Filthy Commerce

We're Number Last!

The U.S. is one of three nations of 181 studied by Harvard and McGill universities that don’t guarantee working mothers leave with compensation, and researchers say it pays the price in lost productivity and health risks for children. The two other countries are Papua New Guinea and Swaziland. 

-- "America Last Among Peers With No Paid Maternity Leave," Bloomberg News, Feb 21, 11

A 2007 article had the U.S. keeping company with Papua New Guinea, Swaziland and Lesotho. Good to know that Lesotho -- home of the $1600 annual gross domestic product -- has changed since then.

A whopping two U.S. states offer paid family leave benefits:

New Jersey and California, have leave programs that offer parents cash benefits, while Rhode Island, Hawaii, and New York provide some disability payments to new mothers. Meanwhile, Washington state, which passed a paid parental leave law but has so far been unable to pay for it, is in limbo. Without any income to keep them afloat during their time off, a substantial minority of those covered by the federal leave law don't wind up taking the leave to which they're entitled. Some 2.73 million workers surveyed over an 18-month period said they didn't take FMLA leave because they couldn't afford to.

-- "The Confusing State of Family Leave Policies," Slate, Aug 17, 10

I got to take sixteen weeks paid leave, thanks to a combination of circumstances: I live in California; I had a c-section, thereby making me eligible for two weeks more of paid disability than I would have gotten had I delivered vaginally; I have an employer who also offers paid disability for giving birth; the employer also offered a week of paid leave for "bonding," and that same employer also has a vacation policy that links seniority and vacation time off, so I was able to dip into the 20 days a year I get annually to stretch my leave out to the full sixteen weeks.

My employer is not stupid: BLS data has shown that employers with generous family leave policies do a better job of retaining workers than their stingier counterparts, and any workplace expert will tell you that retention is typically cheaper than churn. But my situation -- which is a perfect collision between geography and corporate policy -- should not be special, or an exception. Should it?

So long as we're looking at the labor market ...

... If this recession taught folks until 45 nothing else, it should be, "Start saving for retirement now."

Here's a hint: "higher wages" equals "more likely to spend"

This just in: so-called "Affluent Moms" also sacrifice their discretionary spending once the kids come along. Sayeth the Center for Media Research:

O eternal Alameda county optimists ... buy my house!

Since my husband and I are such unabashed romantics, we spent the morning of our 10th anniversary reminiscing about how different things used to be.

Namely, about how once upon a time, all one had to do to buy a house was slap down 10% of the purchase price and pinky-swear to the banks that you were good for the rest. In August 2010 -- a scant five years later -- we were sitting in a banker's office, learning that despite retaining at least 10% of equity in the house, paying down our principle, never making a late payment and boasting excellent FICO scores, we are not what the bank would consider a good risk for refinancing. There are some seriously sexy low-interest-rate mortgages out there ... but we are doomed to drooling and whimpering as we ogle them.

Moments like that can make one regret taking out a mortgage in 2005.

Control/ to get what I want/ Control/ I got to have a lot

We recently put down a new rug in the living room, prompted by the vague suspicion that good parents would find the prospect of an infant wiping out on a highly-polished hardwood floor to be less in the "hilarious" camp and more in the "horrible" one. The thing is, having a rug introduces a whole new dimension to housekeeping. With hardware floors, all one had to do in order to eliminate the cat-generated detritus was sweep. Now, however, we need to vacuum. Truly, this rug has spawned an unholy hybrid of Home Comforts and the Diderot Effect.

Bring on the heirloom tomato subsidy!

Here's a not-very-sexy food story that's been developing all week: due to Russian droughts and smaller wheat crops in Canada and Australia, wheat prices have surged 55% in the last two months. This is good news for American farmers -- they've got oodles of grain in easy-to-dispatch locations -- but not great news for any budget-conscious bread or cereal lovers. If wheat prices go up, the costs are going to get passed on to the consumers.

