The Cynical Economist

Darden tests limiting worker hours as health-care changes loom

Analysts say many other companies, including the White Castle hamburger chain, are considering employing fewer full-timers because of key features of the Affordable Care Act scheduled to go into effect in 2014. Under that law, large companies must provide affordable health insurance to employees working an average of at least 30 hours per week.

If they do not, the companies can face fines of up to $3,000 for each employee who then turns to an exchange — an online marketplace — for insurance.

“I think a lot of those employers, especially restaurants, are just going to ensure nobody gets scheduled more than 30 hours a week,” said Matthew Snook, partner with human-resources consulting company Mercer.

Darden said its goal at the test restaurants is to keep employees at 28 hours a week.

Analysts said limiting hours could pose new challenges, including higher turnover and less-qualified workers.

Wynn On Obama: “I’ll Be Damned If I Want To Have Him Lecture Me”

WYNN: I’ve created about 250,000 direct and indirect jobs according to the state of Nevada’s measurement. If the number is 250,000, that’s exactly 250,000 more than this president, who I’ll be damned if I want to have him lecture me about small business and jobs. I’m a job creator. Guys like me are job creators and we don’t like having a bulls-eye painted on our back.
The president is trying to put himself between me and my employees. By class warfare, by deprecating and calling a group that makes money ‘billionaires and millionaires who don’t pay their share.’ I gave 120% of my salary and bonus away last year to charities, as I do most years. I can’t stand the idea of being demagogued, that is put down by a president who has never created any jobs and who doesn’t even understand how the economy works.

“I’m afraid of the president. I have no idea what goofy idea, what crazy, anti-business program this administration will come up. I have no idea. And I have to tell you Jon that every business guy I know in the country is frightened of Barack Obama and the way he thinks.

David Siegel: Anti-Obama email wasn’t a threat to employees

“It was a private memo,” Siegel said.

In the memo, Siegel wrote, “The economy doesn’t currently pose a threat to your job. What does threaten your job however, is another 4 years of the same Presidential administration.”

The email continues, saying, “If any new taxes are levied on me, or my company, as our current President plans, I will have no choice but to reduce the size of this company. Rather than grow this company I will be forced to cut back. This means fewer jobs, less benefits and certainly less opportunity for everyone.”

When asked if Siegel saw how the email could be intimidating to employees, he replied “That’s not so and I didn’t try to intimidate anybody. I have lived through the last four years of the Obama administration. It hasn’t been fun.”

Fedex to cut thousands from workforce

The cuts are part of a plan to boost profits by $1.7 billion by 2016, mainly through intensified cost reductions.

They also come in the wake of the company’s warnings that its business is being hit by the global economic slowdown.

CRUISE LINER EXEC WRITES SCATHING LETTER TO OBAMA OVER NEW REGULATIONS

American Flagship Project challenges President Obama to explain why his Administration has blocked America’s entry into the $40 billion-a-year foreign-dominated cruise sector

Obama blocks thousands of new jobs and billions in tax revenues by new anti-American policy

From Washington Examiner
by Joel Gehrke

Department of Energy officials gave a New Hampshire-based biofuel company access to $80 million for a Michigan project that has already fallen short of job creation expectations, despite receiving another $40 million in state and DOE subsidies.

“In September 2008, Mascoma [Corp.] pledged 70 jobs at the plant by the end of 2012. On Feb. 29 of this year, Mascoma reported to the MEDC that only three jobs had been created by the grant,” the Capitol Confidential (Mich.) reports today.”The company has been given the full $20 million from the state.”

Mascoma, a renewable energy company that specializes in cellulosic ethanol, received another $20 million for research and development from the Energy Department in 2008.

The company warned the federal government, in its SEC filing, that it has “no experience in the markets in which we intend to operate” — which perhaps explains why it only created three jobs from 2008 to 2011, despite promising to create 70 jobs, according to Capitol Confidential. That means that the Michigan government and DOE, in combining to give the company $40 million in 2008, spent $13.3 million on each job.

Even so, DOE signed an $80 million cooperative agreement with Mascoma in December, 2011. “Biofuels hold great potential, not only for reducing our dependence on foreign oil, but also for creating new jobs and economic opportunities for America’s rural communities,” Valerie Reed, the Acting Biomass Program Manager in Office of Energy Efficiency & Renewable Energy of the DOE said at the time.

Biofuels, in general, may ‘hold great potential’ for job creation, but what about creating three jobs in three years suggests to DOE that Mascoma in particular should receive another $80 million in taxpayer money?

From WSJ
Updated June 25, 2012, 7:27 p.m. ET

The rules and burdens that explain Europe’s economic crisis.

