The New World Economy

[TBrennan]

Keith---Many a white-collar worker was produced by the college education that his union father could afford for his child.

Myself I sent 2 girls to the University of Illinois, paid every penny myself out-of-pocket, paid graduate school too. Couldn't have done that had I not been union.

[gullahisland]

----------------

I can visit my employers site and and access their info regarding my work history. Their records show I worked 429 days last year. I would have worked more but I was sickly last year.

----------------

I'm not trying to be a smart-a$$. Aren't there 365 days in a year? Does this mean that with overtime, you worked an equivalent of 62 days overtime? (actually quite a bit more when you account for scheduled days off, but you get my point)

[T2K]

If you work 322 days a year for 12 hours each day you would have worked 3,864 total hours. If you divide those 3,864 total hours by 9 hours (normal work day) you have worked the equivalent of 429 days.

Keith

[Champagne taste beer budget]

I've been away from the office pretty much since I first started this thread, just now had time to read through most of it. A few twists and turns, but nice to see it's remained civil through 3 pages.

I can relate to the discussion about the employer/employee relationship, having been on both sides of the fence. Right now, I am paying a service writer $160 a day, with no service tickets to be written. Well, a few a day, but nothing like our usual schedule, this is always the slowest time of the year. he did inventory, had been cleaning up, is presently scrubbing the shop floor in one half of the shop, but esentially just doing busy work. I can't aford to keep him here, I should be sending him home for unpaid days off, but I know he has two small kids at home and a wife that doesn't work outside the house, has little or no savings, and simply can't afford unpaid days. And I can't afford to be paying him for scrubbing the toilets.

If push comes to shove, he'll be laid off before I close up shop. He's a personal friend from outside work, our families do things together, etc., which complicates matters further. He did make some bad choices, like taking days off when we WERE busy to go fishing, snowmobiling, work on his garage, etc., but that doesn't make it any easier.

We're also considering restructuring our health insurance program. Right now, it's completly paid, 100%, with a $500 deductable. Employees only, family addition is their responsibility. I INSISTED on having good insurance coverage when we first opened, having been on the employee side of poor coverage, I thought it was the least we could do. However, insurance costs have skyrocketed over the last 6 years, and suddenly it's a major hit every month. Not sure what we're going to do yet, but leaning towards raising the deductable, then freezing our payment costs at where they are now, any future increases in premiums would have to be taken care of by the employee. How many of you out there in a business of 5 employees or less have full medical paid by your employer with only a $500 deductable? Very few, if any, I'd guess. I hate to do it, but I also can't just get insured out of business, there has to be a stop point somewhere.

Gotta run, will ramble on further when I get a chance.

[gullahisland]

That's kinda' what I thought. WOW! My hat's off to anyone who can work those kind of hours.

I do offer this perspective:

My father is a retired pharmacist and I would dare say that MOST Union retirees are much better off than he. He had to go to college (5 years) and paid his own way through a very expensive private university. His father was, of all things, a union member (longshoreman) but was unable (and perhaps a little unwilling) to pay for my dad's education.

As a pharmacist, he went from owning his own store to working for a small independent chain to finally working for a large corporation. All the while, he worked 12+ hour days, including evenings and weekends, and was on his feet the entire day. There was no pharmacists' Union, so he worked without breaks and with surprisingly poor benefits. The best working conditions were when he worked for the large chain store.

The moral of the story? I guess I can see both sides. I like the idea of protecting workers from abuses. I don't agree, however, with the socialist structure of Unions. Let's not forget, however, that all unions are NOT created equal making this topic less cut-and-dried.

Some unions are particularly heavy-handed and out of control, while others do what they're supposed to. I think the California Prison Guards union is COMPLETELY OUT OF CONTROL! They are power-run-amuck. Do some research. They OWN the booming prison industry and THEY MAKE THE RULES. And make no mistake...it's a business. I have a friend who was a California prison guard. He retired last year at age 51 with full benefits FOR LIFE and 87% of his last years' salary (about $95K) FOR LIFE with CPI adjustments along the way.

[TBrennan]

Champagne---Yeah, insurance is getting out of hand. It would probably be cheaper to have national health care covered by a payroll deduction, that would certainly be easier on businessmen that weren't in the health insurance business. But that's another story.

