The Progressive Ensign

insights and analytics to build an economy that works for all

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Major Corporations Underfund Pensions While Pocketing Stock Buybacks

 

Photo: marketplace.org

Five major corporations, among many others were examined by Danielle DiMartino Booth, in the Quill Intelligence blog,  The Daily Feather – Boeing, GE, American Airlines, Lockheed Martin and AT &T on their spending for pensions versus stock buybacks.

Sources : Bloomberg, Quill Intelligence – 10/22/18

The underfunded pensions ranged from just 62.4 % funded to a high of 79.6% for Boeing. Compared to explosive stock buybacks the pension underfunding is not acceptable.  This typifies the character of corporate America taking care of its own executives who are well compensated in stock plans versus workers who are given the financial leftovers.  When corporations purchase their stock from the open market  the price of the stock often goes up because the shares are effectively taken off the market.  Most executives have earnings and stock price targets as part of their compensation plans.

Goldman Sachs forecasts for all of 2019 about $1 trillion in stock buybacks.  Stock buyback funds are not going into raises for workers – which are the lowest they have ever been in a growing economy 2.5 % over the past 10 years.  When inflation is considered the wage raises are basically stagnant causing workers to fall further behind financially.  Workers are strapped by the high cost of auto loans, credit card debt and increasing healthcare premiums.

Stock buybacks means that corporations are not investing in innovation to increase productivity.  Productivity has stagnated since the Great Recession between 1.5 to 2.3 % per year, not enough to boost wages or keep prices in check for many sectors.  With 70 % of the U.S. economy provided by services businesses it is increasingly important that businesses invest in services innovation because services are a challenge to reduce costs or increase quality.

Next Steps:

We have been against stock buybacks from a pure transparency and valuation perspective to begin with – stock prices have been artificially inflated by as much as 20 % some experts believe.  Soaring valuations mislead investors into thinking a company on an earnings per share basis is performing better than it actually is. Stock buybacks do exactly nothing for the economy except to line the pockets of  executives who already make 300 % more than the average employee.  The trillion dollars going into stock buybacks are better spent on pensions to ensure workers can retire, or receive wage increases to make ends meet, or invest in equipment or innovation in research and development to increase productivity.   Stock buybacks were allowed by a former E.F. Hutton executive, named to head the SEC during the Reagan administration.  Now, would be a good time to end the malpractice and for the good of workers and the economy invest stock buyback funds in the future of America.

Toward A Solutions Focused National Dialog

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: better-angels.org

On the right we have a president who mocks a woman who was sexually assaulted at a campaign rally, on the left protesters stalk legislators at restaurants and taunt them while they eat.

What’s happened to our national dialog?  Why can’t we talk to each other in a way that sets up a supportive communication channel leading to solutions?  Abraham Lincoln saw the need for civil dialog to bring a divided nation together in his first inaugural address:

We are not enemies, but friends. We must not be enemies. Though passion may have strained, it must not break our bonds of affection. The mystic chords of memory … will yet swell the chorus of the Union, when again touched, as surely they will be, by the better angels of our nature.”

Recently, volunteers from the left, right and political persuasions across the board were represented at a conversation day hosted by Better Angels in Washington D.C.  The host group takes its name from the Lincoln quote focusing not on changing people’s minds but instead on just helping people to understand and respect each other – on common ground.  The founder, David Blankenhorn, started the group in Ohio after he had become friends with a gay man and changed his position on same sex marriage as a result.  Blankenhorn has developed seven habits of good discourse to keep the dialog on a positive level even in fierce disagreement.  He sees deep polarization due to multiple factors: “The intellectual habits of polarization include binary (Manichaean) thinking, absolutizing one’s preferred values, viewing uncertainty as a weakness, privileging deductive thinking, assuming that one’s opponents are motivated by bad faith, and hesitating to agree on basic facts and the meaning of evidence.”

