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Labor (an Economic Issue)


Introduction

Unlike our other resources, we will always need to put at least a little of our labor into everything that we do. In its most basic form, this labor can be thought of as a renewable source of energy. We take in food and water, and convert it into the energy needed to do work. This can be seen in its simplest form when we are using our muscles to lift or to move something or to mold something into something else.

Although sometimes not as obvious, our brains are a far more valuable labor energy source than our muscles. With our intelligence and ingenuity, we can plan the use of resources, including our labor, to make our work far more productive. In addition, we use our brains to decide what work needs to be done and when to do it. Therefore, our labor is far more than just a source of energy to do work.

History

Throughout our history, labor has been one of our greatest resources. For our earliest ancestors, who only had a few simple tools that they could make from sticks, stones and bones, their own labor was one of the few resources that they had available to them. Even so, by cooperatively pooling their labors, this was enough for our ancestors to be able to populate and to survive in every environment on almost every part of our planet.

Over time, as our ancestors shifted more of their labor away from using their muscles and towards using more brain power, the very nature of our labor changed dramatically. Our ancestors learned new ways of harnessing the things around them in order to amplify what they could do with their manual labor. They learned how to obtain and to process different types of raw materials to make better tools, and to harness the power of animals and nature to do more of their work. Even before the dawn of the industrial age, using just the simplest of tools, our ancestors were able to use their labor to reshape their environment, to build great cities and to construct massive structures like the pyramids of Egypt.

With the discovery and the use of nonrenewable energy sources like coal, oil and natural gas, we were able to enormously multiply the power of our labor. This new industrial age brought about large advances in what labor could do and a large increase in our population. With this new larger and more powerful labor force, we have built up an enormous amount of wealth and have propelled ourselves, literally, into outer space.

Productivity

What does it mean to be more productive? It means being able to do more or produce more with less. For instance, if a given worker can produce more widgets than a coworker in a given amount of time, then that worker would most likely be considered more productive. Of course, we need to look at more than just how much labor is needed. We also have to look at what other resources were needed to produce the widgets and what might have been wasted.

There are many possible reasons for a given worker being more productive at producing widgets. A more productive worker may be innately better suited to making widgets, may have more experience, or may have learned some better methods of producing widgets. On the other hand, a more productive worker may simply have access to some tools or equipment that are better designed for producing widgets than other workers have access to.

For most of us, we simply have more of a talent for doing some things than for doing other things. This may partly be due to our genes and may partly be due to our upbringing and environment. Whatever the reason, we will be more productive if we are doing the things we are more talented at. It has also been shown that people who enjoy their work are more productive. Therefore, to increase our productivity, we should strive to find and to work at what we are more talented at and get more enjoyment out of.

Labor is the one resource where the more we use it the more we can get out of it. This is because our muscles and brains actually become more efficient at performing a given task the more we do it. We gain experience. Thus, the more we work, the more our individual productivity increases, at least until our bodies start to wear out with age. Practice may not really make us perfect, but it does make us better at doing the things that we practice and gain experience doing.

Of course, real productivity does not come from gaining experience doing just anything. If all our ancestors ever did was to become better at doing the same things that they had always done, we would never have progressed beyond our days as hunters and gatherers. Instead, they found new ways of obtaining and producing the things they needed and wanted. It did not matter whether they did it through trial and error, research and development, or just paying attention to lucky accidents, because, on average, the time they invested was more than paid back through improved productivity.

As our ancestors became more productive they were left with more free time. They were able to use some of this newly available time to produce more things in order to make their lives safer, more comfortable, and more enjoyable. They also were able to use some of this time to find even more productive ways to use their labor. Productivity gains also led to increased competition, since less productive individuals needed to become more productive or would end up getting left behind. With each advance in productivity, our ancestors were able to have and to do more until our world became the very diverse, complex and competitive place that we now live in.

Education

As we develop more productive methods of doing things, people will need to learn them in order to be more productive. In our early history, our ancestors only had a few tools and only knew a few ways of producing things with them. This meant that they did not need to spend a lot of time learning how to make and to use their tools, but they did need to spend a lot of time using them to produce the things they needed. As people developed more and better tools, and came up with better methods of producing things, it took people longer to learn how to make and to use those tools, but the productivity improvements actually saved them more time in the long run.

