Hiatus, obviously

The blog is currently on a hiatus while we deal with a happy expansion of our family, the arrival of our son.

Tune in later this summer for more coverage of job creation issues.  Thanks for reading!

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The Future Won't Look Anything Like What We Thought It Would

Over at CNN Money there is an article that explores the concept of the tech talent shortage in a very unique way.  Rather than poll a bunch of experts and throw out some stats, they brought together business leaders and had them do a thought expirement on how their companies would react to a fake near future article on this issue.

While some of the common solutions were brought up, the group began to focus in on what one of the larger tech firms, Google, would do to confront this priblem. This groups interesting hypothetical conclusion is below:

"Thus, the group concluded that Google, faced with talent scarcity, will innovate its way to success -- living with less talent and even thriving despite this shortage.

This future-scape discussion taught these executives one very important lesson: Today's critical growth issue -- immigration reform, for example -- may fade into the background as the truly creative, inventive companies find ways to overcome obstacles."

This is a lesson more job creators should remember.  The problems today are really the challenges smart businesses will overcome tomorrow.

Read the full article here: http://tech.fortune.cnn.com/2014/05/13/americas-tech-talent-shortage-is-it-just-myth/?iid=HP_River

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A Roll of the Dice for Jobs

In Upstate New York there is a lot of commotion over allowing casinos to be built with full Vegas style table gaming.  The law has imposed a limit to where and how many can be built, so developers are fighting over the opportunity.  Each one is crafting their pitch on how many jobs they would create and what economic impact they would have on the region. The areas proposed for these casinos have seen local groups rally to oppose them due to the problems they can bring as well.

That casinos will create jobs while they are being built and will need staff to run them is not in question, but what kind of jobs they require to operate is. Fortuitously, there was an article in the local paper, The Times Union, originally appearing in Salary.com, which explores this very concept.

The article, which you can view here, http://www.timesunion.com/jobs/salary/article/Casino-Jobs-Are-Becoming-a-Safe-Bet-5392398 , has a good overview of the casino industry and an examination of two types of jobs in Pennsylvania casinos.  These are blackjack dealer and surveillance staff. The article talks about how with only a few weeks of training people can easily apply to jobs that pay from the low to mid 30s to the 40s, and how there is a lot of possible advancement. It is a pretty good introduction to the casino industry and well worth a read. 

I have some concerns with the facts and figures discussed in the article, and their applicability to the situation in Upstate New York with the pending casinos, but we can use them for a back of the envelope thought experiment. The parallels between Pennsylvania (specifically where the casinos are, such as Allentown) and Upstate New York are pretty strong, as both are economically depressed areas struggling to come out of the deindustrialization phase.  Jobs are always welcome, but one must ask if the societal costs that come with a casino (gambling addiction, crime, etc.) are balanced by the jobs created, or would these areas be better assisted by similar type of job creators, with less baggage. Let’s examine using data from the article and data from salary.com

The two jobs in question pay between 31,000 for a casino surveillance operator to 35,000 to 40,000 for a black jack dealer as a starting wage.  Combined with health insurance and other benefit packages these sound like fairly decent jobs for those with little more than a high school degree.  But let’s look at another easy entry field, retail.  Retail stores share some commonalties with casinos.  They are both focused on encouraging people to spend money, have employees dedicated to facilitating that process (sales people and dealers), worry about theft, and have higher paying positions as you advance in the industry.  The retail industry also does not require more than a high school degree for most entry level positions.

