Rethinking the Economy » Good Jobs

Sears to IL: Wham, Bam, Thank You Ma’am

RethinkEcon — Tue, 10 Jan 2012 07:45:44 +0000

Once upon a time, there was a company called Sears. Many years ago ago – 1989 to be precise – it threatened to dump Princess Illinois and run off with another state unless it was given a tidy sum ($170 million). Princess Illinois forked over the dough, and there was much rejoicing throughout the land. Last year, Sears decided it was time to ask for another sum. And as soon as Princess Illinois agreed? The folks at Good Jobs First tell the rest of the story:

Gov. Pat Quinn’s signature had barely dried on the Illinois legislature’s lavish new tax-break deal to retain Sears Holding Corp.’s headquarters when the company announced store closures and layoffs. The deal, valued at up to $275 million in property and income tax breaks, was signed into law on December 16. Yet on December 27, the company announced that it would close between 100 and 120 Kmart and Sears stores.

Cynically, we note that the initial list of 80 closures does not include any Illinois stores, nor have any headquarters layoffs been announced… yet. But with Sears still losing market share, and reporting another decline in same-store sales (down 5.2% late 2011 over late 2010), how safe can Illinois jobs be?

And Illinois isn’t alone. There is a basic problem with giving in to extortion:

as we forecast in our blog of last August: when a company is ailing and it asks for a tax break, the wisdom of the plant-closings movement tells us: tax avoidance can be one form of disinvestment, another early warning sign of job loss.

Put another way: if a company doesn’t see a future in the community or the state, why should it keep investing in the schools or roads or universities?

Of course, recognizing this fact is one thing, getting politicians – who care about how many jobs they can tout right now – to do anything about it is a whole different story. For more on the subject, check out Good Jobs First’s website or their valuable blog, Clawback.

What Do We Want? $1.6 Billion a Year from the CME & CBOE! When Do We Want It? Now!

RethinkEcon — Mon, 10 Oct 2011 09:34:36 +0000

If you aren’t just fired up about how quickly Occupy Wall Street is taking off and you’re still worried about the lack of specific, winnable demands, 2 suggestions:

1) Borrow a teddy bear and hug it out.

2) If that doesn’t work, check out Investing in Chicago Communities: A Jobs Fund for a Future That Works. This report, put out by Stand Up Chicago! and the Chicago Political Economy Group just before today’s large Occupy Chicago rally, lays out a plan for starting to make Chicago work again for the 99%:

Under the plan, 40,000 jobs would be created by adding a $.25 per contract speculation fee to be collected from traders who engage in speculation on Chicago’s two main exchanges: the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE). This fee would create $1.4 billion in annual revenue.

“This is a tax whose time has come,” said William Barclay, an adjunct professor at UIC’s Liautaud Graduate School of Business and a board member of the Illinois Finance Authority, who pointed out that the UK and Hong Kong have similar transaction taxes in place….

“The so-called ‘job creators’ are not creating jobs but rather collecting interest on $1.6 trillion in cash that is not being invested in the real economy,” said Baiman [Director of Budget and Policy Analysis at the Center for Tax and Budget Accountability].

“If you play with something that doesn’t belong to you and you break it, you have to pay for it,” said Barclay. “The same investment banks that caused the jobs crisis are now thriving — but they’re not hiring workers. So our jobs plan is looking for these financial institutions — these big gamblers — to pay for what they broke.

Smart work, and just the beginning of many policy geek conversations about what we could fight for. So print it out or download it, and bring it along to read at your local Occupy event!

Engineers to Pols: Stop Pretending We Can’t Solve the Climate Crisis Because We Don’t Have the Tech

RethinkEcon — Tue, 27 Sep 2011 07:13:20 +0000

This just in: engineers are pissed off enough that they are calling politicians on their shit around the climate crisis (hat tip to Jess Zimmerman):

The technology needed to cut the world’s greenhouse gas emissions by 85% by 2050 already exists, according to a joint statement by eleven of the world’s largest engineering organisations.

The statement was presented on Friday 23 September to the South African Deputy High Commissioner ahead of December’s COP17 climate change talks in Durban.

The statement says that generating electricity from wind, waves and the sun, growing biofuels sustainably, zero emissions transport, low carbon buildings and energy efficiency technologies have all been demonstrated. However they are not being developed for wide-scale use fast enough and there is a desperate need for financial and legislative support from governments around the world if they are to fulfil their potential.

Dr Colin Brown, Director of Engineering at the Institution of Mechanical Engineers – one of the eleven organisations supporting the statement – said:

“While the world’s politicians have been locked in talks with no output, engineers across the globe have been busy developing technologies that can bring down emissions and help create a more stable future for the planet.

