MDIA – Employment: Socio-Economic Linkages (140602)

7:46 PM
peterbnyc@gmail.com
www.truevaluemetrics.org
MULTI DIMENSION IMPACT ACCOUNTING (MDIA)
Employment
Socio-Economic Linkage
@truevaluemetric

7:46 PM
C:TVMwebsiteWebsiteTrueValueMetricsOrgTVM-papersMDIA-DiagramsMDIA-Pres-B-Employment-140602.odp
'Manpower' was the driver of economic activity for
most of history. As recently as a couple of hundred
years ago, horses were a big part of power in the
modern economy.
Economic 'progress' has been achieved over the
last 200 years or so by making it possible for labor
to be more productive.
A big part of this has been by using new types of
engines to convert energy into useful work.
EMPLOYMENT - Socio-Economic Linkage

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As people became more productive, more economic
product was produced.
More productivity, more production, more profit and
the potential to pay workers more money.
Workers earning more money enable an improvement
in the quality of life and the standard of living of PEOPLE
During the course of the industrial revolution, there was
a very impressive improvement in the quality of life and
the standard of living for working people in industrialized
countries.

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The same cannot be said for people in non-industrialized
countries.
The labor market conditions were different, with many
people seeking few jobs.
In this situation PROFIT could be maximized with low
wages, poor working conditions that had the least cost.

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As long as the market for the product is an export
market, there is no business incentive to pay higher
wages.
This changes when the market for the product is
driven by the buying power of local people. In this
situation, better pay starts to result in better sales
of the products.
EMPLOYMENT – The Market for Labor

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In the industrialized countries, with rich customers,
and high labor costs, it was possible to increase profits
by moving production to low cost locations and
importing the product into the market.
This approach grew rapidly from the 1970s until now.
When the rich customers ran out of money, the banking
system obliged by creating all sorts of ways for potential
customers to get credit. Initially there was store credit,
that morphed into credit cards and then home equity.
In the end, however, it is wages that enable products to
be purchased and quality of life to be maintained and
improved. In the end 'Wages Are Aggregate Demand!'
EMPLOYMENT – Wages Are Aggregate Demand

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A flourishing society is one where there is a healthy
balance between PEOPLE (employment and wages)
and PROFIT (production and sales).
The amazing improvement in productivity that has
been possible in large part because of our greater
knowledge of science and technology should be the
foundation for a society better than anything that has
ever been possible before.
EMPLOYMENT – Flourishing Society

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There is a VALUE CHAIN that links what is going on in
a business with what is going on with the employees,
their families and their communities.
When payroll goes down, there is a big impact on the
individual employees, their families and their communities.
(1) there is impact on the individual
(2) there is impact on the family
(3) there is impact on the community
EMPLOYMENT – The Benefits

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The impact on the individual may be thought of
as the money that is earned from employment
… a money measure.
But in fact the value measure is more complex.
For individuals with little 'wealth' the income from
employment is very important.
For individuals whose income flow is quite small,
the value of income is very high. The value of
incremental income drops down as income
increases.
For very high incomes, the only value of
incremental income comes 'bragging rights'
EMPLOYMENT – Benefit for the Individual

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For the purpose of demonstration, using the US
as the benchmark:
For annual income up to $15,000 …
there is a value multiplier of 2
For annual income from $15,000 to $30,000 …
there is a value multiplier of 1.5
For annual income from $30,000 to $60,000 …
For annual income up to $60,000 to $200,000 …
For annual income higher than $200,000 …
EMPLOYMENT – Benefit for the Individual

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The impact on the family may also be thought of
as the money that is earned from employment
… a money measure.
For families with little 'wealth' the income from the
employment of a single family member is very
important.
For families whose income flow is quite small,
the value of income is very high. The value of
incremental income drops down as income
increases.
For very high incomes, the only value of
incremental income comes 'bragging rights'
EMPLOYMENT – Benefit for the Family

7:46 PM
For the purpose of demonstration, using the US
as the benchmark:
For annual family income up to $25,000 …
For annual family income from $25,000 to $50,000 …
For annual family income from $50,000 to $100,000 …
For annual family income up to $100,000 to $350,000 …
For annual family income higher than $350,000 …
EMPLOYMENT – Benefit for the Family

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In addition to BENEFIT for an individual and the
family, there is also a benefit for the COMMUNITY.
There is a 'multiplier effect' that results from people
in a community spending their money in their
community to buy things that they need.
The value of this 'multiplier' depends on the state
of the families and the state of the community.
EMPLOYMENT – Benefit for Community

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Globalization has been very 'profitable' for large
scale business organizations.
There have been benefits arising in these global
supply chains that should not be overlooked, but
the 'multiplier effect' in local communities has
been diminished significantly.
The value of this 'multiplier' varies significantly
depending on how much of what is purchased
by individuals and families is being produced
locally.
There was a time when the multiplier would be
anywhere in the broad range from 2 to 10. Now, it
is more likely in most communities with almost
complete dependence on remote production
that the multiplier may be less than 2!

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The value of this 'multiplier' also varies significantly
depending on the 'wealth' and 'income' of the
individual and the family.
For annual family income under $100,000 …
the local multiplier needs not be adjusted
For annual family income between $100,000
and $350,000 … the local multiplier should be
discounted by 50%
For annual family income between in excess
of $350,000 and up to $1,000,000 … the local
multiplier should be discounted by 90%
For annual family income exceeding $1,000,000
… the local multiplier should be discounted
by 100%

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The theme of this presentation is that employment is
an important socio-economic BENEFIT while also
being a COST to the ORGANIZATION.
This COST is reflected in the dynamic of the supply
chain and the eventual COST of the PRODUCT.
In MDIA analysis, there is also a BENEFIT that is
embedded in the PRODUCT profit and supply
chain history.
Multi Dimension and Multi Perspective optimization
of socio-economic decisions using MDIA type thinking
is going to have very different outcomes than the
prevailing decision making that uses conventional
accounting and profit centric optimization.
EMPLOYMENT – Benefit in the Supply Chain

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The New Economics Foundation (NEF) has
popularized the Local Multiplier 3 (LM3) as a
tool of economic analysis.
MDIA brings the results of a tool like LM3 into
a closer integration of all the socio-economic
factors that are in play all the time.
EMPLOYMENT – Local Multiplier 3 (LM3)

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In the end, the goal of MDIA analysis is better
decision making that is using all of the important
factors of performance in a manner that is easy
and reliable.
This presentation is part of a set of presentations
that aim to inform about MDIA … and set the stage
for ongoing development and deployment of the
system.
Feedback is welcome.

7:46 PM
May 2014
QUESTIONS? FEEDBACK?
peterbnyc@gmail.com
www.truevaluemetrics.org
@truevaluemetric

MDIA – Employment: Socio-Economic Linkages (140602)

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