How To Bring Raw Material Cost Down
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by denversbest02
Pay Schemes (wood, grain, and oil)
I believe a major part of or economy problems is due to business owners and workers not knowing exactly how much they should be paid due to their productivity. Also because our wages are being controlled by the higher quality companies and the price of the good is being controlled by lower quality companies. This article will explain what the ideal pay scheme is for all industries in order to break even, even make big profits at an affordable price. These numbers are based on my own productivity calculator, so there might be errors. lol. I believe if businesses follow this model, we will see inflation start to slow, prices begin to drop and our economy can get back on track.
Basic information:
Citizens with skills:
0-1, increase their skill at 0.5 each time they work. So in 2 days they will be skill 1.
1-2, increase at 0.25 each time. In 4 days they will reach skill 2. (6 days total)
2-3, increase at 0.10 each time. In 10 days, they will reach skill 3. (16 days total)
3-4.05, increase at .05 each time. In 21 days, they will reach skill 4.05 (37 days total)
>4.05, increase at .02 each time. Every 50 days, they increase a skill level.
As you can see, it takes 36 days to reach skill of 4, and 86 days to reach skill level 5.
Raw Materials (RM)
To start, I want to say if you own a raw material company and aren’t in a high productivity region, than don’t expect to make as much profit if any compared another company that is. We do not have a region in USA that has high productivity of diamonds; therefore we will see high prices. To counter this problem, we need companies to go out into other countries and export them into the US. If not this, we need citizens who are willing to make less, which is unlikely. Once we can get a steady flow of affordable diamonds, than we will see gift prices come down. This also holds true for iron/guns. So for RM prices this should be a reference of how much to pay and charge.
I will assume that companies have efficient number of employees. For RM its 10. And that employees get an average trivia score of + 50%.
Let’s look at grain, oil, and woo😛
Skill: 0.5
Wellness: 50
Company Quality: 1, 2
Productivity: 1.50, 1.35
Should work in a quality 1 or 2 company.
Optimal salary: $0.75 (Q1),
Current salary poste😛
$1.00 – $1.25
Optimal Market price = $0.60 for Q1
Current Market price = range from $0.57 (oil) - $0.90 (wood)
This worker produces 1.50 RM at $0.60 each = $0.90. Therefore we could pay the worker at most $0.75 just to break even. Since our minimum wage is $1.00, the only way to make money is by raising prices. But they are only 0 skill for 2 days.
Skill: 1.5 (average between 1 and 2)
Wellness: 60
Company Quality: 1, 2, 3
Productivity: 4.95, 4.46, 3.96
Should work in a quality 1 company
Optimal salary: $3.00 (Q1),
Current salary poste😛
$4.00 – $4.25
Optimal market price = $0.60 for Q1,
Current market price = range from $0.57 (oil) - $0.90 (wood)
With this model, a company would break even paying $3 per worker per day.
*with only a medium productivity, you are looking at half of the production, therefore twice the cost.
Skill: 2.5
Wellness: 70
Company Quality: 1, 2, 3
Productivity: 9.00, 8.10, 7.20
Could work for Q1 or Q2.
Optimal salary: $5.00 (Q1), 5.00 + 2.30 (price of Q2 food – Q1 food; about 2.50) = $7.50
Current salary poste😛
$6.75 – $7.00
Optimal market price: $0.60 (Q1) and $1.20 (Q2)
Current market price: Q1 range from $0.57 (oil) - $0.90 (wood); Q2 $0.94 (oil) to $1.65 (wood)
Profit (per person per day): Q1 = $0.40, Q2 = $2.22
Q1 company would break even at this cost, while Q2 company would actually make $2.02 per worker per day.
Skill: 3.5
Wellness: 80
Company Quality: 1, 2, 3
Productivity: 13.65, 12.29, 10.92
Could work for Q1, Q2, or Q3.