Prime Minister Mario Monti has issued a new “growth decree” to revive Italy’s moribund economy. Among other initiatives, the 185-page plan proposes discount loans for corporate R&D, tax credits for businesses that hire employees with advanced degrees, and reduced headcount at select government ministries.

Will any of this solve Italy’s economic problems? Only in the sense that one could theoretically drain Lake Como with a ladle and straw. Allow us, then, to illustrate why Italy’s economy stagnates.

Imagine you’re an ambitious Italian entrepreneur, trying to make a go of a new business. You know you will have to pay at least two-thirds of your employees’ social security costs. You also know you’re going to run into problems once you hire your 16th employee, since that will trigger provisions making it either impossible or very expensive to dismiss a staffer.

But there’s so much more. Once you hire employee 11, you must submit an annual self-assessment to the national authorities outlining every possible health and safety hazard to which your employees might be subject. These include stress that is work-related or caused by age, gender and racial differences. You must also note all precautionary and individual measures to prevent risks, procedures to carry them out, the names of employees in charge of safety, as well as the physician whose presence is required for the assessment.

Now say you decide to scale up. Beware again: Once you hire your 16th employee, national unions can set up shop. As your company grows, so does the number of required employee representatives, each of whom is entitled to eight hours of paid leave monthly to fulfill union or works-council duties. Management must consult these worker reps on everything from gender equality to the introduction of new technology.

Hire No. 16 also means that your next recruit must qualify as disabled. By the time your firm hires its 51st worker, 7% of the payroll must be handicapped in some way, or else your company owes fees in-kind. During hard times, your company may apply for exemptions from these quotas—though as with everything in Italy, it’s a toss-up whether it’s worth it after the necessary paperwork.

Once you hire your 101st employee, you must submit a report every two years on the gender dynamics within the company. This must include a tabulation of the men and women employed in each production unit, their functions and level within the company, details of compensation and benefits, and dates and reasons for recruitments, promotions and transfers, as well as the estimated revenue impact.

The system does allow certain exemptions—provided your company stays small, or you hire the right gender or in certain areas. Industrial and security firms are exempt from paying into the national fund for temporary unemployment if they have 15 employees or fewer; retail and tourism companies don’t have to start contributing until they hire their 51st worker; and trade companies are exempt until they hire their 201st employee.

Here’s another loophole you might try to jump through: Businesses currently receive tax credits worth up to €15,200 per year per new permanent-contract hire—that being for new employees who are also women or under the age of 35 and live in the regions of Abruzzo, Molise, Campania, Basilicata, Puglia, Calabria, Sardinia and Sicily.

Businesses with no more than 250 employees may also still be enjoying their three-year profit-tax holiday, which was granted in 2010 for small and medium-sized firms that reinvest their profits in forging “networks” for “innovation” with other small businesses nearby.

All of these protections and assurances, along with the bureaucracies that oversee them, subtract 47.6% from the average Italian wage, according to the OECD. Two-thirds of that bite comes before payroll, meaning many Italian workers are unaware of their gross cost to employers.

But you as the employer are aware of them, which may explain the temptation to stay small and keep as much of your business as possible off the books. This gray- and black-market accounts for more than a quarter of the Italian economy. It also helps account for unemployment at a 12-year high of 10%, and GDP forecast to contract 1.3% this year.

Still, who knows: With any luck, you may discover a loophole in Mr. Monti’s new growth decree that will allow you to hire a few more employees without incurring too many costs—provided, one assumes, that all of the new hires are disabled, blue-eyed Sardinians under the age of 35.

FINAL Final_MAP Report

From The Weekly Standard
BY MARK HEMINGWAY

Talks between the Newspaper Guild of New York and the New York Times have been heated. In late March, the union forced the paper to drop its proposal to extend the workweek at the Times to 40 hours​—​any work over 35 hours and the paper has to pay overtime. The Times’s management bitterly noted that the shorter workweek costs real money and that “eight-hour days are the norm .  .  . in much of the world outside The Times.”

Following on the heels of this victory, the guild set its sights on another management proposal: transitioning workers out of a traditional pension plan and into a defined contribution plan, such as a 401(k). Again, this is now the norm in much of the world outside the Times, but the union is having none of it. On April 18, New York Times guild members began circulating a YouTube video featuring some of the paper’s most senior staff excoriating Times publisher Arthur O. Sulzberger Jr. and “corporate management.” The pension move is an affront because “we’ve already been investing in helping save the paper,” said Times columnist Jim Dwyer.

If the guild has been helping the paper out of its dire financial straits, their pension plan doesn’t reflect that. According to the paper’s last annual report, the company pension plans are $522 million underfunded and have enough money to cover only 77 percent of the plans’ liabilities. The federal government considers pension funds endangered if they are less than 80 percent funded, and 65 percent funding is the threshold below which the government declares a pension plan to be in “critical status.” That’s the point at which a fund is likely to go into an accounting tailspin and never be able to cover its obligations.

