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What do Henry Ford, NFL referees, and human workers at J.C. Penney have in common?

27 Sep

Here’s today’s COMMENT FROM AN OLD FART: Moi wrote in 3rd world America: Not working for a dollar, working for a dime:

Moi discussed what many Americans feel is diminished prospects for their future in Americans, no longer dreaming:

The Victorian Contexts gives a good overview of the world of Charles Dickens.

Charity begins at home, and justice begins next door.

Electric communication will never be a substitute for the face of someone who with their soul encourages another person to be brave and true.

No one is useless in this world who lightens the burdens of another.”

Charles Dickens

Mr Jarndyce, and prevented his going any farther, when he had remarked that there were two classes of charitable people: one, the people who did a little and made a great deal of noise; the other, the people who did a great deal and made no noise at all.”

Charles Dickens (Bleak House)

Throughout history there have been great empires who eventually challenged each other for dominance in a variety of areas. One of the most interesting historical rivalries was between Athens and Sparta. See, PBS’ The Two Faces of Greece: Athens and Sparta which has atable comparing the two cultures. http://drwilda.com/2012/09/03/3rd-world-america-not-working-for-a-dollar-working-for-a-dime/ Some commentators have said that the is the “Pacific Century” and economic power and influence will shift from the Americas to the Pacific. Whether it is incompetence or fear, which has given rise to a strange shift in the view held by many managers toward their employees and the role of business toward contributing to the strength of a society. Henry Ford, the NFL referee strike, and J.C. Penney share a theme.

AP is reporting in the story, NFL Reaches Tentative Agreement with Refs which was posted at Time:

The union was seeking improved salaries, retirement benefits and other logistical issues for the part-time officials. The NFL has proposed a pension freeze and a higher 401(k) match, and it wants to hire 21 more officials to improve the quality of officiating. The union has fought that, fearing it could lead to a loss of jobs for some of the current officials, as well as a reduction in overall compensation.

The NFL claimed its offers have included annual pay increases that could earn an experienced official more than $200,000 annually by 2018. The NFLRA has disputed the value of the proposal, insisting it means an overall reduction in compensation.

Replacement refs aren’t new to the NFL. They worked the first week of games in 2001 before a deal was reached. But those officials came from the highest level of college football; the current replacements do not. Their ability to call fast-moving NFL games drew mounting criticism through Week 3, climaxing last weekend, when ESPN analyst Jon Gruden called their work “tragic and comical.”

Those comments came during “Monday Night Football,” with Seattle beating Green Bay 14-12 on a desperation pass into the end zone on the final play. Packers safety M.D. Jennings had both hands on the ball in the end zone, and when he fell to the ground in a scrum, both Jennings and Seahawks receiver Golden Tate had their arms on the ball.

According to Marc Bastow, Investor Place Assistant Editor, who writes in the article,  NFL’s Referee Spat: Everyone’s Screwed, League gets a massive PR problem over a relative pittance these are the issues involved in the referee strike:

The dispute with the NFLRA revolves around three main issues:

  1. The NFL wants to change how NFLRA members receive retirement benefits, going from a defined-pension plan in which the NFL contributes a set amount each year that provides a fixed, stable retirement revenue source, to a defined-contribution 401k plan. Current full-time NFL employees (the league considers the referees part-time employees) are all on a combined defined/401k plan. This issue appears to be the main sticking point.
  2. The salary pool for all 121 union referees is $18 million, or roughly $149,000 per referee. The NFL has offered to add $1 million per year to the pool. (Because I am not a referee, I have no idea how much any of that means relative to time invested in the profession. But I do know the job is difficult.) The majority of referees have “primary” jobs that announcers love to tout when they talk about officiating crews, however, so it’s likely this point can get worked out since the refs are making money elsewhere.
  3. The 121 referees are broken up into 17 crews that work the games (which means there is one extra crew). The NFL wants to add another three crews to increase the pool to 140 referees. Needless to say, the referees feel that would imperil their job security since they could be — you know, replaced — if they did not perform.

In monetary terms, those issues come out to a difference of around $4 million per year, according to a league memo from the NFL’s chief attorney, Jeff Pash. http://investorplace.com/2012/09/nfls-referee-spat-everyones-screwed/

The NFL referees and their labor issues are just one symptom of an economic landscape that is no longer positioned for success.

A sleeper story is described by Barbara Thau in the Daily Finance article, J.C. Penney’s Latest Leap: Retailer to Ditch Cash Registers, Cashiers:

J.C. Penney (JCP) will say farewell to cash registers, checkout counters and cashiers by 2014, said Ron Johnson, the chain’s CEO, during the Fortune Brainstorm Tech conference, reports Time.

Penney’s plan evokes Apple’s (AAPL) mostly cash-register free stores — and that comes as little surprise: Johnson was the head of Apple Retail and is considered the mastermind behind its success. He left Apple in November to take the top spot at J.C. Penney.

Johnson, who has been in the headlines lately for Penney’s radical, controversial — and so far, unsuccessful — strategy to eliminate most of its sales and coupons, is now looking to shake up the checkout experience in the chain’s stores.

His plan is to eliminate cashiers, cash registers and checkout counters, replacing them with a patchwork of technology solutions, such as WiFi networks, mobile checkout, RFID (radio frequency identification) technology tracking systems for merchandise, as well as self-checkout options. http://www.dailyfinance.com/2012/07/23/jcpenneys-no-more-cash-registers-cashiers/

The NFL strike and the future J.C. Penney human layoffs point to two issues which bring this discussion to Henry Ford. The issues are is it more profitable to a business to pay for expertise, as in the case of the NFL strike and is technology really going to replace humans as in the case of J.C. Penney?

Tim Worstall posts the article, The Story of Henry Ford’s $5 a Day Wages: It’s Not What You Think at Forbes:

So, if creating that blue collar middle class that could afford the cars wasn’t why Ford brought in his $5 a day wages, what was the reason?

Actually, it was the turnover of his staff.

At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford’s turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he was to keep up this production.That level of turnover is hugely expensive: not just the downtime of the production line but obviously also the training costs: even the search costs to find them. It can indeed be cheaper to pay workers more but to reduce the turnover of them and those associated training costs. Which is exactly what Ford did. As Paul Krugman points out, the effects are obvious:

But in any case there is a fundamental flaw in the argument: Surely the benefits of low turnover and high morale in your work force come not from paying a high wage, but from paying a high wage “compared with other companies” — and that is precisely what mandating an increase in the minimum wage for all companies cannot accomplish.While that’s talking about the living wage argument it applies here as well. The point is not so as to be paying a “decent wage” or anything of that sort: it is to be paying a higher wage than other employers. That gets your workforce thinking they’ve got a good deal (for the clear reason that they have got a good deal) and if the workers think they’ve got a good deal then they’re more likely to turn up on time, sober, and work diligently. They’re more likely to turn up at all which was one of the problems Ford was trying to solve. http://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-henry-fords-5-a-day-wages-its-not-what-you-think/

This government, both parties, has failed to promote the kind of economic development AND policy which creates liveable wage jobs. That is why Mc Donalds is popular for more than its dollar menu. They are hiring people.

This economy must focus on job creation and job retention and yes, hope. Both for those racing through college and those who have paid their education and training dues. “You deserve a break today at Mc Donalds,” the only employer who seems to be hiring.

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