Today, most of us spend at least the first 18 years of our lives learning about our world and how to live in it. Then, many of us spend many additional years learning the things that we will need to know in order to get and to work at a good paying job. Much of that learning is done in grade schools, colleges and various technical and trade schools. The more complicated the work that we were planning to do later in life, the more schooling that we would need and the later in life that we would actually start working at a full time job.

In general, the time that we and our teachers spend in school is worth the cost and the years of not producing anything, because our education will help us to more than make up for that school time in the years when we do work. There are a number of things that we can do to ensure that our schooling is actually worth the time and the cost, and that everyone has the opportunity to get the education that he or she needs to be a productive member of society. I will talk more about these ideas in an upcoming subsection on Education.

Work

It would be great if all work was productive work. Unfortunately, this is not always the case. There are many reasons for this. Part of the problem stems from the fact that our world has become overly complex and is changing so fast that most people cannot keep up. This can leave people doing nonproductive work, businesses trying to improve the productivity of the wrong type of work, people not knowing about or using the newest productivity methods, and governments requiring businesses and citizens to file redundant forms. In addition, many people may only be concerned with earning a living and may not care whether or not their work is productive.

For instance, a case of nonproductive work can arise when improvements or other changes are made in some portions of a process without reviewing the entire process. Take a company that had always required some paperwork to be filled out for each piece of merchandise produced. Over time, improvements to the process may have automated the capture of all the information that was provided by the paperwork. If neither management nor the people responsible for filling out or filing the paperwork realized the paperwork was no longer needed, then they may waste a lot of time still filling it out instead of doing more productive work.

In another case, a business may put a lot of time and effort into improving some portions of a process, but does not see improved productivity because they did not address the bottle necks in the process. For instance, processes may have been improved so that certain components could be delivered to an assembly area faster. If that assembly area cannot process the components any faster than they were being delivered previously, then this change will not speed up the overall process. Instead, inventory of the components may now build up in the assembly area or the delivery people may end up sitting around waiting for more of the components to be needed. If the assembly area is the bottle neck, then improvements should have been made there first.

There are also cases where some workers are more productive than other workers, but some less productive workers are paid the same or more than the productive workers. This is especially the case when a given pay per hour is mandated such as with a minimum wage or with some union jobs. Without proper incentives to encourage workers to be more productive, they may not improve their productivity and more productive workers may not feel the need to keep their productivity levels up. Where possible, it makes more sense to pay based on what a worker produces or accomplishes, so that productive workers will be able to earn more. I will talk more about this in the upcoming subsection on Jobs.

We also have cases where various laws, regulations and mandates require filling out information on multiple and often redundant government and business forms, for things like government services, health insurance, employment, etc. For instance, many people need to fill out both Federal and State income tax forms, which need to be processed by two different government agencies. A simple productivity improvement would come from having a single Federal Income tax form with appropriate attachments for each state. Taxpayers would only need to fill out one income tax form and only one agency would be needed to process the forms. I will talk more about this particular case in the upcoming section that covers taxes.

An additional case is when there are wide swings in demand for a given product or service, so that there are frequent times when there is not enough work or there is too much work for the available staff to handle properly. For instance most retail stores have few customers during weekday mornings and afternoons, but they must keep enough sales personnel in each department in case a customer does come in. Then, on some evenings, Saturdays and Sundays, and especially on the days after Thanksgiving and on through Christmas, there are often so many customers that the regular sales personnel do not have enough time to handle each one properly. In addition, any temporary staff may not be as qualified to help the customers. This situation requires smoothing out customer traffic, which requires more than a simple fix. I will address this a little further in the following example.

The Whole Picture

Let’s take a look at an example that will illustrate the pitfalls of looking too narrowly at improving our labor productivity and why we need to look at the whole picture. We will look at the labor productivity involved in building a parking lot for some business. For instance, this parking lot might be for some new office building or shopping center.