Working mothers, you're not allowed to plan for the future

Is there anything more satisfying than assuming you know why and how other people are spending their money? Going by the dreary similarity of blog commenters in different segments of the blogosphere, apparently not.

I speak, of course, of the myth that a two-career household is financially worse off than one in which there is one breadwinner. Working mothers are almost inevitably called out on both mommyblogs and personal-finance blogs, usually by someone who remarks with a blend of evangelical zeal and fact-free naivete:

"I bet if you just re-evaluated your priorities, you wouldn't have to work! Stop paying for cable, brand-name products, meals out. Then you could stop working and save all that money on day care too! Get off the job treadmill -- it's soooo much better for your family."

The formula for writing these sorts of comments is simple: Start by assuming the working mother is a financial idiot; add a dollop of anti-consumerist morality; stir in a mini-homily on re-evaluating priorities so your children don't grow up to practice skeet shooting in a bell tower (bonus points if you can imply " ... you shallow, label-obsessed Medea" without actually saying it); blend well and serve.

You know what is always, always missing from these "You don't need HBO, but your kids need you!" mini-lectures? Clear and explicit directions on how a one-income family is supposed to swing saving for two adults' retirements.

Why getting that MRS is no undergrad joke

Time magazine's "Are Marriage Statistics Divorced From Reality?" (May 24, 10) points out a few fascinating thing, but the one that stood out for me: "What seems most clear is that less-educated, lower-income couples split up more often than college grads and may be doing so in higher numbers than before."

How to reframe data, taxpayers' edition

Hat tip to Megan Kelly for the heads-up on the original AP article.

Today, the Associated Press published "Nearly Half of U.S. Households Escape Fed Income Tax." The following caught my eye:

When is it okay to judge how people spend their money?

Here's a fun little exercise in self-knowledge. Try reading "The Burden of Paying for Wedding Bells Shifts" (NYT, April 2, 10). Here are the interesting numbers:

The average American wedding costs more than $28,000, excluding major cities where the price is higher

In the past seven years, the percentage of maternal parents who foot the bill has halved to 10%. In that same period, the percentage of couples who paid for their own weddings rose from 27% to 33%.

And the story's anecdotes point to the costs being "spread around" with a wider pool of relatives picking up the costs.

How you find out more about yourself: What your responses are when you read through the story.

For example, on an intellectual level, I'm curious as to whether the rising percentage of couples wholly funding their wingding is at all linked to the rising ages of first-time spouses. I downloaded the U.S. Census Bureau's latest data on estimated median age at first marriage, and in the past seven years, the median age for men has risen from 27.1 to 28.1, while the median age for women has risen from 25.3 to 25.9. Is there a link between age and matrimonial funding? I don't know if anyone knows.

At the same time, on a purely knee-jerk level, I was thinking, What adult who's ready for marriage expects their parents to foot the bill? You want to make a public declaration of starting a new family, you prove it by underwriting the costs.

It took some conscious effort to reel back the judginess and remember that weddings have a lot of emotional and cultural factors. Parents may view the wedding as their obligation or their way of launching the new family. There may be pressure to throw a 400-person shindig, and it's hard to do that on a shoestring. And while it's easy to snort that $28,000 is a lot of money to toss on one day ... well, if you have the money, whose business is it how you choose to spend it?

That got me to thinking: When is it okay to be judge-y about how someone spends their cash? Is it ever? We send so many messages through our consumer activities; it's understandable that the line gets blurred between "It's none of my business" and "If you wanted to keep it to yourself, you wouldn't flash the cash."

Working at home won't always work

The shiny crown of workplace flexibility is working at home. It was the focus of some Presidential attention this week, it's the sexy "You can have it all!" solution dangled in countless career articles and commercials, it's the appeal of being able to tend to a sick child while also keeping the boss placated.

