Friday, February 22, 2019

Amazon and Queens: What Happened?


“Amazon on Thursday canceled its plans to build an expansive corporate campus in New York City after facing an unexpectedly fierce backlash from lawmakers, progressive activists and union leaders, who contended that a tech giant did not deserve nearly $3 billion in government incentives.” – The New York Times, February 14

That was the story.  How did it get to that point?

We start with Amazon’s 14-month-long search for a second headquarters, which we were led to believe had the honest objective of building it from the ground up.  In November that company announced that it had not chosen the likes of Baltimore, Little Rock, or Salt Lake City, but gone with perhaps the most obvious location, from which it extracted an agreement for $3,000,000,000 in subsidies and tax savings.  That fetched the remarkable amount of resistance, ostensibly about the money but under the surface as much or more about Amazon’s strength, the strange concern that the 25,000 new or brought-in jobs with average annual compensation said to be $145,000 were not unionized, the bad side of gentrification, and the catchall concern of “income inequality.”  Then Amazon suddenly backed out, saying that “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward.”

Many were in favor of the project.  They included both Governor Andrew Cuomo and Mayor Bill de Blasio, most owners of nearby Long Island City, Queens businesses of all sizes, nearby public housing residents hoping the area’s jobs situation would improve, many others around the city and state, and the Times Editorial Board, which, despite having decried the deal in a November 14th piece, called Amazon’s withdrawal an “embarrassment to the city” and “an opportunity lost,” and said that as a result the city could get “a reputation for the smugness of its politicians and their hostility to business.”  De Blasio was particularly loud and colorful in showing his anger at the cancellation, saying that day that “you have to be tough to make it in New York City,” and writing a piece, published two days later also in the Times, including the unchosen solution of “if you don’t like a small but vocal group of New Yorkers questioning your company’s intentions or integrity, prove them wrong,” calling Amazon’s move a “capricious decision to take its ball and go home,” saying that “they didn’t want to be in a city where they had to engage critics at all,” and that “a project that could’ve opened a path to the middle class for thousands of families was scuttled by a few very powerful people sitting in a boardroom in Seattle.”  Amazon has now stated that they will not build this second head office anywhere, but will instead enhance their existing and planned locations.

So, who won and who lost?  The largest winner was Alexandria Ocasio-Cortez, a U.S. representative not even of that district, who spearheaded the opposition and took center stage in what, when combined with the proposed Green New Deal and Senator Bernie Sanders’ presidential bid and quick fundraising, has been a sudden burst of activity from the leftmost part of the Democratic Party.  Local community activists in general and specifically, who now know what they can do, also benefited. 

From there, though, almost everybody lost.  Amazon, who seemed arrogant anyway in choosing New York after its seemingly-necessary-only-to-milk-it search, now also comes off as petulant, spoiled, and oversensitive.  As put by Doug Herendeen, show host for WRTA Radio in Altoona, Pennsylvania, they may now be replacing Walmart as the large company people on the left most love to hate, which is quite an achievement, especially for a firm, per Kevin Roose, with a “bedrock” principle “that being loved by customers is all that matters.”  Cuomo, de Blasio, and New York City, who now all seem like impotent bystanders, also lost heavily. The people of Long Island City, Queens, the city, and New York state, since per de Blasio will not have their employment, infrastructure, or cost of living issues helped by the withdrawal, were defeated as well.        

Where will we go from here?  There will be fewer large subsidy offers for a while, but I doubt they will go away permanently, as the appeal of bringing in good jobs is just too strong.  The Sanders/Ocasio-Cortez Democrat wing will continue getting attention, and will garner more votes in next year’s presidential primaries than we would have thought a month ago.  And Amazon, though reviled now by many more, will keep cruising along – a cherry on the top of this debacle was the news four days later, per Niall McCarthy in Forbes, that “Amazon Paid $0 In Federal Income Taxes Last Year.”  That on $11.2 billion net profit, and the difference between the “statutory” 21% corporate levy rate and the $129 million “tax rebate” they received, actually giving them a negative levy, is $2.48 billion in Amazon’s favor.  Whether they get the last laugh, though, is very much unknown.