There are lots of factors to consider. Some of the questions that may need to be answered might include such things as the following.

  • When does the work need to be done?
  • How much time will be needed to complete each task?
  • What equipment will be needed?
  • How many and what kind of workers will be needed?
  • How will weather affect the schedule?
  • Will any night work be needed?
  • Will the supplies and materials be available when needed?

Most experienced construction companies have a wealth of knowledge to answer the above questions. They may know what a similar project took and base this one on that one, or they may know how to scale what it took on a larger or smaller project to the size of this project. Either way, they should be able to fine tune their plans in order to build the parking lot in the most efficient and productive way possible.

The above is all good and wonderful if we are certain that we need a parking lot of a certain size at a given location. In our society, we seem to be more oriented towards individualism than towards being part of a community. This also seems to be true for businesses. This means that each business will most likely build its business and parking lot on its own separate piece of land. Since it is just looking out for itself, the business is pretty much guaranteed to need a parking lot large enough to meet its peak demand. On the other hand, it would be sensible to see if there are ways we could reduce the size of the needed parking lot in order to save land and money.

For instance, is there a way to smooth out the use of the parking lot in order to reduce its peak usage, which would allow for a smaller parking lot? If the parking lot is for an office building, you could stager work schedules so that everyone would not be there at the same time. Instead of everyone working 8am to 5pm Monday through Friday, some people could come in earlier, some people could come in later, some people could work different 4 day workweeks, and some people could even work weekend hours. Not only could a smaller parking lot support the same number of workers, but the office building might not need to be as big, if some space could be shared.

If the parking lot was for a shopping center, then having offices and other businesses stagger their work times would also help to smooth out the times when people shop. In addition, the shopping center could offer discounts or promotional items to those people who shop at less crowded times. Along with allowing for a smaller parking lot, there would be a better flow of customers, which would help to keep sales people busy, but not too busy, throughout the entire day.

We might also want to see if there was a way to share a parking lot, which might eliminate the need to build a new parking lot. Most people work Monday through Friday somewhere between the hours of 8am and 6pm. An office building’s parking lot would be mostly full during those hours and mostly empty the rest of the time. For a shopping center, the opposite would be true. A shopping center’s parking lot would be mostly empty when people are working and would only fill up at other times. For both businesses, they would have parking lots that would be underutilized most of the time, but at precisely the opposite times.

A single shared parking lot would be better utilized throughout the entire week without ever filling up much more than either separate parking lot would have. Then, each business would only need to pay for about half as much parking. In addition, workers would have the benefit of being able to walk to the shopping center at lunch time or after work without the need to drive, and the shopping center would get a little extra business from the office workers.

While we are on the subject of combining parking lots, we should also think about adding an apartment complex. A combined parking lot for an office building and a shopping center would still be underutilized at night, which is the very time when an apartment complex parking lot would be most full. Now, not only would all three businesses cut their parking costs by about two thirds, but some residents could walk to both work and shopping and those residents who did work someplace else could still walk to shopping.

This example could be taken even further by throwing in some entertainment businesses. Eventually, you could get to the point where almost everything was within walking distance and you might be able to shrink the size of the parking lot to almost nothing. If you added in a convenient car rental or car share place, then most residents would not even need to own a car. Not only would we greatly improve our productivity where it came to building parking lots, but we would save on transportation costs as well with the reduced need for cars and roads, and we would save time by not having to drive to as many places.

We could take this example even a little further by combining some of the buildings. Most shopping malls are usually in one or two story buildings, while some office and apartment buildings are often several stories high. Why not consider putting the offices and apartments over the stores, or stacking and interconnecting the stores with the offices and apartments? This would save some additional land that could be turned into a park, a playground, a garden or just left as a wooded area.

Employer verses Employee

When we talk about labor, we must remember to look at it from the perspectives of both the employers and the employees. Each can view labor as a valuable resource that needs to be used productively, but each differs in what labor and productivity means to them. These differences in viewpoint can cause problems for employers, employees, and our economy.

