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Saturday, January 19, 2013

Why Can't An Employee Be An Employer?

One of the popular stories making the rounds in the past week is about a computer programmer at an unnamed American company.  It turns out that this programmer found a simpler way to get his work done than doing it himself:  he outsourced his work to other programmers in China.  And he managed it all well enough to get excellent annual reviews from his own employer.  If you missed it, you can read the story here.

So, the employee became an employer.  And the writer of the news story (and other versions of this story that I have read on other websites) refers to this as "a scam".  I am afraid I don't agree with that characterization.  And I am not alone in that.  Usually, stories on Yahoo attract a range of commenters, and most commenters do not agree with others.  But, in the case of this story, there is pretty much near-unanimity among the commenters:  none of them consider this employee a scammer, and in fact, most of them consider him clever and enterprising.

Now, what he did was probably not entirely legal according to whatever employment contract he signed with his employer.  And the way he outsourced the work could lead to a security breach (which is why his employer started investigating in the first place).  He could have set it up so that his "employees" could log into just his workstation, and he should have logged his workstation into the company network himself using the correct security measures instead of letting his "employees" log into the network directly with his credentials.  But, a security breach never did occur, the work he was responsible for doing got done, and that is all that should matter.

But, apparently, the employee is no longer employed because of doing what he did.  That got me thinking.  What exactly is illegal about what he did?  Why did he deserve to lose his job over this?

From an economically rational point of view, I don't see anything wrong with what he did.  He took part of his pay, gave it to someone else and had them do his job.  So, he traded in some of his money for more free time.  Seems like a perfectly rational thing to do.  Think about what a company does.  The owners of the company (the shareholders) don't think they want to or are capable of doing what a chief executive needs to do.  So, they take some of the company's money, give it to somebody and ask him to do the CEO's job.

The CEO does not run the company single-handedly either.  He trades in more of the company's money for employees (vice presidents, secretaries, etc.).  He then gives these people some more of the company's money and asks them to trade it in for more employees.  It doesn't exactly happen in the orderly sequence I have outlined above, but that is how companies are run:  money is traded in for employee time.

I am sure this computer programmer's manager did the exact same thing:  he was handed a chunk of the company's change and asked to trade it in for manpower so that everything the manager is tasked with doing would actually get done.  So, he traded some of that money in for this computer programmer.  Most computer programmers stop the chain at that point, and trade in their own work for that money.  The programmer who is the subject of this story went further, and traded in some of his money for somebody else to get the work done.  And we actually don't know whether the chain stopped there or the person who he was dealing with got somebody else to do the actual coding (which is quite possible!).

Think about the differences between his manager and him.  His manager outsourced some of his own work to this computer programmer using the company's money, not his own.  The programmer outsourced some of his own work to somebody in China using his own money, not the company's.  Ultimately, it did not cost the company any more money, the computer programmer got extra free time that he would not have gotten otherwise, and the programmer in China earned some money that he otherwise would not have.  To me, that sounds like a win-win-win.

The real problem may have been that the company fired the programmer for being made to look bad.  It is obvious that they were wasting a lot of money when they could have found programmers to do the same work for much less money.  This employee exposed them, and firing him was their revenge for that.  At least, even if he is not qualified to be a programmer, he seems more than qualified to oversee their outsourcing program (and believe me, I would be shocked if this company did not outsource any of its work to contractors, domestic or international).  And what the programmer did was not easy.  If you have dealt with outsourced resources in an IT environment, you know exactly what I mean.

But the story opens up another train of thought for me:  This programmer worked in an office, so he had to show up for work, look busy, etc. to earn his money.  For people who work from home, whose work is mostly unsupervised except for the couple of weekly meetings they are expected to phone in to, this kind of enterprising spirit can be very useful.  The employee can work at several different jobs with several different employers, and outsource all of the work to several different "employees" with small parts of his incomes.  The more he does it, the more his total income.  He would be limited only by the amount of work he can coordinate.  But not to worry, he can perhaps outsource that work to somebody else for a little money too!  Behold the birth of a body-shop contract programming outfit!!