Looking at salary.com's own numbers for the Albany area illustrates that some of the potential jobs created by the casino, could have been created by a retail company as well.  For surveillance, which the article lists at $31,000, you can draw an easy comparison to a store detective, which the median salary and bonus is about $31,000.  While this is median versus starting salary, the societal ills attached to the gambling industry might outweigh the small differences in salary.  Source here: http://swz.salary.com/salarywizard/

For black jack dealers it s a little bit more of a stretch in terms of skills but a comparable function is a retail store customer service representative (both interact with the customer and facilitate the transfer of funds).  Here the median salary in the Albany area is lower than the mid 30's to 40,000 range cited in the article.  The median salary and bonus is bout 33,500, which would indicate that the casinos are bringing in better jobs in this case, as even the starting salary is higher then the median salary.  Source here: http://swz.salary.com/salarywizard/

Choosing to utilize casinos as part of an economic development strategy has been a tough choice all over the country.  While they do create many jobs and some of them quite high paying, (especially as you enter upper management) the same could be said for other industries that bring less social costs like retail.  What is a good sign is that many of the proposed casinos in the Upstate area are planning on being more resort than casino in many cases, with features like indoor water parks and luxury golf courses.  It still remains to be seen what jobs are created, but hopefully our business and political leaders will make every effort to ensure the economic benefits are enhanced and the societal ills are mitigated.

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Pew Portrays Population Prognistication Perfectly

There is a great and truly beautiful graphical illustration of the changing demographics of our country that Pew Research put together. There upcomng book, Next America, should provide a lot of great details on where the trend lines are going.  Demographics play a key role in understandingbroader economic trends and jobs trends, so this is fascinating reading. The way they present the data (on my ipad at least) really draws you in as well.

If you have 15 minutes check it out here: http://www.pewresearch.org/next-america/

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Capital Expenditures: Big Boom or Too Soon?

In Fortune, Shawn Tully has a great piece about how some economists are starting to see a solution to our current economic malaise: Capital Expenditures or "capex" for short. Capex is the major investments and purchases businesses make like building a factory, buying equipment like a plane, or investing in new product lines. You can read the article for yourself here:

http://finance.fortune.cnn.com/2014/04/02/hold-on-to-your-hard-hats-a-capital-spending-boom-may-be-coming/

In the article Mr. Tully talks about how some economists see capex as poised to rise and that this increase could have a huge impact on the economy. He says that "A resurgence in capital investment is what America's been waiting for. It would create a virtuous, self-reinforcing cycle of growth."  While I have some concerns with the evidence of the economists he cites (one being improving CEO confidence, which could be due to other factors), he is correct that such a resurgence could pull our economy out of the funk we are in.   Earlier in the article he points out that capex "Now stands at just over 12% of national output, compared with around 13.5% of GDP in 2007". If it were to grow by even half to its normal output it would have an outsized impact on our feeble economy.

The fear that I have though is that if this is occurring too rapidly that it might prematurely drive up prices as resources are bid up to meet business needs.  The jump in prices might reduce the size of an investment (the company builds one less plant as prices eat into the budget) or it could reduce overall demand in the economy (price shocked consumers pull back on purchasing discouraging other companies from investing).  Combine that with a summer that may already have high energy costs due to geo-political turmoil and a frigid winter in the US and the capex recovery could be over before it gets started.

On the other hand, businesses may invest regardless of the winds of economy.  Many organizations think in 5 year business cycles, and while the recession may have thrown a wrench into the best plans times are different now.  The recovery is occurring, albeit slow, and domestically our politics are in a relative tranquil period and may be for months to come.  If there was ever a time to invest in aging infrastructure or new products, that time is now.

Hopefully the latter wins out over the course of the year, although only time will tell.

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More Education Leads to More Money, Also Water Wet and Grass Green

There is a fun tool (or at least fun if you are a jobs geek) over at CNN Money that shows just how many jobs there are that pay different hourly rates.  It breaks down all of the jobs in the United States by $10 dollar an hour increments, and then visually displays then along a bar in relative population size. You can check it out here:

http://money.cnn.com/interactive/economy/us-jobs-wages/?iid=HP_LN

It is interesting that of the 151 million jobs, over half pay less than $20 an hour.  While this should not be surprising as the median household income is under $55,000, what is interesting are the jobs that CNN Money cites as examples of jobs in each category.  In the under $20 an hour category truck drivers and construction workers are cited while in the under $10 fast food workers and personal care aids are representative.  Conversely in the over $20 an hour categories civil engineers and lawyers are present.   This is further emphasis on the importance of education and training as the lower wage jobs have a lack of higher education requirements as a commonality, while many of the higher wage jobs require extensive education.