For employers, labor is a resource to be used to get work done. For them, this labor is an expense, since they need to pay the employees who produce the goods and services that they sell. They see productive workers as the ones who produce the most for the least cost. For employers, having the most productive workers translates into lower costs and more profit.

For employees, their labor is a resource they can use to earn income. They need to work in order to make the money they need to pay for the necessities and luxuries of life. They see their labor as being the most productive when they can earn the most money for the least amount of their work. In general, that might mean earning a high hourly rate, but it could also mean having lower stress, higher benefits, better working conditions or more enjoyable work. For employees, being a productive worker translates into more wealth, a better lifestyle and the time to enjoy it all.

Of course, there are employers who pay more for work than they might have to, and employees who work harder than they might need to. Nevertheless, the average employer wants low labor costs while the average employee wants high income. On the other hand, employers want to sell their goods and services at high prices so they want their buyers to have high incomes, and employees want to buy goods and services at low prices so they would want the employers from whom they buy to keep their labor costs down.

As a result of their different perspectives, employers and employees have strategies that are at odds with each others’ goals. Employers might try to lower their labor costs by producing in places where labor costs are lower and selling in places where incomes are higher. Employees might join labor unions to negotiate higher pay, but buy goods made in places where labor costs are lower. In addition, the people working in upper management might also want to earn a high salary, which can make it harder for these employers to keep their costs down and for the employees to get higher pay.

Balance

For any economy to be healthy, it must have a balance between employer expenses and employee incomes. In its simplest form, this means that businesses need to sell enough to make a profit and people need to earn enough to pay for what they buy. This is easiest to see when we look at local businesses employing and paying local workers, who in turn are buying the goods and services of the local businesses. The economy can also be in balance, when enough locally produced goods and services are sold non-locally to pay for the non-locally produced goods and services being bought locally. In other words, there is a balance of trade where the value of imports and exports is about the same.

During periods of economic growth, the economy can get out of balance. Local businesses will be producing and selling more of their goods and services in other places than other businesses are selling locally. This means that not only are these local businesses making more profits, but that their employees are working and earning more. Since the local employees are earning more, they could save and spend more, but would have less free time. Locally, they have a positive or favorable balance of trade where wealth is increasing, because their exports exceed their imports.

On the other hand, somewhere, things would not be going as well. There, imports would be exceeding exports. In this case, they have a negative or unfavorable balance of trade. With the work being done someplace else, these people would not be working as much. Without enough work, these people would not be earning enough to pay for what they buy, which means they would need to borrow or to dip into their savings. If things continued this way, they would eventually need to stop buying as much or risk going bankrupt. When this happens, they start importing less, which means other places will not be able to export as much and their economies will also falter.

Imports may exceed exports for a variety of reasons. People may buy imported goods because they are cheaper. Businesses may send jobs overseas because the overseas employees work for less. In the first case, revenues for local businesses would go down, which might force them to cut costs by letting employees go or by shipping more work overseas. In the second case, incomes for some of the local employees would go away, which means they could not afford to buy as much from the local businesses. As you can see, each of these cases can actually cause or magnify the other case, which could spiral the local economy into a recession.

With things in balance, wealth would correlate closely with how much work people did. It would all boil down to what people wanted. Those people who wanted more would work and produce more, which would earn them more money to buy the additional things they wanted. Those people who preferred more time off would work and produce less, which would earn them less, but give them the time off they wanted. As time went by and people’s needs and wants changed, some people would need to switch careers so that enough people would produce enough of the right things and would keep the economy in balance. Given all the benefits of having a balanced economy, what can we do to create this balance? One way would be to have a Moderated Economy like the one I talked about in a previous subsection.

Wasted Labor

Other than things like natural disasters and wars, the one thing that has the biggest potential to throw an economy out of balance and destroy wealth is having a lot of wasted labor. As a resource, our labor has a use it or loss it quality. Like the energy from wind or sun light, it is only available at certain times and must be utilized at that time or be lost forever. Of course, many people can and will work more hours per day than they normally would, but they can only keep that up for a short period of time without burning themselves out. Therefore, if we want a balanced and strong economy, we must reduce our wasted labor.

