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Thread: Be An Independant Contractor or Employee?

  1. #26
    Banned Melonie's Avatar
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    Default Re: Be An Independant Contractor or Employee?

    The ugly and lazyass unfortunates among us deserve equal protection under the law, dammit.
    Yes they do ... but this does not mean that they deserve to have their weekly paycheck 'subsidized' by a de-facto transfer of wealth/earnings out of the pockets of dancers who produce more club income because they are indeed more beautiful and/or hustling harder. This is exactly what happens when a club collects say a 50% 'retainer' on every private dance sold by every dancer which the club then uses to fund weekly base pay checks and unemployment/disability premiums. The most beautiful/hardest hustling girls who sell the most private dances (often by a 3-4-5 to 1 margin over their less beautiful less energetic co-workers) wind up contributing a huge amount of 'dollars' to the base pay and benefit pool rather than their own purses, which the club then uses to 'subsidize' equal base pay and benefit coverage for less productive co-workers.

    From a financial incentive standpoint for a top notch dancer who is very beautiful and a hustler, this can translate into the difference between earning $2,000 a week without benefits as an IC, versus earning $1,200 with benefits as an 'employee' with base pay included. At the same time, for a less top notch dancer, this could translate into earning $500 a week without benefits as an IC versus earning $450 a week with benefits as an 'employee' with base pay included. Unfortunately, in the real world, it won't take long for the top notch dancers to figure out that they are giving up some 40% of their income potential versus moving on to another club which treats them as an IC. When the the top notch dancers do move on, the club and the remaining 'employee' dancers have lost both a large part of their customer appeal, as well as the 'financial engine' which provided sufficient cash flow for the club to be able to afford the weekly base pay and insurance premiums for 'mediocre' dancers - many of which are actually not productive enough given a 50-50% private dance split to generate the club revenue necessary to cover the cost of their base pay and benefit insurance premiums. This is of course a formula for financial disaster a la the Lusty Lady.
    Last edited by Melonie; 02-13-2005 at 09:35 AM.

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    Default Re: Be An Independant Contractor or Employee?

    Quote Originally Posted by Melonie
    Yes they do ... but this does not mean that they deserve to have their weekly paycheck 'subsidized' by a de-facto transfer of wealth/earnings out of the pockets of dancers who produce more club income because they are indeed more beautiful and/or hustling harder.
    I was joking about ugly-ists. Lazy-ists are another matter.

    [high earner vs. lower earner]

    ...the difference between earning $2,000 a week without benefits as an IC, versus earning $1,200 with benefits as an 'employee' with base pay included. At the same time, for a less top notch dancer, this could translate into earning $500 a week without benefits as an IC versus earning $450 a week with benefits as an 'employee' with base pay included.
    These numbers seem a bit exaggerated to me, but nevertheless, what you are referring to here is the US tax and benefit system in general. Progressive taxation. I'm not sure if this is your argument, but arguing that one shouldn't pay taxes because the system is unfair is a perilous position to take. Correct me if I'm wrong. If you are only talking about the non-tax witholding deductions, your model seems highly unlikely.

    Merely proclaiming that some catastrophic change will occur without support beyond vague hand waving is unpersuasive.

    ...This is of course a formula for financial disaster a la the Lusty Lady.
    A major problem arises in any industry when reforms and regulation enforcement are not uniform. If tax laws simply go enforced for one business vs. another, it is hardly surprising that the one not paying taxes wins. If all competing businesses in this (LL) locality operated on a level playing field, no doubt the "financial" disaster of LL may never have occurred, and an a drastically improved regional business model could have emerged.

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    Banned Melonie's Avatar
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    Default Re: Be An Independant Contractor or Employee?

    These numbers seem a bit exaggerated to me, but nevertheless, what you are referring to here is the US tax and benefit system in general. Progressive taxation. I'm not sure if this is your argument, but arguing that one shouldn't pay taxes because the system is unfair is a perilous position to take. Correct me if I'm wrong.
    OK I need to correct you because you're wrong. Nowhere in the IC versus 'employee' example did I mean to imply that the IC should not declare her IC income, and pay estimated taxes on that income. But you should not equate legally sanctioned gov't taxation of dancer income with club de-facto 'taxation' i.e. confiscation and redistribution of dancer income within the club's own 'employee' payroll system.

