Phil Hauck's TEC Blog

Wednesday, August 6, 2014

On Income Inequality and the Middle Class (Ah, Controversy!) ...

Income Inequality Is Over-Stated … by a large degree!
   (And so is the Women’s Wage Gap!)
I’m reading more and more articles making this point.  There is something called the Gini coefficient, named after the man who developed it in the early 1900s, that measures the gap between those with the highest incomes and those with the lowest.  Over the past 40 years or so, the Gini coefficient has actually lowered, not increased.  Most quotes look at the gross incomes of families … but when transfer payments and tax credits are included for our lowest income (housing allowances, food “stamps”, Earned Income Tax Credit, etc.), we are actually doing pretty good.
The studies indicate the keys to progress are NOT minimum wage increases, more government benefits, and the like.  Indeed, when you compare states experiences, those states with the highest minimum wage, highest levels of benefits, etc., actually have the higher Gini coefficients, on balance.  What’s going on is that those policies chase away workers, business and capital.  They aren’t relatively more prosperous economies.
The key, they show, is having aggressive policies that “raise all boats,” which is pretty hard to do these days because increases in regulations, uncertainties, etc., lower the willingness to expand.  But some states have and are doing it.
Note:  Yes, the past several years have shown a divergence in the Gini Coefficient ... increasing inequality.  The 1% that we disparage got that way and stay that way because they earned enough money, after taxes, to SAVE money they could INVEST.  The stock market has been on a tear … so those who have SAVED have increased their INVESTMENT EARNINGS.  Those of us who work for salaries and wages don’t get those kinds of increases (nor the ups and downs of the stock market, either).  
        How do we resurrect the adage of "Pay Yourself First":  Save 10% of your paycheck and invest it, and live off the rest.
Regarding the Women’s Wage Gap:  If you take the gross wages earned of women vs. men, you get the large gap that our president talks about.  Studies that have built in the impact of differences in skill levels, hours worked, results, etc., find that the gap is still there, but it’s 4%, not  the 23% that is often quoted.

There's concern about the disappearance of the Middle Class.  
       Indeed, one study with a definition of the Middle Class indicated it has shrunk by 10 percentage points over the past 20 years, with 6% moving up and 4% moving down.  The difference was education level.
       Whereas the computer's ability to process data and provide information has eliminated millionss of Middle-Class jobs, it's also true that many formerly manual jobs have become more sophisticated and command higher wages.  That includes many health care jobs, many construction jobs, automotive repair, customer service, some call center, most administrative, teachers, designers ... and the like.  Middle Class jobs are/will be a combination of judgment and use of computer analysis skills ... requiring some training beyond high school, and on-the-job sophistication.  That's the challenge for those who want to be Middle Class.
Others simply won't.  They require much physical work, are easy to learn ... and are in plentiful supply.  They will be worthwhile, but not high-paying, and not family supporting.
Another trend:  A reduction in the costly learning considered a requirement for many "professional" positions ... a reduction to the knowledge necessary, plus on-the-job experience.  Teachers may not need a college degree, attorneys may only need two years of study.  You already see the trend in medical care with the burgeoning of nurse practitioners, hospitalists, and the like.

Microsoft Executive's Insights ...

I had a chance, courtesy of Skyline Technologies at Insight Magazine’s Thinc! conference, to hear Efram Stringfellow, Microsoft’s 18-state regional head, talk about the future of his business. Among his points:
•  Already, more than 2.4 billion people are internet-connected … just one click away from YOUR website.
•  Millennials are interviewing US for jobs.  We used to be interviewing them.
•  Companies aren’t built for change.  We’re built for consistency and order, delivering our current strategy flawlessly. Yet, now we want our people to grab the data they need, interpret it, and react on their own to the customer’s needs as they change!  How to make that transition in our expectations of what each employee should be doing?
•  Our coming workforce is expecting a “rapid response organization, and if you aren’t, they’ll find one that is."  Rapid response comes from “open communication, experimentation, and working as a network.”
•  "Break the paradigms.  Everyone is showing up with somebody’s mobile device, and if we're to have dominant market share, we have to support others' operating systems as well."
•  The Cloud is NOT necessarily cheaper … but what it is is secure and  up-to-date with upgrades.
•  Our aim is to get you out of a system that YOU have to maintain.  You don’t have all the necessary expertises, and we do.
•  We need to provide you a Roadmap of where we think we’re going, so that you can make intelligent decisions regarding risk and cost as to how you want to invest in these new integrative technologies.
•  Two of his four kids are named Xavier and Quentin.  He referred to them as “X” and “Q”.

