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How Government Spending Cuts Will Lead to Job Losses
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Recently the two presidential candidates and their two parties started arguing about a government project called "The Bridge to Nowhere."
From Wikipedia:
The Gravina Island Bridge, also known as the "Bridge to Nowhere", was a proposed bridge to replace the ferry that currently connects Ketchikan, Alaska, to the Ketchikan International Airport on Gravina Island. The bridge was projected to cost $398 million. Members of the Alaskan congressional delegation, particularly Rep. Don Young and Sen. Ted Stevens, were the bridge's biggest advocates in Congress, and helped push for federal funding. The project encountered fierce opposition outside of Alaska as a symbol of pork barrel spending and is labeled as one of the more prominent "bridges to nowhere".
Both sides now agree the project was wasteful government spending, but both sides claim their opposition to the project shows their commitment to save the taxpayer's money and cut government spending. It is easy to be against wasteful government spending, but neither side has much to say about the role of government in America's jobs or what might happen if government starts saving instead of spending.
Starting in December 2007, seasonally adjusted national establishment employment is down 605,000 jobs. The decline was a mixture of
- 590,000 jobs gone in manufacturing, construction and mining
- a 168,000 decrease in private sector service jobs
- a 153,000 increase in government services employment, including education
If we back up a whole year to August 2007 and look at change over the last 12 months, national employment is down 283,000 jobs but government employment is up 274,000 jobs.
If we back up two years to August 2006 and look at change for the last 24 months, then national employment is up 1.1 million jobs, but government employment is up 476,000. The government increase in jobs is offsetting losses in manufacturing and construction that are not made up by new jobs in private services.
Actually, 22.5 million people work on government payrolls in local, state and federal governments, but many more work on private payrolls as part of government sponsored and government funded projects like the Bridge to Nowhere. The terms "government contractor," "outsourcing" and "privatization" all signify private businesses, but they are private businesses doing government funded and government sponsored work.
Government employment added to government sponsored employment is more than a mere 22 million: much more.
America puts a heavy burden on its jobs by funding social security, Medicare, workman's compensation, unemployment insurance, and health insurance as a cost of employment. The personal income tax requires a higher rate on wages than on corporate dividends.
Both candidates say they will create jobs and we hope they do. It would be a better campaign if the candidates would suggest some new policies toward work and pay.
Right now, and for the foreseeable future, cuts in government spending will cause an unacceptable loss of jobs. The candidates want us to think they can manage the government to save, but without some new attitudes and new policies our government cannot save, it must spend.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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How Exchange Rates Affect Savers' Bottom Lines
Last spring, the Washington Post ran an article entitled "Foreign Buyers Flock to DC Office Market." The article explains that foreign investors bought 10 times as much commercial property in the District in 2007 as they did in 2006, with 2008 looking like 2007.
Buyers from Europe, Australia, Asia Pacific and Latin America have bid up prices to a record $867 a square foot.
Washington is an office-based economy with a stable or growing job base, so it is good to have the construction industry creating jobs and making way for even more office jobs. It would be better if the savings and savers financing the buildings were Americans.
Foreign nationals have so many dollars to invest because Americans buy so much oil and import so many products from Europe, China and other countries abroad. In 2001 and 2002 Americans paid around a dollar for a Euro, Europe's universal currency. By 2005 they had to pay around $1.35. Today, it is around $1.57.
A bottle of French wine that was $10.00 in 2002 now costs Americans $15.70. A higher price for wine makes it easy to see how higher exchange rates and a falling dollar value discourage consumption.
It might not be as obvious how higher exchange rates and a falling dollar value can benefit American savers. American buying abroad has supplied so many dollars to foreigners they are using their surplus in America's capital markets.
Some of it is loans but some of it is to buy America's assets like the office buildings mentioned above. It is sobering for real savers to see Americans trading assets like office buildings to pay for import consumption, but the devaluing dollar will begin to change that.
The devaluing dollar that limits American consumption will also limit the dollars foreigners have to invest in United States capital markets. If Americans have to rely more on its own savers, then savers can expect to earn higher interest rates.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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How Lower Retail Prices Depress Buying Power
Retail trade has an average monthly employment of nearly 15.5 million. While it is not the biggest part of America's economy (government is bigger and health care is almost as big and gaining fast), it is the percentage of America's jobs that makes retail different from other sectors.
In 2007, retail trade had 11¼% of wage and salaried jobs in the United States. It was also 11¼% in 1975. Back in the late 1940s, it was 10¼ to 10½%, but the percentage slowly crept up to 11% in the 1970s and briefly reached 12% in the late 1980s before beginning an 18-year decline to 11¼% today.
Using computer technology in trade, especially for barcodes and inventory management, increases labor productivity. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing.
