*Recovered Post* US Productivity Increases - But How?

*This is a recovered post from December 6, 2005 at 5:33 PM*

Business productivity in the United States at a 4.7 percent annual rate in the third quarter, the largest increase in the indicator in over two years. This figure seems positive, right? Well, there is no way to physically measure the idea of producivity as a whole, so how does the US Labor Department comprise this number?

The answer lies in a few underlying measures the US Labor Department measures separately. The first of these is the demand for durable goods, defined as goods that are meant to last more than three years, such as automobiles. This measure increased 3.7 percent over this period. Another measure that is factored into the productivity calculation is the measure of shipments of complete goods from factories. This measure rose 1 percent in the period. Although numerically these add up to the 4.7 percent mentioned above, a couple of other measures exist that factor into the productivity measure.

The Labor Department has a measure of unit labor costs for durable goods in the United States. This measure compares the standard wage of an employee in various industrial fields with the unit cost of production of an item. The change in the wager rate over the course of a quarter is measured against the change in the unit cost of the items being produced by that employee. This comparison can measure productivity in that the unit labor cost is lowered, even if the wage rate increases, if the production of an item increases enough.

In addition, there is a ratio measured known as the inventories to shipments ratio, which measures how long it would take to deplete standing inventories at the current rate of sales for durable goods in the US. This rate, which stood at 1.17 months in October, indicates to producers whether or not to increase production of goods in industrial fields, thereby allowing the producers to artifically create higher productivity within their businesses.

All of these factors contribute to the single measure mentioned above, the 4.7 percent increase in productivity in the US. And this, indeed, is a very positive number.

As stated in Detroit news last wednesday, Ford will cut up to 30,000 jobs in North America within five years and close at least 10 assembly and component plants. They also stated they will announce the departure of up to seven top executives in the coming weeks. All these changes are expected to be unveiled by January 23rd, 2006.

These changes have become more reality than rumors because of soaring health-care and raw material costs, and a decline in U.S. market share. So far this year, Ford’s North American unit has lost more than $1.4 billion before taxes. Also fords auto sales have fallen every month but two in the last 18 months.

Therefore, because of recent layoff's, do you expect the unnemployment, welfare, and bunkruptcy rates to rise signifigantly?

Barking up toy business tree

Michael and Theresa Frasier started a business about a year ago selling dog toys. They stumbled on the idea after their dog, Chloe, choked on the stuffing found inside of a purchased dog toy. Theresa decided that it was time for her to start making her own, safer, toys for Chloe. She decided to make a toy that had no internal stuffing, instead opting for an all cloth toy. After realizing how much her dog enjoyed the toy, she decided that she had stumbled on a great idea. She and Michael decided to sell the toys over the internet, and their business was born. Theresa realized that by subcontracting the toys to a China based manufacturer, she could make a greater profit. The toys sell for $12 plus shipping and handling.

This small business example illustrates the growing burden that companies face when faced with the decision to make their product within the United States or outsource manufacturing to other countries where labor is cheaper. If small businesses are forced to outsource, then what implication does this have for the rest of companies within the United States? Furthermore, What implications does this example have on the unskilled labor force? Does the idea of social cost and benefit limit itself to one nation or on global terms?

Ban smoking

In this article, it talks about banning smoking in public places. This law is spreading acrossed the United States. While smoking is a private cost for the smokers, in public places, smoking is an external cost to non-smokers. By making this law, the government will be using Pigou's theory...if the smokers want to smoke, they will have to pay the price of leaving the public place, to go outside and smoke, so that the non-smoker has an equal right to breath clean air. By cutting back on the smoking in public places, will the businesses pick up because more people will come out knowing that it is smoke free? Or do you think that the businesses will be losing customers because of smoking being banned?

Identity Thief

This article talks about how people can become victims of identity thief. There was a study done proving how easily identities can be stolen and how identities are chosen to be stolen. Many consumer watchdogs are trying to push Congress to enact laws against indenity theif and making the punishment much harsher. Do you think that banks and businesses can do anything to help push the laws through Congress and do you think the laws will help cut down the amount of identities that are stolen every year?