If the veteran journalists at the Times weren’t so busy trying to protect their generous benefits, they might realize there’s a story here. Union pension funds​—​particularly multi-employer plans​—​are on the verge of collapse across the country.

This problem has been building for a while, largely as a result of an aging unionized workforce. A Government Accountability Office report found that since 1998 more people have been collecting benefits from multi-employer plans than paying into them.

As bad as this sounds, new rules from the Financial Accounting Standards Board (FASB) requiring companies to disclose their pension liabilities have revealed the problems to be much worse than previously estimated.

Analysts at Credit Suisse crunched the numbers on 1,354 of the country’s 1,459 multi-employer pension plans and concluded they are collectively $369 billion short of the money needed to cover their liabilities and are only 52 percent funded. That’s more than double the $160 billion deficit previously estimated by FASB. Credit Suisse arrived at its figure by measuring the actual assets and obligations, as opposed to the plans’ “actuarial value,” an estimate that allows companies to discount their pension liabilities based on expectations of future returns that have turned out to be unrealistically optimistic.

“With multi-employer plans in bad shape, companies could get hit from a number of angles including increased contributions, difficult labor negotiations, higher withdrawal liabilities, and [mergers and acquisitions] could be impacted as acquirers have to price in the underfunding. The new insights may even change investor and rating agency opinions of certain companies,” according to Credit Suisse’s report, “Crawling Out of the Shadows: Shining a Light on Multi-employer Pension Plans.”

In other words, because of the new transparency requirements, the stock of unionized companies could take a big hit. What’s more, transparency about union pension liabilities could end up depressing entire industries. That’s because union pension plans are interconnected. If pension plans start failing in heavily unionized sectors such as construction, transportation, and supermarkets, it could have an ugly domino effect.

One of the reasons 401(k)s and defined contribution retirement plans began supplanting traditional defined benefit pension plans in the 1970s is that they had a big advantage for workers-​—​portability. Workers could quit their jobs and take their retirement plans with them. Multi-employer plans were Congress’s attempt to offer union members portability without sacrificing the advantages of being in a defined benefit plan. Unions can use collective bargaining to force companies to pool their pension plans. Workers can then move between companies—say from Ford to GM—with their pensions intact. Hence the term “multi-employer pension plans.”

Read the rest of this entry »

From WSJ

Illinois is a lesson in why companies are starting to pay more attention to the long-term fiscal prospects of governments.

Chicago Mayor Rahm Emanuel recently offered a stark assessment of the threat to his state’s future that is posed by mounting pension and retiree health-care bills for government workers. Unless Illinois enacts reform quickly, he said, the costs of these programs will force taxes so high that, “You won’t recruit a business, you won’t recruit a family to live here.”

We’re likely to hear more such worries in coming years. That’s because state and local governments across the country have accumulated several trillion dollars in unfunded retirement promises to public-sector workers, the costs of which will increasingly force taxes higher and crowd out other spending. Already businesses and residents are slowly starting to sit up and notice.

“Companies don’t want to buy shares in a phenomenal tax burden that will unfold over the decades,” the Chicago Tribune observed after Mr. Emanuel issued his warning on April 4. And neither will citizens.

Government retiree costs are likely to play an increasing role in the competition among states for business and people, because these liabilities are not evenly distributed. Some states have enormous retiree obligations that they will somehow have to pay; others have enacted significant reforms, or never made lofty promises to their workers in the first place.

read the rest here

In fact the things are getting worst…

Banks Seen Dangerous Defying Obama’s Too-Big-to-Fail Move

Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government.

Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It is also exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to grow internally and through acquisitions from European banks, reeling from government austerity measures related to the rising cost of public debt in Greece, Spain, Portugal, Ireland and Italy.

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

But, but, but, wait a minute! ….Didn’t they pass the Dodd- Frank Wall Street Reform and Consumer Protection Act to deal with the too big to fail banks? 

Oh- yeah they did. 

So, what did the government incompetent bureaucratic achieved? 

Here you go…

Committee: Dodd-Frank compliance to cost private sector 24 million man-hours per year

Regulators have written only 185 of the expected 400 rules. But those 185 rules are expected to cost the private sector more than 24 million man-hours each year to comply.

The tracker has also found that those 185 rules take up more than 5,300 pages.

….let’s just get it down to the community banker — the person that loans money to most of the small businesses in our country,” Neugebauer said in a phone interview. “We’ve had a few community bankers come in here and say, ‘you know, they’re hiring a lot more compliance officer than they are loan officers.’ That is increasing the cost of banking and, ultimately, they have to charge higher interest rates and higher fees.”

The ordinary people got f@cked again…