    To clarify my example, let's begin with a basic assumption that the most beautiful hardest hustling dancer in a club would typically sell 100 private dances per week at $20 each, while a less beautiful less motivated dancer might sell 25 private dances per week (roughly 20 versus 5 private dances per night - a quite realistic number). In an IC environment this would translate into gross incomes of $2000 versus $500 because the IC dancers would get to keep 100% of their private dance money.

    However in an 'employee' environment, where the club must have a new source of revenue to cover hourly base pay, the club's 'employer's' share of SSI taxes, and unemployment/disability insurance premiums, the dancers would only get to keep say 50% of the private dance money i.e. $1000 a week and $250 a week gross respectively. But the 'employee' dancers would also now receive a check for tipped employee base pay at say $5 per hour or $200, raising the respective gross earnings to $1200 versus $450 per week. This example clearly points out that the actual 'cost' of a club switching to 'employee' status with unemployment and disability benefits, while reasonably inconsequential to the lower earning dancer, is EXTREMELY significant to the very beautiful hard hustling dancer because the club's payroll system is 'confiscating' and redistributing a HUGE chunk of her actual gross earnings via retaining a percentage of private dance money i.e. subsidizing the 'employer's' share of SSI taxes and benefit costs for lower earning dancers as well as the actual costs for the very beautiful hard hustling dancer.

    If, alternatively, the club's payroll system were to attempt to directly charge equal weekly dollar amounts to dancers for the ACTUAL costs of their unemployment and disability insurance coverage rather than 'confiscating' a percentage of private dances sold by every dancer and redistributing it, then the respective net pre-tax earnings of both dancers would be on the order of $1800 per week versus $300 per week respectively. While this system more accurately reflects the actual cost consequences of providing benefits to 'employee' dancers, it would also reduce the pre-tax pay rate of mediocre dancers to a level below $8 per hour, which is untenable given that WalMart pays about the same amount with better benefits without having to take one's clothes off !

    A few very upscale show clubs in big cities are able to institute a similar system in principle (without the employee status and without benefits) via charging steep fixed 'stage fees' per night to every dancer, which has a similar de-facto effect of running out mediocre dancers whose earnings potential cannot generate enough revenue to cover the stage fee with a reasonable profit left over. However, this approach can only work if the market can provide sufficient financial incentive to attract an unlimited supply of very beautiful hard hustling dancers to adequately staff the club when mediocre dancers leave, which while true in Manhattan is certainly not the case in smaller cities and suburbs. Most clubs must rely on some small percentage of very beautiful dancers to attract customers, but must also rely on a larger number of less beautiful but more readily available dancers to adequately staff the club.

    I suspect that the LL's problem stemmed directly from the fact that very beautiful hard hustling dancers quickly caught on to the fact that the club's payroll system's 'confiscation' and redistribution of a large PERCENTAGE of their incomes quickly created a large disparaty between their actual gross earnings as 'employees' versus their potential gross earnings as an IC in a different club down the street. Given their attributes, it would have been very easy for the most beautiful hardest hustling dancers to be hired at other clubs.

    However, with the top notch dancers now gone, and many former club customers with them, the clubowners would have found themselves in a situation of running a club full of mediocre dancers able to sell only say $500 per week worth of private dances, with the club committed to paying out $200 per week in base pay plus another $200 a week in unemployment/disability insurance premiums per dancer. With a 50-50% split of private dance money, this situation would have left the club in the red to the tune of $100 per week per dancer, which is again an untenable situation ! The clubowners would then have no choice but to confiscate and redistribute 100% of private dance money to return club earnings to the black. But with absolutely no financial incentive now remaining to sell private dances, the remaining mediocre dancers very likely gravitated to a situation of merely showing up for their shifts and going through the motions, which further reduced private dance sales and tipped club earnings back into the red. However, at this point, the club would have had NO source of revenue with which to cover the legally mandated hourly pay and disability/unemployment insurance premiums for the mediocre dancers, a clear formula for bankruptcy.