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Rage against the machine! How to stop robots from stealing our jobs.

Perhaps in the future posited by movies like The Terminator, the robots did not take over with weapons, instead they took our jobs?

On that topic there is a great interview in scientific american with Erik Brynjolfsson which you can read here:

http://www.scientificamerican.com/article/yes-robots-are-coming-for-our-jobs-now-what/

In the interview he talks about his research into how technology is separating productivity improvements from employment increases.  This is a problem that is growing more apparent as our computers and robots get more effective but fewer people are being employed.

Erik spends a lot of time talking about the problem, one analogy that stood out was this one:

"Think of someone who writes software. You can take that talent or luck and replicate it a million times. And while the person who created it does very, very well, the people who previously did that job are less important or maybe not even necessary. The example that I gave in my TED talk was TurboTax. You’ve got a human tax preparer being replaced by a $39 piece of software. It makes the pie bigger in the sense that you create more value with less effort, but most of that value goes to a very small group of people."

However he does not have much to offer in terms of solutions. He does say that one of our problems is that unlike other revolutions (like the agricultural or industrial), we have been unable to create new industries to have people work in. That might be somewhat true, but the increase in demand for it workers over the last few decades shows that new industries are being created, its just they demand less total employees as previous revolutions require.

In terms of solutions we can bring to the table, there are a few, but not easy ones. Perhaps we need to identify a new understanding of work and careers, one that encourages and supports part time work? As less total employees are required to do a job, maybe employment is increased by making part time work a viable career path?  Many households have one full time worker (40 hours) and one part time worker (20 hours), perhaps the future is two part time workers (30 hours each)?  This might require more government assistance to offset reduced or altered income, or it just may need the cost of living to continue to drop to make that feasible lifestyle choice.

Another option is to encourage greater investment in industries and sectors that require human thought or action.  This could mean encouraging personal service industries like health or therapy to expand by lowering taxes or restrictions on them. Additionally, it may be wise to provide assistance to labor intensive industries and services. It may not make sense to require sales tax on hair cuts, if the goal is to lower total unemployment, for example. This might be difficult to do though for governments facing deficits.

These are just a few ideas on how we can cope with the rising robot revolution. Unfortunately we will need more ideas, and soon, to ensure we are not all terminated!

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Pick your pipeline to job numbers

An interesting article was in US News and World Report by Alan Neuhauser that talks about the Keystone XL and how many jobs it may create.  According to the article the "State Department [...] has said the pipeline would create the equivalent of 3,900 full-time construction jobs if it's completed in one year, or 1,950 if it’s done in two years. TransCanada, the company hoping to build the pipeline from oil sands in western Canada to refineries in the U.S., has come to a far different conclusion. It says the project will create about 9,000 part-time, temporary and full-time construction jobs. It hasn't said how many permanent jobs it will provide once construction's complete." The full article can be found here:

http://www.usnews.com/news/articles/2014/03/14/in-calculating-keystone-xl-jobs-no-easy-answer

So, as the article asks, why the disparity?

It comes down too how do they do the numbers. What should be a straightforward equation could be calculated in different ways.  The State Department count is based on full time equivalents, which would count a welder who worked on the pipeline for six months as half of a full time equivalent.  TransCanada, on the other hand, counts the total number of jobs created, irrespective of the time working.  So that same welder would count as one job in their tally. 

In some respects they each could be right, depending on what outcome you are looking for.  If you are looking to see how many total jobs you could create than TransOcean's method.  If you are looking at jobs that pay all year round, than the State Department's method works better. Which is better to truly measure job creation, is something for another blog post.

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New Business, Old Business, Small Business, Growing Business?

There is a great post over at the Journal by Eric Morath that talks about how the best job creating businesses are not the small ones, but the new small ones.  You can view the post here:

http://blogs.wsj.com/economics/2014/02/24/say-it-together-young-businesses-not-small-ones-drive-job-growth/

In it he talks about how the Chicago Fed Chairman Jason Faberman explains how the largest creator of jobs are small businesses that are less than 4 years old.