Friday, February 15, 2019

Slowbalization – More Causes Than You Might Think, and Clear Employment Effects


Another good drawing festooned a provocative article late last month.  This, on the cover of the January 26th-February 1st Economist, was of a snail with its shell replaced by a view of Earth and the title “Slowbalisation – The future of global commerce.” 

In the unbylined piece, and its summary in the Leaders section, we see that that word, “coined by a Dutch writer,” has been apt for the past few years.  The authors say that we can already talk about “the golden age of globalisation,” which ran for 20 years ending in 2010, and that it “was something to behold,” when shipping and telephone call costs came way down and “business went gangbusters.” 

The reasons it is not now the same go well beyond the current White House occupant, or even similar pseudo-populists in the likes of Poland and Hungary.  Per the authors, goods-moving rates have stopped falling, services are often impossible to transport, more parts are being made nearer their consumers, and “multinational firms have found that global sprawl burns money and that local rivals often eat them alive.”  “Cross-border bank loans” have plummeted from 60% of 2006 GDP that year to 36% recently, and “gross capital flows have fallen from a peak of 7% in early 2007 to 1.5%,” both largely caused by more cautious lending attitudes from the Great Recession.  Other metrics down from 2007 include trade in goods and services as percentage of GDP, intermediate imports as the same, the percentage of profits “multinational,” and the share of S&P 500 companies’ sales from other countries.  Even services that can be done remotely are not crossing borders as much as I, anyway, had expected, with information technology positions still often turning up near the top of lists of most promising American careers.  Accordingly, instead of, as it may have seemed, the Trump administration working to bring vigorous intercountry trade to a screeching halt, its tariff actions, instead, have had a “fragile backdrop.”

The real problems with slowbalization go beyond damaging people benefitting from cheaper and better products.  They include, per the authors, cutting emerging countries’ selling opportunities, impeding solving international problems such as immigration and tax avoidance, and helping China to “win regional hegemony faster.”  Although globalization has been one of the three largest factors of the permanent jobs crisis, even if it were to disappear completely automation and efficiency would stop manufacturing and easily optimizable service jobs from returning to anything like their 1950s ubiquity. 

Here are a few pertinent observations, some old but all valid.  The frequency and amount of international trade has not moved only in one direction even for the past several decades, let alone over centuries.  Tariffs are stupid, and cut prosperity in unmeasured ways much more than any job creation or often-in-vain-anyway job preservation adds to it.  As we saw with the auto industry in the 1980s and 1990s, overseas competition is one of the best drivers for American companies to improve their products.  Although its evidence is now in latent demand instead of official unemployment, our country has excess capacity in workers.  These four realities apply no matter what the world trade situation.

How can we expect American jobs to be affected by slowbalization?  The current unhurried downward trend for service providers will not accelerate but will continue.  They will be temporarily shored up in areas protected by tariffs.  They will improve for people connected with Canadian or Mexican trade, and worsen for those working for companies exporting elsewhere.  As shifts in trade laws generally involve treaties and negotiations, change will not be quick, so even if there is an overall reversal of anti-globalization attitudes, it will take years to see its results.  Yet, as with the weather, if you don’t like the current situation, wait – it will change. 

Friday, February 8, 2019

Intense Fostering of Workaholism: The Latest Ugly, Depressing Business Fad


The top two-thirds of the front page of the January 27th New York Times business section showed a bold picture.  Drawn in red, yellow, and black Soviet-mural style, it had three present-day, youngish adults, holding a portfolio, a smartphone, and a computer tablet, at attention and indicating support for something, with, below them, a commuter train and platform and in large letters “TGIM!” (Thank God It’s Monday).  The headline of the Erin Griffith article said “Drudge Report,” and the next largest type asked “How did millennial workaholism become an aspirational lifestyle?”