“We are now overdue for government commitment, with ambitious, concrete emissions targets that give the right signals to industry, so they can be rolled out on a global scale.”

The statement calls for:

•A global commitment at Durban to a peak in greenhouse gas emissions by 2020, followed by substantial reductions by 2050;
•Governments to ensure that green policies do not unfairly and unintentionally act to the detriment of one particular industry or country;
•Intensive effort to train and retrain workforces to ensure we have the right skills for the new industries that will spring up around green technologies;
•A heavier emphasis to be placed on boosting energy efficiency, which is the best available measure to bring down emissions in the short and medium term.

The eleven organisations include the Danish Society of Engineers (IDA), India’s Institution of Engineers (IEI), Germany’s Association of Engineers (VDI), Australia’s Association of Professional Engineers, Scientists and Managers (APESMA) and the UK’s Institution of Mechanical Engineers (IMechE). Collectively they represent over 1.2 million engineers spanning four continents.

Taxes, Regulations Killing the Economy? No, Says Small Businesses

RethinkEcon — Tue, 06 Sep 2011 07:22:29 +0000

The next time a conservative tells you that the reason the economy is in bad shape is because taxes and regulations are crushing small businesses, show ‘em this study by McClatchy.

Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy canvassed a random sample of small business owners across the nation.

“Government regulations are not ‘choking’ our business, the hospitality business,” Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. “In order to do business in today’s environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order.”…

McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath….

For many small businesses, their chief problem is an old one: navigating the bureaucracy of the Small Business Administration to secure government-backed loans…. Kansas City-based Summit, 20 years old, supplies college-licensed clothing to university bookstores in four Midwestern states. Sweeney hired his fourth employee in August. He’s adding licenses to sell apparel to colleges in the Southeast and Atlantic region, but his company doesn’t have inventory or other collateral that bankers usually want to secure loans. And the small local banks Summit deals with frown on the red tape required for SBA loans, after a loan he got in 2008 took three months of nightmarish documentation. “It was only $35,000,” Sweeney said. “Our bank basically said it would never do that again.”

Other small firms say their problem is simply a lack of customers.

“I think the business climate is so shaky that I would not want to undergo any expansion or outlay capital,” said Andy Weingarten, who owns Almar Auto Repair in Charlotte. He’s thinking about hiring one more mechanic.

Added Barry Grant, the regional president of Meritage Homes Corp., in California, “It starts with jobs. … There’s an awful lot of people sitting on the fence; they’re waiting for a sign.”

For Labor Day: How Managers and CEOs Screw It up for Everyone Else

RethinkEcon — Mon, 05 Sep 2011 21:41:04 +0000

Wall Street melts down, taking the rest economy with it. Who’s to blame? Unions and workers, of course. In honor of Labor Day, the fabulous Wall Streeter Yves Smith gives Exhibit 23,234 of what a load of crap this is. The whole post is definitely worth reading; here are some highlights:

Let me give you an all too typical example of how American management has contributed to the demise of our industrial competitiveness, namely, the former Mead Corporation paper mill in Escanaba, Michigan, which is now part of NewPage, owned by Cerberus.

The Escanaba mill makes coated paper. Coated paper is shiny paper, the sort you find in most magazines, catalogues, and art books. Coated paper is fussy to manufacture, which makes it daunting in a continuous process setting like a mill. In a highly-capital intensive continuous process business, downtime is hugely expensive.

In 1969, Mead added a #3 machine in Escanaba….

#3 machine was not operating at the expected efficiency level. Management nevertheless pressed forward with a further mill expansion in 1970-1971, of a kraft-recovery system. The best workers on the #1 machine were moved to the #3 machine which did not solve the problems on #3 and worsened the results of the #1 machine. It took an over two year turnaround effort to get the mill operations up to a good level of productivity.

By the mid 1970s, the Escanaba mill had gone from being the dog to the star…. The mill was recognized as one of the best coated paper makers in the US, and demanding publishers such as National Geographic, Smithsonian, and Playboy sought out its product…

Mead had had a series of record-breaking profit years, each higher than the last, yet sought to squeeze the unions in 1989.

The 1980s were the heyday for papermakers. By the later 1990s, Mead had started scrimping on shutdowns, which is when the plant’s equipment gets maintenance and repairs. Twice a year shutdowns were replaced by annual shutdowns.

In 2002, Mead merged with WestVaco to form MeadWestVaco. The shallow dot-bomb era recession led to further reductions in reinvestment. A $5 million shutdown budget for Escanaba was reduced to under $2 million, even as the departing Mead CEO received a $30+ million golden parachute.