We underline the last point, agreement on basic facts is missing from much of our dialog today.  As most Americans get their news from non-journalist sources: Facebook, Google, and Twitter.  These social media outlets sprung onto the news stage from opinion based businesses, run by entrepreneurs who are more programmers whose interest is in creating opinion platforms not fact based platforms.  Facebook, Google and Twitter are now scrambling to find journalists and news professionals to rein in the runaway opinions and falsehoods that proliferate on their sites.

As a society we are left with only a few major national newspapers, the Wall Street Journal, The New York Times, the Washington Post for thoughtful in depth analysis, Major television news organizations are more focused on sound bites than drilling into issues in any depth.  The PBS News Hours does bring in experts from multiple points of view on an issues to create context and deeper understanding of the topic.  Yet, the audience of social media is in the tens of millions while PBS News Hour is seen by a far smaller audience.

Where do we go today? Better Angels, Spaceship Media and Institute for Civil Discourse all host conversations across the political divide.  Yet, it is a huge cultural issue tearing apart the fabric of our democracy.  To repair our democracy and return our federal government to the people requires seeking the common good over all our basic positions – or we can never reach enough consensus to move ahead as a unified society.

Rethinking How We Get From Home to the Grocery Store

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: texastribune.org

In a recent seminar by Climate One, an environmental conversation group, sponsored in San Francisco, one participant pointed out “the greenhouse gas reduction potential is huge.  Greenhouse gases from transportation are about 28% of all greenhouse gases in this country. “  Certainly changing how we get from home to the grocery store and everywhere will have a significant impact on climate change and greenhouse gas diffusion into the atmosphere.

While a few of us walk to the market bringing home our groceries in a cart with a basket, 99 % of all grocery trips are made by one person in a two-ton car, spewing out carbon gases.  Of course, most Americans still live in suburbs, sprawled out with single family homes connected by streets and freeways to shopping centers where the grocery store is located.  We buy a house in the suburb, buy a car to get around and that’s about all the thought we put into it.

We need to start thinking beyond the present urban map and transportation model centered on the single passenger car.  How about electric scooters?  They are shareable, we setup a logon on our smartphone, pick up a scooter left by a previous user and head on our way. Just leave the scooter there on the sidewalk when we arrive for the next person to use it.  In a minute or two, they are riding and are off on their trip.  Bikes are being shared in cities all over the U.S. with some bikes motorized to handle longer trips.

A short trip in a car on average costs about $8 one way, while an electric assisted bike costs just $2 per trip. There are cargo bikes available as well that can handle larger loads.  Of course, weather is an issue as these sharable scooter and bike solutions are growing popular in the Southwest and West.  Public transit, a bus or subway maybe the answer for rainy or snowy days.

Uber and Lyft are rethinking their business models to include electric scooters, and bikes. A customer logs on to their app for all personal transportation needs is their vision. They already offer shareable rides at a discount. Instead of buying a car, people are living closer to work and shopping in densely populated cities where owning a car is actually a costly liability.

New sharable transportation models combined with driverless cars would not only change transportation but our city maps as well.  Urban planners are already building denser housing near transportation hubs, providing bike lanes off away from parked cars and more bike pathways used exclusively by bikers.  The economic consequences are significant, the new car and used car markets would begin to shrink,  financing and insurance businesses for auto loans would decline.  New businesses using sharable transportation system would spring up for delivery, assisted transportation for doctor appoints or dropping off kids a practice.

Most importantly, using sharable transportation vehicles, bikes and scooters would make a significant impact to reduce carbon gases across the planet.  We may be able to finally, get ahead of the climate change curve and return our planet to more livable temperatures

Thinking creatively to solve our major problems like Climate One does in conversation mode with all points of view represented is refreshing.  The dialog during this seminar was focused on ‘can do’  and ‘make it happen’ while being sensitive to safety issues, city regulators and other businesses.  If we could have more of this civil solution oriented tone in our national dialog we could solve the big problems in front of us, as we always have the past two hundred and forty years.

Housing Has Not Recovered From the Great Recession

Image: 15146affordablehousing.weebly.com

As a percentage of GDP housing has not recovered from 2008.  Particularly, in two key categories: (1)  Furniture, Repairs & Maintenance and (2) Construction.  Additionally we know that appliance sales have been lagging as well due to tariffs and price versus worker wages being stagnant.