This concept sound confusing at first, but can be easily explained when thinking about the difference between a fledgling tech company and an established barber shop. Both are small, but the barber shop is probably not going to be hiring at the same clip that the tech company might be.

Faberman, according to Morath, advocated that governments encourage policies that support new business, not just any small business.  While the article does not go into too many details, I would like to suggest one possibility.  Many new business are cash starved, while older businesses feel the weight of growing taxes as time goes by.  Perhaps governments can make the tax credits and exemptions that are granted to many small businesses transferable. This would allow new businesses to sell their credits to established firms, allowing greater capital access and improving the financial strength of all small businesses.

There may be some logistical, and revenue challenges, that could reduce the success of this idea, but at face value it could help both the corner barber shop and the hot new tech start-up.

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Valentine's Day List: Flowers, Chocolate, ... Jobs?

Every year people across the globe participate in a ceremony named after a 3rd century saint from Italy: Saint Valentine.  While there are articles about what to buy, or what to wear, or how to make the best cupcakes for Valentine's Day, here at the Job Creator Spotlight, we are going to look at whether the so called "Day of Love", gives a little love in the sense of more jobs. Specifically, what kind of boost to hiring or overtime does Valentine's Day have on the retail florist industry?

Let's look at the industry first, specifically independent florists. According to the Bureau of Labor Statistics a florists median pay is $11.45 an hour, which is not terrible for a job that only requires a high school diploma (or equivalent). While formal training is not required, those with greater experience can expect to make more.   Many florists work for small shops and while they may have business all year round, Valentine's Day is a busy day for what is usually a fairly small enterprise.  To gauge the impact this one day spike in business has on them, over a dozen independent florists across a three county area in upstate New York were polled and asked the following questions. Below is a summary of the responses to the different questions:

1. How many employees do you have?

Only independent florists were polled, so predictably the number of total employees was not very high. At most, there were a few full time employees and several part time employees. The average of total full time employees was two per store. While nearly all had part time employees at different times, there was not enough quantifiable data to get a good average.

2. Roughly what percentage of your business for the year does Valentine's Day represent?

The answer here varied significantly and only a few gave a clear answer as to why that was. One cited a reliance on weddings, another said that Christmas was a more important holiday. The average percentage of business derived from this holiday was 20%.

3. Have you hired anyone to help you with this holiday, specifically?

This is the question that drives this website, and here the answers were very interesting.  None of the florists polled indicated that they would be hiring other florists.  What they were hiring for, in the short term, were delivery drivers and retail clerks.  According to the Bureau of Labor Statistics, these two fields pay a median wage of $9.44 and $9.38 respectively.  This is less than a florist would make, and does not require any special training beyond how to operate the required tools (a vehicle or a cash register). Thus it makes a lot of sense that these easily transferrable job duties are passed on to temporary employees.  While most of the answers were a bit vague, the average increase was around three temporary hires.

4.  Do you plan on offering additional hours or overtime to current employees?

Due to the small size of these businesses many employees were salaried and not eligible to receive overtime. A few were offering their part time employees more hours during this busy season based on their availability.

These questions helped answer the question of how does Valentine's Day impact job creation. The spike in orders and surge of business leads to an increase in payroll, if only for a brief time. While it is to be expected that when business increases people will be hired, what was interesting was the work they were hired for. Simpler jobs and tasks that do not require much training, but make up a large amount of time each order requires, is where the florists dedicate their extra revenue.   It makes a lot of sense, but it is very interesting to see the hand of the market at work.  The floral shops didn't hire more florists, they hired people to do the other jobs so they could focus on making beautiful flower displays.

