MONEY 49 - ECONOMY

THIS IS MY 49^TH POST ON UNDERSTANDING MONEY TOOLS

In this blog let’s cover several topics including the economy and jobs approaching some new things.

I meet with some people socially who have good minds and fortunately like to debate.  One recent topic of discussion we have discussed before in our blogs.  It is a controversial topic; the future of America, its people, economy and jobs. With the 1980s and early 1990s we starting seeing more jobs drift overseas. President George Bush drafted the North American Free Trade Act (NAFTA) before he lost the presidential race in 1992, and President Bill Clinton worked with Congress and it was passed. To my thinking this aided Mexico far more than helping the US or Canada. Of course, since then we have outsourced much of work to foreign countries at the sacrifice of the US worker. In the past several years we have seen union labor crushed, and robotics replacing human workers. Moving forward we will have more robotics.  Here’s the debatable point. What do we do with all the available manpower in this country, some educated, some not?

My friends who remain positive on this labor issue sight that America has seen higher unemployment before dating back 150 years, the “industrial revolution”, the invention of the steam engines, and computerization after World War II. Thomas Watson Sr. the founder of IBM, stating that we may have a need for a handful of computers. Wow, if he could see where we have come. We will work through this.

I am a bit more negative than some of my friends for various reasons. One reason is the transference of great US wealth to the top 1%, and to have a healthy, prosperous country the wealth needs to be broadly distributed with the middle class….the spenders of money who buy goods hopefully made in the USA.  If the money and assets are with the top 1% they will need to invest the money back into this country with new companies, helping rebuild our very depreciated infrastructure of roads, buildings, water/sewer lines and more.  A second reason for negativity is education and training in this country. We have not really changed our educational structure and system in over 100 years. We lack advanced technical training for young people, provide expensive college education, and there are gaps.

Germany is doing very well. Let’s take a look at the basics of their educational system. When a student enters high school,  “Gymnasium” in German, depending on his/her desires in life and mental capabilities, that person will choose to either go to a university or go to a technical training school. Not everyone should go to college, however everyone should be given a chance to make a very good living in life.  Many doctors and lawyers in foreign countries don’t make the salaries that they do in the United States. A wider spread of money to reach more people. A factory auto tech in Germany now makes about $75/hour.

A third negative point is that we are very diverse in nationalities, religions, cultures and more. We lack unification. Daily we see agreements but more likely the lack thereof in Congress and the Senate, and therefore nothing gets accomplished.

Bottom line, will the US prosper and build new companies here, will the top 1% wealthiest people look beyond immediate gratification, and view this country 25, 50 and 100 years in the future?  A country that would be good for everyone? Without foresight we can’t have much of a promising future.

It has been noted that 95% of the stock market gain and monies made over the past 7 years has been made by big companies, big banks and the top wealthiest people. Can big companies buy their own stock back in when they consider it inexpensive?  Yes, they certainly can, and do, to make more money.

Let me give you an example of companies pushing employees and thinking only bottom line. Not too long ago I saw an ad for a part time employment position offered by a major US retailer. I was curious so I called to inquire. First, this major company outsourced the hiring and I spoke with a person on the East Coast. Here is what they offered. The closest location to my home was about 65 miles each way, or 130 mile a day drive through the city. The part time job was for a 3 hour shift, they ran 3 shifts a day. The reason for a 3 hour shift was to get the maximum energy out of a person; no breaks, no lunches. After 3 hours most people get tired and sale’s effectiveness will drop. They paid $8/hour plus commissions on sales so the expected employee would make $12-13/hour.

Let’s look at the reality of this from a prospective employee’s point of view. First, $13/hour for 3 hours a day is $39. Now take myself and the drive time.. The US Government says that it costs an average of $.55/mile to run your car. This includes depreciation, gas, oil, tires, insurance and more. Another consumer source I read said it costs closer to $.57/mile. If I took this job I first would need to take into account my driving time. Then, 130 miles times $.55/mile for the cost of driving my car would be $71.50. But I only am making $39 for the day. America’s big business is squeezing the bottom line and workers too hard.

While on the point of auto mileage and business there are a couple points I want to address. There are some jobs and employment where you can deduct this mileage expense and some you are not permitted. If you are a W-2 employee going to and from your company’s office location, you can’t deduct mileage expense. If you are a contract employee such as a tech person, real estate agent, etc. and receive a 1099 for taxes you can in most cases deduct mileage. I have heard employers say you drive an older car so it doesn’t cost $.55/mile because the auto is depreciated. There is a cross over on mileage expense, one being mainly depreciation the other being auto maintenance and repairs.  On a new car maintenance is next to nothing, but depreciation (lost value) is high. Then, as the car ages depreciation is minimal but maintenance goes way up.

Let’s take a look again at the middle class. This past week a TV newscaster spoke about middle class family incomes and purchasing power that has dropped since 2000 to now. In 2000 they reported that the average family income was about $57,000 and today it is approximately $53,000. That is approximately a 7.5% drop. I don’t think most families with children had much disposable income even at $57,000. Now, this is where I said I need to look at “time value of money”, “present value of money”, “future value of money”. All those mean the same, just how you are looking at it. Where am I going with this? The newscaster and network forgot about how inflation has affected the purchasing power over the past 14 years in these figures.

To get a more accurate picture on these dollars and the financial standing of the middle class in 2014 I went to Google and put in “what is the dollar worth today versus year 2000”? Several sites come up that calculate year to year inflation and how it has eroded the dollar. (This is really cool. You can go either way. For instance, you can put in a dollar amount today and find out what the dollar was worth in a given year, or reverse the procedure.) The site I went to could calculate back to 1913. It asked what year to start and what year to end. The result for the years 2000 to 2014 was that the US dollar is worth 38.4% less today. Let’s take that into account with the middle class family and the news reporter. The average family should now be making $78,000/year to stay constant with year 2000 earnings; not even close to $57,000. What a shame, and no wonder people can’t afford to buy things.