Sources: BEA, John Burns Real Estate, The Wall Street Journal, The Daily Shot – 10/18/18

Housing has not recovered from the Great Recession downturn from sub-prime mortgages and loose lending practices.  As part of the recovery, banks were made whole with billions of TARP funds, but homeowners who tried to write down their principal loss on their homes to reduce mortgage payments were not allowed in court.  Banks paid a small pittance of $50 million in homeowner relief that was distributed in a hazard manner.  Millions of homeowners lost their homes and more importantly lost their equity.  They could not replace their homes when the economy turned around, they had to take ‘make do’ jobs when they did finally find a job and are now left with little wealth to retire on except for Social Security.

Young prospective home buyers face a daunting affordability crisis as the inventory of affordable homes is low as builders focus on wealthy buyers, who buy high margin homes.

Sources: Scotiabank Economics, NAR, Haver Analytics, The Wall Street Journal, The Daily Shot – 10/17/18

In all regions of the country affordability continues to fall after reaching a peak in 2012.  Mortgage rates are at the highest level since the Great Recession, the inventory of middle class housing continues to decline and the commitment to homeownership is waning.  We hear more and more about how ‘renting is really ok’ – for who?  The wealthy landlords who continue to raise rents while raking in the cash.  What about families who want yards for their kids to play in, or to gain ‘sweat equity’ by upgrading the home they live in or landscaping the yard.  It is clear just looking at most neighborhood which homes are owned and maintained and which ones are rentals owned by an off premise landlord.

Next Steps:

Dropping the national commitment to home ownership is not the solution to the problem.  We need to ensure that the 80 % who do the heavy lifting in the economy can afford to buy a home on their incomes.  Corporations need to be increasing wages for workers at least as fast as their executives and more to ‘catch up’ to the raises and stock plans of the executive team receiving high compensation from stock and stock buybacks.

Reducing student debt, now at $1.5 trillion is critical so that prospective home buyers do not have student debt right at time they are starting families and purchasing a home.  We have proposed a far reaching program building on existing student debt forgiveness programs to more comprehensive service for debt forgiveness programs.

Builders need incentives to build lower margin homes middle class homes in new developments.  Local and state governments need to take on the charter of ensuring that affordable housing is a priority for zoning near commercial and business centers.

Fannie Mae and Freddie Mac need to be committed to focusing on first time buyers and lower income prospective buyers innovating ways to get them into homes while at the same time being financially responsible.  The Federal government needs to provide more funding for the two housing agencies to bring down rates to an affordable level.  Working in cooperation with groups like Operation Hope, banks need to make a new effort to make mid and lower income buyers financially literate and help them move into homes.  Think what a huge difference it would make for our cities and rural communities if people owned their homes and made improvements to their home and yards.

The Press Needs To Help Build the Common Good

 

Image: epceurope.eu

While, it is necessary that all of us be engaged in building the common good – the press establishes the national dialog on major issues.  When the press focuses on reporting problems only, with no solutions, monitoring or follow up we are left with a sense of frustration, desperation and hopelessness.  One way the press can make a difference is to stick up for the people who cannot defend themselves.  Recently, the PBS News Hour, assigned their correspondent to follow a three year old immigrant girl through her process of being reunited with her parents after separation at the border.  PBS by staying on the story, asking the hard questions and continuing to press the administration for her status illuminated the fate of thousands of other children.  A  week ago, The New York Times completed an in depth analysis of the Trump family fortune and how Donald Trump acquired his fortune essentially as a gift from his father paying very little in taxes.

We see these in depth analyses and vigilant reporting as necessary to keep the truth flowing to citizens to help them make good decisions.  Yet, reporting on major topics often winds up being a sound bite of 30 seconds or a few short sentences quoting a Senator or Congressman with very little context.  The text of what the legislator says is scrolled across the bottom of the TV screen in summary form, with no data, context or way to follow up.