Sunday, January 6, 2013

The Republican Vision For America

With the Republican party moving more and more to the right of the political spectrum, and the rise of the Tea Party movement pushing it along in that direction forcefully, one has to wonder what the ultimate Republican agenda for America is.  If one analyzes their policy positions and priorities, I think their vision for America becomes quite clear.  Without going into great detail, here are the salient bullet points:

1.    Enable the wealthy to become wealthier while pushing everybody else farther and farther down the economic ladder.  This is done in the name of "Tax Reform".
  • Push for a flatter and flatter tax system, where everyone pays taxes at the same marginal tax rate
  • This is obviously regressive because certain taxes like Social Security contributions are limited by income.  So, the higher your income, the lower your overall average tax rate will be
  • Moreover, when sales taxes are taken into account, the tax system tilts more towards regressiveness because people with lower incomes spend (rather than save) more of their money, and therefore pay a higher percentage of their income in sales taxes
  • The Republicans will also want to eliminate taxes on the sources of income favored by the wealthy, such as capital gains and dividends.  On the other hand, tax breaks that the poor and middle class take advantage of, such as home mortgage deduction, child tax credit, earned income credit etc., will be cut back or eliminated entirely
2.    Eliminate the social safety net.  This is done in the name of "Entitlement Reform", "Welfare Reform", etc.
  • Raise the social security and medicare eligibility ages until they become almost meaningless as retirement programs.  People will be forced to work until they are practically incapable of dragging themselves out of bed to get to work.  And their quality of life in the small window of retirement will be so miserable (more on that in the next bullet point) that people will never want to retire unless forced to by their physical state
  • Manipulate the cost of living adjustment until the payments from these retirement programs are completely incapable of providing for a decent retirement to the recipients
  • Make Medicare a block grant type of program where future retirees get fixed amounts of money from the government to pay for private health insurance.  And when the manipulated cost of living adjustments hit these block grants, retirees will find themselves incapable of maintaining any kind of decent health care coverage in their golden years
  • Introduce "means-testing" to limit payouts under these programs.  The problem with means tests is that wealth as defined in these means tests may not be equivalent to income.  So, your retirement income from these programs may be curtailed or completely cut off based on the fact that you own a home (which does not generate income for your retirement expenses).  Retirees may be forced to sell fixed assets for day to day income, aiding in the concentration of wealth in the hands of the few who can afford to buy up these assets
  • Eliminate or impose strict limits on unemployment insurance.  The Republicans have been vocal in opposing extension of unemployment benefits to the long-term unemployed even in the face of persistently high unemployment and slow economic growth.  They have also opposed retraining programs for unemployed people to learn new skills more suited to the changing economy.  All this will culminate in the elimination of these programs entirely in favor of "private sector participation" (which will never happen because retraining and other programs cannot be run profitably, given that the beneficiaries of these programs are unemployed and are not in a position to pay for them)
  • Eliminate or impose strict limits on poverty mitigation programs such as food assistance.  Republicans will cite "rampant fraud" to make these programs so onerous to qualify for that they will be nothing but programs on paper.  It will suit the Republican agenda much better to have these desperately poor people commit crimes for which they can be incarcerated in private jails run by their wealthy donors than to provide them with life's basic necessities so that they can try to make something of their lives
3.    Unravel and eliminate worker protections.  This will be done in the name of "Job Creation".
  • Weaken unions by passing right to work legislation that makes it impossible for unions to form or be financially viable
  • Get rid of the minimum wage or make sure that it does not keep up with the cost of living, making it largely meaningless
  • Remove worker protections, making it easy for employers to keep wages low by firing anyone for any reason and replacing them with lower-wage workers, either American or foreign
  • Eliminate regulations, making workplaces more unsafe, but cheaper
  • Make the job market a free-for-all where the lowest bidder is the only one who stands a chance of getting a job.  Average wages will grind downwards while corporate profits soar.  The middle class will be eliminated while wealth concentrates in the hands of fewer and fewer
4.    Impose a social agenda that alienates the well-educated.  This will be done in the name "Moral Values".
  • Impose restrictions that make science education in this country a farce.  It is fairly routine for US states to be the only jurisdictions in the entire world where basic science education is hampered by meaningless controversies such as over the teaching of evolution, climate change, etc.
  • Pass socially regressive legislation on civil rights, gay rights, women's rights, etc.
  • Persecute scientists, educators, higher educational institutions, etc. for pursuing research that goes against the Republican agenda (research into climate change, renewable energy, stem cell research, etc.)