Cerberus acquired the Escanaba mill along with four other MeadWestVaco mills in 2005, forming the company now known as NewPage. Cerberus set return on invested capital targets that were, to put it politely, audacious for the paper industry, which led it to scrimp even more on keeping the plant operations up to snuff…

[As the corporation continued to get into trouble, it shut down plants that were profitable but not wildly profitable rather than selling them off, often devastating the towns where the plants were located.] In Kimberly, NewPage refused to sell to two buyers and declined the support of the Governor to keep the plant open. “This is a case of a corporation taking a productive, profitable plant and closing it, and refusing to sell it to anyone else,” Andy Nirchl, president of the United Steel Workers local, said at the time.

It tried putting through a 60% price increase in 2009, and was forced to roll it most of the way back as its competitors implemented only modest price hikes. This took place when the standing of the mills was falling. Escanaba was shipping product that had breakage problems; its quality had gone from being among the best to middling to low. In 2010, NewPage has had three CEOs, including the notorious Bob Nardelli, who has been named one of the worst CEOs of the 2000s and the worst CEO of all time by CNBC.

Paper industry incumbents have not thought much of Cerberus’s management acumen… [Quoting one:] This entire mess was created, of course, by Cerberus mismanagement. They hired the wrong people, gave them impossible marching instructions, and have continue to play an expensive game of musical chairs at the highest levels of the company. The initial strategy of “pump and dump” didn’t work, and now Cerberus is relegated to actually operating a company. This is not their strength. But then, what is their strength?

Cerberus is negotiating a restructuring of the NewPage debt and may file for bankruptcy. The financiers will all get their cut and will move on to the next deal. Yet the workers at these mills and the communities they anchor, like Chillicothe, Ohio and Luke, Maryland (two other places I lived when I was growing up) will suffer the consequences of this rent extraction.

This isn’t to say that unions don’t make boneheaded mistakes. But even though they have control over only a handful of decisions that get made — and even though, as Yves points out, for “most manufactured goods, [labor costs are just] 11% to 15% of total product cost” — somehow it’s always their fault. But if the company is doing great? Then clearly it’s because of the brilliance of the CEO.

The Full Cost of the Deficit Obsession Disorder

RethinkEcon — Thu, 25 Aug 2011 21:43:05 +0000

How much is the insane obsession with deficits costing us? Krugman explains, using the latest projection from the Congressional Budget Office, which optimistically assumes that the economy will bounce back by 2015:

the projection says that we’ll have a cumulative output gap of $5.1 trillion, with $2.8 trillion of that having already happened.

Surely it would have been worth making an extraordinary effort to avoid this outcome. In particular, an $800 billion stimulus, a significant fraction of which was stuff that would have happened anyway (like extending the patch on the alternative minimum tax) looks ludicrously underpowered. Yet policy has been timid and conventional….

The CBO also projects unemployment staying above 8 percent until late 2014 — again, with no clear explanation of why it should fall sharply in 2015. This translates into a human catastrophe for the long-term unemployed.

Our side has got to get our ass in gear.

Material from Van Jones’ Speech

RethinkEcon — Mon, 04 Jul 2011 07:17:08 +0000

There was a lot of great material in Van Jones’ speech at the Rebuilding the Dream kickoff — so much so that I decided I want to write up some of it to experiment with later. Here are some of my favorites:

On the myth that we are broke:
We’re not broke, we were robbed.
Saying “we are broke” is a great way to paralyze people.

Every American entrepreneurs blessed to have the best investor — America pays for roads, courts, firefighters, teachers. So: “if you do well in America, you should do well by America.”

“I am not talking about the good businesses” — small businesses, green businesses, “the corporations that are still patriotic. We honor them, we admire them.” He’s talking about the businesses whose attitude is “gimme, gimme, gimme — don’t give nothin’ back.”

The three pillars of the middle class: good government, good employers, and good citizens.

Why unions are the key to middle-class: our grandparents knew that “giving working folks the voice was the key to an economy that can maximize profit without minimizing people.”

The attitude of the superrich: “privatize again, socialize the pain. Socialism for the super wealthy, Darwinism for working folks.”

The biggest lie: “we are helpless. We can’t do anything.”

“Our slogan was never, ‘Yes He Can.’ It was ‘Yes We Can.’”

Fighting for the American dream, not for the American fantasy. The American fantasy: “everybody will be rich and buying things will make you happy.” The American dream “hard work should pay” — good American wages, benefits, dignified retirement.

The story of America: “the story of an imperfect people struggling to bring that unequal funding reality closer to that beautiful founding dream “that all men are created equal.

We are fighting for our opponents too. We don’t want them not to have a fire department near their house, we don’t want them to drink poisoned water.