The internet makes available a wide variety of reliable research sources such as local, state and federal government agencies, non-partisan research groups and universities. Corporations have finely tuned their decision processes around a simple approach – gather data from all sides of an issue or topic both qualitative and quantitative, analyze the data, look into various solutions, present multiple solutions to decision makers, then decide.

The public today has major issues that need to be addressed by government agencies and their leaders – we need high quality reviews and analysis available to everyone to make good voting decisions.  The old style of journalism focused on a lead to grab attention and then fill in the details later through the body of the story or at the end needs to be examined in the Internet age.  Front page news can continue to present headline stories, yet they should be placed into context, with qualitative and quantitative data, presented graphically for easy viewing, with expert analysis from 360 degree points of view.

The fact there are only a few national newspapers, which fewer people are reading does not help the situation toward building the Common Good. We need Internet providers like Facebook, Google and Twitter to be the next generation of journalists, instead of feeding the fragmentation and opinion masquerading as news.  A quick reading structure to the story, using multimedia maybe thought of as the ‘teaser’, graphics and charts with expert analysis from multiple points of view.  Every story needs to go the next step and focus on how to solve  the problem presented.  Often, only problems are published leaving the reader with no way to take action.  Some stories, do leave Internet links or ways to contribute to a family who had a fire and needs shelter.  Yet, the major stories of our time: climate change, opioid epidemic, workers being left out of the economic mainstream, loss of hope in ghetto areas, or escalating health costs are not covered in an action enabling format. In this blog we have taken a building toward the common good and action approach by starting with a basic issues, providing a graphic of data from a non-partisan source, then follow up alternatives and action to solve the.problem.

The press needs to take responsibility for the fractionalization happening when a constant drone of problems are broadcast to people with no follow up, no facts for building a common understanding, presentation of alternatives and next steps for action to solve the problem.  We need to become a problem solving society and the press in how they communicate issues to us can take us a long way toward a common good building nation.

Building the Economic Power of Youth

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Image: opportunityinsights.org

Last week a non-profit research and policy organization, Opportunity Insights published a startling map and database linking the success of children in poverty to their neighborhood to climb out of poverty.  A key finding is that children growing up in neighborhoods where there is low income continue to live in poverty as adults.  Though of more interest is that all factors being equal children where there where two parents in the household did significantly better than children in one parent households.  Family structure made a significant difference.

Source: Opportunity Insights – 10/4/18  (areas in blue, children who grew up in low income areas tended to make more money, children in dark red far less)

Certainly, households with just one bread winner, generally automatically means that there  is less income in that household.  Opportunity Insights notes that often single parent communities do not have the same ‘social capital’ as two parent communities.  In terms of parents that can support their children, tutoring after school, going to after school activities and a father who is there to provide support to the mother.  Particularly, for boys having a father in the household seemed to be determinative in future opportunities boys enjoyed in adult life.  Key to forming the right skills for a higher income is an example of a mother or father working a job, focusing on nurturing their children’s skills and being an advocate for the child in the school system.

John Hope Bryant, CEO of Operation Hope, a for purpose non-profit group helping low income people through financial coaching and skills development to build a secure economic future. Bryant notes that 63 % of middle income Americans cannot afford a $500 car repair or $1000 in emergency health care. Without financial independence, people cannot protect themselves from social injustice, economic manipulation and profiling, People need to learn how to build personal ‘capital’ to dig out of the community that keeps them in poverty. He observes growing up in Compton, a California low income community, that children in the neighborhood grew up with no positive aspirations.  They continue to be surrounded by negative roles models: drug dealers, loan sharks, and criminals who have the economic power.  Yet, they don’t have the ‘capital’ or knowledge on how build wealth in a positive way and key relationships.  A person with no hope is a dangerous person, who becomes angry, vengeful and desperate. Bryant says there are three types of issues for children in poverty neighborhoods:  low aspiration and few opportunities for 25 % of the problem, poor role models and a negative family and community environment for another 25 % and finally low confidence and self-esteem for 50 %.