You know why working at home does not work for some people? I can think of a few reasons:

1. Some jobs require a physical presence in order to get done. Not every worker in America is a white-collar drone. Nearly 15 million work in retail, 5.5 million work in construction, 16 million work in manufacturing and non-durable goods, 19.4 million work in education and health services, 13 million work in leisure and hospitality. [Stats courtesy of the April 2, 10, BLS results] Show me the welder who can telecommute.

Why that cheap house in the 'burbs costs you more in the long run

When we bought our house, we stuck to the rule that all housing-related expenses ought not exceed 28% of our gross income. The rule's been good to us -- and thanks to the mortgage interest deduction on our taxes, we've managed to keep our debt ratio even lower.

But one of the things that killed us in the first year and a half of owning the house were the commuting costs. I was driving 70 miles roundtrip five days a week; that commute cost me approximately $6000 per year; keeping the second car and paying for Phil's ferry tickets added another $6600 to our annual transit costs. Had we considered commuting as part of a housing -- or location-based -- expense, our ability to stick to the debt ratio rule would have been severely compromised.

(Now, happily, it's not an issue; I changed jobs, we're down to one car and our total transit costs for the year usually hover around $4900 -- or 39% of what they used to be. The ratio's not endangered. And there was rejoicing in Tiny House!)

The Center for Neighborhood Technology is arguing that Americans should start factoring transit and commuting costs into their housing expenses via their new site, Housing and Transportation Affordability Index. The crux of the argument is simple: moving out to the exurbs will ultimately be more expensive than staying in densely-populated employment centers.

One of the most compelling examples springs from the DC area, where the CNT compared total housing and transportation costs in Logan Circle (which is in DC proper), Kettering (an inner-ring suburb in Prince George's county) and Purcellville (i.e. the exurbs, in formerly-rural Loudon county). Their findings:

-- In Logan Circle, total housing + transportation costs were 43.23% of area median income (AMI). The breakdown was 32.36% housing and 10.87% transit.

-- In Kettering, total housing + transportation costs were 48.35% of AMI. The breakdown was 29.61% housing and 18.74% transit.

-- In Purcellville, total housing + transportation costs were 49.63% of AMI. The breakdown was 28.83% housing and 20.80% transit.

Big deal, you say. Exurbanites are only spending 6.4% more of their income on total housing and transit. Look what they get in exchange -- 4% less on housing costs and a hell of a lot more house for the money.

Except look at what they lose. The thing about paying more for a house is that you ultimately own something that is (relatively) permanent, and can be used as an asset if necessary. You can't do that with a commute -- it's a cost you can't get back. The folks who are burning gas all the way to Purcellville and back are sinking more of their money into a dead-end expense and less money into an asset. To add insult to injury: that asset is ultimately valued at less than their counterparts' Logan Circle place.

Another way these folks lose: If you "drive 'til you qualify," you're obviously not in an economic position to carry the greater up-front costs of buying a place in the city or an inner-ring suburb. You're buying what you can afford -- and you're still going to end up spending more of your income on housing plus transit than someone with a little more cash in their wallet. It's the Sam Vimes Theory of Economic Injustice all over again.

The CNT studies focused on housing + transit costs with a baseline assumption of home ownership. I'd love to see the data on renting -- to see whether it's ultimately more affordable to rent in the city vs. an inner-ring 'burb vs. an exurb. Being able to carry the costs of housing and transit isn't just a problem for homeowners. If anything, it's even more urgent for people who aren't getting a mortgage interest deduction or the vague reassurance that they'll own their house by 2025.

A $45 Thanksgiving? Wal-Mart's got it for $20

O, excitement! We just finalized our Thanksgiving menu ...

Go West; paradise is there

The collapse of the state’s (latest) real-estate bubble has sent California’s economy into free fall. A short list of the state’s current problems would include surging unemployment, struggling schools, and a budget deficit larger than the entire budget in almost every other state.