Higher productivity means potential savings as lower costs and competition pressures retailers to lower prices, but the savings limits job growth and decreases the retail share of jobs.
Employment data by state or metropolitan area tells the same story. The percent of retail jobs by state cluster tightly around the 11.25% average and the percent variation above and below that total is usually less than a percent.
Because retail jobs remain at roughly the same percentage of total employment, the only way to have more retailing jobs is to have a bigger population to serve. For anyone in local government or a chamber of commerce who wants to boast local employment by luring in a big national retailer, the plan will not work.
Before much time goes by, the new retailer displaces existing retailers and jobs fall back to 11 or 12 percent.
The matter of displacement is controversial because the retailer Wal-Mart has the reputation of charging low prices but paying the lowest wages in the retailing industry. When a large retailer such as Wal-Mart enters a new market in a new location, there will be potential savings for consumers from lower prices if Wal-Mart really has lower prices.
However, if Wal-Mart really does pay lower wages, then lower wages without new jobs depresses local buying power, which will depress all of the local economy.
While it may appear that lower prices are savings for many, lower paying jobs have secondary effects that spread throughout the area. Savings are more complicated than lower prices. Savings over time depends on prices and wages.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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Travel Reimbursements Are a Pain. Seriously.
I've been traveling a lot recently for work — during the month of March, I traveled for three straight weeks; Boston the first week, Orlando the second, then back to Boston the third.
Normally, I don't mind traveling, but three weeks in a row is stressful. It doesn't help, though, that I have to deal with getting all of my expenses reimbursed.
Now that's stressful.
For some reason, my travel expenses are always coming under scrutiny by the accounting department.
THEM: "These receipts don't add up."
ME: "I don't have receipts for a $20 group lunch I paid cash for — I wrote it on the expense report."
THEM: "You need receipts for everything."
ME: "I got a $1.50 soda from a vending machine. How am I supposed to get a receipt? Call up Coca-Cola and ask for one?"
THEM: "If you spend over $55 any day, you have to pay for the rest."
ME: "So if I spend $65 one day then nothing the next, I still have to pay the difference? What kind of sense does that make?"
There's a problem when you're worried that the money you personally put forward for the company may not come back to you. I lose interest on every penny I spend for the company.
I'm not trying to rip them off, I'm just trying to get my money back. But they make it seem like I'm a thief for wanting my money back.
This month, because the accounting person was on vacation when I booked a hotel room, they apparently charged the room to me — even though the company has a corporate account. Too bad my receipt didn't note it. Now I have to carry a balance or transfer money around because I need to submit a second expense report.
There's got to be a better system than employees putting their money first and hoping to get reimbursed. Why not a pre-paid card good for X amount of dollars for employees who travel? If there's any large purchases that exceed the pre-paid amount (like group dinners), you charge it and submit an expense report.
How do you deal with travel reimbursements?
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Investing in Education: How Much It Pays
There are several ways to estimate returns on investments in education. One way is to compare wages between jobs using general workforce skills with jobs that need college degree skills.
Compare wages for a certified teacher with a college degree to wages for a teaching assistant, for example.
Another way converts college tuition and expenses into an estimate of a minimum wage or minimum salary increase that will make college a paying investment. The process requires interest calculations because money paid for college tuition and expenses could be used to buy stocks and bonds or other interest earning assets.
Tuition and expenses amounts to an investment in a higher paying job, even though college students may want to go to college for other reasons.
Suppose in-state tuition at public college is $6,000 per year each year for four years. In some states like North Carolina, the state tuition is reported as $3,886, while in others like Michigan it is $7,115. Some are above and some are below, but let's use $6,000 as a representative tuition for 2007.
In the first year, $6,000 invested in stocks and bonds would earn interest or dividends. Similarly in the second year, except $12,000 would be invested and the second year earns interest or dividends on $12,000.
At the end of four years at the time of graduation, the principal invested and the interest earned is a total amount, which will equal $27,230.82 at 5 percent interest.
The principal amount of $27,230.82 earning 5 percent interest over the next 10 years and compounding monthly will be equal to $44,849.42. Start at graduation and $288.82 of extra income each month over the next 10 years using 5 percent interest will also be the same $44,848.63.
The $288.82 equals the minimum extra monthly earnings necessary to pay for a college education at an interest rate of 5 percent. Using a forty-hour week and 160 hours a month, it is less than $2.00 an hour of extra wage and salary that pays for college.
Nothing is a guarantee — but expect college to pay.
Our thanks for these calculations go to the built-in spreadsheet functions on MS Excel. Experiment yourself.
Use the Excel help file under FV, which is the future value function. The spreadsheet entries above are =FV(.05/12,120,0,-27230.82,1) and =FV(.05/12,120,-288.82,0,0).