Our labor can be wasted when we are doing nonproductive work or when we are not working for some extended period of time. Of course, businesses have a big profit incentive to eliminate nonproductive work, and most of them already employ various methods to identify and to reduce their nonproductive work. The bigger problem is with the wasted labor of people who, for some reason, are kept from working.

When people do not work for an extended period of time, their labor may be wasted and lost forever. The reasons for people being out of work can vary greatly. Workers may not have the skills needed by businesses. A recession may force a lot of businesses to close. Workers may be out sick or recovering from an injury.

Whatever the reason, when labor is wasted, it not only reduces the wealth of the worker, but the wealth of all of us. When people are unemployed, they are not contributing any of their labor to create wealth and they will need financial support from the people who are still employed. When people are ill or injured, they not only miss work, but may get paid for doing no work and may need to be taken care of by other people who could have been doing other productive work.

On the other hand, there are some cases where being out of work can be a good thing. Vacation time is important to give people the time needed to relax and to have some fun, so that they can come back to work refreshed and recharged, which can make them more productive. Attending school can allow people to learn new skills, which they can use to be more productive when they get back to work.

Of course, most people would prefer and already have many incentives to stay healthy and to be employed. What we do not always have is an incentive for local businesses to hire more local workers. This is especially true when the work can be done someplace else for less. Of course, this all goes back to the poor design of our current economic system. One of the ways in which we can help to change this is to think in terms of recoverable value.

Recoverable Value

The idea behind recoverable value is finding the best way to get the most back out of something that we have already lost money on. There may be nothing we can do to recoup all that has been lost, but there may be a way to get some money back. Therefore, instead of us simply writing off the loss, we want to take a look at other alternatives.

For instance, let’s take a look at a business that needs a new payroll system. Instead of buying a new one for 100 thousand dollars, they decide it would be cheaper to create their own new payroll system. Unfortunately, they spend close to or more than 100 thousand dollars and they still have not gotten their new payroll system to work. In hindsight, we can easily see that they would have been better off just buying a new payroll system in the first place, but they did try to create their own and they will need to live with that decision.

If the business scraps their work and now buys a new payroll system, it would cost them another 100 thousand dollars. On the other hand, a careful evaluation of the work they had already done may show that their new payroll system could be salvaged and made to work for only another 25 thousand dollars. Therefore, by finishing what they had started, they could possibly reduce their losses by 75 thousand dollars.

Let’s take a look at another quick example. Let’s say you have something that would be worth 100 dollars if it worked. You decide to spend 50 dollars to get it repaired, but that is not enough to get it working. You find out that it has another problem that will cost you another 50 dollars to repair it. If you had known it would have cost 100 dollars to repair it at the start, you probably would not have tried to repair it.

Now, you are already out the 50 dollars and there is nothing you can do to change that. This is assuming that the person doing the repair work was not trying to cheat you. Given the current situation, would you now spend the additional 50 dollars to get something that is worth 100 dollars? In this case, as long as you were sure there were no other problems that would cost you even more, then the answer would probably be yes.

Recoverable Labor

Now, let’s apply this concept of recoverable value to our unemployment situation. Here we have a pool of people who are not working and who are receiving unemployment benefits, welfare, or some other support from various government programs and charities. In this case, the community is losing out on the wealth that could have been produced and the taxes paid if these people were doing productive work, and everyone else in the community is losing out by having to pay higher taxes or by donating to charities to support the unemployed workers.

To see what we can do, let’s look at a somewhat simplified, exaggerated and idealized example of a given community that currently has a 10 percent unemployment rate. The high unemployment rate is mainly due to the fact that businesses have found it cheaper to manufacture certain goods elsewhere. Most of the remaining jobs in this community are those that are harder to outsource to other places. These might include jobs in the service and hospitality related industries, in the government, and in those businesses and industries that require more highly educated workers than those currently available in the cheaper labor markets. In addition, wages for those jobs that could still be outsourced would be lower than they otherwise might be.

