Category Archives: Business and Economy

Collecting online sales taxes

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With so many governments struggling to make ends meet, more states are looking at how to collect more sales tax revenue from online purchases. While Internet users may not like this, it seems like this is primarily being held up by complications about how to collect the money:

Under a 1992 Supreme Court ruling, businesses are responsible for collecting sales taxes on every sale they make in a state where they have a “physical nexus.” In other words, if the business has a store, an office or even a single sales rep in your state, it’s supposed to tack the state’s sales tax onto your bill.

Online retailers like Amazon.com typically don’t add the tax, except in the states where they’re based or where they have physical facilities like warehouses or distribution centers. Amazon, for example, collects sales taxes only in Washington (its home state), Kansas, Kentucky, North Dakota and New York.

The tax is still supposed to be paid, however. And if the seller’s not responsible, then you, the buyer, are. In general, you’re supposed to voluntarily file your own report and pay the standard tax on your out-of-state online purchases. (The appropriate forms are available on state tax agency websites, revenue officials are happy to remind you.)

But it turns out that the vast majority of Americans are completely unaware of those rules, so the forms don’t get filed and the taxes don’t get paid — to the tune of $8.6 billion in 2010 alone, the National Conference of State Legislatures estimates.

Two quick thoughts:

1. Why have states waited so long to get on this? Perhaps they didn’t want to look like the bad guys while things were relatively good.

2. If more of these taxes are paid, what effects would this have on Internet commerce? There would still be benefits to Internet purchases: no need to go out to a store, often a lot more options, delivery to your doorstep. At the same time, would this help traditional retailers?

Median income falls in the 2000s, poverty rate up

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Recently released figures from the Census Bureau show troubling news with two oft-cited measures of income:

The bureau’s annual snapshot of American living standards also found that the fraction of Americans living in poverty rose sharply to 14.3% from 13.2% in 2008—the highest since 1994. Some 43.6 million Americans were living below the official poverty threshold, but the measure doesn’t fully capture the panoply of government antipoverty measures.

The inflation-adjusted income of the median household—smack in the middle of the populace—fell 4.8% between 2000 and 2009, even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation. Between 2007 and 2009, incomes fell 4.2%.

While the poverty figures have drawn a lot of media attention, they are now at 1994 levels (also around the time of a recession). It is not good news that the poverty rate is up but this isn’t catastrophic compared to recent historical figures.

Perhaps more troubling is the decrease in the median income over the course of an entire decade. This suggests that the economic problems aren’t just limited to those at the bottom of the economic ladder; it is affecting many more Americans who saw no real income growth over a ten year stretch. Figures like these are also used by some as evidence of the growing income gap in America.

Decrease in office romances

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Businessweek suggests that office romances are on the decline because of a confluence of lawsuits and third party discrimination claims, which may be linked to pressures from the current recession. But there are those who argue that such romances are actually good for productivity and for businesses:

A once-amorous workforce already seems to be feeling the effects. This February, 75 percent of U.S. workers surveyed by job search website Monster.com (MWW) believed a workplace relationship could bring a conflict. Sixty-two percent said they felt office romances were a distraction from job performance. Careerbuilder.com’s annual Valentine’s Day romance poll has shown an alarming decline in reported office trysts. In 2006, 50 percent of respondents claimed to have partaken in a workplace relationship during their career. Earlier this year, the number dropped to 37 percent.

This is disturbing news not only for employees but also for their bosses. Some management experts believe that a workplace fling can “greatly increase something called ‘engagement,’ ” says Stephanie Losee, co-author of Office Mate, a guide to finding love in the workplace. “That’s when you’re excited to come in and work and you care about your company.” For these reasons, National Public Radio, Princeton Review (REVU), Pixar (DIS), and Southwest Airlines (LUV) encourage in-house matchmaking. Frederick S. Lane III, author of The Naked Employee, argues that co-worker couples spend more time at work, take fewer sick days, and are less likely to quit.

So if office romance is down due to economic pressures, are people now building romantic relationships elsewhere? Or are people just less likely to pursue romantic relationships when economic instability is present?

Additionally, I don’t envy managers who have to look out for and monitor such relationships. Such situations seem ripe for Michael Scott-type awkwardness.

IMF warns of social consequences of global recession

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A new report from the International Monetary Fund and the International Labour Federation suggests the recent global economic crisis could lead to social instability:

A joint IMF-ILO report said 30m jobs had been lost since the crisis, three quarters in richer economies. Global unemployment has reached 210m. “The Great Recession has left gaping wounds. High and long-lasting unemployment represents a risk to the stability of existing democracies,” it said.

