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Author Topic: How could wages in Bitcoin work?  (Read 2960 times)
bullioner
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February 10, 2013, 08:00:07 PM
 #41

The answer is that even if wages were paid in Bitcoins, they would not be a fixed quantity of Bitcoins.  If wages are paid in a commodity whose value fluctuates a lot (such as Bitcoin), it would make sense to try and define the amount in terms of a fixed amount of purchasing power.  One way to do this is to use a commodity price index for a basket of commodities.   

Bitcoin, in conjunction with contracts using commodity price indexes, can thus come fairly close to what Hayek envisages in The Denationalisation of Money.  Bitcoin on its own can't.

Though the large fiat currencies lose lots of value over time, they're not all that volatile, normally only losing a few percent of their value per year.  Wages defined in these fiats thus tend to lose a few percent a year in value in real terms automatically.  This tends to be manageable because of the smoothness, lowish annual rate of change, and ability to negotiate new rates from time to time.  Bitcoin, gold, or anything with a fixed amount in existence, is unlikely to be suitable for fixing wages in directly, because their value will naturally be more volatile.
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February 10, 2013, 08:22:28 PM
 #42

If a company makes btc profits only, workers can be entitled to a percent share of profits based on their position, hours worked, etc. Call it a co-op, an employee-owned company, or whatever you like. It would take some active involvement of everyone to manage things and renegotiate all pieces of cake when new hires are made or people quit, but there are historical examples where this worked (see worker self-management).
Bitcoin would further enhance things by providing necessary transparency and audit trail.

Example: majority of people involved decides to hire a new engineer. Everyone's share is reduced to accomodate for the new hire's sallary of 1.23% of the net profit. The net profit is expected to increase due to increased productivity, so everyone's happy.
 

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February 10, 2013, 08:31:16 PM
 #43

The answer is that even if wages were paid in Bitcoins, they would not be a fixed quantity of Bitcoins.  If wages are paid in a commodity whose value fluctuates a lot (such as Bitcoin), it would make sense to try and define the amount in terms of a fixed amount of purchasing power.  One way to do this is to use a commodity price index for a basket of commodities.   

Bitcoin, in conjunction with contracts using commodity price indexes, can thus come fairly close to what Hayek envisages in The Denationalisation of Money.  Bitcoin on its own can't.

Though the large fiat currencies lose lots of value over time, they're not all that volatile, normally only losing a few percent of their value per year.  Wages defined in these fiats thus tend to lose a few percent a year in value in real terms automatically.  This tends to be manageable because of the smoothness, lowish annual rate of change, and ability to negotiate new rates from time to time.  Bitcoin, gold, or anything with a fixed amount in existence, is unlikely to be suitable for fixing wages in directly, because their value will naturally be more volatile.

Sure, tying bitcoin to commodities via contracts would certainly stabilize bitcoin prices.  However, I don't see why it has to be tied in with wages.  We need actual commodity producers and consumers trading commodities for bitcoin and bitcoin for commodities.  Once this is happening, bitcoin can be used to specify wages.  If you tie the wages directly to the commodities, you have a whole lot of people interested in increasing the price of commodities without actually wanting to consume them.  You'll get manipulation and false signals all the time and things will be way more volatile than they need to be.

https://www.bitcoin.org/bitcoin.pdf
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February 10, 2013, 09:09:33 PM
 #44

How would a Manufacturer of goods pay in bitcoin?
Example: would a bed springs manufacturer who takes spools of metal and runs it through machines to create springs pay for raw material and sell it`s products in bitcoin? If so at what price?

Also, would the Company that purchases those bed springs to cover them up
with material before selling them to the furniture stores for bitcoin, pay for material in
bitcoin as well as pay its workers in bitcoin? at what price?

I think we have a very long way before bitcoin replaces fiat money  Angry

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February 10, 2013, 09:14:55 PM
 #45

In our current inflationary system, the bulk of the power is granted to the business owners. Owners are free to bully their employees, refuse to give wage increases, and attack unions.

With a deflationary system, the power is reversed. The employees can choose to decline wage decreases if they do not consider them fair—leaving the owners to negotiate properly with the unions.

Paying wages in a deflationary system is more fair, not less so.
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February 10, 2013, 09:15:25 PM
 #46

How would a Manufacturer of goods pay in bitcoin?
Example: would a bed springs manufacturer who takes spools of metal and runs it through machines to create springs pay for raw material and sell it`s products in bitcoin? If so at what price?

Ask metal supplier for bitcoin address, select send bitcoins, enter address and amount.  The price would be set by the supplier, same as it is with fiat.

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Also, would the Company that purchases those bed springs to cover them up
with material before selling them to the furniture stores for bitcoin, pay for material in
bitcoin as well as pay its workers in bitcoin? at what price?

Maybe.  Although having the entire supply chain and output chain in BTC has some advantages, each interaction can use a different payment method if they wish.  Again, manufacturer/supplier usually sets the price.

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I think we have a very long way before bitcoin replaces fiat money  Angry

Duh.  However, business to business payments are taking place today in bitcoin.  Additionally, a very small group of people do earn a portion of their wages in bitcoin.  Personally, I've done several programming jobs for bitcoin.

https://www.bitcoin.org/bitcoin.pdf
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justusranvier
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February 10, 2013, 09:17:16 PM
 #47

How would a Manufacturer of goods pay in bitcoin?
Example: would a bed springs manufacturer who takes spools of metal and runs it through machines to create springs pay for raw material and sell it`s products in bitcoin? If so at what price?