The Tea Party talks about liberty.
We like the whole Pledge of Allegiance. “The Pledge of Allegiance does not stop with the word Liberty.” We believe in “Liberty and Justice for All.”

Google Says: More Clean Energy Now or Fewer Jobs & Profits Later

RethinkEcon — Thu, 30 Jun 2011 07:29:08 +0000

Does pushing for cleaner energy kill jobs & growth? No, says Google (via Grist’s Stephen Lacey). In fact, waiting will cost us dearly:

Google, a leader of innovation in the digital economy, says that without a private and public focus on innovation in renewables, storage, and electric vehicles, the cost of delaying the clean energy economy could be in the trillions of dollars to the U.S. economy.

Using McKinsey’s macroeconomic tool for modeling energy costs, they found that

by 2030, innovation in the modeled technologies alone could have a transformative impact on the US, adding over $155 billion per year in GDP and 1.1 million net jobs, while reducing household energy costs by $942 per year, oil consumption by 1.1 billion barrels per year, and GHG emissions by 13% relative to BAU. By 2050, annual gains in GDP increase to $600 billion, net additional jobs to 3.9 million, and emissions reductions to 55%.

And if we don’t? Lacey summarizes Google’s findings:

delaying this “innovation arms race” by as little as five years with inconsistent policy that slows private investment (a delay not unlikely in the U.S.) could result in $2.3-$3.2 trillion in unrealized GDP gains — costing the U.S. over a million new jobs and preventing the reduction of up to 28 gigatons of CO2.

One more example of how Stacking the Odds in Favor of the Good Guys pays off.

Rebuild the Dream: Best Shot at Alternative to Tea Party?

RethinkEcon — Mon, 27 Jun 2011 07:12:15 +0000

On Thursday, activist Van Jones kicked off a new movement called Rebuild the Dream. The speech he gave his one of the best he’s given in quite a while. It’s definitely worth checking out.

I may be wildly optimistic, but I think Rebuilding the Dream – which has backing from Moveon.org, SEIU, the AFL-CIO, US Action, plus a whole lotta other folks — is the best shot our side has for building an alternative to the Tea Party. So if you’re tired of us getting our butts kicked, after you’ve seen the video sign up on their website for one of the house meetings they’re planning on having in every state on Saturday, July 21.

DIY Computerized Manufacturing: Getting a Little Closer to Becoming a Reality

RethinkEcon — Mon, 16 May 2011 07:01:16 +0000

A great article in the New York Times about the burgeoning world of DIY manufacturing. Because prices of machines that let you build things have been dropping steadily, we’re getting to a point that feels a lot like the early days of PC hobbyists. And eventually it could have an equally powerful impact on the economy.

Makers, as they call themselves, can’t compete with the long, orderly rows of workers from the poorer provinces of China or India who cut, stitch and solder bras, shoes and cellphones for pennies — or even with the hundreds of billions of dollars a year worth of stuff that continues to pour out of large, old-fashioned American factories. Their method involves creating “hacker space” cooperatives, where a few dozen members share a 3-D printer, a laser cutter and an oscilloscope and engage in collaborative manufacturing projects. Makers have created companies like Shapeways and CloudFab, which for a fee will manufacture small runs of products that you design. They are becoming kit makers like Bdeir, manufacturing building blocks that allow others to create things.

Neil Gershenfeld, an M.I.T. physicist who is an intellectual godfather to the maker movement, suggested to me that the new tools would over time change global industry as we know it. He predicts a wave of new competitors for the megacorporation that designs, makes and sells products all under one brand. Instead, Gershenfeld imagines a consumer of the near future downloading a design for a mobile phone through an iTunes-like portal; buying an add-on from another firm that tweaks the design; and having it printed at a neighborhood shop in a plastic shell of your choice.

For now, the tech is still in the early stages – and there are still lots of obstacles to overcome and bugs to work out. The reporter asked one small shop if he could try building something using their “CupCake CNC, a so-called 3-D printer that spits out small plastic wares,” which costs only $699.

He guided me to the Web site Thingiverse.com, which abounds in digital models — three-dimensional files that the CupCake can print out. I browsed and chose an iPad stand …

The CupCake began to print. First the nozzle moved back and forth smoothly, dropping black plastic in neat rows. It was building a base for my object. Then it began to jitterbug, dashing unpredictably this way and that, depositing bits of the melting goo one layer at a time. Slowly it formed an iPad stand. But then, 19 minutes in, the machine lost the plot and began to squirt everywhere, and we had to start over.…

Andrew said that the design I picked might have been flawed.

In the long run, how will this tech shape the economy? For example, will it create lots of good jobs in the US? Or is that a fantasy? We are as likely to figure that out now as folks were when they first made predictions about the impact of computers on society. But definitely worth keeping an eye on.