Next Steps:

The Labor Force Participation Rate for  adults ages 24 – 54 is 82.5 % is at a new low, and has been declining since the Great Recession. The opioid crisis, a symptom of the hopelessness that many of our young people feel today is causing millions of otherwise productive people to not join the labor force.  Deutsche Bank completed an analysis of how the opioid epidemic is hurting labor participation in many states.

Sources: OECD, Deutsche Bank Research – 9/10/18

Researchers found that states in the South (overlays the poverty areas in the neighborhoods map above) Alabama, Mississippi, Arkansas and East Central – West Virginia there is a high correlation of opioid prescriptions and labor force rate.

It clear from a moral, ethical and economic standpoint we need as a country to invest in our young people who face increasing challenges in becoming upwardly mobile.  How do we do it?

John Hope Bryant is investing in people in these neighborhoods by providing families and individuals with tutoring to increase credit scores (maps of FICO scores of under 500 map into the above areas too) and how to get low cost loans.  Bryant sees developing entrepreneurial skills in starting new businesses as a way to move economically ahead as well.  More important is learning how high income people became wealthy through building relationships and developing the courage and skills to start a new business.  As he notes, moving from one failure to the next to learn and see trial and error as a necessary part of the path toward creating a product or service of value. The entrepreneurial process builds self-esteem and confidence so crucial in transforming lives and creating opportunities.

Opportunity@Work, a non-profit group originated in the Obama White House, then spun off is tackling the education issue head on with training focused on helping those outside of the economic mainstream to get jobs in the new economy. The group helps candidates get the skills they need in high tech, then making the connection between employers and workers with a non-traditional resume.  In addition, they are pioneering new ways to finance education so that students will not be saddled with thousands of dollars of education debt when they start their careers.  Opportunity@Work is targeting assistance for 1 million people to get hired in the next decade.

We have proposed that a Marshall Plan-like initiative with an entrepreneurial approach be led by the federal government, venture capitalists, corporations, health providers, non-profits and universities to gain a beachhead in many low income communities particularly in rural areas of the Midwest and South. The Heartland Initiative brings key leaders in many fields to focus with high impact on enabling a community and its people to join the economic mainstream from upgrading Internet speeds to providing local access to affordable health care and counseling for mental health issues.  It is a multi-faceted project because there are connected issues, it is one thing to provide a young person with training, but if they are still taking opioids they will fail a drug test by a hiring firm.  Details about the Heartland Initiative are in our post, calling for a new approach to social programs using an entrepreneurial model with seed financing and cooperative groups to spring into action.

We need to bring those that have been on the economic sidelines back into the mainstream of our economy if we are to make any progress as a nation on building an economy that works for all.  With mounting national debt in the trillions of dollars, student debt at $1.5 trillion and opioid deaths at epidemic levels we need to see building the economic power of our youth as one solution to our economic challenges.

Workers Exercise Power Through Pensions on Corporate Policies

Photo: commondreams.org

Toys R Us was saddled with billions of dollars of debt by private buyout firms like Kohlberg Kravis Roberts.  Pension funds provide firms like KKR with funds to invest expecting higher returns than stock market rates. When the workers at Toys R Us petitioned the Minnesota Pension Fund that they had been denied a severance the fund suspended making investments with KKR.  About 35 % of all private equity funding comes from public pension investors.

The New Jersey pension fund has listened to its pensioners on issues like not foreclosing on Puerto Rico residents who are recovering from Hurricane Harvey and an investment in a payday lender.  Adam Liebtag, the acting chairman of the New Jersey State Investment Council, told the New York Times,  “They are paying closer attention. They are following the money.”

Pension funds provide about 35 % of all private equity funding. providing a good channel of leverage for activist groups.  The deals that pensions do with private equity firms continues to rise as well.

Source: Prequin Private Equity Spotlight, Value Walk – 10/2014

Sarah Bloom Raskin, a fellow at Duke University and a deputy Treasury secretary in the Obama administration, observed, “Workers don’t want their pension money invested in ways that hurt other workers”.  Workers are waking up to the fact they have financial power to get private equity firms to listen to their concerns that private equity policies are hurting some workers as in the Toys R Us case, heavily loaded with $5 billion in debt from a private buyout.