Also, would the Company that purchases those bed springs to cover them up
with material before selling them to the furniture stores for bitcoin, pay for material in
bitcoin as well as pay its workers in bitcoin? at what price?

I think we have a very long way before bitcoin replaces fiat money  Angry
It will start with the mattress retailer, who will use a payment processor like BitPay to accept bitcoins from their customers and get paid in local currency.

At some point the retailer will start asking its suppliers if any of them are willing to take bitcoins instead of dollars, or perhaps their overseas supplier will approach them and ask for bitcoins because they like the faster clearing time.

In this way Bitcoin adoption starts out on the edges of the supply chain and works its way inward.
bullioner
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February 11, 2013, 02:18:07 AM
 #48

[...]
Bitcoin, in conjunction with contracts using commodity price indexes, can thus come fairly close to what Hayek envisages in The Denationalisation of Money.  Bitcoin on its own can't.

[...]
[...]  If you tie the wages directly to the commodities, you have a whole lot of people interested in increasing the price of commodities without actually wanting to consume them.  You'll get manipulation and false signals all the time and things will be way more volatile than they need to be.

Interesting point.  This did occur to me when reading the book I mentioned.  The risk in general is that by trying to make the purchasing power of a volatile but monetised commodity stable by tying it to a basket of commodities, you cause the unintended side effect of monetising all the commodities in the basket, making them unnecessarily expensive to consume.  This wasn't addressed to Hayek in the book.  He does talk about an issuer of his hypothetical money buying some of the actual commodities to maintain rates, but he doesn't mention the risks around making whole classes of commodities less consumable in the process.
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February 11, 2013, 03:12:19 AM
 #49

I think the simplest way this could be done is just by tying them to the dollar. Otherwise fixed BTC salaries I think are wayyy down the line.
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February 11, 2013, 05:39:44 AM
 #50


Example: majority of people involved decides to hire a new engineer. Everyone's share is reduced to accomodate for the new hire's sallary of 1.23% of the net profit. The net profit is expected to increase due to increased productivity, so everyone's happy.

Pay based on company performance could definitely work, and is already done with stock options today, however, co-op management and your example likely won't. Employees often don't have management skills, and can't see the whole of business operations from the top, and thus can't make business changing decisions like where to concentrate resources or whom to hire.

In our current inflationary system, the bulk of the power is granted to the business owners. Owners are free to bully their employees, refuse to give wage increases, and attack unions.

And employees are free to leave and find a job elsewhere. The job isn't the employee's, it's given to them by the business owners.

With a deflationary system, the power is reversed. The employees can choose to decline wage decreases if they do not consider them fair—leaving the owners to negotiate properly with the unions.

The employee can decide to decline a wage decrease, and the owners will just fire them. Especially if the business doesn't make enough money to afford them any more. The power is still will the one who owns the business, and gives the jobs.
dree12
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February 11, 2013, 09:38:39 PM
 #51

In our current inflationary system, the bulk of the power is granted to the business owners. Owners are free to bully their employees, refuse to give wage increases, and attack unions.

And employees are free to leave and find a job elsewhere. The job isn't the employee's, it's given to them by the business owners.
The job is taken by the employees.

With a deflationary system, the power is reversed. The employees can choose to decline wage decreases if they do not consider them fair—leaving the owners to negotiate properly with the unions.

The employee can decide to decline a wage decrease, and the owners will just fire them. Especially if the business doesn't make enough money to afford them any more. The power is still will the one who owns the business, and gives the jobs.
The business can decide to decline a wage increase, and the employees will just leave.

Employees and owners are a symbiotic relationship. Neither can live without the other. The more dominant in the relationship depends on which one maintaining the status quo benefits (owners in inflationary economy, employees in deflationary one).
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February 12, 2013, 05:07:04 AM
 #52

I believe dominance should be determined by how independent the employees are - having transferable skills, not being dependent on a single job, being able to ask for increased job compensation without fear of being laid off, and if they are laid off, being able to find another job or resort to starting a business themselves - and that it should NOT be determined by how much power and force the employee can exhert over the employer, either through threats of union strikes, or legal controls and regulations.
I feel completely comfortable with my employees working on side projects, learning new things, and ask them to update their resumes at least once a year with whatever new skills and tasks they have picked up recently. I WANT them to feel like they don't depend on me, because them not feeling tied to me and their job actually keeps us on friendlier, more open, and more even terms, and keeps the business more productive and innovative. If my employees were in a union, or had some sort of control over keeping their job against my will, the work environment would have been a lot more stressful, with "me vs you" tensions rising often.
dree12
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February 13, 2013, 01:05:21 AM
 #53

I believe dominance should be determined by how independent the employees are - having transferable skills, not being dependent on a single job, being able to ask for increased job compensation without fear of being laid off, and if they are laid off, being able to find another job or resort to starting a business themselves - and that it should NOT be determined by how much power and force the employee can exhert over the employer, either through threats of union strikes, or legal controls and regulations.
I feel completely comfortable with my employees working on side projects, learning new things, and ask them to update their resumes at least once a year with whatever new skills and tasks they have picked up recently. I WANT them to feel like they don't depend on me, because them not feeling tied to me and their job actually keeps us on friendlier, more open, and more even terms, and keeps the business more productive and innovative. If my employees were in a union, or had some sort of control over keeping their job against my will, the work environment would have been a lot more stressful, with "me vs you" tensions rising often.

Suppressing a voluntary union is asserting dominance. I don't support mandatory unions, but trying to eliminate all unions is effectively bullying your employees.
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