    The conclusion to be drawn is that, for a fact, there are many many 'mediocre' dancers working every night who are NOT capable of generating sufficient revenue to cover the actual cost of the club providing them an hourly base paycheck, plus paying the 'employer's' share of SSI tax on their earnings, plus paying insurance premiums to provide them with disability and unemployment benefits, with enough left over to provide those mediocre dancers with an acceptable level of gross weekly earnings to justify remaining in the exotic dancing business. And unlike gov't sanctioned progressive income taxes which are inescapable by law for high earners and low earners alike, there is no law which prohibits very beautiful hard hustling dancers from 'jumping ship' to avoid having a large chunk of their earnings potential confiscated and redistributed by a club's payroll system to subsidize the actual costs of providing base pay and disability/unemployment insurance for 'mediocre' co-workers.

    In all of these examples, income taxes would come into the equations after the fact.
    Last edited by Melonie; 02-14-2005 at 03:59 AM.

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    Default Re: Be An Independant Contractor or Employee?

    Thanks for the clarifications. Interesting analysis, although not very encouraging towards the future. I remain optimistic a better business model exists to benefit everyone involved under a legal employment or even a legal IC environment, which at the moment remains elusive.
    Quote Originally Posted by Melonie
    I suspect that the LL's problem stemmed directly from the fact that very beautiful hard hustling dancers quickly caught on to the fact that the club's payroll system's 'confiscation' and redistribution of a large PERCENTAGE of their incomes quickly created a large disparaty between their actual gross earnings as 'employees' versus their potential gross earnings as an IC in a different club down the street. Given their attributes, it would have been very easy for the most beautiful hardest hustling dancers to be hired at other clubs.
    If these suspicions are correct, my suggestion for uniform enforcement (and presumably compliance) in a region could still have some, albeit reduced success, provided customers continue to patronize the businesses after all the best talent has left for greener pastures. The assumption is that although talent could flee the region, the customers wont. I see an interesting parallel here to the "brain" drain problem that faces many developing countries, and eastern Europe. An inability to retain key talent is debilitating to any industry.
    Last edited by stant; 02-14-2005 at 09:12 AM.

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    Default Re: Be An Independant Contractor or Employee?

    If these suspicions are correct, my suggestion for uniform enforcement (and presumably compliance) in a region could still have some, albeit reduced success, provided customers continue to patronize the businesses after all the best talent has left for greener pastures. The assumption is that although talent could flee the region, the customers wont. I see an interesting parallel here to the "brain" drain problem that faces many developing countries, and eastern Europe. An inability to retain key talent is debilitating to any industry.
    I'm not so sure about your assumptions that customers can't 'flee' the region - particularly if a different 'region', i.e. a hot club which treats its dancers as IC's and which has thus attracted every top notch dancer in town, can be found a block away. Even if a state were to enforce clubowners treating all dancers within the state as 'employees', there is also the state line option, the private party option, the escort option, or a plethora of other alternatives open to guys other than continuing to patronize the same old 'mediocre' dancers in the same local club(s). And even if there aren't any options open to customers other than patronizing clubs with 'mediocre' employee dancers, the guys always have the option of adjusting their club spending habits accordingly.

    There is actually a corrolary to the 'employee' dancer theory which says that dancers will look for some method of improving their earnings potential even when the club has 'confiscated and redistributed' any former incentive to sell private dances. That method is usually providing 'extras' to earn extra money from customers which occurs without the knowledge of the club (and therefore the dancer is free to keep). This of course creates an entirely new cycle of club 'mutation', with mediocre clean dancers being starved out of business and gradually being replaced with other mediocre dancers who don't mind providing HJ's and BJ's in exchange for some extra (undocumented) tip money from club customers which the club won't confiscate.

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    Default Re: Be An Independant Contractor or Employee?

    Quote Originally Posted by Melonie
    I'm not so sure about your assumptions that customers can't 'flee' the region - particularly if a different 'region', i.e. a hot club which treats its dancers as IC's and which has thus attracted every top notch dancer in town, can be found a block away. Even if a state were to enforce clubowners treating all dancers within the state as 'employees', there is also the state line option, the private party option, the escort option, or a plethora of other alternatives open to guys other than continuing to patronize the same old 'mediocre' dancers in the same local club(s). And even if there aren't any options open to customers other than patronizing clubs with 'mediocre' employee dancers, the guys always have the option of adjusting their club spending habits accordingly.
    Even aside from this theory, empirical evidence clearly indicates that legal/regulatory reforms exacerbate the very problems they were designed to solve in this industry. (e.g. Houston).