We will assume that the unemployed workers want to work, that the community provides all the unemployed workers with enough to at least survive, and that most of the unemployed workers do not resort to crime. In this example, let’s say that everyone that was still working would need to contribute about 5 percent of their take home pay to provide the unemployed with about 45 percent of what they would have earned when working. This means that a least 10 percent of the population would be just scraping by and the remaining 90 percent of the population may need to get by with less.

Now, let’s have the community try a little experiment. They would first identify some item that currently had to be imported from someplace else. The reason that the item needed to be imported was because no business could operate a factory locally that could compete with the factories producing it in places that had lower costs. The community would then subsidize a business to build and to operate a factory that would produce this item and would employ some of the otherwise unemployed local workers.

If private industry couldn’t made a profit on its own, how could this subsidized factory benefit the community? Part of the answer lies in recoverable value. With a high unemployment rate, the community would have stood to lose a lot of its wealth by spending a significant amount for each unemployed worker. If the community instead spent part of this money subsidizing the factory, it could end up costing the community less, and the now employed workers would earn more. In addition, the money used to buy the new locally produced goods would now stay in the community, where it could be used to buy other things and to build wealth.

In this case, the unemployed workers had been costing the community about 45 percent of what the workers would have earned in wages. By using some of that money to subsidize the salaries of the now employed workers, the community could save some money and the factory would essentially get cheaper labor. Given the lower cost of this recovered labor and the lower local transportation costs, the factory might now be able to produce its goods at a competitive price, and be profitable.

A caveat to this would be that this would only work when hiring otherwise unemployed local workers and only when selling locally. Non-local workers would need to be expensed at 100 percent of their labor costs and any exported goods would have to be sold at a price that would cover 100 percent of these labor costs. That is, unless some appropriate reciprocal agreements were made with other communities with unemployment problems.

How else would this affect the community? People would now be able to buy these locally produced goods at a good price, so the money that would have gone to buy the imported goods would now be going to the newly employed workers at the new factory. These workers would now be earning enough to be able to afford to spend more money, which would help out the local economy and could create some additional local jobs. The community would also make out, since all the new workers would be paying income and sales taxes. Depending on how well the new factory does, the community could also make a profit and the workers who had previously been employed could benefit from the lower tax rates that would come from paying out less in subsidies than in unemployment and welfare benefits.

If this experiment was tried in the real world, things would probably be a bit more complicated, but I am sure that the financial benefits would still be there plus the additional psychological benefits from having a better economy. The key factor in this is in not wasting our labor resources. In general, it is always better to keep our local workers employed doing productive work. Of course, if we already have full employment, then we might benefit from outsourcing some work that would be cheaper to do someplace else. But before we do that, we must consider the cost of any unemployment that may result. In addition, for this to work, the community would need to gain the cooperation of local employers and employees.

Cooperation

As we saw earlier, the goals of employers and employees are at odds with one another. Each employer and each employee will generally work towards their own goals, which could potentially move them towards an unbalanced economy. The problem is that employers and employees are on opposite sides of the economic scales. Strengthening only one side without strengthening the other will throw everything out of balance.

The question then becomes, is there a way to get them to work together for their mutual benefit? Numerous studies have shown that when two people cooperate, both will be better off than if each only looked after their own interests. This would also apply with employees and employers.

For employees, we actually see them cooperating in the form of labor unions. Employees have been able to get better wages, safer working conditions, and numerous additional benefits. However, in some cases, unions have overly burdened businesses with higher labor costs, which have made them less competitive in the global economy.

Businesses have also tried to cooperate in the form of cartels that try to control prices. The idea is to allow them to raise the prices of their products to an artificially high level in order to increase their earnings and to make really big profits. Along with monopolies, cartels have generally been considered a bad thing for most people, since they allow businesses to make their big profits by bilking their customers.

The problem with unions that get too strong and with cartels is that they strengthen only one side of the economic scale. We need to get employers and employees to cooperate for their mutual benefit. One way to do this is through employee owned businesses. In this case, the employees are the employers, so they need to look out for both sides of their economic scale. Unfortunately, employee owned businesses will probably always be the exception rather than the rule.

