Thursday, November 29, 2012

Mollie Orshansky: Ms. Poverty

There are currently 46.2 million people in the US living in poverty. That is 15.0 percent of the US population.

Do you ever one where the poverty level come from ?  It was first developed by Ms. Poverty: Mollie Orshansky. Ms. Orshansky was responsible for some of the pioneering work on developing US poverty standard.  She started publishing in 1947 on food budgets, family incomes and rural living standards.  Around 1962 she moved on to the general conditions of the poor. and finally around 1965 to 1968 she published some of the first measures of poverty in the United States.

You can read more about Mollie Orshansky on the Federal Health and Human Serveries web site. Here.

Wednesday, November 28, 2012

Jobs hole forecast

When will we return to net positive job growth ?  When will we fill in the job hole from the great recession ?

Using data from establishment non farm payroll numbers since the bottom of the recession, we have forecasted net positive job growth for June 2015.

We have added forecast limits to mean job forecast based on job creation from the bottom of the .  So we could see net positive job growth as early as February 2015 or as late as November 2015.

Sunday, November 25, 2012

Jay-Z's money and charitable donations

We will leave it up to you the reader to decide if Jay-Z should donate more money to charity.

Shawn Carter ("Jay-Z") is reported to have a net worth between $440 million and $576 million. Forbes has estimated his fortune at $460 Million (April, 2012).  Jay-Z was in the news recently for directly contributing only $6000 to his own scholarship fund headed by his mother. It was report by the Daily.  However, Jay-Z donated performances in support of various charities including raising $250,000 during one concert.

Here are some charities Mr. Carter has made donations to as either cash or performance time.

According to, Shawn Carter has donated to

PlayPumps - African water supplies - Fundraising concernt in November 2006
Boys and Girls Clubs
Music for Relief
Red Cross - $1 million for Hurricane Katrina Relief
Grammy Foundation
Broadway Cares/Equity fights AIDS
Artists for Peace and Justice
NYC widows and orphans fund -  Answer the call concert - 2009

Jay-Z has also taken heat for profiting from Occupy Wall Street t-shirts.  However, Jay-Z did hold a fundraiser for president Obama. He also closed the Para Olympics in London.

Actor and activist Harry Belafonte has also questioned the Carters record of giving in this piece in the Hollywood Reporter.

Obama Performance Meter Draft

How should measure the performance of the Obama Presidency ?

Here are some basic metrics the Evil Black Economist will be tracking the in the second term of the Obama Administration.  This is a draft proposal.

Short Term (1-4 Years)

Good Jobs Created
Good Jobs Created divided by Population Growth
Unemployment Rate
Inflation Rate
Median Income
Approval Rating
Generic short term happiness measure (TBD)
Liberal vs. Conservative Budget and Spending Priorities

Long Term (4-10 Years)

Good Jobs Created
Good Jobs Created divided by Population Growth
Unemployment Rate
Child Poverty
Educational Attainment
Long term happiness measure (TBD)
Debt to GDP

Saturday, November 24, 2012

Don't believe the Hype: Fiscal Downslope not Fiscal Cliff

Once again the media is doing a very poor job of reporting a complex issue.  Some how an agreement to cut federal government spending has turned into a "Cliff" that is 100% guaranteed to plunge the economy into recession.  We don't think so.  Reducing government spending will certainly trim current GDP growth by perhaps 0.5% it has some long term benefits.  Paying down the debt will stabilize government finances, boost confidence and keep interest rates low.

The Fiscal Slope is also gradually phased in over the next year.  It cuts military spending and domestic discretionary spending while leaving social security and medicare untouched. The immediate, January 1st effect is to stop the Bush taxes cuts and return the social security payroll tax to the pre-recession level of 6.2%.

Thursday, November 22, 2012

Hostess Mess: What can we learn ?

There was lots of news this week about Hostess Bakeries.  Hostess makes Wonder bread and Hostess Twinkies along with other bakery items. Hostess employed approximately 18,000 workers mostly bakery and route delivery(salesmen) workers. Sales have been declining for many years. The company went bankrupt in 2004 and emerged from bankruptcy in 2009 during which it's workers took pay cuts.  It is current owned by a private equity firm called Ripplewood Partners.