Of Interest ...

Beer Lovers ...
Okay, Beer Lovers, what’s the largest brewing company owned and headquartered in the U.S.?
(See answer, below.)

New NFL Success Factor?  
A recent article pointed out that the Indianapolis Colts and New England Patriots, two “dynasties” of the past decade or so, are teams loaded with college graduates as measured by players drafted as 5th year seniors. Two of the top three in college graduates met in last year’s Super Bowl (Denver and Seattle); worst was Jacksonville, which went 4-12.

No, not jobs.  "Jobs:  The Movie"  About Steve Jobs
It's not a great film, but what it does do is demonstrate the importance of a Leader CLEARLY and FORCEFULLY expressing the MISSION of the organization.  The CAUSE.  WHY we're doing what we're doing.  He does it in spades ... all the time ... sometimes brutally!
People want to buy in to what you are doing emotionally!  Allow them to do it.

Area College Tuition, Aid Gaps
A recent Insight magazine article showed this interesting data.  Note:  The Aid amount also includes Loans, which have to be paid back.
Estimated Cost Average Aid Difference
Fox Valley Tech $3,300 N/A ??
UWGB $17,298 $10,711 $6,587
Lawrence  $49,722 $33,730 $15,992
St. Norbert $38,498 $20,341 $18,157

Fragility of the Business Enterprise
1995 was 19 years ago.  Since then, fully half of the that year's Fortune 500 companies then have been replaced.  Lessons:  There is no assurance that mature companies will persist.  Like civilization, the culture and responsiveness to marketplace changes of business organizations is fragile.  Support and development of the business infrastructure needs to be strong state and national government policy ... including encouragement of R&D and new business startups.

Another Sign of the Apocalypse  
We thought we were done when we recognized how poorly school boards and city councils have done with taxpayers money by agreeing to ridiculously expensive union contracts.  Now comes word that the board of the Metropolitan Opera has in the past agreed to union contracts (they deal with 15 unions!) that pay musicians up to $200,000 and choral group members $145,000 to $150,000 … starting with a $100,000 base that includes 9 weeks of paid vacation, and then has add-ons for wearing costumes during breaks, including lunch; using body makeup; costume fittings; any encroachment of the 4.5 hour respite before performances, and for being present more than 7.5 hours a day.  How do organizations survive?
PS:  Green Bay's Symphony didn't ... their 101st year will be their last.

On Regulations ... A Sunset Date!  
We complain (rightly so) about the stifling capability of regulations at every level, but they just keep piling up.  Obviously, most are good for society (as opposed to those that are good for organizations that “paid” to get them created), but ...  An idea I read:  Have an Expiration Date on all regulations, no more than ten years hence, when they must be reviewed as to whether they need to be renewed.

India Turning Around?  
Kitty and I traveled to India back in 2008 as part of a TEC international trip … a country of 1.2 billion people, first-world and third-world (that part living on less than $2/day).  60+ political parties, so virtually impossible to govern.  Gave them low marks for ability to create a vibrant economy.  That may now change:  New prime minister Modi, who uprooted the 30-year rule of the Nehru/Congress party and actually won more than 50% of the vote(!), has a track record in his state of Gujarat, which he led since 2001, of vastly reducing corruption, creating financial and technology parks, expanding infrastructure to support growth, and following successful trade development policies.  Let’s hope.

Taking Business Income Tax Rates To Zero!
I’ve long wondered why businesses are charged any income tax at all.  They are the golden goose, creating jobs that provide incomes for families.  So, why tax them, taking away dollars that would have been used for capital expansion and new product development?  Why not leave that money in the business so it can be used to create more jobs … and thus even more income to tax?
Well, Kansas has taken that step.  Last year, Kansas reduced to zero from 6.45% the income tax on sole proprietorships, LLCs and Sub S Corps.  One result:  2013 had a record year in new business formation.
When will we do this nationally?
Corollary:  Don't tax any income earned by a business overseas.  There is much discussion about our current taxation policy of overseas profits right now (Inversions!), and its result of keeping dollars sequestered overseas rather than repatriated to the U.S. to fund expansion here.  

Beer Lovers Answer ...
Nice try.  MillerCoors is owned by SABMiller, South African-based ... and Anheuser-Busch is owned by InBev, a Belgian concern.
Hard to believe, but the largest brewing company owned and headquartered in the U.S. has only 1.6% market share:  D.G. Yuengling & Son, very strong on the East Coast.  Second, with 1.3%, is Sam Adams.