Clothes & Where you should buy them

In New York there was a commercial for the New GAP store placed before movies in the theater, this is a very derranged setting of tearing apart an old store, to find out a new one is going in. GAP used to be one of the top sellers and it's customer number has decreased 4% over the year. Many people feel it is because GAP changes it's style so often compared to that of Abercrombie and Fitch and American Eagle. GAP used to be trendy and trendsetting, now today it changes so often that it's hard to determine what it is. One reason is that GAP seems to be a season behind, with fall clothes still being full price and hanging on the racks, although it is winter. And with sales decreasing what will happen to this fashion mogul?

Where should you buy your clothes, somewhere that's trendy or somewhere that's cheaper? What's the difference in the supply and demand of these two differences? Is GAP really on the verge of declining and even going out of business? Or is this just talk due to a bad publicity stunt?

TI to increase revenue in the fourth quarter

In this article the well-known TexasInstrument is set to increase their revenue greatly. This is because of the high demand for semiconductor products. These products are used in mobile phones. Stock prices have risen 2% compared to the 1% of the previous day. Prices will rise from 38 to 40 cents a share on a revenue $3.56 and $3.71 billion. Compared to the previous 36 to 40cents a share and $3.43 and $3.72 billion. There have been supply shortages over the past few months, but it has not been resolved due to the high demand of these products.

Is the trade off fair to consumers, that the supply is low while the demand is very high? The company is making a 35% rise in revenue compared to the 15% rise in revenue of Dow Jones Semicondutor index. Is it fair to the other businesses like Dow Jones that TI is gaining more and more money for unproduced product?

Tax Bill passed

NEW YORK (CNNMoney.com) - The House on Wednesday overwhelmingly approved a $31.5 billion bill that would prevent millions of Americans from paying higher tax bills in 2006 as a result of the alternative minimum tax.

The bill would extend for one year, through 2006, an increase in the levels of income that would be exempt from the AMT, a move that would shield an additional 17 million or so taxpayers from being subject to the higher tax next year. The $31.5 billion cost of the bill represents the tax revenue the federal government would lose if the House bill becomes law.

The AMT system was originally designed to make sure the very wealthy didn't dodge their fair share of taxes. But because the income-exemption levels were never adjusted for inflation, the AMT is set to capture an ever-increasing number of taxpayers, many of them middle-income, absent a change in the law.

That's why, in recent years, lawmakers have issued temporary "patches" that raise the AMT exemption levels for a year or two at a time. But temporary solutions are considered inadequate to address the complexity and fairness issues the AMT presents, so there also has been a push to eliminate the AMT altogether as part of broader tax reform package.

People must pay the AMT only if their tax liability under the AMT system is higher than it is under the regular income tax code. That means calculating their tax liability under both systems, which differ in key ways.

The AMT, for instance, disallows many of the deductions and exemptions allowed under the regular system, which can make your taxable income look a lot higher.

The House's AMT bill is separate from a $56 billion tax bill for 2006, which House lawmakers are expected to vote on Thursday. AMT relief has broad bipartisan support, but the separate House bill is a concern for Democrats, according to a report in Congress Daily and Heather Bennett, editor in chief of Tax Analysts' federal publications. Here's why:

The Senate in November passed its own tax relief bill that included AMT relief but did not include an extension of lower tax rates for capital gains and dividends -- a centerpiece of the House's tax bill and something President Bush has been pushing for.

The Senate and House will need to negotiate which elements from each of their bills make it into a final joint bill that will be sent the president.

"The fear among Democrats is that passage of a stand-alone AMT bill would free up $30 billion that Republicans could use to include the capital gains and dividend cut, or other GOP priorities, in the tax reconciliation bill," Congress Daily reports.

The extension of the investment tax breaks, currently set to expire in 2008, would come at a time when lawmakers want to reduce the budget deficit and have proposed doing so in part by curbing spending increases for programs that target low-income Americans. Critics say the investment tax breaks primarily benefit upper-income taxpayers.

After the House vote on Wednesday, Rep. Bill Thomas (R-Calif.), chairman of the Ways and Means Committee, said he thought it would be possible for lawmakers to complete their work on a final joint tax bill this year, Congress Daily reported.

But given all the other legislative business on both the House and Senate agendas before Christmas, there is a possibility that the conference on the final tax bill will get pushed into 2006. If that's the case, the Senate may try to pass its own separate bill on AMT relief before the holidays to make sure it's in place before the New Year.


Do you think the passing of this tax bill will affect the economy at all?