The company said it would close operations without further concessions for the workforce. As of November 21st, 2012, the company said it would sell it's brands and stop operations.

Here is the story from the St. Louis Post-Dispatch on bad management workers relations.
Here is the best story I have found on all of the details around Interstate Bakeries /  Hostess from the DailyNewsFinder.

Here is how we see the issue.  OK, this is a fantastic, teachable moment for the US in 2012.  But not about union givebacks or job losses.  Instead, it's about straight up bad management and how little power workers have in a tight economy.  It is also about how non-transparent financial reporting by private equity firms is compared to public firms The workers may have had an inkling, but could not accurately judge if the company was in real trouble or management was "lying again".

So, to the Evil Black Economist Blog, it like a simple, "bad" management bankruptcy over a eight year period. The problems were obscured by limited private equity reporting. We will have to wait for all the facts, but it looks like Hostess was not a going concern they way it was structured with huge amounts of debt. And both management and the union were using the company for excessive benefits.  No amount of "good" management would have saved the company. It should have been  liquidated for it's brands and factories years ago. If, I was the owner, I would have been talking to Bimbo for years.

Here are some facts I am looking for in the public bankruptcy filing.
1) Were earnings before interest and taxes positive? growing?
2) Was hostess adding new products? Customers? Increasing prices? or was the company shrinking?
3) What did the cost side look like?  Were commodity prices or wages causing problem? Were management and labor costs similar to the rest of the industry or they overpaid?
4) Why did private equity change leadership so often? (may not be available).

I don't see a lot to support for the political arguments others are reading into the matter.  It is a simple, and sad, bankruptcy where a lot of people get hurt. I challenge everyone to follow-up on the story and really read the chapter 11 filings when they come out.

And now for some personal opinion.

I believe, companies, especially private equity firms, need to be more transparent with their workers (open book accounting) about how the company is doing. So I am calling for regulations to make PE legal entities provide better reporting to their workers and the public.

Second,  he workers need to have some equity in the company.

Third, government institutions worked pretty well.  Bankruptcy court did it's job, the Pension Benefits Guarantee Corporation will bail out the unfunded pension liabilities and state unemployment will handle the workers however everyone comes out a loser.

Wednesday, November 14, 2012

Robert Balfanz: Dropout Predictor

I saw a piece on PBS FRONTLINE about the work of Robert Balfanz a researcher at the Center of Social Organization of Schools at Johns Hopkins University. Dr. Balfanz has done a lot of work on predicting when kids will drop out of high school.

Like us here at the Evil Black Economist Blog, he believes middle school is the key place for determining a kid's life trajectory.

Here is a a long term study of Dropout Trends in the Philadelphia School System.  You can find more of his work on the web.

Sunday, November 11, 2012

Is Amazon a worse employer than Wal-Mart ?

A note about Amazon and the warehouse industry

I keep seeing persistent stories about Amazon warehouses being a tough place to work.  I think Amazon may be a high profile case in a very tough industry.  The fulfillment industry is a very competitive industry with low margins.  The industry is benefiting from a huge surplus of low-skilled unemployed workers in the US and over capacity. Amazon is just applying it's big company know how to squeeze the workers a little more.

Warehousing is a lot tougher now than when I worked in one during a summer in Atlanta.  I regularly worked in 90 degree heat until I found a better job.  Working in a warehouse used to be a "good" job.  The staff was mostly women "pickers" and mostly male equipment operators. The jobs has some good points: you were inside when it rained; we had a break room, you could take items that were damaged or not and there were forklifts for heavy lifting. The work was not that hard.  You got breaks.  The downside was always pay.  It was not much money, but better pay than fast food or retail.

My job was to pick up the printout and walk around picking items from the shelves and put them in a giant laundry cart. I didn't think the work was that bad; just hot. After I left, I discovered the real reason the work was not hard:  The boss did not ask us to pick very many items.

