**Scenario 1**
The first instance occurred today, actually. We have a trip coming up on Saturday and in our final preparations to get the boat super shiny and clean for the boss, we were looking for an extra hand. We told the dockmaster up front that we would pay $20/hour and to let whoever he sent our way to let him know in advance. A guy shows up a little while later and starts sizing up the boat, walking down the dock trying to gauge the length of it and counting the number of decks etc. Our first mate stopped him and let him know up front that we were paying $20/hour and that the dockmaster should have told him that up front before sending him down.
"Nah, nah man. How many decks you got? I get paid $2.50 a foot man", was this Bahamian's reply to our offer. Our boat is 130' feet so he wanted $325 for what could have been anything between 4 and 7 hours work, or apprx. $45-80 an hour.
"Sorry bro, $20 bucks an hour is what it is, take it or leave it."
Well, believe it or not, this Bahamian decided it wasn't worth it and turned down the work, deciding he would rather be unemployed for the day than to work for 6-7 hours at $20/hour and get a free lunch out of it too. We decided, based on prior experience, that most Bahamians, or any dayworker really, are not worth more than $20/hour and that we could manage the work on our own rather than employ someone for more than that.
**Scenario 2**
We've been experiencing some mechanical and electrical issues recently, nothing new on a boat, something's always broken. Being in the islands, it's really difficult to get reliable and quality help on some of these things. There is one electrician on the island and in the yachting community who has a reputation for being an EXCELLENT electrician and who is also reliable and hard-working. He knows this and therefore he knows he can charge an arm and a leg for his services. Recently, he was supposed to arrive at the boat at 8:30. An hour later he still hadn't arrive but did call our engineer and told him there was an emergency that he got called away to while he was en route to our job and that he would be there at 10am.
He showed up at 10am, as promised, and he and the engineer sorted out the problem by noon. He said his going rate was $80/hour and we owed him for 4 hours work.
"Four hours work? How did you come up with that?" asked our incredulous engineer.
"I charge for travel time to and from the boat. I left at 8am and finish at noon, that's four hours."
Nevermind that during his drive time he veered off to help another vessel. Nevermind that most people don't charge for drive time. He also casually informed our engineer that he's raising his rates to $120/hour in the near future. But, our engineer figured, he is the best electrician on the island, he did sort the problem out, and he has dropped everything and come and helped us in an emergency situation before too. Alright, $320 bucks it is then!
So what can we learn from these scenarios?
Value is Subjective
In scenario 1, for whatever reason, the Bahamian worker thought $20/hour was not enough to entice him away from whatever other stuff he could have been doing that day. Sort of like supermodel Naomi Campbell, he doesn't get out of bed for less than $300 a day apparently.
And from our end, we knew from experience that his productivity would not be worth more than $20/hour so we both mutually decided we would not go through with the transaction and both parties walked away, maybe somewhat disappointed, but overall no worse for the wear.
In scenario 2, now we find a situation in which we did find it of value to pay the electrician his $80/hour AND go along with his four hours of work malarkey. He's got the market cornered and he knows it. Now, will we continue to use him knowing he's going to raise his rates to $120/hour? Hmm, maybe only in an emergency. We might find a better value hiring someone else moving forward, but that's our call. If the electrician's business drops off too much, he might lower his rate to find a better equilibrium, but that's his call.
Other electricians might also see him as an example and start emulating his work ethic (although you can't fake real knowledge and skill and consumers will notice that sooner or later) but if they're qualified as well they might start to eat into the electrician's business and might put market pressure on him to lower his rates. All these scenarios are okay and, once again, these are all things that are none of the government's business. Gotta love the free market!
What shouldn't happen is the government shouldn't give in to cries of any cabal of workers who might gang up on this shining star and demand price controls and equal workload or work pay regulations or force this guy to join a group of workers whereby they distribute the work fairly amongst them all. There are countless modern day and historical examples where government tries to interfere in the business environment to make it "fair" and supersedes the natural market forces that arise from two parties who are free to make business decisions that best suit each party mutually like in the above examples.
For politicians, though, really it boils down to pandering for votes. If a group of many workers is angry that one certain worker or one certain business is running circles around them and they petition the government to "do something", well the politician measures up how many votes he/she will receive to appease the "do something" crowd vs. the number of votes he/she will receive from allowing that person to continue operating as normal; usually the "do something" crowd has far more numbers on their side and so something "gets done" to the detriment of the other party. Either that or the politician has a connected friend in the industry and offers laws and regulations to benefit that connected friend in exchange for campaign donations, once again to the detriment of the other party. Gotta love democracy!
But I digress. I believe there are many other lessons to be learned from the above exchanges but for the sake of brevity, I'll end it here. I'd like to hear from you. Did you find anything instructive in either of those scenarios? If so, what?
**Update: After we sent away the dayworker from the first scenario, the dockmaster then ended up getting his son, who was probably about 20ish, to come over and help. He, obviously, was happy for the money and he did a good job for us too. Value is subjective.
"I charge for travel time to and from the boat. I left at 8am and finish at noon, that's four hours."
ReplyDeleteWere you already a mile out to sea? $120 would be a rate reduction seeing as he charged you $160/hr for his 2 hours of work. I can see an upfront charge just for showing up but for $80/hr travel he should have been there in ten minutes. It's like saying you should value his poor driving ability equally with his electrical skills. As a skilled tradesman, his behavior pisses me off.
I already wrote a lengthy response just to accidentally delete it in said of publishing it. I will just assume it wasn't very good and we are both better off for it not to be read.
Hehe, yeah it is pretty shady but given all the other factors, in this instance, it's a cost we were willing to pony up. If he starts charging $120/hour and then wants to still charge people for drive time, well, he might see his business start to drop off significantly.
DeleteI think this is all very illustrative of how a free market works, how people respond to market forces, the fact that value is subjective and even though it's a bit of a crock that we had to pay for his drive time, we still did anyway because he's done good for us in the past and did so that time as well, and how governments and other central planning agencies can't possibly control for the myriad factors that go into the decisions we make as consumers or producers.