Anyway the money has to come from somewhere. One thing I learned is that an employer can afford a certain amount of compensation per employee, whether that be in the form of wages, insurance-whatever.

When we negotiated it was our job to find the highest point the employer could go. Once that point was reached the money had to be divvied-out; so much for wages, so much for pension, insurance, apprenticeship and training fund and so on. And the higher cost of insurance was something that went there instead of on the check.

All you can do is the best you can with what you have available, that's business. Don't feel bad if you can't maintain for your employees what you'd like, I'm sure you're doing the best you can. The main thing is to keep the business going, without that nobody, you or employees, makes any money.

[damonrpayne]

Champagne - do you have the option of joining an insurance co-op or getting what's called (in Wisconsin) a co-employer? Health insurance works (obviously) by spreading costs around so that there's X healthy people per no-so-healthy people so getting your folks on a bigger policy only helps matters. I know several local businesses from 2 people to 25 people doing this now, and the insurance savings far more than pays for the fees you incur by having a co-employer. The only downside is that you are somewhat at the mercy of the group if the majority decides to choose a different plan/provider.

Govt healthcare I think would ultimately cost us more overall. No matter where your political views lie you may agree that the Federal Government is not the most efficient entity out there, $4 out of every $5 of "input" get lost in the beuraucracy leaving you with $1 of benefit/output. Given how much Healthcare costs now (which I blame to a large degree on our unhealthy lifestyles) the amount of input($$) needed to make federal healthcare work would be staggering. I hope, if America decided Govt. care is the way to go, we at least do it at the state level.

[3dzapper]

Been there done that Champain. Don't envy you.

I was an ASE Master with L1 Cert and State Emmissions Cert. I could have gotten a job at Pep Boys for $27.50/hr flat rate + bennies (they tried to recruit me). Probably could have clocked enough hours for $1650/week or more(60 flat rate hours in 48 clock hours) because they "feed" their L1s to keep the State Emmissions Repair Facility sign over the door. That's a whole lot more than I took from my shop. My salvation was that I owned my real estate.

I had to give full medical with no deductable, $10 co-pay $10 prescriptions and paid Dental to attract good help in this market. That was along with paid Holidays, paid uniforms, paid vacations, pay for a few hours time off to do personal business , etc. Then if a job was too hard, too dirty, or too complicated, it was my job.

Enough ranting. I'm retired now living the life of Tom.)

Rick

[dodger]

One of the meds I take for high blood pressure is the generic Cardura.

The Clerk accidentally slipped an order form into my bag when they gave me some. They didn't have enough.

Here is a price rundown:

180 tablets, 8 mg.

If you walk in off the street, no insurance now remember this GENERIC

the cost to you: $289.39

My Insurance: $15.00 co-pay

My Insurance pays: $143.88

The med cost the Pharmacy: $15.28

As you all know I have knee problems, I went through a series of injections - once a week for three weeks. My Cousin's Fiance is the Office Manager, so I get the truth.

The Doctor pays $1100.00 for the three hypos with the med. They bill my Insurance $1500.00 plus $300.00 for injecting it.

If my Doc writes a letter of need, my Prescription Insurance will cover the exact same med. Wal-Mart Pharmacy Price $650.00, then if you add the $300.00 for injecting it - $950.00 vs $1800.00.

It's supposed to last a year. Six months later I had a second round.

Knowing where the Doc feels and that it goes in half-way, I could do it myself. I'm not squeamish.

Last example. My bout with Diverticulitis at first felt like Appendix. They drew two bottles (small) and five vials of blood. Only one was glass. She put them on the table to label, no leaks.

Fifteen minutes later the Lab called to say all were broken.

Six plastic, one glass. They TRIED billing my Insuranance $375.00 for the broken containers. The Insurance Fraud Investigator for my part of the State is a good friend.

I called the Hospital, spoke with Administration, it was removed from my bill.

How many check their bill if they have to go to the Hospital?

The World Economy is costing us plenty. More Profits, fewer workers, it's obscene.

dodger

[Champagne taste beer budget]

daymon: We've looked into that a little, but don't recall the outcome. I just tried to call and ask my wife about it, but caught her just as she was headed out the door to take our daughter to the doc, appears to have Impetigo. I'll get back to you on that tmrw.