Optimal salary: $8.00 (Q1), $13.00 (Q2), $17.00 (Q3)
Current salary offers: $11.50
Optimal market price: $0.60 (Q1), $1.20 (Q2), $1.80 (Q3)
Current market price: Q1 range from $0.57 (oil) - $0.90 (wood); Q2 $0.94 (oil) to $1.65 (wood); $1.96 (grain) to $3.00 (wood)
Profit (per person per day): Q1 = $0.20, Q2 = $1.75, Q3 = $2.66
If you notice, the higher quality company you have, the more money you can potentially make. A Q2 company makes $1.75 per worker per day. A Q3 makes $2.66 per worker per day.
Skill: 4.5
Wellness: 90
Company Quality: 1, 2, 3, 4
Productivity: 18.90, 17.01, 15.12, 13.23
Could work for Q1, Q2, or Q3.
Optimal salary: $10.00 (Q1), $18.00 (Q2), $24.00 (Q3), $28.00 (Q4)
Current salary offers: $20.00
Optimal market price: $0.60 (Q1), $1.20 (Q2), $1.80 (Q3), $2.40 (Q4)
Current market price: Q1 range from $0.57 (oil) - $0.90 (wood); Q2 $0.94 (oil) to $1.65 (wood); Q3 $1.96 (grain) to $2.40 (wood); Q4 $3.00 (wood)
Profit (per person per day): Q1 = $1.34, Q2 = $2.41, Q3 = $3.22, Q4 = $3.75
**make sure you only have 10 workers. Any less/more hurts your productivity by 10% up to 50%. You could potentially only get 6.82 productivity instead of 13.65 just because of this mistake.
As you can see, making a profit is relatively easy and we can keep prices low. The problem we are having is medium productivity businesses are competing with high productivity companies. This is forcing the price at the level of medium productivity, when it could be much lower. Also, to increase stock, upgrade your company qualities, this will produce a lot more.
Again to show how important high productivity is,
3.5 skill makes 5.46 productivity under medium, while the same skill makes 10.92 under high.
Also, the higher quality companies need to take control of this market, and stop being so greedy. Q1, companies should not be making the same amount of profit as Q3. And with this model you can see that it is true.
As always, any criticism will be gladly accepted. Also I will be posting on diamonds next article so please subscribe.
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Comments
So it comes out. It's the setting of a national minimum wage that has our markets screwed. I knew there was a reason I voted No.
Good article Denver. Voted.
I would love to pay these wages but I wouldn't have any employees.
.50 to .75 sound like a resonable min. wage after all no body will stay at a job that pays that
I'm returning 100% of my Q1 grain profits to my employees to try and keep wages competitive, but the wages are STILL lower than the market average. We're in a high quality region with reasonable wellness scores.
The only explanation for the average is that companies are willing to lose money week-by-week to retain employees. The wealth is being transferred directly from business owner to employee.
Arguing logically isn't going to have any effect on businesses where the bottom line is disregarded.
The labor market is still not doing a good job of distinguishing a high-wage, high-quality job from a medium-wage, low quality one. The lower quality companies are trying to offer the same wages as high-quality just to keep workers interested. More articles (like this one) need to communicate the idea that high-quality companies should naturally be paying their workers more.
One factor I take issue with is the "optimal market price" idea. In a free market, prices will always include competitive pressure downwards. Since high-quality raw materials have much higher utility than lower, but don't cost proportionally more labor to produce, the price will never reach the 1:2:3:4:5 ratio you suggest. Undercutting by high-quality producers will always shift price ratios toward the 1 : 1.11 : 1.25 : 1.43 : 1.67 defined by productivity and labor cost.
Very informative article.
unfortunately if you set those prices no guys will work for you because there iwll ALWAYS be someone offering 0.5 more than you..
its capitalism baby, the strongest rule and set market standards 🙂
you are americans you should know it better than me....
you are talking of a sort of communist like "organized" state economy.