The answer then must come from the proper planning and oversight provided by a Moderated Government, which can work to balance the needs of both employers and employees, and their communities. This is what would be done in a Moderated Economy.

Government

Since most employers and employees would generally not cooperate on their own, then we, through our moderated government, must provide some incentives. Our various branches of government can adjust our tax and regulatory laws so that it becomes advantageous for employers and employees to do the things that will keep our economy in balance. The following are some of the things that could be done. I will talk about some others in the following subsection on Jobs.

Reduce our Cost of Living

Our way of life is very different than it was for our ancestors and currently still is for many people in other parts of the world. We have far more choices in the things we can do and the things we can buy. We also have far more things that we are required to spend our money on. Many of these required things are meant to make our lives safer and more enjoyable, but they raise our cost of living. In order to pay for these things, we need to earn more money by having a higher hourly wage or by working more hours.

Our need to earn a higher income, is one of the reasons that it has become more expensive to manufacture goods here than abroad. If we can reduce our overall cost of living, then we could afford to earn less and still end up have as good, or even better, lifestyles than we now have. This, in turn, would also make our labor less expensive, which would make us more competitive with workers in other labor markets, and would provide us with more employment opportunities.

The way to reduce our cost of living is by reducing or eliminating certain expenses. The best places to start are those areas that take the biggest percentage of our budgets, but we should not forget the smaller things. For most people, the three biggest expenses are housing, transportation and taxes. Our moderated government can greatly help to reduce these and other costs by making the right changes in our tax and regulatory laws.

For housing, we must be realistic in determining how much we can afford. Beyond keeping us and our stuff safe from the elements, everything else is optional. The thing that is driving up the price of housing is the rising demand for the dwindling supply of the resources that go into our housing. The supply of land and natural resources is limited, but as the population increases, the demand increases and the cost of housing goes up. Therefore, the best way to keep housing costs low, is to reduce our overpopulation, which our government needs to take charge of. I will talk more about overpopulation in an upcoming section.

Transportation is the one area in which we can really save big. As we saw in the previous example of reducing the need for a business to build a new parking lot, we can restructure our communities to greatly reduce the need for cars, roads and parking lots. With everything else being equal, someone who does not need to own and to operate a car could reduce their cost of living by something like 20 or 25 percent over someone who needs a car to get to work, to shopping and to entertainment. This car free person would also save a lot of time by not having to sit in traffic. The government can do a lot to encourage businesses and people to build and to live in communities that provide the right mix of homes and businesses where the need for owning a car is greatly reduced.

To save on our taxes, we need to make our government more efficient. Our government should only be involved in those things that people and business cannot do for themselves. When people are spending their own money on something, they are more inclined to spend it on higher priority items and to get the most for their own money. For instance, when people pay for their own health insurance, they are more apt to get just the amount they need and no more. However, the government would be more inclined to try to provide everyone with the same coverage, which could include coverage that many people do not need, while not covering some things that are needed.

The one thing that our government really needs to do, and is also the main reason for having a government, is to protect us from external and internal threats. It is a lot more efficient for government based military and police forces to protect us than for businesses and individuals to try to protect themselves. The government also can protect us through the proper use of taxes and regulations. Unfortunately, our tax and regulatory laws have gotten overly complicated. Simplifying them appropriately would save the government, business and us all both time and money.

I have already mentioned simplifying our Federal and State Income Taxes by using a single form. I will talk about other ways to simplify our taxes in an upcoming section that covers Taxes. In addition to simplifying our tax laws, we also want to simplify our regulatory process. The best way to start would be to provide businesses and individuals with a single place where we can handle everything. For businesses, there should be a single local agency that would process all local, state and federal paperwork. This would provide businesses with a single place that can help them with whatever they need, reduce paperwork and eliminate a lot of duplication. The same could work for individuals.

Employ Local Workers

A community wants its citizens to be employed, so that they can pay their taxes and help to keep the local economy healthy. Although it may not matter that much whether its citizens work locally or in a nearby community, there are enough advantages to local employment that we would want to encourage it. Not only would local employers and employees pay more local taxes, but they would spend more locally. Local employment would also reduce workers transportation costs, which would leave them more to spend on other things.