"The California Experiment," The Atlantic, October 09

Fiscal troubles are just the tip of the iceberg. California's percentage of adults without at least a high-school education is the second-highest in the nation (and the fact that 72% of those without diplomas are immigrants only fuels the state's growing problem of social stratification). The Commonwealth Fund has ranked the quality of California's health care lowest of the 50 states. The state has the highest rate of criminal recidivism in the country. It has six of the ten worst cities in the country in air pollution. Los Angeles and San Francisco have some of the most congested roads in the nation, which costs the state's employers billions in lost productivity each year. The state is seriously discussing mandatory water rationing, and has in recent years experienced severe disruptions of its electricity supply. Unemployment is over 11%, and a recent survey of corporate CEOs ranked California the worst state in the country in which to do business. It is losing native-born ­citizens faster than any other state.

"Who Killed California?" National Affairs, Fall 09

(If you read the second article -- spoiler alert: liberalism killed California -- you'll also want to read the VDARE Foundation's rebuttal.)

As industries in other U.S. states prepare to rehire on signs of recovery, firms in California are still waiting for their economy to rebound.

The state has 12.2 percent unemployment, above the national U.S. level of 9.8 percent.

"Sorry, No Jobs. This is California," Reuters, Oct 13, 09

As a Californian and a taxpayer, I should probably be super-worried about the spate of "Oh, God! California is befubared!" articles that have popped up. However, I am also a member of the media and not a day goes by where I don't read about my chosen vocational field heading off a cliff. So, you know, meet the new panic, same as the old panic.

And for those of you who aren't working in an industry enthusiastically chronicling why it deserves to be driven into extinction or living in a state enthusiastically driving itself into extinction with every successive proposition on a ballot ... enjoy the schadenfreude.

When treading water could be considered progress

“On average, most workers do not recover their old annual earnings,” said Till von Wachter, an economics professor at Columbia University, who recently completed a working paper with two other economists that examined the long-term earnings of workers who lost their jobs in the recession of the early 1980s.

Mr. Wachter studied workers who had been with their companies at least three years, then lost their jobs when their employers reduced their work forces by at least 30 percent. He found that even 15 to 20 years later, most on average had not returned to their old wage levels. He also concluded that their earnings were about 15 percent to 20 percent less than they would have been had they not been laid off.

-- "Income Loss Persists Long After Layoffs," NYT, Aug 4, 09

The grocery games get grim for some

I read two different and interesting stories regarding brand loyalty and packaged goods this morning.

This one's for Comrade Kerry ...

... per our conversation in the comments here. I thought the Economist's take on the middle class this week was especially interesting:

During the past 15 years a new middle class has sprung up in emerging markets, producing a silent revolution in human affairs—a revolution of wealth-creation and new aspirations. The change has been silent because its beneficiaries have gone about transforming countries unobtrusively while enjoying the fruits of success. But that success has been a product of growth. As growth collapses, the way the new middle class reacts to the thwarting of its expectations could change history in a direction that is still impossible to foresee.

[...]

What happens if you have clambered up a few rungs, joined the new middle class and now face the prospect of slipping back into poverty? History suggests middle-class people can behave in radically different ways. The rising middle class of 19th-century Britain agitated peacefully for the vote; in Latin America in the 1990s the same sorts of people backed democracy. Yet the middle class also supported fascist governments in Europe in the 1930s and initially backed military juntas in Latin America in the 1980s.

If you can, be sure to read both the editorial "Two Billion More Bourgeois" and the report "Burgeoning Bourgeoisie."

January's retail numbers: Smells like cheap teen spirit

I apologize for not getting these out earlier -- Internet blackout at home, work deadlines, blah blah blah. Let's see who the big winners and losers were in January ...

And now comes the "Oh, HELL no" financial decisions

Stores magazine and BIGResearch conducted a survey to see what shoppers say they can't live without and what shoppers say they're likely to cut back on this year. How do you stand relative to the people who were surveyed?