    That said, I think you are underestimating the ingenuity of American businesses to operate profitably within even a difficult regulatory environment. In fact, in my opinion, the more difficult the obstacles to overcome, the wider the lead American businesses gain over competitors. Want to beat the Chinese? Make VERY high quality a regulation and make it higher every year. Sometimes sweeping regulatory tightening changes the world, see automobile emission regs; and sometimes deregulation is a catastrophy (see power).

    You've come up with any number of presumed scenarios debunk reforms I've suggested. Absolute or not, as you suggest...er proclaim, I accept your criticisms. I believe, however, you underestimate the tremendous effect a well designed employee system could have, even enough to attract more, not less talent, and dramatically improving morale. Forced legalization might even bring entertainment back closer to the mainstream.

    Nevertheless, I'll admit your relentless pessimism and attacks on reforms has engendered a growing resentment and suspicion of recovery in myself. I see a fundamentally weak opportunity to recovery claims. Prior to Mel's postion, mine was opposite. Disheartening.

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    Default Re: Be An Independant Contractor or Employee?

    That said, I think you are underestimating the ingenuity of American businesses to operate profitably within even a difficult regulatory environment. In fact, in my opinion, the more difficult the obstacles to overcome, the wider the lead American businesses gain over competitors
    Thank you ... I think LOL ! At any rate, now that you've had a small taste of real world strip club economics on the surface, it's time to really get you thinking about real world strip club economics behind the scenes. Along these lines I'll leave you with a question to ponder in regard to clubowner ingenuity -

    Despite the fact that Vegas clubs have way too many dancers in relation to customers as it is, clubowners and/or investor groups are continuing to build and open new multi-million dollar clubs in Vegas. Why would they do this, knowing that the Vegas market is saturated such that actual strip club profits are extremely unlikely to justify a reasonable Return on Investment ?

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    Default Re: Be An Independant Contractor or Employee?

    Quote Originally Posted by Melonie
    Thank you ...
    Likewise.

    I think LOL ! At any rate, now that you've had a small taste of real world strip club economics on the surface, it's time to really get you thinking about real world strip club economics behind the scenes.
    Christ, typical professor. Get the grad students to churn out the research.


    On that note....come see me during my office hours about a "tort reform is witchcraft" project I've been saving for you.
    Despite the fact that Vegas clubs have way too many dancers in relation to customers as it is, clubowners and/or investor groups are continuing to build and open new multi-million dollar clubs in Vegas. Why would they do this, knowing that the Vegas market is saturated such that actual strip club profits are extremely unlikely to justify a reasonable Return on Investment ?
    One would suspect such businesses to be grotesquely profitable from these indications. Hmmmmmm.

    That topic aside, a larger "evolutionary" question lies ahead for Vegas SC's, as it did for casinos. Are we better off in a system with mega-sized corporate owned gambling resorts, or one with much smaller, gambling houses run by "family" business networks? An argument could be made that the earlier era, although it had problems, avoided a certain pathology of rampant gambling addicition. It was a more elegant time, in certain ways, and everyone knew this was not a place for kids.

    At least that's the crap I've been told by really nice, old and leathery people in Palm Springs.

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    Banned Melonie's Avatar
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    Default Re: Be An Independant Contractor or Employee?

    One would suspect such businesses to be grotesquely profitable from these indications. Hmmmmmm
    Hmmmm indeed. Let me repeat this to be taken as a given. The ACTUAL income potential of a new multi-million dollar club in Vegas is well below the level which any sane conventional capital investor would consider as an acceptable Rate of Return - not to mention the earnings potential of dancers in this saturated market. Yet expensive new clubs continue to be built. What possible sort of behind the scenes financial situation would warrant the continued investment of millions of dollars where the investors already know that ACTUAL club income does not justify the investment ?

    That topic aside, a larger "evolutionary" question lies ahead for Vegas SC's, as it did for casinos. Are we better off in a system with mega-sized corporate owned gambling resorts, or one with much smaller, gambling houses run by "family" business networks?
    Well, many of the same 'evolutionary' stimuli towards corporate ownership come into play today i.e. the increased need for lawyers, accountants, regulatory compliance. Of course when it comes to mega-sized corporate owned strip clubs versus your use of the phrase 'family' business, you've just given yourself a hint towards answering my previous question LOL !

    On that note....come see me during my office hours about a "tort reform is witchcraft" project I've been saving for you
    I never joke about witchcraft since one of my 'spells' went awry (hint - see the photo gallery)

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