----------------

On 3/28/2005 3:43:45 PM 3dzapper wrote:

Been there done that Champain. Don't envy you.

I was an ASE Master with L1 Cert and State Emmissions Cert. I could have gotten a job at Pep Boys for $27.50/hr flat rate + bennies (they tried to recruit me). Probably could have clocked enough hours for $1650/week or more(60 flat rate hours in 48 clock hours) because they "feed" their L1s to keep the State Emmissions Repair Facility sign over the door. That's a whole lot more than I took from my shop. My salvation was that I owned my real estate.

I had to give full medical with no deductable, $10 co-pay $10 prescriptions and paid Dental to attract good help in this market. That was along with paid Holidays, paid uniforms, paid vacations, pay for a few hours time off to do personal business , etc. Then if a job was too hard, too dirty, or too complicated, it was my job.

Enough ranting. I'm retired now living the life of Tom.)

Rick

----------------

Funny, I could have written that same statement, nearly word for word. Had L1 but not Auto Trans. A couple places recruited me when I was opening and managing Precision Tunes in Minneapolis, but that was 12-14 years ago. We just bought out the CD for our property like 4 weeks ago, took it to the bank instead of the previous owner turning over the CD every couple years as finance rates changed. Now at least if things go teats up, we can recoup our investment in the property instead of just bailing on the CD with nothing to show for the last 7 years.

Oh Yeah: And I DO envy you!!

[Audible Nectar]

From a US perspective, the "new economy" doesn't look very good - unless you are at the top of the money chain (already made your money, or high up in big mega corp).

Labor: The US worker is now competing head to head against the entire world's workforce. If you as an American worker earning $20 per hour are competing against foreign workers earning $5 per day and living in mud huts, US wages/standard of living will approach thiers (equilibrium). This means for the same work you did 10 years ago, you will now earn less for the same work - and gain less "net" benefit from that work.

Declining influence of unions serve to further the speed of the wage fall, because as Tom explained, unions help set wages for non-union workers of the same craft. As union strength declines, so does the union's ability to pull up the wages of those who are non-union.

Rising cost of necessities:

Health: This is the 8000 lb rhinoceros that continues to eat the US out of house and home. 15% of the US economy is health care costs - and that percentage is rising. That means less dollars for other things - when that dollar is shrinking at the same time. If there is ONE issue that could singlehandedly end conservatism, it's this one - because nothing is more important to people than just being alive. Leaving health to strictly market forces ensures that many will get left out - it's just too expensive.

Housing: We know that housing costs have gone insane, but let's take a better look at this.....because this subject will be the bridge to another important subject - DEBT.

The biggest factor driving the housing market is not wages earned - it was the "laxing" of lending standards during the Clinton administration. It used to be that in order to buy a house you had to have more money down, and could spend a lesser percentage of income toward housing costs. Under the newly laxed standards, people could borrow more money based on the same annual income with less money down - and could borrow a greater percentage of the equity from that home (in extreme cases, up to 125% of it's value).

This does several things. One, it inflates the cost of homes, because the lax borrowing standards create more $$$$ chasing those same homes. This drives up the market price. Furthermore, that borrowing is to be paid back by workers who have a lesser percentage of monies available for housing (everything else is going up too), and whose earning power is declining.

So in other words, the nation anointed Alan Greenspan rock star status from the Clinton economy, which was effectively a huge party all financed on borrowed $$$$ - $$$$ we are just beginning to grasp the mass of. Not so much on a government level - they DID pay thier bills in the '90's - but on a CONSUMER level, WHOA. Those debts are now coming due. Many refinanced in order to make up the gap between what thier earnings were paying and the bills they had outgoing. That's only postponing the inevitable.

Now we have a double whammy: The nation (as individuals) are in debt up to thier eyeballs, and so are all of the Governments - especially the Federal Government. This gives little power to react and do anything about it (and I contend that the powers that be want it exactly that way - Grover Norquist's message "starve the beast until it can do nothing" is the goal from the current Administration's perspective). The goal is Lassez Faire economics - no controls, just let the market run itself. If folks cannot deal, don't look to Gov to help - they will be broke.