The study cited evidence that victims of recession in their early twenties suffer lifetime damage and lose faith in public institutions. A new twist is an apparent decline in the “employment intensity of growth” as rebounding output requires fewer extra workers. As such, it may be hard to re-absorb those laid off even if recovery gathers pace. The world must create 45m jobs a year for the next decade just to tread water.

The Telegraph headline say this social instability was termed a “social explosion.”

So what kind of social consequences are these groups talking about? A number of commentators have noted how such recessions affect future behaviors, particularly among younger generations who become scarred by such experiences. But when a term like “social explosion” is used, it suggests images like riots, labor strikes, labor demonstrations, perhaps even the collapse of democracies in the face of pressure from angry citizens. In the United States, it is hard to imagine this. (Indeed, it is an interesting question to ask: what would have to happen for a majority of Americans to participate in more demonstrative collective action?) Even the Great Depression didn’t lead to many violent or excessive disruptions (or at least the history books don’t discuss much of this).

I wonder how much of this language is prompted by particular political viewpoints. The Telegraph hints at this:

“Most advanced countries should not tighten fiscal policies before 2011: tightening sooner could undermine recovery,” said the report, rebuking Britain’s Coalition, Germany’s austerity hawks, and US Republicans. Under French socialist Strauss-Kahn, the IMF has assumed a Keynesian flavour.

The whole situation bears watching – how will average citizens respond?

From corn syrup to corn sugar to boost image

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The Corn Refiners Association is putting in a request to the Food and Drug Administration to change the name of “corn syrup” to “corn sugar.” This rebranding is being done to help shed the image that consuming corn syrup increases the likelihood of obesity.

Apparently, there is some precedent for changing a name like this. Ever heard of “low eurcic acid rapeseed oil”? Once renamed “canola oil,” sales apparently picked up.

If this name change goes through, how long before those opposed to corn syrup start a campaign against corn sugar? I wonder how much time the Corn Refiners Association thinks they can buy.

Starting salaries by college major

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The National Association of Colleges and Employers has released a new study looking at 2009 starting salaries by college major. Average starting salaries for all graduates dropped a small amount from 2009:

NACE’s Fall 2010 Salary Survey shows that the overall average offer to Class of 2010 bachelor’s degree graduates stands at $48,288, compared with $48,633 offered to the Class of 2009. This represents a drop of 0.7 percent.

Liberal arts majors were below the average starting salary:

The average starting salary offer to liberal arts graduates—as a group—dipped 3 percent from last year to $35,508. Salary offers to sociology majors climbed 3.1 percent to $35,357 and history majors saw a slight increase of 0.7 percent to $38,731. Meanwhile, offers to English majors dropped 1.8 percent to $35,946 and offers to psychology majors fell 6.7 percent to $32,260.

The top five salaries? Four of five involve engineering – from number 1 to number 5, petroleum engineering, chemical engineering, mining and mineral engineering, computer science, and computer engineering.

What matters in a hybrid: financial value or something else?

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A recent study compared hybrid models to their traditional counterpart models and found that the hybrids are not a very good value:

Everyone knows hybrids get better fuel economy and emit less CO2 than their conventional counterparts, but they also cost more because of the added technology. And that makes them a lousy value because you won’t recoup that added cost in fuel savings.

So say the car gurus at CarGurus.com, who repeat a common argument against hybrids but back it up with some stats. They examined the purchase price and operating costs of 45 popular hybrid models and discovered the average gas-electric automobiles costs 25 percent more to own and operate than its gasoline-only sibling.

This may help explain why hybrids still are only a small part of the market – just under 3% according to this study.

But for those who currently drive hybrids, is financial value the primary reason? While this seems to be key to the larger market, I would guess there are a lot of current hybrid drivers who drive them for other reasons like being (or perhaps appearing) green. If more people truly wanted to be green or were worried about pollution from cars as opposed to saving money, then they would probably purchase more hybrids.

The continuing image battle between Walmart and Target

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Two articles from CBS illustrate the image battle being waged between Target and Walmart. While the stories are supposedly about what you should and should not buy at each place, here are the opening paragraphs about the relationship between the two retailers. The first story focuses on Target:

In the battle for public opinion, Target has shellacked its larger competitor, Walmart. Whether it’s environmentalists attacking the very concept of big-box retail or workers’ rights advocates lambasting the chain’s treatment of employees, Walmart has become the poster boy for the excesses of capitalism. Target, meanwhile, has built a reputation for cheap chic, pairing with Liberty of London and Michael Graves to churn out high-design at low prices. Walmart gets blamed for putting mom and pop stores out of business, while Target recently opened its first store in Manhattan, a market Walmart has yet to crack.