Before I get into this piece, I’ll tell you what it got me thinking about.  I worked for 14 years, 1988 to 2002, in AT&T information-technology-related cubicle jobs.  I was outstanding at such fringe attributes as organizing and managing my time and work, focusing my efforts, and accomplishing a great deal, to the point where I wrote and was paid to give a presentation on those things titled “Ten Free Hours a Week.”  The one thing I did not do, though, was work extra hours.  While my management occasionally postured about a general need for the likes of me to do that, they never required it, and I was never admonished either formally or informally for not staying longer.  The mini-analysis I did showed that, even if such behavior meant more pay and a slightly higher chance of promotion, it would have an expectation of only a few dollars per hour.

However, many of my peers took a different approach.  Some were in the office – working from home was then only emerging there – sixty or seventy hours per week, the overage unpaid of course, and made sure that everyone knew that.  Productivity and performance, in that environment where constructive criticism was rare and supervisors seemed to ignore differences between employees, varied absurdly – in fact, I once told my boss that I was doing from two to ten times as much work as any of my five similar-job coworkers.  People took divergent views on what tasks they should be doing, a critically important judgment area in a setting with little outside control.  I cannot determine how much my or their approaches hurt or helped them, but never saw any correlation between hours worked and promotions received.

Time worked, though, varies with companies.  I was there not long after Ross Perot’s Electronic Data Systems became infamous for people being expected to work extra-long hours.  And while some set expectations for that during hiring, it was and is informal pressure that drives that. 

That brings me back to the article, which showed how forcefully some of today’s cubicle workers are being persuaded to put in more time.  According to what Griffith wrote, the main perpetrators are not only specific CEOs or proprietors, such as multiple-business owner Gary Vaynerchuk, but a commercial workspace provider.  Apparently, if your office is in a WeWork facility, you are treated to throw pillows, neon signs, and even cucumbers in water coolers bearing messages such as “hustle harder,” and “don’t stop when you’re tired.”  The piece is lacking in any indication of how many people live this way, but WeWork’s count of 400,000 tenants, and its $47 billion market valuation, mean that it’s more than a few.

So what are the problems with that?  At the top of the list is what I thought of over and over while reading the article:  the philosophy is self-serving.  One37pm, Tesla, and Quora, three companies Griffith cited, would prefer to hire fewer people by getting dozens of unpaid hours from those they get, representing massive savings.  Another is confusion between the founders’ efforts, which are entrepreneurial, and the employees’, which are not.  Working for a fast-moving new company does not make you an entrepreneur – if you want that, you can start one of your own.  Business owners put in huge amounts of time, which they accept since they have a chance of earning not something like $140,000 per year plus benefits but multiples of that, or, if at a smaller scale, making a living from doing something they fully control.  (We cannot validly compare these expectations to those given new lawyers motivated by the business-ownership rewards of firm partnership.)  If they, per a former Yahoo CEO, “are strategic” about sleep, bathing, and even trips to the bathroom, that is toward knowing that they, not their management or business owners, will fully benefit from everything they achieve.  The language Griffith relates is full of such independent-firm references, most insidiously Tesla co-founder and CEO Elon Musk exhorting his non-business-owning employees that “nobody ever changed the world on 40 hours a week.”  Extra benefits such as bringing in lunch food and providing ping-pong tables, while of value, are transparent efforts to maximize work time.  Hiring a mercenary third party, whether WeWork or another, to push long hours is ultimately cowardly.  And even the slogan is wrong – if you are working seven days a week, what is significant about Monday?

As long as there are businesses, there will be crazes.  In 1970’s Up the Organization, Robert Townsend torpedoed “synergy” by calling it “a business fad like hula hoops, which holds that two plus two makes five.”  After an appropriate if ineloquent barnyard epithet, he said that “two plus two usually makes three, and you know it.”  To name more, in the 1980s we had adoration of anything Japanese, before we found out that that country’s success was illusory and unsustainable; in the 1990s, unrestricted telecommuting got us less work, when employees who could not succeed in environments designed for getting things done went home to their handpicked distractions.  And here we have another. 