  • Starve the higher education system of the country of funds by curtailing grants to the most innovative areas of science, medicine and other high-tech fields
  • Push anti-immigrant legislation that makes it more onerous for foreign students to come to the US for higher education.  Combined with the persecution of scientists and the lack of funds, graduate students will go elsewhere, starving the US of the most innovative ideas that the country has been a disproportionate beneficiary of all these years
  • Well-educated people with the wherewithal to move will leave the country to further their education and research aspirations.  They may also move simply to be in a better social environment where their rights are respected even if they are in the minority (immigrants, LGBT, etc.)  This will leave the US with a poorly educated, practically illiterate population that is easy to manipulate and control
  • Only the wealthy will be able to afford a good education in private institutions or in institutions outside the US.  Their wealth will enable them to start up new companies, but the benefits to the US population will be minimal since most employees of these companies will be based abroad, where the well-educated, qualified employees will be.  Companies will pay less for these employees than they would if they were in the US.  Combined with the lack of worker protections in the US, the US may once again become a country of factories where poorly paid, uneducated masses of laborers toil long hours under unsafe conditions, with no protections for whistle-blowing or recourse in the case of workplace accidents
 5.    Weaken regulations, making the country one in which "caveat emptor" takes on special meaning.  This will be done in the name of "Small Government".
  •  Increase the power of already powerful corporations over the general population by eliminating consumer protections and commonsense regulations
  • Make it easy for companies to pollute and harm consumers in other ways by eliminating the regulatory powers of government agencies like the EPA, FDA, etc.
  • Eliminate protections for natural habitats, endangered species, recreational areas, etc., by eliminating or reducing the need for permits and other scrutiny
  • Make corporations more powerful by giving them rights to spend unlimited amounts of money on elections.  Combined with the weakening of employee groups like unions, this will make it virtually impossible to counter their influence on the nation's politics and policies.  This in turn will lead to more business-friendly legislation, weakening employee rights and protections, consumer rights and protections, and regulations governing corporate conduct
6.    Concentrate wealth in the hands of the few by passing out government money disproportionately to people with good connections.
  • Increase military spending and war-mongering, making companies in the military-industrial complex super-rich and powerful
  • Hire mercenaries with no-bid contracts to run defense operations, making companies with the right contacts (and their owners) wealthy
  • Make more government functions private, and pick the winners to favor based on their political leanings.  Examples of this would include running penitentiaries, security and national defense, etc.
A porous or non-existent social safety net and the lack of meaningful options for retirement income and healthcare during retirement will make employees more dependent on their employers.  Employers will have greater power over employees just because employees are more and more afraid of losing their job or retiring.  When this is combined with weaker worker protections and looser workplace regulations, it will lead to a workforce that is cowed into submission for fear of being pushed into abject poverty.  The lack of education and transferable job skills will also make the position of US workers more tenuous.  The desperation of the workforce will lead to lower wages and benefits as practically anything will be considered better than nothing.

The middle and lower classes has already started feeling the pinch of these policy changes as wages for people outside the top 2% of income-earners has stagnated, and has, in many cases, gone down in real terms from where they were 20 years ago.  Trickle-down is an economic theory that no well-educated, well-respected economist subscribes to.  Making the wealthy wealthier will not improve the conditions of the others.  It will only make wealth and income inequality more acute.  And rising income and wealth inequality is the first sign of a failing society.

So, what would be the ultimate result if this vision comes to pass?  The US would become a 2-class society with a few super-wealthy robber barons, and millions of poor, uneducated laborers.  There would be virtually no middle class to speak of.  Cities will be vast slums with exclusive gated communities for the wealthy.  These communities will be guarded by military-style security outfits that will keep the chaos and riots (which will be commonplace everywhere else) outside these pockets of tranquility.  It will be a country with a high average income, but a tiny median income.  It will be a country in which some people will have everything they want and others will have nothing they need, leave alone want.  It will be a country where most of the land is polluted, stripped of natural beauty or resources, and unfit for human life, while the rich few have their own private lakes, rivers, pristine forests, etc. for their own entertainment and enjoyment.  It will be a land of serfs, controlled by wealthy, dynastic rulers.  It will be a land of opportunity for the few, and a land of despair for the many.

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