Now, in a modern warehouse everything is measured. Everything is check against "best practice." The work is a lot tougher.  The work can only be done by the young and physically fit. Warehousing has traditionally paid more than retail work.  But the working conditions are so difficult than many people move back to retail jobs when they get tired or injured. Turnover are high.  Many warehouses outsource their personnel need to bogus temporary agencies to skirt pay and benefit regulations.

In many other posts, I have detailed, the number one issue I have with retail sales: low pay and poor benefits.  However, working conditions are decent because I believe, they have contact with the public.  Retail companies do not want disgruntled employees dealing with the public. When I visit retail stores in my area, the workers seem to treat each other with friendship and respect. In a modern warehouse you seem to get low pay and no respect.

Why are warehouse such a bad place to work ?

Warehouse are bad places to work because warehouse productivity is do easy to measure.  You measure the number of "moves" and "picks" per hour. Information technology (like RFID) lets you track everything inside the warehouse.  In warehousing, there is no extra "stuff" to confuse the productivity issue. No customer interaction (some places forbid talking to co-workers). None of this: "Did the person great me with a smile and look me in the eye ?" subjective BS stuff.  Just cold hard facts such as "error free pick rate" or "packages shipped per shift"

And, worse if you can measure productivity, you can increase it. Amazon is large enough and sophisticated with computers and business processes to try and do just that.  The issue is that this increased productivity creates poorer quality jobs for the workers. Note: many of the practices Amazon uses are common in the industry, it just looks like Amazon squeezes a little harder.

There are several physical limits to improving productivity: Physics, Time and People.  1) Physics. People and machines can not move faster than a certain rate without jeopardizing warehouse safety or breaking the laws of physics.  For example, there is a maximum speed a fork lift can travel around a corner. Or a limit to how fast you can pick items in a bulky coat inside a refrigerator. 2) Time.  Everything in the warehouse takes time: travel time, reach (pick) time, sort time, receiving and put-away time. Handling X number of goods takes Y time.  And the time is fixed. 3) People.  People can only work so hard before that make mistakes or won't do the job.

Amazon, using information technology, has optimized the use of all three resources.  The issue is that Amazon has invested enormous amounts of money on warehouses and wants to get a productivity return.  And the only place that can come from is by leaning on the workers.


Loyal readers know we always put in our two cents and propose some solutions.. That is why writing a blog is so good, you can mix fact and opinion.

Standard solutions

Raise the minimum wage. Support living wages in warehouse communities.
Get rid of "sham" subcontractors. Encourage full time work, pay and benefits.
Actively enforce warehouse building code, health and safety laws.
Name and shame: make Amazon warehouse working conditions more visible
Don't buy from Amazon.
Get better terms from Amazon when they locate in a community.  Cut down on the tax breaks.
Convince Amazon that that warehouse "profit centers" can have a lower rate of return than other lines of business.


Here are some resources from the internet related to Amazon and warehousing.

Amazon promotes warehouse jobs at Amazon Fulfillment Careers.
Mother Jones has a story on poor conditions warehouse workers face.
NJ.Com has a story on Amazon planning to open two NJ warehouses including one in Robbinsville, NJ.  Here. Local businesses are complaining about Amazon not collecting state sales taxes and receving location subsidies.
Allentown,PA morning call has another story here.

Fulfillment Center Definition:

Hey when did a warehouse become a fulfillment center ?  Fulfillment centers provide more than just warehousing, order picking and shipping.  These new centers also provide customer service, packaging and relabeling and light manufacturing. They service multiple retailers while a standard were is own by the company. They also operate as separate profit centers as opposed to traditionally being part of the cost of goods sold.


Tuesday, November 6, 2012

CRS says no link between high income tax cuts and growth

There was an important piece of research that came out from the Congressional Research Service about a month ago. The report called "Taxes and the Economy: An economic analysis of the top tax rate since 1945," demonstrated that there is NO link between the rate the top 10% of income earners paid in taxes and the overall growth of the economy.

We thought the story was important but it got only a small amount of little bit of coverage in the national press. The New York Times has a link here to the original document. You can also find copies by googling the title.

Well now the congressional Republicans have forced the CRS to withdraw the report. The withdraw has led to more publicity and attention for the report.

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