary stimulus.

  • P J Evans

    Yeah, that’s entirely why Regal cut the hours for their theater managers so they don’t get health insurance from the company either. /sarcasm
    High-paid executives aren’t any *better* executives than those paid a reasonable salary. They just like thinking that they are.

  • spinetingler

    No, he’s using the tactic of him not understandum.

  • P J Evans

    The one I was working at brought in contract workers for up to one year. If they were really good, the company would make them year-to-year employee-contractors, with better benefits, including a pension after some years. They do this on things that are supposed to be ‘projects’ and not permanent. (They’ll also make some of them regular employees.) There are also more responsibilities, of course…

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    Can you demonstrate this?

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    The problem is that people aren’t rational. Business aren’t rational,
    because they’re run by people. Markets aren’t rational because people
    are participating on all sides.

    -Understood. But markets, thanks to the price system, have a self-correcting capability not found in government. The government has a different mechanism (most notably, votes) of correcting its policies. I say this method is usually (though not always) less perfect than the price system.

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    I do not understand why this comment has so many likes, as I made my edits to my previous comment before this reply was published. Also, what are “they’re”?

  • http://mordicai.livejournal.com Mordicai

    You are right, which is why I am in favor of laws! Laws are a great opportunity to take those rational ethics & make ‘em stick. I’m no anarchist. Humans are terrible at being people, but luckily…it is a group effort. At least, it should be.

  • deltaexmachina

    The Culture Industry – The Ideology of Death

    ireport.cnn.com/docs/DOC-961596

    .././…

  • Lori

    I say this method is usually (though not always) less perfect than the price system.

    I think this represents confirmation bias more than reality.

  • TheBrett

    Theater managers aren’t executives. And what’s a “reasonable” salary for an executive anyways? I doubt Regal’s paying anything seriously better than what the top people would get at other big companies.

  • http://anonsam.wordpress.com/ AnonymousSam

    Some sociopaths don’t approve of their behavior either.


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