This will reshape the commercial landscape very soon

According to today's release from the U.S. Census Bureau:

A larger percentage of foreign-born than native-born residents had a master's degree or higher in 2007, according to a new report from the U.S. Census Bureau. Nationally, 11 percent of foreign-born -- people from another country now living in the United States -- and 10 percent of U.S.-born residents had an advanced degree.

[...]

 In the West, the percentage of foreign-born who had completed at least a bachelor's degree or higher was less than the percentage of the native-born (24 percent compared with 31 percent). Among the foreign-born, those living in the Northeast had the highest percentage of bachelor's degrees or more (32 percent), which was the same as their native-born counterparts. The foreign-born in the South (26 percent) and Midwest (31 percent) were more likely than native-born residents to have at least a
college degree (25 percent and 26 percent, respectively).

Across all regions, a smaller percentage of foreign-born than native-born adults had completed at least a high school education.

Why you should care: Statistically speaking, people with advanced degrees make more over their career lifetime than people with bachelor's degrees, and people with bachelor's degrees tend to make more over their career lifetimes than high school graduates. Marketers and retailers chase the people who have money. Because in some parts of the country, the people with the advanced degrees and the higher earning potential are going to be outnumbering the native-born, and that is going to affect everything from the makeup of the local strip malls and big-box centers to what businesses come in, stay or leave an area. Like politics, all spending is ultimately local.

Just in case you missed the business news earlier today ...

More than 200,000 job cuts have been announced so far this year, according to company reports. Nearly 2.6 million jobs were lost over 2008, the highest yearly job-loss total since 1945.

-- "Bloody Monday: Over 74,000 Jobs Lost," CNN, Jan 26, 09

In other words: we're almost at the 10% mark to stay on track with 2008, and we're not even 8.3% of the way through the year.

According to the BLS's labor summary of two weeks ago, there were approximately 144 million working Americans as of Q4 08. A quick calculation shows that the job cuts CNN reported affected approximately 0.14% of the workforce. But even though that percentage looks reassuringly small, if you're in it, it's scant consolation.

What comics can teach us about inventory

Diamond Comics Distributor -- the largest comics distributor in the U.S. and the one holding exclusive distribution arrangements with D.C. (TWX), Marvel (MVL), Image and Dark Horse -- just released its list of best-selling comic issues and trade paperbacks for 2008. Since Diamond is the pipeline through which nearly every comic sold in America passes, their numbers are a fair reflection of the state of the U.S. comics market.

 In terms of quantity of comics sold, Marvel whomped DC -- the former sold 45.8% of all comics, while the latter sold 31.67%. Of the top ten single-issue comics sold in the U.S. last year, the count was Marvel -- 9, DC -- 1. It helped that eight of those Marvel titles belonged to a relentlessly hyped multi-issue crossover event, i.e. the comics equivalent of sweeps week.

However ...

Christmas (sales figures) came! Christmas (sales figures) came!

Before we begin: This post looks at same-store sales, meaning the sales figures from all branches of a store that have been open for a year or more. These same-store sales are also known as "comps." Comps are handy because they tell you what shoppers are doing relative to the same time last year, and they tell you whether a retail chain's sales growth is the result of (presumed) repeat business or of new outlets opening. Got it?

It's Christmas Eve ...

... for those of us who follow retail sales trends.

Even if you don't, here's a rough idea of how tomorrow will go:

"Cyber Monday Results" (Calculated Risk, Dec 4, 08) -- "Sales are basically flat, but volumes are up suggesting some serious discounting."

"Holiday Season Magnifies Shoppers' Frugality" (AP, Dec 24, 08) -- "If 75 percent off before Dec. 25 didn't make people splurge, will even bigger deals afterward do the trick? Another problem is that shoppers shunned gift cards this season. That means they are less likely to return to the stores after the holiday."

