Sen. Bernie Sanders (I-Vt.) on Wednesday introduced a bill to establish a standard four-day workweek in the United States without any reduction in pay. The bill, over a four-year period, would lowe…
Let’s assess the effects this change could cause on real numbers.
Note: This is a duplicate of a part of a comment I’ve written here above as a response, but I don’t want it to be buried. Hope that’s fine
I’ll take Nutrien’s 2023 audited financial statement as an example. (Numbers in brackets are what’s deducted to get what’s not in brackets)
Sales - 29056
Freight, transportation, distribution - (974)
Cost of goods sold - (19608)
EBIT - 8474
Interest - (w/e)
EBT - 1952
Taxes - (670)
Net earning - 1282
Out of cost of goods sold (2858) is cost of labour, let’s also add (626) from general administrative expenses, and just say it’s all wages.
Effective tax rate - 670/1952*100% = 34,3% (wow, that’s a lot for where I live, also ignoring mining tax for simplicity)
Let’s see what happens to our efficiency if the changes take effect.
All of costs can be divided into Fixed and Variable ones. Labour, in this case, is Variable because we can manipulate it by employing more staff to compensate for reduction in working hours and keep the sales at the same rate. (Contract workers are usually Fixed Cost, but it’s all relative, as no Fixed Cost is ever truly fixed.)
Going from 40 => 32, we have a 20% reduction in working hours. Mind you, this doesn’t mean there will be a 20% hit to productivity. It may be more, it may be less (most likely less), for simplicity let’s say it’s 20%. So, we need 20% more workers to compensate.
(2858+626)*120%=4180.8
New EBT = 1952 + 2858 + 626 - 4180.8 = 1255.2
New net profit = 1255.2*(1-34.3%) = 824.7. Mind you, the effective tax rate will probably be lower if employment affects deductibles and/or grants tax privileges.
So, our net profit margin went from 1282/29056 = 4.4% to 2.8%. Looks bad at first glance, but it’s also a bad year. A year prior net profit margin was at whopping 20.3%, so a decrease from 4.4% to 2.8% would be nothing in comparison.
Will it result in increased prices? Yes, but it will also lead to economic growth, because more free time = people spend more money = companies earn more = companies grow faster, but so does inflation. If they can manage the inflation, I don’t see why this couldn’t be possible.
Reducing net profit doesn’t have any impact on pricing in capitalist markets. It’s not like capitalists have some specific profit percentage they are allowed to hit (unless they’re in a very regulated industry like grid or water supply). They want infinite returns, and they’ll increase prices as much as the market allows to generate more profits.
Capitalists don’t look at a net profit of 4.4% and say “yup that’s enough”, but if it were 2.8% they’d say “damn guess we have to increase prices for customers, I really wish we didn’t have to do this”.
They might increase prices as a retaliatory measure. The same way businesses slashed hours as a result of Obamacare. They didn’t have to, but it benefited them to, and they didn’t see a downside.
They might be able to increase prices, blame it on this law, and have people who are aligned politically with them put up with it and maybe even support their business more to “stick it to the libs”. They already do this with things like inflation, blaming it on Biden and then increasing prices far more than necessary.
Oh, yeah, absolutely. Price policy is a whole different topic. Only monopolies can afford to increase them just because they’re not meeting the expected quota.
Don’t know about “retaliatory measure”, it’s hard to imagine companies uniting like that over it. Usually, they just play by the rules, and those could be the new rules (strong emphasis on “usually”). In fact, if the management is competent, it’s likely that they have already accounted for it, just in case, after the news dropped.
Let’s assess the effects this change could cause on real numbers.
Note: This is a duplicate of a part of a comment I’ve written here above as a response, but I don’t want it to be buried. Hope that’s fine
I’ll take Nutrien’s 2023 audited financial statement as an example. (Numbers in brackets are what’s deducted to get what’s not in brackets)
Out of cost of goods sold (2858) is cost of labour, let’s also add (626) from general administrative expenses, and just say it’s all wages.
Let’s see what happens to our efficiency if the changes take effect.
All of costs can be divided into Fixed and Variable ones. Labour, in this case, is Variable because we can manipulate it by employing more staff to compensate for reduction in working hours and keep the sales at the same rate. (Contract workers are usually Fixed Cost, but it’s all relative, as no Fixed Cost is ever truly fixed.)
Going from 40 => 32, we have a 20% reduction in working hours. Mind you, this doesn’t mean there will be a 20% hit to productivity. It may be more, it may be less (most likely less), for simplicity let’s say it’s 20%. So, we need 20% more workers to compensate. (2858+626)*120%=4180.8
So, our net profit margin went from 1282/29056 = 4.4% to 2.8%. Looks bad at first glance, but it’s also a bad year. A year prior net profit margin was at whopping 20.3%, so a decrease from 4.4% to 2.8% would be nothing in comparison.
Will it result in increased prices? Yes, but it will also lead to economic growth, because more free time = people spend more money = companies earn more = companies grow faster, but so does inflation. If they can manage the inflation, I don’t see why this couldn’t be possible.
Reducing net profit doesn’t have any impact on pricing in capitalist markets. It’s not like capitalists have some specific profit percentage they are allowed to hit (unless they’re in a very regulated industry like grid or water supply). They want infinite returns, and they’ll increase prices as much as the market allows to generate more profits.
Capitalists don’t look at a net profit of 4.4% and say “yup that’s enough”, but if it were 2.8% they’d say “damn guess we have to increase prices for customers, I really wish we didn’t have to do this”.
They might increase prices as a retaliatory measure. The same way businesses slashed hours as a result of Obamacare. They didn’t have to, but it benefited them to, and they didn’t see a downside.
They might be able to increase prices, blame it on this law, and have people who are aligned politically with them put up with it and maybe even support their business more to “stick it to the libs”. They already do this with things like inflation, blaming it on Biden and then increasing prices far more than necessary.
Oh, yeah, absolutely. Price policy is a whole different topic. Only monopolies can afford to increase them just because they’re not meeting the expected quota.
Don’t know about “retaliatory measure”, it’s hard to imagine companies uniting like that over it. Usually, they just play by the rules, and those could be the new rules (strong emphasis on “usually”). In fact, if the management is competent, it’s likely that they have already accounted for it, just in case, after the news dropped.
They don’t all need to band together. They just need a few big ones to do it, then everyone else will just jump on the bandwagon.