Recently, however, Target has looked vulnerable, suffering more in the economic downturn than Walmart did, and committing a rare public relations gaffe by making a political contribution that angered gay groups.

The companion piece examines Walmart:

Despite (or perhaps because of) the fact that Walmart is the nation’s largest retailer, there are plenty of people who wouldn’t be caught dead in one. To these folks, Walmart conjures images of a rapacious juggernaut of stadium-sized stores offering low-quality merchandise, spotty service, and mistreating employees and the environment — while driving small local retailers out of business.

But many of those misgivings are starting to fade, partly as a result of some well-timed improvements to the company’s product line-up and its environmental record. What’s more, there’s nothing like the worst recession in 80 years to nudge “low prices” a little higher on the collective priority list. And while Walmart may not be making its employees rich, the chain handed out very few pink slips in the downturn and remains the country’s largest private employer.

To be sure, there are plenty of reasons to remain wary of the retail behemoth. Whether you are concerned about the threat to a downtown business district, object to the retail culture, or just have a mental picture of the Walmart shopper that you can’t square with your own self image, it may not be for you. But it’s worth keeping in mind that, when it leverages its enormous scale for good, Walmart can make a difference in a hurry. It’s one thing when a boutique sells fair-trade coffee, but when Walmart gets into the game, a lot of sustainable farmers benefit. Here are five product categories where you can comparison shop in good conscience at the nation’s “low-price leader.”

These openings are illustrative of how brand image matters in our world. The Walmart article opening begrudgingly admits that Walmart could contain some good for shoppers and shoppers could benefit if they are “in a hurry.” The real meat of the story is supposed to be the good deals (and not so good deals) each store offers compared to other retailers but this gets buried behind this editorializing about the image of each place. There could be a lot of interesting work done on examining how exactly Target has crafted a different kind of image and what markets each store serves.

Even with the negative publicity, surveys suggest Americans feel fairly favorably toward the Walmart. According to Rasmussen data from the summer of 2009, only 33% view Walmart unfavorably and only 26% “rarely or never shop at the store.”

An interactive look at job loss by sector

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The Wall Street Journal features an interactive timeline that shows job growth and loss by sector for each month since December 2007. The big losers: construction, manufacturing, retail, and business services. The winners (and only three sectors experienced job growth): health care, education, and federal and state government.

h/t Instapundit

Untangling the effects of income on happiness

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Examining the relationship between income and happiness can be tricky. A recent research study, conducted by two Princeton researchers and summarized by LiveScience, is illustrative of some of the issues in this research field:

-The researchers were working with a large dataset that is built around a daily survey of Americans: “they analyzed more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 U.S. residents conducted by the Gallup Organization.”

-Changes in income were measured in terms of percentages rather than absolute numbers. This was done to reflect the fact that a percentage change in income would be better for comparisons across income types. As the researchers note: ““In the context of income, a $100 raise does not have the same significance for a financial services executive as for an individual earning the minimum wage, but a doubling of their respective incomes might have a similar impact on both.”

-Survey respondents answered questions related to two measures of happiness: overall life satisfaction and what their emotions were the day before. According to the LiveScience article: “For life evaluation, participants indicated on a scale from zero to 10, from worst to best possible, how they would rate their lives. For emotional well-being, participants answered yes/no questions about whether they had experienced various positive and negative emotions a lot during the prior day.” Having both of these dimensions is critical as a general question about happiness might be interpreted differently (do the reseachers mean happy right now or overall?) by respondents.

-Some of the findings: having a “Low income seemed to magnify the emotional pain of life’s misfortunes, including divorce, illness and loneliness.” However, there was a tipping point of $75,000 where having more money didn’t help improve one’s well-being:

The researchers suggest that making anything more than $75,000 no longer improves a person’s ability to spend time with friends, avoid pain and disease and enjoy leisure time – all factors involved in emotional well-being.

“It also is likely that when income rises beyond this value, the increased ability to purchase positive experiences is balanced, on average, by some negative effects,” they write. For instance, a past study revealed a link between high income and a reduced ability to savor small pleasures, the researchers noted.

This tipping point of $75,000 is above the median income in the United States. I would be curious to know if individuals feel this tipping point when their income does rise to this level – are they cognizant of this point? Or once they reach $75,000, are they still locked into a mindset that having more money will lead to increasing levels of well-being?

Also, this $75,000 point could be quite fluid. Over time, this point would change based on economic conditions and cultural understandings of what is a “good income.”