Posts Tagged ‘Profits’

Conversations Starbucks won’t have

April 2, 2015

Starbucks.conversation161Background: What ‘Race Together’ Means for Starbucks Partners and Customers.

When profits and productivity aren’t enough

July 9, 2014

Losing Sparta by Esther Kaplan on VQR tells the following story.

A Philips lighting fixtures plant in Sparta, Tenn., was named by Industry Week in 2009 as one of the 10 best factories in the USA.

Workers and managers had worked together to increase output on some lines by 60 percent, lower changeover time between small orders by 90 percent, and reduce defective parts by 95 percent.  As a result the plant generated a good profit.

Yet in 2010 an executive showed up from corporate headquarters in the Netherlands and announced that the plant was closing, and its operations moved to Monterey, Mexico.

To people in Sparta, this didn’t make sense.  Local business leaders did a study that showed that any savings on wages (which generally are no more than 10 to 15 percent of manufacturing costs) would be offset by increased transportation costs of Philips’ markets in the Northeast and Midwest.  They were unable to make contact with anyone in Philips who was willing to listen or who had authority to make the decision.

Esther Kaplan thinks that the decision probably was based not on study of the Sparta plant specifically, but on an overall policy of centralizing manufacturing in low-wage countries.

I know from reporting on business years ago that there are fashions in management.  In one era, the fashion was diversification, so that your business is not dependent on any one market; in another, it was divestment and concentration on core competency.  And I know there are managers who think that willingness to cause human suffering is a sign of realism and tough-mindedness.

I also know from my own experience that when managers tell employees it is necessary to do X in order to keep their operation going, they almost always will do everything humanly possible to achieve X—provided that they think the statement is being made in good faith.

Workers in Sparta did everything management asked of them, but to no avail.  Kaplan wrote that this is the story of American workers as a whole.   Americans by many measures are the most productive workers in the world, and U.S. productivity continues to increase, but this does not keep manufacturing jobs in the USA.

Return on investment (of labor) is falling

July 11, 2013

blog_nelp_wage_declines

The United States officially has been in economic recovery in 2009.  Economic output, as measured by Gross Domestic Product, is up.  Corporate profits are up.  The stock market has reached new highs.  So, according to the law of supply and demand, wages should be rising, too.  Right?  Wrong.

Economics writer Felix Salmon has the figures.

NELP, the National Employment Law Project, has taken a detailed look at what happened to wages during the recovery — specifically, between 2009 and 2012.  They looked at the annual Occupational and Employment Statistics for three years — 2007, 2009 and 2012 — and created a list of wages for 785 different occupations.  They then split those occupations into five quintiles, according to income; the lowest quintile made $9.49/hr, on average, last year, while the highest quintile averaged $40.23/hr.  […]

The big-picture lesson that NELP draws is that between 2009 and 2012, real median hourly wages fell by 2.8% — and that the poorer you were to start with, the more your wages fell.  The top quintile didn’t do well: their wages dropped by 1.8%, in real terms.  But the fourth quintile did particularly badly: its wages fell by 4.1%, on average. 

To take one example, occupation 39-5012 — that’s Hairdressers, Hairstylists, and Cosmetologists — was earning $12.00 an hour, in 2012 dollars, in 2009.  But by 2012 they were earning just $10.91 per hour: a drop of more than 9%. 

Or look at occupation 51-6042 (“Shoe Machine Operators and Tenders”): that job saw wages fall 14%, in real terms, in just three years, with nominal wages falling from $12.69 to $11.69 per hour.

The charts show the large range of outcomes: some occupations are doing great.  At the top end, the highest-paid profession on the list, Psychiatrists, went from earning $69.48 per hour in 2007, to $83.33 per hour in 2012.  That’s a real increase of 8.3%.  But overall, everybody is doing pretty badly.

So what’s going on?

20120314-graph-the-1-percents-jobless-recovery-01

Click on Wage deflation charts of the day for Felix Salmon’s full article.

Click on The 1 Percent’s Jobless Recovery for the Century Foundation’s article.

Recovery feeds profits, starves wages

July 1, 2011

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth. … …

According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.

The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.

“The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.

According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.

via NYTimes.com.

Click on The Wageless, Profitable Recovery for the original article by Steven Greenhouse in the New York Times, which includes a link to the full Northeastern University study.

Hat tip for this link to Marginal Revolution, where Tyler Cowen wrote that such a steep “gradient” is unprecedented.