The results of this unscientific, but hopefully insightful, survey illustrates that for one small section of an industry, independent florists, Valentine's Day is more than just flowers and candy. It also means temporary jobs and more hours. The jobs being created are not the highest paying, but they also do not require advanced training. In fact, for the majority of shops, the way they handle a fifth of their business for the year is through adding people to their payroll.  So when you are buying something from one of these shops for someone special, know that you are helping someone else earn a little extra money as well.

A special thanks to just a few of the stores polled who offered to have their website listed below:

http://www.fleurtaciousdesigns.net/

http://www.centralfloristofalbany.com/

http://www.maloneysflorist.com/

http://www.laurelsflowershop.com/

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Much like the audience reaction to the State of the Union, how you feel about the proposed minimum wage hike depends on where you sit (or live)

The president last night talked about how it was time to raise the minimum wage. While the arguments regarding whether this will create more jobs or reduce employment have been noted before (such as here), one thing that is universally accepted is that this kind of change will impact some areas more than others.  Richard Florida at The Atlantic Cities has produced a great look at how this will impact some of the wealthiest and some of the poorest labor markets.  You can view it here:

http://www.theatlanticcities.com/jobs-and-economy/2014/01/1010-minimum-wage-would-affect-some-metros-much-more-others/8235/

The big takeaway for me is that raising the minimum wage in many major metropolitan areas may barely move the needle, but in others it could almost bump someone into the next income quintile. One way to examine the impact this would have is to compare the salary of the minimum wage worker against a fairly decent benchmark for the cost of living in an area, home values.

Lets look at Seattle, WA and Myrtle Beach, SC.  In Seattle, according to Trulia, the median sales price was $416,000 in the months of October to January. In Myrtle Beach, according to Trulia again, the median sales price was $154,000 in the months of October to January. Both are well known metropolises with major businesses (different industries dominate such as technology in Seattle and tourism in Myrtle Beach), however both clearly have different costs of living, illustrated by differing home prices.  However, if the minimum wage was extended to both areas, the recipients of it would be effected in dramatically different ways.

In Seattle they would barely notice the change and would only be marginally better off. They would go from having an income that is 27 times less than the median home price to having one that is 19 times less than the median home price. Truly time to live it up. It should be noted that Seattle has a higher minimum wage than the federal minimum (9 bucks, so the jump would be from 22 times to 19 times)

But for the worker in Myrtle Beach, the difference would be incredible!  Currently they would have an income that was 10 times less than the median home price, but with the increase they would go to having an income 7 times less.  If two people making the minimum wage were to purchase a home together (a husband and wife perhaps) they could probably afford it using back of the envelope mortgage math (i.e. your home shouldn't be more than 3.5 times your gross income).

This difference might also help explain some of the positions taken by supporterss and opponents of the hike. If you support the hike in Seattle it is easy to see how a marginal increase for the working poor will help them out and the larger economy as well.  The folks at minimum wage in Seattle already have to spend nearly every dime of their income on necessities, more funds will give them some breathing room and boost local economic growth as they purchase items they heretofore had to give up.  While businesses may loose some profit, they actually could make it up as spending increased on marginal goods and services. Most minimum wage workers will be spending their money locally, not on trips or exotic imports. Some people may loose jobs as a result of cost cutting measures, but many operations are already run so lean in these high cost areas that the changes can be absorbed or offset with marginal cost increases.

In Myrtle Beach however, the owners of small businesses may themselves be making only so much more than their employees, especially as a low cost of living allows them to operate at lower margins (and may force them to as prices strive to stay comparably low).  This would force them to either raise prices, which reduces demand, or cut workers, which eliminates jobs, to make up the difference in their margin. An example of the price cost would be to look at a strictly labor example, say a bike messenger delivery service, that could be forced to change prices by almost 30% to recoup the costs, or lay off the slowest rider until the 30% savings is recovered. This sudden change could have a real chilling effect on this local economy as owners and managers limit investment and focus on retooling their businesses to handle these changes (although over time it would eventually work itself out as businesses return to a price and labor equilibrium). This may explain the vehemence many business owners from these areas have to the increase and the concerns and passion shown by their political representatives.