On the Internet?

The internet has put shopping at the fingertips of many. People can buy almost anything online that they could at a store; even prescription drugs. According to an article on ABC, there is an increasing black market for the sale of prescription fertility drugs. Some people don’t need all of their prescription and are willing to sell it at a fraction of its cost to other people in the same position.

Couples are looking for a way to have children and they are desperate. They are willing to take the risk that the treatment they are receiving could have been altered and could potentially make them sick or even cause them to die. Knowing that these risks exist and still being willing to take the drugs, people are causing medical professionals to worry.

What can be done to prevent this situation from occurring? Do you think that this practice of selling leftover prescriptions online will spread to other prescription drugs? If the black market spreads online, what impact will this have on the official economy?

Will The Rise In Gas Prices Ever Stop?

A recent article on CNN.com mentioned that one of President Bush's top economic advisors said that the gas prices across America is still too high even though they have fallen in the last few weeks. The national average fell last week to a price of $2.15 per gallon, which was the lowest since late June. It stated that average unleaded prices are still up 10% from last years prices. After hearing one of the top advisors even come out and say that the prices are still too high, do you think that gas prices will ever get to where they were about 2 years ago? Is there any chance of the average price of gas to get that low ever again?

Heating Costs Rise ..But Why?

In a recent article on CNN.com, it stated that a warm start to the winter will give some Americans a sense of relief on their heating bills. They said this because Americans are expected to suffer the worst heating price in the last five years. The Energy Information Institute came out with some numbers that said the average American household 25.7% more this winter than last winter. The average heating bill is supposed to reach about $989. This is the biggest percentage jump since 2000-2001 when the average heating bill rose 37% and the average bill came to be $774. Is this rise in the cost of heating bills due to the cost of natural gas? Or is the main reason due to the ridiculously high oil prices? What do you think the main reasons are for the big rise in the average cost of heating bills?

auto insurance

The price of auto insurance is based off of a variety of criteria: age, number of accidents, number of tickets, type of vehicle driven, etc. Based on an article in USA Today, insurance companies might be adding address and zip code to that list. A new study found that people who reside within a mile of a church are 10% less likely to be in an accident and drivers that live within a mile of a restaurant are 30% more likely to be the cause of an accident.

Is a person’s address and zip code a fair variable to add into the equation of what determines the price of auto insurance? If it is used, will the difference in insurance premiums change the behavior of people buying homes? Or will it be a minimal amount that will have little effect? How should insurance companies use this study when setting insurance premiums for their customers?

Abortion and Crime? Related?

A recent book titled Freakonomics by Steven Lewitt. This contriversal book is aboutthe hidden economics behind every day problems in society. One chapter of the book has become a large dispute between economists everywhere. The chapter deals with abortion and crime rates. The theory, quoting the artical, "Unwanted children are more likely to become troubled adolescents, prone to crime and drug use, than are wanted children. When abortion was legalized in the 1970s, a whole generation of unwanted births were averted, leading to a drop in crime nearly two decades later when this phantom generation would have come of age."
Some economist are now saying that Lewitts reasoning is very faulty. And that he left out some major points to consider. After reading this artical do you think that this is a good theory or has Lewitt got it all wrong? What do you think is the reason for the crime drop?

itunes

According to The Register, a UK based internet site, Microsoft is complaining that apple is building a monopoly with its downloadable music site, itunes. Microsoft states that only music downloaded from their site is available to use on the ipod, an extremely popular MP3 player that is available through Apple. Additionally none of the music downloaded from the itunes site is compatible with the windows based media players.
Do you think Apple is creating a rival monopoly to capture the portable music market and challenge some of Microsoft?s business?



http://www.theregister.co.uk/2003/10/20/microsoft_monopoly_says_apple_monopoly/

McDonald's Under the Tree

McDonald's is promoting reloadable gift cards for the holiday season in an effort to increase sales and decrease time spent in lines at the counter. The cards are available in $5, $10, $25, and $50 denominations. In an effort to increase the popularity of the cards, McDonald's has given away millions of $1 cards to Southwest Airline employees and customers, their own customers who bought premium chicken selects during a promotional time period, and through American Express credit card mailings. Do you believe that these reloadable gift cards will increase McDonald's sales? What do you think about this idea? Will and should other fast food joints follow in McDonald's footsteps?