Next Steps:

We see the pension leverage option on private equity firms as a model to build on.  Why not require pensions to listen to their investor – workers by having a set of investor – workers on their board, participating in the investment decisions the board makes to begin with.  Workers should be constantly polled for their concerns to ensure adherence to investment policies that are moving the lives of workers better in any company where the pension is invested.  Workers are mainly left out of the financial decisions that manage their lives while working for a company, at least after retiring the money they have saved in a pensions fund should speak for them and their concerns in building a better life for all employees.

Resetting the Web’s Balance of Power

Internet pioneer, Tim Berners-Lee has an audacious yet powerful goal for his latest startup Inrupt.  He wants to “reset the balance of power on the web and reignite its true potential.” Building work with other Internet activists at MIT he is developing a decentralized personal web based platform called Solid.  He is introducing a ‘Netscape’ browser front end that gives the user control of all his own content. During a demo he shows a fundamental set of tabs with a To-Do List, Calendar, Chat Address Book and eMail.  Yet, this screen hides from the user one basic difference, all his data is stored in a POD or Personal Online Data store. All the content he creates or uses is stored in a POD, not some corporate server like Google, or Facebook.

Source: Tim Berners-Lee – 9/29/18

Users of the Inrupt browser and applications are given a Solid identity and access key to personalize security. Berners-Lee envisions an Alexa like persona assistant, he calls Charlie where a user can be comfortable accessing health records, financial accounts and personal memos in POD storage not a Amazon cloud server. He sees global web developers writing appls for Solid and Inrupt to take back the Internet, provide the security and safety of personal identity management and reduce the need for government regulation.

We are excited about the opportunity to finally end the corporate control of user created content which we have always believed is the user’s property not the Internet application provider.  Google, Facebook and Apple have the idea that they own our content, can do anything they want with it, including selling it to partners without our permission.

Solid and Inrupt are revolutionary in scope, technology and return the Internet to its original vision – to empower users and link them together on a peer to peer basis.  Not, a corporate behemoth holding all the content power to a weak end user.  Maybe with technology like Solid we can finally get back to a democracy of entrepreneurs, small business and users controlling their content, its use and distribution!

Amazon Raises Minimum Wage to $15@hr While Eliminating Bonuses, Stock

 

Photo: kansascity.com

Amazon announced the $15 pay raise today in response to criticism by progressive politicians like Sen. Bernie Sanders who recently introduced a bill to tax companies like Amazon 100 % for employees on government assistance.  The company plans to hire over 100,000 seasonal workers this holiday season, the raise will apply to all full – time, part-time and seasonal workers beginning November 1st. The pay move by Amazon comes at a time when retailers are finding it hard to hire clerks and warehouse workers for wages generally under $15 @hr.  Amazon’s move is a challenge to retail firms across the country forcing them to raise wages or lose out in hiring to Amazon.  Sen. Sanders congratulated Amazon in a tweet, noting the raise was a ‘shot heard around the world, certainly for all hourly workers worldwide.

Sources: Amazon, The Wall Street Journal – 10/2/18

While  the $15@hr wage increase made the headlines, the firm took away bonuses and stock awards for warehouse workers.  The company said the wage increase more than makes up for the loss of bonuses and stock awards.  What?  Why is Amazon doing this?  To mitigate the cost of raising wages to $15@hr to bottom line profits.  Amazon needs to think through the message they are sending, do they want the ideas and dedication that bonuses and stock recognize or not?

In addition, the company said it would be lobbying in Washington for a raise of the federal minimum wage which has been stuck at $7.25 for ten years.  Amazon uses a highly profitable server business to provide a cash feed to the retail business while building market share to eliminate competitors.  Amazon raising wages makes it even more difficult for competitors to hire workers and retain them.