I bring attention to these issues because the minimum wage debate is one that many see as critical to advancing job creation in our country.  However, our country is big and vast with many different regions that have very different economies.  Mandating a central change across the country will have different results in these different economies.  As this conversation continues it's important to keep in mind that the rules change from area to area, industry to industry, and what seems like a panacea for job creation in one area really is a job killer. All politics is local, it was once said, and perhaps all job creation is as well.

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Job Creation is not just a US problem

Amy Rosen at Forbes has a post about how the economic leaders of the world are starting to focus in on a problem we have been focusing on this site: job creation. Specifically, how do you create jobs for the emerging young work force.  As we have noted before, there are just not enough jobs for all the young people entering the workforce, and this problem isn't limited to the US. Countries like India have not been spared from the recession, yet young people every year enter the economy looking to be part of the workforce. Many will be disappointed at the mediocre jobs that are available, and many others will fail to secure any paid employment and must rely on family, friends or the state for support.  This youth unemployment represents a true tragedy as moldable young minds atrophy in their prime.  This will only compound in the future as those who fail to fully enter the workforce early are forced to catch up all their lives, putting their eventual children in potentially the same spot. 

Amy makes the case that entrepreneurship and helping people make their own jobs may be one solution.  I applaud her, and others, efforts, but I wonder if that may be a solution for some youths but not all. When we are talking about the young, for any nation, only a fraction are truly equipped to be entrepreneurs. Many more could, with proper training, but one of the best training programs to making your own job is a job in the first place.   This gives people a source of independent revenue, perspective on an industry, and an opportunity (possibly) to try ideas out before they have to completely own their own successes and failures.  I wish Amy good luck in Davos as she pushes this issue, and hope her solution is at least tried. Any efforts to resolve this issue is far better than the status quo.

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Terrible end to 2013

It is all over the news of late "Disappointing Job Report", "Lower Job Numbers; Only 74,000 Jobs Created", and so on. It truly was a disappointing December job report, especially coming on the heels of several good but not great ones.  However, many factors go into creating the monthly job report, some may change and the number could go up in revisions next month.  The numbers may also be the result of seasonal or other factors, not part of the usual seasonal factors.

One interesting fact from the job report is that for the first time in 10 years the health sector didn't add any jobs in a monthly report. This is astonishing because it has almost been an unwritten law that health care will add jobs. As health care costs have increased, the sector has continually added jobs. Of late the health sector has not been growing as fast but is still growing. The article below cites several reasons, one that is not mentioned but occured to me is Obamacare.

http://money.cnn.com/2014/01/10/news/economy/health-care-jobs/

The article says that the industry needed a breather and that a slowdown was inevitable with the decreasing cost increases.  But the costs have been decreasing all year, why would it shrink in this last month?  Well there are many common budgetary and organizational reasons for laying off employees at the end of the year, but I think other factors played a sizable role.  In my mind, Obamacare was one of them.  I don't think that this is a sign of things to come, but the onset of changes to insurance and medical procedures from the affordable care act has also brought on uncertainty. This is an industry shifter, with many variables and twists that even the experts are not sure what will happen on 1/1/14. This is a very large dose of uncertainty, at least for the first month.

When you have uncertainty, mixed with declining revenues, it is a recipe for reduction of the workforce.  Even more so, it is a freeze on new hires as people across an industry all say the same thing "Let's hold off on filling x position, until we have a clear picture of what's going on".  It will be interesting to see if hiring picks up next month or the month after as uncertainty subsides and unmet needs become more important.
  

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Follow Fallows

James Fallows at The Atlantic has been doing a fantastic series on smaller cities and towns and the business and civic life that makes them successful. Success being, as he defines it: "More jobs, more opportunity, more satisfying life choices for more people".  It is a great series, asking good questions and finding some answers, but often more questions.  His recent post is a good synopsis of what he has covered so far, as well as a look at one company and one town in California.  I urge you to take a look:

http://m.theatlantic.com/national/archive/2014/01/luck-planning-karma-the-elements-of-a-small-towns-high-tech-success/282824/

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