Free Agent Fraud

the game of baseball witnesses players changing teams almost weekly. some big name guy goes here for millions of dollars while another big name guy goes there for draft picks or prospects. is all the trouble worth the benefit though. in some cases yes, but in some cases no as well. we've all heard of those big deals where a player gets signed for a ridiculous amount of money because he had a great season the previous year with a different team. what happens when they don't perform? was all the off-season work worth the mid-season flop? how do managers draw the line on whether or not the benefit of taking a chance on a player outweighs the work they put in and money spent to get him. it doesn't seem likely that we will ever find a way of knowing the future, so what factors do managers have to look out when determining their overall costs and benefits of taking a chance on the new free agent?

No more smoke

Across the country, it is becoming more and more common for establishments to be designated as non-smoking. Because second hand smoke can be just as dangerous to a person’s health as if they chose to smoke themselves; bars, restaurants and now hotels are starting to take action. By eliminating smoking in their establishments, these owners are protecting their workers and their patrons from the negative externalities of second hand smoke.

This article on MSNBC, discusses the actions of the Westin hotel chain. Westin, a company which has 77 hotels in North America, has decided to make it a policy that all of their hotels be free of smoking. Anyone caught breaking this rule will receive a $200 penalty. Westin believes that it may lose the business of smokers initially, but as time passes they expect to attract more guests who prefer the policy.

Do you think this is a good economic decision for Westin or for society? Will other hotels follow suit? If more and more businesses continue to eliminate smoking, do you think this will lead to a decline in the number of smokers?

Baseball a Billion Dollar Business?

after reading this article on what makes up the overall value of a sports team it got me thinking. is baseball merely a profit-making business investment for owners these days? mentioned in the article is the fact that the new york yankees baseball team has an estimated worth of nearly $1 billion. do owners think of baseball as a mere business investment or is it for the love of baseball? it is obvious that owners have the potential to make a lot of money off of a team. what about the bad teams who finish near the bottom of their division every year; are those teams as profitable. i like to think of it as a challenge for the owners. when their ownership begins they need to make the most profit off of the team as they can. to do this they have to win and get good fan support. so my question to you is, do owners simply think of baseball as an investment in which they are only out to make money and collect the benefits?

Iraq: Should we stay or should we go?

As we all know, the war in Iraq is continuing to grow less popular. Congressional meetings are showing the opposing opinions on the war. On one hand there are people saying that since the world's greatest army is protecting Iraq, the Iraqi government will have no incentive to protect itself. These same people may say that American forces have "become a catalyst for violence" (as Democratic Congressman John Murtha said in a speech supporting the deployment of American troops). Murtha suggested that a gradual pull-out could take six months. On the other side of the argument, people may say that pulling the troops out of Iraq will send a message to terrorists that we will "abandon our interests when we are confronted with murder and blackmail" (as stated by Vice-President Dick Cheney in response to Murtha's comments). In the past few weeks, Donald Rumsfeld and Condoleezza Rice have both commented on the possibility of withdrawing some of the troops.

According to this link, 54% of Americans think the war was a mistake. 32% of Americans believe that the war will result in a stable and reasonably democratic Iraq. A fifth of Americans support the immediate withdrawal of all troops, while most support gradual withdrawal over a long period.

How has the United States economy been affected by the war? Will the economy be better off if the government decides to 1.) pull troops out immediately, 2.) gradually withdrawal, or 3.) stay. And lastly, do you think that the war will negatively reflect upon Republicans in the 2006 election? How so?

Boeing Bounces Back

Boeing, one of the worlds largest airplane producers, is bounceing back from a slump in sales with their new line of airplane models, to combat lost sales taken by Europes top producer, Airbus. The most impressinve being Boeing's new 787 Dreamliner jet. The 787 is a lighter more fuel efficient plane. In fact, it burns an average of 20% less fuel that other planes its size. Plus, it conserves 24% more fuel then Airbus's A350. With gas prices like they are, many airliners are turning to the Dreamliner, ordering so many in fact that Boeing is outselling Airbus at a 10-1 ratio. Do you think its possible with Boeing's new model that they could monopolize the airplane manufacturing industry? Do you think that Airbus can bounce back? Furthermore, Dont you think its weird that a gas crisis can be beneficial to a company? Why do you think that is?