@worldwide imports
its not that businesses are losing money, its that they can pay higher wages due to the productivity formula. With the way the RM productivity is set up, don't expect to make much profit as a Q1 company. As you move up Qualities, you can pay higher wages, and make more profit.
inflation isnt to do with productivity, it has to do with money supply. and in this war, there was massive amounts of money being used that wasnt already there... it was money that was printed. as the money was printed for gifts and weapons, there was a greater supply in circulation. this greater supply of money led to a high demand of money, and with more money to pay more for the demand, prices escalate as there is more money to bid up with. if there was a limited supply of money to keep bidding for products with, there would be a limit to how far people could spend the money to bid up prices. money became cheap because the fed, just like irl, printed money.
@Sweet Group - This idea that somebody will always be willing to pay more is one of the stupider parts of capitalism. It's called a bubble. There is actually a point where one _shouldn't_ want to pay more for an employee.
Employees have value because they generate productivity. Productivity is directly translatable into money. These are actually really easy to determine numbers.
When you pay more wages than the productivity is worth you lose money.
Articles like this one aren't espousing communism, they are encouraging business owners to remove their skull from their rectums.
because of capitalism and bussinesses trying to compete this idea will never work. People are always wanting to make more money and some people make it and some businesses fail.
@denversbest: Q1 companies matching wages with Q2-Q5 companies ARE losing money. There are Q1 business owners that don't understand why, though.
High Prices are the direct result of Inflation in the money supply. Solve that issue and you'll see prices declining. You cannot inflate prices if excess money in the economy doesn't exist.
Or I should say, you can try to inflate prices, but when nobody has the money to pay that price, 1 of 2 things will happen. Either (a) you go bankrupt because you have zero sales or (b) you lower your prices.
We're a bunch of pirates and war profiteers and we won't rest until you're out of business and crying.
jasonalwaysready, increase in money supply is not the only issue with the market. In fact, it is not certain how largely the effect of the increase in money supply is effecting our markets. The increase in money supply probably factors in, but its more caused by supply and demand. When supply is low and demand is high, prices rise. That continues to be the case. A form of post war socialism would be the only way of tweaking market prices and keeping prices stabilized.
the supply and demand problem of high prices is a symptom of the disease of high money supply. stop printing unending money (out of the fed to buy war products) and youll stop the rise in prices. money is cheap, so it takes more of it to buy the same amount of product.
Prices are not high for everything. Prices for Q1 grain have actually dropped by 15% this week already.
everything that is purchased by free money from the fed has skyrocketed.
The government hasn't printed any money since right after V1 started; we'd been stockpiling money from taxes to spend in case of war, and then we spent it when the war came. True, that lead to inflation, since the money was being used instead of just sitting there, but that'll naturally end when the stockpile runs out (or the war ends).
Productions is correct. Although the outcome is the same. Printing money isn't really a problem at the time its printed. The problem starts when that money enters the economy. So if the Govt printed $1/Trillion Dollars and stuffed it into a pillow and only $100,000 circulated in the economy, no biggie. But if that $1/trillion was spent to buy Weapons, Defense Systems, Gifts, etc, now the money is in the economy and its impact is felt within hours/days.
So when the War started and money began flowing out of the Government's pockets, all those new dollars destroyed the value of the existing dollars in the economy. So just like Jason said, it now takes more dollars to purchase the same goods as it did before. Q1 Food was $1, now its nearly $2. If you wages aren't adjusting for inflation, you are getting screwed. This will then trigger Wage-Push Inflation in which workers demand more and businesses have to fork it over, else lose workers. This causes businesses to pass along the costs in terms of higher prices for products.
This cycle feeds on itself as long as new money keeps coming into the economy. The only way to stop it is to stop the money flow. The only way to restore prices back to their original price points is to start pulling money out of the economy. Thus making Dollars scarce. This has political death attached to it, because when there is a shortage of dollars to go around, guess what happens? Workers start getting laid off and/or wages start getting cut. Business start failing because the number of dollars (ie: musical chairs) cannot sustain their current levels. This will then piss off the population and existing politicians might find themselves unemployed in the next election.
Inflation is EVIL. And curing Inflation is gut wrenching. Hats off to the politician who steps up to solve the problem. I recommend implementation on Day 1, cause by Day 30, your political capital might be zapped.
wow
Quote: wow