The best way to encourage local employment would be to provide a tax incentive. The idea would be to eliminate or provide a credit for employment taxes on local employees, which would include workers living within a few miles of the business, but in a different community. The community would still get income tax revenue from the employees. Since it would be cheaper for local businesses, they would be more inclined to hire and to retain local workers.

Produce Necessities Locally

During good economic times, luxury goods and services are bigger money makers for employers and employees than necessities. During a recession and at various other times when there is economic uncertainty, people will cut back on these luxury items. This means these luxury producing employers may start losing money and need to lay off workers. If a community’s local economy is heavily dependent on these luxury goods and services, then it would be very vulnerable to economic downturns.

On the other hand, if a community’s local economy is more heavily invested in goods and services that are part of the necessities of life, then it can better withstand economic troubles. People may cut back some, but they cannot do without these necessities, so the employers and employees in these industries would be better able to ride out the bad economic times. The trade off with being invested in necessities is that you do not make as big a profit during good economic times.

Given the relative benefits of investing in luxuries and necessities, it makes sense to balance the two. It may be even better to make it easy to shift between them as dictated by the shifting economy. In order to do that, we need to make sure that the local businesses have the expertise and skills to make all of the basic necessities. The best way to do this would be to provide incentives for local businesses to actually be making them. They may not necessarily be making all that is needed, but they are making enough so that they know how.

If the economy takes a downturn, workers involved in luxury goods and services would be laid off. The community could then ramp up their production of necessities and move the unemployed workers into those jobs. This way, it would reduce the community’s wasted labor and keep more money locally instead of using it to import those necessities. For instance, there could be a cloths factory that normally makes some percentage, but not all of the cloths needed in the community. During an economic downturn, production could be ramped up to produce more of the community’s needs.

Therefore, we want to encourage local businesses to provide a good mix and balance of goods and services. We would do this by providing tax incentives to appropriate businesses. If a given necessity was not being produced locally or was being produced at some very low level, then any business that got into that business could get a tax break. The amount of the tax incentives would vary depending on what percentage of local consumption was being satisfied and what the local unemployment rate was. Done correctly, this could help to keep the unemployment rate low, which would keep the local economy healthy.

Buy Local Goods and Services

When people buy local goods and services, more of a community’s wealth stays within the community. In addition to the economic boost given to the local businesses and their employees, there is also a boost in local tax revenue. Therefore, it would be advantageous for the community to encourage people to buy locally produced goods and services.

The simplest way to do this is to have the government provide tax incentives. For instance, since the community would already be taxing the employers and employees, they might reduce the sales taxes on locally produced items. Of course, it might be easier to reduce value added taxes on the goods a business sells locally. Either way, we would not want to go overboard on reducing taxes on the local goods and services to the point where the government loses money. If this happened, the community could end up subsidizing the purchases of people coming in from other communities to buy the locally produced goods and services.

Conclusion

Allowing individuals to use their initiative and drive to work at making their lives better has been a key factor in making our nation great. When people can keep the fruits of their labor, they are more willing to work hard and to do productive work. Unfortunately, the improvements that have come in some people’s lives have come, too often, at the expense of others. The problem is that our current economic system relies on the mistaken belief or hope that individuals and groups that are working for their own betterment will make everyone’s lives better. This has not and, undoubtedly, will never be the case.

Without an overall plan, people will work at odds with one another and the hard work of one person or group will often be ruined by the hard work of others. Of course, we certainly do not want our governments to take over too much control, but we do need them to do some planning to ensure that people’s efforts go towards producing the best results for the entire community. By creating and maintaining an economic framework within which businesses operate, our Moderated Government can ensure that its citizens will have everything that they need with as little wasted resources as possible. In order to protect the health of our economy, people need to work more closely together as a community. We need to move towards a Moderated Economy.

Next Section

Jobs - Keeping everyone employed in order to keep our economy humming.

Last Updated:
Thursday, December 28, 2017
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