When the nation's workers begin to default on home loans, the housing value bubble will begin to burst - especially in high value areas like SoCal, Bay Area/Cal, Seattle, NYC/suburbs, etc (those in smaller communities not so hard hit). Remember that many of these mortgages are ARM's - adjustable rate mortgages, held in a time period when rates are going up. As the rates rise, so do those mortgage payments (if you got one of these ARM's, LOOK OUT!). As rates rise, prices will fall because people will not be able to afford the higher payments and ARM holders will default on thier loans. More to the banks, less to the seller. The only people who benefit here will be those who scoop up the properties for cash (ala great depression era - the rich LOVED this then, due to ability to stock up on cheap assets for cash, then make a MINT on it later).

America as a "Consumer Economy": We are, in fact, becoming a nation of consumers. If you want to know why this is a problem, go here:

Warren Buffett: Thriftville and Squanderville

Warren explains it better than I can. But the bottom line is that the world markets are starting to get tired of taking our increasingly worthless paper to fuel our consumption, as evidenced by the falling $.

And in the face of all of this, the Government wants to convince us that we should trash Social Security - the last "sure thing" people could count on as a safety net in old age. That sale, thank goodness, is so far going nowhere. The reality is that the Government's attempt to get rid of SS is nothing more than an attempt to DEFAULT ON A 3+ TRILLION DOLLAR DEBT. The fat cats in Washington borrowed OUR MONEY, blew it away, then tell us that we need to get rid of SS. No, you need to PAY YOUR DEBTS - just like you expect us to. (Anyone see the new Bankruptcy Law?)

Historically all great empires have fallen from the act of those in power raping the public treasury. That's exactly what is occuring now......and it is why I say that "The American Economy Has Jumped The Shark".

Ok, so it looks pretty gloomy, so what should YOU do?

1. STAY OUT OF DEBT!!!!!!!! Borrow for INVESTMENT ONLY - and no, those National Union 350B tubes I got offered last year for $500 isn't an INVESTMENT, unless I would later sell them, of course. Since I didn't have CASH, that deal didn't happen.

Even on autos, borrow as little as possible, as they are NOT an investment. Necessity - for most, yes. But be careful here. When you borrow, you become a SLAVE TO HE SYSTEM - especially when you borrow for consumption and not investment.

If you want even more reason not to borrow, get a whiff of the new Bankruptcy Bill. Trust me folks, you cannot afford to screw up a borrowing decision. THINK BEFORE YOU SIGN.

2. PAY OFF YOUR DEBTS!!!!!! Those low interest CC's you have? They won't be low interest for long, folks! And when that interest goes up, the payments end up being all interest pretty quick, so PAY THEM OFF NOW!!!!

3. In high value housing markets, be careful about borrowing at this time. I ENVY NO ONE who is absent home equity or ownership right now....as it will be difficult for many to accurately forecast thier own earning power over the next 20-30 years. For many, renting can be a better deal, depending on your specific situation.

4. OWN YOUR STUFF - This is "The Ownership Society (TM, SM, and any other copyrights that apply). That means OWN OR BE OWNED. If you borrow to get it, THEY OWN IT. If you pay with cash, IT IS YOURS.

5. Seek your own business plan and financial independence. If you can find a way to get your own business started - either as a main avenue for earning, or simply part time, do so. Increasingly you will be told that your labor and worth is less if you depend on another company for your employment. In fact, if you try to get a job somewhere, every attempt will be made to exclude or devalue you - create more hungry workers so they can be paid less. If you smoke joints, had late CC payments, watch South Park, or god forbid you are a LIBRUL - who knows what can be used to keep you jobless or earning less - but if you run your own ship, no one can mess with you, and the quality of your work will have a better chance of standing on it's own merits. BE A PRODUCER.

Since the masses have no interest in collectively standing up for rights to health care, jobs, and a generally good quality of life for more people, them we must do the best we can on our own in the meantime. I define a good economic system as one that serves the vast majority of it's people. Increasingy, the US economy is failing that test. What remains to be seen is what happens when the system fails the MAJORITY of the people. That will happen, IMO, but just how that manifests remains to be seen.

[3dzapper]

Self reliance, what a novel idea.

Rick

[Audible Nectar]

Self reliance is ALWAYS a good idea....but what made this country great was the balancing of the individual freedoms of finance while ensuring a minimum standard of accessibility to all. I have always not only seen SOME balancing of these needs as fair and humane, but also as a way of controlling the populace, because if they cannot get it legally, they will get it ILLEGALLY, from whereever and whomever they can.