"Grinchy Holiday at the Mall" (CNN, Dec 25, 08) -- "U.S. retailers' sales fell as much as 4 percent during the holiday season, as the weak economy and bad weather created one of the worst holiday shopping climates in modern times, according to data released on Thursday by SpendingPulse."

"Post-Holiday Shoppers Hit Store" (Time, Dec 26, 08) -- "With gift card sales down this holiday season and consumers looking to save money rather than spend it, even the big discounts may not be enough to save what looks to be one of the most dismal holiday shopping seasons in years."

"Retail Sales Plummet" (WSJ, Dec 26, 08) -- "Including jewelry sales, the luxury sector plunged by a whopping 34.5%. [...] No retail sector was spared. Among the biggest losers were electronics and appliances, which fell a combined 26.7% versus a 2.7% gain last year. Women's apparel slid 22.7% compared with a 2.4% drop a year ago. E-commerce showed the most resilience, with online sales falling just 2%. But it was still a disappointment compared with last year when online sales posted a 22.4% gain in the period."

"Retailers Hung Out to Dry" (Toronto Star, Jan 2, 09) -- "Retail sales in Canada remained far stronger than in the United States for most of 2008, but they began slowing noticeably in the final three months as the impact of America's financial crisis began to creep north."

One of the analysts I follow is predicting that 80% of retailers will report a decrease in sales relative to the 2007 holiday period -- and that's even with last year's weak (0.4%) sales growth setting an easy benchmark!

So ... let's talk January sales. If you're a follower of month-by-month sales guides, you know that this is allegedly the month for: linens, computers, athletic gear and televisions (hello, Superbowl). Anyone got any spending plans for this month?

On "the paradox of thrift"

U.S. household debt, which has been growing steadily since the Federal Reserve began tracking it in 1952, declined for the first time in the third quarter of 2008. In the same quarter, U.S. consumer spending growth declined for the first time in 17 years.

That has resulted in a rise in the personal saving rate, which the government calculates as the difference between earnings and expenditures. In recent years, as Americans spent more than they earned, the personal saving rate dipped below zero. Economists now expect the rate to rebound to 3% to 5%, or even higher, in 2009, among the sharpest reversals since World War II. Goldman Sachs last week predicted the 2009 saving rate could be as high as 6% to 10%.

As savings increase, economists say, spending is likely to contract further. They expect gross domestic product to decline at an annualized rate of at least 5% in the fourth quarter, the biggest drop in a quarter-century.

"The idea that the American family will quickly spend us out of this recession is a fantasy. It won't happen," said Elizabeth Warren, a professor of law at Harvard University who last month was named chair of the Congressional oversight panel tasked with overseeing the distribution of the government's Troubled Asset Relief Program funds.

-- "Hard-hit Families Finally Start Saving, Aggravating Nation's Woes," WSJ, Jan 6, 09

(All emphasis mine.)

Amusingly -- or wincingly, depending on what kind of mood I'm in when I ponder this -- our spending slowdown began right as we bought our house and began dealing with the fixer-upper aspects of it. But what about you guys? If you've implemented a spending slowdown, when did you begin it? What prompted it?

Retailers' resolutions: Just try to stay in business

"We will have a lot fewer stores by the middle of 2009," says Nancy Koehn, professor of business administration at Harvard Business School. "It's happening very, very quickly because of the financial crisis and the recession."

During the holiday season, when retailers typically generate as much as 40% of their annual sales, Americans cut their spending. Total retail sales, excluding gasoline and autos, were down between 2.5% and 4% this holiday season, compared with the same period in 2007, according to MasterCard Inc.'s SpendingPulse unit. That makes it among the worst holiday seasons of all time, says Michael McNamara, a vice president.

[...]

Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11. AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010. In the previous two years, the firm had estimated 4% to 7% of retailers then tracked were at a high risk for filing. Retailers are particularly vulnerable to a recession because of their high fixed costs.

-- "Retailers Brace for Major Change," WSJ, Dec 29, 08

Emphasis mine.