Join the new world

Today, the Duchy of Wessex Newspaper has decried the change in the worker productivity formula. While the argument from Wessex SO is compelling, there is another perspective that should be heard. Quite simply, the change in the productivity formula will save a number of Canadian resource companies!

For those of you who are unfamiliar with the productivity formula, under the old system to calculate how much you would produce when you worked we used this formula:

(Worker skill level /2)
….. times
(1 + number of employees/10) – If at or below 10 employees
Or
(3-number of employees/10) –if over 10 employees
…..times
(1+2*employee wellness/100)
…..times
(Resource bonus)
…..times
(Trivia bonus)—calculated
…..times
(11-company quality)/10

More simply, a worker in a Q1 company with a skill level of 3, in a 10 employee company, with a 98 wellness, who answered one trivia question correctly, would produce roughly 86 units of resource per day. If all the company employees worked to the same ability, then the total production for the day would be 860 units of resource.

Today, the formula was changed. Now, instead of (worker skill level / 2) we use (worker skill level), but the total production is multiplied by 0.25. That worker who was producing 86 units is now producing about 9.5 units. The company daily total had dropped from 860 units down to 96 units of resource.

Our first thought—likely shared by many readers—was that a drop in production is BAD! However, after some thought, we believe that the drop is not just good, but imperative. There is no value to a company in producing 800+ units per day if no one is buying. All it does is create a massive stockpile: identical to the manufacturing sectors. The market is flooded with resources because companies are trying to dump that stockpile. How bad is it? Here is a snapshot (1327h MST)

Grain—8 companies selling Q1—Lowest price $0.03 per unit

Diamonds—7 companies selling Q1— Lowest price $0.02 per unit

Iron—2 companies selling Q1— Lowest price$0.20 per unit

Oil—1 company selling Q1— Lowest price $0.10 per unit

Wood—11 companies selling Q1— Lowest price $0.08

We can almost guarantee that the Grain and Diamond companies are selling at a loss. The Wood company is selling at near break-even. Only the Iron companies are selling at a profitable price. At this rate, we are going to see a massive collapse of the resource industry.

Part of the problem is that salaries being paid to workers. In a previous article we discussed the wage structure for ZanCo West Lumber. http://www.erepublik.com/en/article/you-can-build-canada-s-resource-sector-692189/1> In that article, Wessex SO slammed ZanCo for paying wages that were too low. Today, Wessex SO is suggesting that worker salaries need to be cut by $1 – 2, “In a week Canada has managed to go from a $8 wage in 3.00 to a $4 wage.” Amazingly, the wages at ZanCo West Lumber do not need to be cut. The workers for ZanCo West, who have been loyal to the company, do not deserve a cut. Unfortunately, too many companies saw a great potential for wealth in the resource sector. They paid high wages to draw workers in. Now they are finding that they cannot meet the expectations.

There is another item that all business owners must consider. Far too many companies are employing more than the “maximum production” employee level for their industry. Under the v1 productivity formula, companies are punished for employing too many workers (see the second item in the formula). Any resource company with 10 employees has a multiplier of 2. If they have 12 staff then that multiplier drops to 1.8; the employee production drops to 8.8 units per day. If they employ 15 staff then production drops to 7.4 per day. That drop in production will raise the company’s breakeven point by 30% or more. It is a controllable item for the wise business owner. Unfortunately, it will lead to an increase in unemployment that must be resolved.

In fairness, we must agree with the Wessex suggestions for improving demand. However, we believe that these solutions should be considered as a partial solution to the unemployment problem. We also believe that rather than picking one or the other of the solutions, the Government should institute both of the Wessex suggestion. A Q1 and Q1 Defense Company should be opened; and the Ministry of Industries companies (training companies) should be re-opened. This would help create more jobs, and it would stimulate the resource markets. These acts may be the only thing to save the Canadian economy.

Right now, any business owner in the manufacturing sector should buy-up as much of the cheap resources as they can afford. Resource prices will be jumping by about 650% in the next day or two. Workers, and the unemployed need to start pressuring the Government to start businesses that will provide you with a salary to survive on. And all Canadians need to do everything in their power to support Canadian businesses. If we all work together, we can weather this storm!