I have always believed that it was the socio-capitalistic hybrid that made America unique. All things in balance. When that balance gets disrupted too far one way or another, then things get economically painful for many.

Just like with a budget. Any businessperson knows that our budget is wayyyyyy out of whack and cannot sustain itself....it's a recipe for bankruptcy/failure. Only this time, it's the United States budget and it's citizen's budgets individually. The success of an economic system also depends on people's faith in that system - and when the empirical evidence begins to expose a lack of faith in that system, then the s#it's gonna really hit the fan.

Anyhoo, time to go to work

[boomac]

There's too much doom and gloom in this thread and the finger pointing indicates more of a political bias than an interest in making things better. Both JJKIZAK and T2K want to blame Republicans when both are old enough to know that Democrats have controlled politics for an overwhelming majority of their lives. Its an all too familiar whine.

BTW T2K, Reagan wasnt talking about all unions and you know it. Most small business owners and a majority of white collar managers work just as long and hard as you do. Yes, some unions and their members get a bad rap and a lot of that rap is unjustified.

How many of us are stock holders? How many of us have ever written a letter of concern to the board of directors of a corporation that we have ownership in? Has anybody ever written a letter and chastised their corporation for exporting jobs out of the country? Anybody ever call their elected officials and make that complaint? You can, ya know!

If our country is in serious trouble, (Im not a supporter of that opinion) its because too many people expect the government to solve all their problems. We have a pretty good standard of living here in the USA. (Check out JJKIZAKs system profile.)

It aint just white collar managers shopping at Wal-Mart! You want to boycott Wal-Mart or other corporations taking advantage of cheep labor? If so, give me the facts and Ill probably join you. I miss main street commerce. I only fear that the actions necessary to correct all this will go over, with the American public, like a screen door in a submarine.

[JJkizak]

Boomac:

I have been a Republican all my life. Eisenhower was my favorite. He once said in a speech that the one thing that he was worried about was the power of the Industrial/Manufacturing Complex---world wide. I voted for Nixon, Reagan, Big Bush, and Little Bushy the first time. I'm a firm believer in mathematics, and the numbers say the middle class is being eliminated.

JJK

[boomac]

I dont know JJK. We all seem to want and expect so much more today. What is middle class? I dont really know but Lordy, somebody is buying all the crap they sell on TV. Have you been to a college dorm lately? Every kid seems to have a computer, cell phone, Play Station, TV, stereo DVD player, burner and DVDs up the ying yang. How nmany times can you watch the same movie? Any Wall-Mart near a college campus is a gold mine. That sucks for the main street merchant but whos willing to spend more for the same thing?

Now, we could set price controls and minimum mark-ups. We could demand higher tariffs on imported goods. The problem is who would ever have the stomach for that? I still believe that the citizens of this country can make a difference. The problem is that we have to want it bad enough.

[JJkizak]

You raised a good question. Who is the middle class today? Yesterday it used to be something like 12 to 30 bucks per hour. At least in my mind. Maybe it was more but 30 bucks an hour was pure gold for me. You raised another good point. Who is buying all of these $300,000.00 houses? I don't have a clue. The mortgage payment, real estate taxes, BMW and Hummer financing? 150 grand wages to me was like a million. I could only dream of that. I'm doing ok because I planned for it my whole life.

JJK

[Audible Nectar]

Boomac: Most stockholders would never call the companies they hold stock in and castigate them for outsourcing. Why? Because that's one of the fastest way to boost stock prices - lay off or outsource people. It's a shortsided view that will catch up with the US eventually - unless we as a nation come up with some SERIOUS innovation on a repeated basis (due to shrinking timelines of tech cycles) to create new jobs, or place controls for the service jobs that remain. Since stockholder profit interests are diametrically opposed to labor, there must be some way to balance it. The lassez faire capitalistic way to do this is through innovation - but it seems that when we do innovate, the benefits are largely gone offshore very shortly (think computer industry)....the benefits of innovation haven't lasted as long. The devaluation of labor is gutting the middle class, because they all cannot be business owners, professionals or corporate managers - and that seems one of the few ways to make a GOOD living anymore.