Next Steps:

We applaud Amazon for waking up and making this sweeping move to raise hourly wages to a baseline of $15 @ hr.  At the same time we are concerned that with giving the wage increase they are taking away bonuses and stock awards – this policy sends  the wrong message to workers. The wage increase is a strategic move as well, putting its weaker competitors back on their heels and in a worse political position.  Are they going to oppose federal legislation that may come from a Democrat led House to raise the federal minimum wage?  In a mid-term election year where non-supervisory workers have experienced stagnating wages since the 2008 recession Amazon competitors will be hard pressed to make their case to consumers. As politics is more in the spotlight for companies and consumers, brick and mortar retailers’ possible stand against raising wages may hurt sales and hiring.

With Amazon making the first move we agree with Sen. Sanders, who called on other major companies to start paying decent wages to their employees so they support their families, buy cars and purchase a home.

The e-retailer behemoth is in the cross hairs of political criticism in terms of work conditions like few bathroom breaks, to uncertainty with plans to add 40,000 robots over the next five years. The firm’s automation plans will have a significant impact on the workplace for non-college educated workers, we need to be working on a public policy recognizing the impact automation has on worker careers.   Should robots be taxed as some have suggested?  If  so, based on what formula?  How would the funding be used to support retraining and safety net needs for the workers displaced? Amazon has been able to amass a dominant retail position by using revenues from its business to business cloud server profits to mitigate the ecommerce business running at a loss and early development of brick and mortar stores.   We stand by our earlier analysis that the server business – Amazon Web Services (AWS) be spun off from the e-retail business to level the market playing field with other retailers.

U.S. Healthcare Spending 41 % More Than OECD Countries

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Image: consumersunion.org

The United States healthcare system is an expensive healthcare system compared to the OECD countries that spend 41 % less per person as a percent of GDP with a 4 year higher life expectancy rate.

Sources: The Daily Shot, The Wall Street Journal – 10/1/18

As U.S. spending continues to increase life expectancy rates are stagnant, simply not improving.  Note that while OECD spending continues to grow at a much slower pace the life expectancy rate continues to climb. Americans are not getting the health care system performance that our European sister countries are achieving.

Sources: OECD, CMS – US, Moody’s Investors Services, The Daily Shot, The Wall Street Journal – 10/1/18

Even when looking at similar income level countries the cost difference is highly apparent in cost per capita.

What are OECD countries doing that the U.S. is not doing?   For starters they do not have a private health insurance system which adds a profit motive to treatment, triages services to the higher income people and increases drug prices to consumers.   Administrative costs in the U.S. are 8 % of the total healthcare spending versus the OECD countries which range from 1 to 3 %. One reason for the high administrative burden is administrative hiring was 650 % more than hiring of health services workers since 1970. Generalist physician salaries are significantly higher in the U.S. by 50% compared to developed countries. Drugs in America cost twice the average prices in comparable developed countries.  The drug costs are distorted in the U.S. largely due to price controls in European countries so drug manufacturers charge as much as they can to U.S. providers and patients to make up the difference. Finally, another key reason is about 10 % of the U.S. patients are not covered by insurance.  Which means they do not receive care from birth, let medical issues fester and go to emergency rooms for all their care (as U.S. law requires hospitals to serve all who come regardless of insurance). A study of the healthcare delivery system in Philadelphia showed that overall healthcare costs in the city could be reduced by 20 % if patients that needed care had services offered in doctor offices covered by insurance.

Next Steps: 

We have recommended in previous posts that we have one insurance system in the U.S. as other developed countries.  Administered by the Health and Human Services department, a health account would start as soon as a baby was born.  Contributions by individuals, their employer and the government would go into one account.  Private insurance could continue in those years where a worker is on the payroll of a company with benefits.  In the event the worker is between jobs he or she would be covered by the government supported part of the plan.  There would be only one formulary  for drugs, and schedule for treatments and procedures.  The administrative overhead could be cut to the 1 to 3 % range that other countries enjoy.  Staffs in providers offices dealing with insurance idiosyncrasies and byzantine rules could be cut by 75 %.  Drug companies would be prohibited from implementing stock buybacks which would make billions of dollars available to cut prices and innovate new medicines instead of lining the pockets of executives.

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