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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Why Bill Gates Shouldn't Be Worried About Technology Grads
When Bill Gates testified before Congress on March 13, he had his usual requests: more money for math and science education, more funds for research, and more visas for foreigners to come and work in the United States.
He claims foreigners need to come here to "maintain a competitive edge in technology innovation."
The Bureau of Labor Statistics defines 7 different computer occupations that need at least BA degree skills, and one in computer and information science research that requires a doctorate. The Bureau of Labor Statistics reports these 8 occupations totaled 3.2 million jobs in 2006 and growing year by year.
However, computer programming jobs are down from over 500,000 in the late 1990s to fewer than 400,000 in 2006. The above mentioned research occupation has reported employment of 25,000 for 2006, but here the Bureau of Labor Statistics is forecasting annual growth under 1,000 per year.
When we look at the National Center for Education Statistics, we find 1,679 doctoral degrees in computer engineering and computer information sciences for the year ending June 2006.
The remaining 6 occupations needing at least BA degree skills include two specialty jobs in software engineering, and one each for systems analyst, database administrators, network computer systems administrator, and network systems and data communications analysts.
In our logical minds, recent graduates should compare to recent job growth for the United States to fill its computer jobs with graduates from American Universities. For the year ending June 2006, the National Center for Education Statistics reports 72,400 BA and MA degrees granted in computer and information science and degrees in computer engineering.
The average annual increase from 2004 to 2006 for the 6 computer occupations mentioned above was just over 75,000.
However, some of the nearly 20,000 MA degrees undoubtedly went to those who already have BA degrees in computing or computer engineering, so we doubt the 72,400 degrees represent new people available for computing jobs. Even so, jobs as computer programmers dropped an average of 10,000 per year from 2004 to 2006, which makes us doubt the need for 75,000 new graduates to fill those jobs.
The data for the recent years does not suggest large shortages of available degree candidates in computing from American Universities, despite Mr. Gates' worries. More ominous, though, is a decline in jobs as computer and information systems managers, down from just over 280,000 to just under 24,000 from 2004 to 2006, an average drop of 8,000 jobs a year.
We think Mr. Gates should tell us why!
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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How Labor Productivity Affects Your Savings
We tend to think of savings in personal terms as income set aside in personal accounts.
But improvements in labor productivity are also saving because new and better ways to produce products and provide services save resources.
Take the customer service representative, a job with potential savings. Customer service representatives serve as a point of contact for customers in nearly every sector of the economy, although they have more jobs in the financial services sector than anywhere else.
There are now almost 2.2 million jobs as customer services representatives, making it the 7th largest profession in America. More importantly, their numbers continue to grow.
Unlike autoworkers, who have to be at the auto plant to do their work, customer service representatives can be anywhere they have a computer and a telephone. Working from home saves the personal costs of transportation.
Even better, the cost of driving for gasoline, car insurance, car repairs and child care saves after tax dollars. The savings go directly to those who hold the jobs.
Telecommuting also saves businesses the expense of providing office space, building maintenance, electricity, heating and air conditioning, which gives them incentives to have some staff working at home at least some of the time.
To top it off, telecommuting saves society from clogged highways, air pollution, road maintenance and traffic enforcement.
Given the complexity of America's many service plans in loans, credit cards, insurance, telecommunications, health care and utilities, customer service work will not be decreasing anytime soon. The growth rate for customer service jobs continues to be above the growth rate for jobs in general with nearly 250 thousand new jobs reported since 2000.
The Bureau of labor Statistics is forecasting annual growth at around 55,000 new jobs a year. Telecommuting for customer service representatives would generate substantial savings given their large numbers in the labor force.
And, unlike so many other jobs, some of the savings goes directly to the workforce.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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How to Get a Raise at Your Job
Over at CE Pro (my day job), we've just posted a story called "8 Ways to Get a Raise at Work." It's aimed at custom electronics installers, but the message it delivers can be translated into whatever you do for a living.
Fred Harding, the author of the piece, shares his background on looking to increase his salary:
When I was in high school, I worked for Jack Houchins of Jack’s Vacuum Exchange fame. After working there for about a year, I decided I deserved a raise.
So, I broached the topic with him. His reply was to ask, “Why?”
Jack went on to explain that I wasn’t any more productive over the past couple of months; I wasn’t selling more and so on.
Simply showing up wasn’t enough, he said. I needed to earn a raise.
I thought about that for awhile and came to realize he was right. I really wasn’t worth any more to him at that moment in time. I could change that, though, and I set out to do just that.
Keep in mind: you don't deserve a raise. You need to earn a raise.
Penelope Trunk says that it isn't enough to do your job well — you need to be doing more than when your salary was originally set.
I've been in a very good situation during my young career. My company automatically adjusts salaries every summer, and since I've been promoted to new positions twice, I've effectively had five raises in under three years.
Have you earned your next raise?
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