"I'm a firm believer in mathematics, and the numbers say the middle class is being eliminated."

I agree. I'm much like you JJ. I never considered myself of a liberal persuasion growing up either......in fact, I did the opposite of what most do. I've maybe grown a bit more liberal with age - or maybe I have simply reinforced aspects of my liberalism with time (things like access to education and other things gov can do to help people help themselves, rather than "freebies". See also investments like technical research). In high school and college, I was much more of what would be considered "republican" thinking at the time (early '80's). Things like fiscal responsibility, freedom from too much government, personal motivation/responsibility, with a streak of libertarianism thrown in for good measure. As much as I still believe in those things, we have not gotten what I grew up being told "republicanism/conservatism" is with this government. The gov is bigger than ever, not fiscally reponsible, and is in your face more than ever.

I guess that tends to put me in a "liberal" camp given the current climate, but I still don't consider myself a hardcore liberal. I'm more left of center now - I was right of center then....but that's because the center has moved right in the last 20 years, IMO. All in all, I think I'm pretty balanced and common sense, and seek the same from our legislators (hard to find).

More important than the labels/politics are the symptoms, though. As JJ says, the middle class IS shrinking. I saw this coming ten years ago - people borrowing HUGE on earnings they hadn't made yet....and the stable earnings for many never came. Then I began taking finance and accounting courses - and the math began to coincide with the empirical evidence. At no time have people's jobs been so "fly-by-night". Here today, gone tomorrow. The tech cycles are MUCH faster now. From invent to produce to outsource (where someone else learns to do it cheaper and better than you) takes much less time. And must we all be business owners or corporate managers in order to have a good standard of living? I think, increasingly, yes. This leaves out too much of labor rate calculations to market forces.

When I got married, my wife and I made a decision that one of us was "getting fixed". I was the first through the Doc's door. Why? We cannot afford children. I cannot, based on my current employment earnings, feed the kids, clothe them, send them to college. I honestly believe that I will be unable to provide as good of a living standard than I have had.....so we took responsibilty and made the appropriate decision - for us. When it comes to child rearing, I would approach it as I would any other - do it right and with full effort, or don't do it at all.

When we are dual income foodslingers, it's more like ONE good income for many here - and that doesn't raise kids properly in this day and age - nor leave the time for them they deserve. So we bypassed that portion of life and expense, knowing that we can now deal with whatever the economy deals us.

I'm sure glad I've got my Klipsch needs taken care of....because I'm not so sure that the financial future will be as good as it is now. Money for toys will be less plentiful, go it's good that I have those out of the way. We are just finishing up our "backing up" of the systems - spare tubes, ratty versions of my Mac stuff and Klipsch drivers for spare parts (geez, Mac parts will be expensive 10 years from now), and general "finishing up" before this stuff gets too expensive (especially TUBES). Many here have much more to spend on this stuff than I do - I have to get it right the first time:) It's our only real "material" luxury....we live a pretty spartan lifestyle for the most part otherwise....well, we have comps and cell phones but not before most others did, but we always buy used cars, furniture - and speakers But music is such a great influence on us, we saw the trouble and gruntwork working for it as worth it. We will always have it to enjoy.

I see JJKIZAK buys like I do too - used How's that for fiscal conservatism

BTW - Thanks for the civil discussion. I do appreciate it, and find the conversation stimulating. I am glad that people do care enough to have the discussion, and are cordial in participating so we benefit from the exchange.

[damonrpayne]

Who's buying $300,000 houses? Mostly people wih existing home equity.

I really like this thread, I appreciate the different viewpoints.

[boomac]

I would think anybody capable of affording a $300,000 house is either well above middle class or they have bought real estate wisely. If I were a youngster starting out, I would save like crazy and buy a duplex. Id live there with somebody else helping to pay the freight and I would start looking for a single family home, (in the right location) as soon as I had enough equity built up in the income property. If a young couple can do that by the time they are in their 30s, theyve accomplished something special. Pat yourself on the back Damon!

AN, youre right about stockholders not wanting to jeopardize profits but it has to start somewhere. One person raising the question at a stock holders meeting or writing a letter could make an impact. Im willing to place American Jobs above the almighty buck but that concept has to be sold. It can't be a union vs corporation thing or nothing will get done. Nothing but political "lip service".