If this “hustling” propagates, what will happen?  People will burn out, and what would have been company-beneficial 20-year careers won’t make it to five.  Businesses will lose lawsuits, when juries determine that heart attacks, strokes, and other excessive-stress results were their fault.  People will write reams of articles and stacks of books, devastating cubicle-job employers in general as well as the specific companies involved.  We may even see France-style legal restrictions on what workers can be required to do outside of normal business hours.  And even production will be a disappointment, as the studies, showing that hourly work accomplished after 45 or 50 per week first drops off then crashes, are verified.  The trend, if this is one, is as detrimental as any business fad I have ever seen – let’s hope for all of our sake that it does, indeed, go the way of hula hoops.

Friday, February 1, 2019

The January Jobs Report: After Sorting Through the Disclaimers, It Looks Good, But the AJSN Says Latent Demand for Work Was Up 1.3 Million


Before we consider the data, we need to look at the caveats the Bureau of Labor Statistics put on this morning’s Employment Situation Summary.  They were “workers who indicated that they were not working during the entire survey reference week and expected to be recalled to their jobs should be classified as unemployed on temporary layoff… However, there also was an increase in the number of federal workers who were classified as employed but absent from work.  BLS analysis of the underlying data indicates that this group included federal workers affected by the shutdown… Such a misclassification is an example of nonsampling error and can occur when respondents misunderstood questions… If the federal workers who were recorded as employed but absent from work had been classified as unemployed on temporary layoff, the overall unemployment rate would have been slightly higher than reported.”

Whew.  I think all that means that the data, understandably and almost perforce, did not accurately reflect the government shutdown.  So, what did it apparently tell us?

First, it showed a second straight huge gain in nonfarm payroll positions, 304,000.  Second, the official seasonally-adjusted unemployment rate rose 0.1% to 4.0%.  Third, unadjusted joblessness, up 0.7% to 4.4%, showed not only the large seasonal difference between December and January, but the greater optimism of those not working that they might be able to do that, and other factors beyond those two.  The measures of how common it is for Americans to be working or strongly trying to work, the labor force participation rate and the employment-population ratio, each increased 0.1%, to 63.2% and 60.7% respectively.  Private nonfarm payroll wages went up only 3 cents per hour, less than inflation but closer to that than last month’s jump, to reach $27.56.  The count of people unemployed for 27 weeks or longer sat at 1.3 million.  One change we can disregard for now is the 400,000 burst in those working part-time for economic reasons, or looking to increase their less-than-full-time labor hours, to 5.1 million, an unknown but doubtless substantial share of which almost certainly reflected idled full-time government workers with side ventures.

The American Job Shortage Number or AJSN, the measure which shows how many more positions could be filled if all knew that getting one were as easy as getting a pizza, returned to within 45,000 of its January 2018 level, or up 1.27 million from December’s, as follows:


The largest changes to latent demand since last month were one million more from those technically jobless, followed by a 171,000 hike from people wanting work but not looking for it for 12 months or longer.  Compared with a year before, nothing changed much, with the largest worsening from those in the just-mentioned category, and small but meaningful improvements in those unemployed, those not wanting a job, and those in the military, in institutions, or off the grid. 

How can we evaluate January’s data?  The picture, though fuzzier than usual, is still there.  The 304,000-job gain, which blew away published estimates of 172,000 and 165,000, should have little to do with the government shutdown.  The supporting numbers are generally consistent with good times, with more people, if not yet getting jobs, changing their statuses to ones closer to that.  Otherwise, we will need to look at February’s data – if, of course, the government is fully open at BLS survey time.  In the meantime, through the fog, I saw the turtle take another step forward.