The Potential Effect of the healthcare bill on the underemployment rate

Yesterday the Waco Tribune had an article entitled "Waco companies search for ways to cut insurance costs".  It specifically addresses how the costs are exponentially increasing for small businesses to provide healthcare to their employees.  The bottom line is that either the employers will have to raise their prices and pass it along to their customers, or they will keep their prices the same and reduce benefits while increasing costs to their employees.  Either way, the cost increase to the employers is inevitiable.  What the article does not address is the potential impact on the unemployment and underemployment rates.

One way to avoid a significant increase in healthcare costs is to backfill any open positions with two part time positions rather than one full time position.  This avoids having to pay expensive healthcare benefits, and it also decreases the unemployment rate.  The job market being what it is right now (an employers' market), there is not much motivation for employers to be competitive with benefit packages as many people are just happy to have work at this point. 

The problem comes with the much-ignored underemployment rate.  Just because people have a job doesn't mean that it is providing their financial needs, as happens with underemployment.  Underemployment does not jump start the economy and does not pull an economy out of a recession.

In the past, employers were more likely to hire full time, all things being equal, because it had less mobilization costs and created a more stable workforce.  However, with the increase in healthcare costs, the mobilization costs for two part time employees may not look as bad compared to the healthcare costs for one employee.

So we see yet another potential way in which the healthcare bill will likely hurt the economy thru the underemployment rate.

Sam Walton's Way

This is another short by New Word City Books about Sam Walton. Sam was incredible in that he started with just about nothing, and built an empire. One of the keys was that he did not try to build all at once. He built one store at a time and grew his business slowly and surely through its formative years.

This short book outlines several things that differentiated Sam Walton and provided him the success that he enjoyed:
1. He defined his overarching goal and never lost sight of it, no matter what little things tried to trip him up.

2. He empowered his employees by giving them information about the business. He stated that the more they know, the more they would understand and the better decisions would be made.

3. Listen and Look. He watched his competitors and listened to his employees for ideas.

I found this interesting because Wal-Mart is a corporation that I do not like very much. I see them as a company that puts small mom and pop businesses out of business. On the other hand, the way Walton built his business reads like a textbook on how a business should be built. He was just very diligent about it, which is a good thing.

So maybe my issue with Wal-Mart isn't a principle issue, it's a charity issue. Wal-Mart obviously doesn't need my business, and probably doesn't even care about my business. I can get better quality merchandise at the same or slightly more prices elsewhere and make me feel that I am actually making a difference in their business and helping someone succeed.

On the other hand, I shop at big box electronic retailers and buy books on Amazon.com. Call me inconsistent, but I'm human.

Some quotes from Peter Drucker

Tonight I read a short book on Peter Drucker who was a business theorist during the 20th Century. While I usually have little respect for theorists because they don't usually know from what they speak and ignore the pragmatic side of things, it seems that Peter Drucker had his feet planted squarely on the ground. The following is a list of quotes from the book that I wish modern management would live by:

1. One either meets or one works

2. The best way to predict the future is to create it.

3. Most of what we call management consists of making it difficult for people to get their work done.

4. There is nothing so useless as doing efficiently that which should not be done at all

5. The most important thing in communication is hearing what isn't said

6. When you see a successful business, someone once made a courageous decision

Some good thoughts for modern management.

How Obama is about to screw the neediest of the lower middle class

Actually, he's already done it. I know, I know, he said he wouldn't raise taxes on anyone making under $250,000 per year. The buck stops with him, he made a campaign promise. He gave his word.

Please stop laughing in the peanut gallery. We're trying to have a serious discussion here.

This has to do with Flexible Spending Accounts. Now, lets be clear. An FSA is not an entitlement program like Obamacare. It's a tax cut. It allows you to specify a specific amount of money you want your employer to withhold from your paycheck throughout the year, and this money can be used, PRE-TAX, for medical expenses. In other words, no tax on medical expenses. The catch, of course, is that if you don't use it, you lose it. No big deal, just lowball it a bit and you get a great deal.

Roughly 20% of employees take advantage of an FSA account. Of the 20% that participate, 80% of them keep their annual contributions under $2500 (significance of this number discussed below).

Currently, there is no Federal cap on how much you contribute, although most employers place their own cap. My employer has two programs, with caps at either $4000 or $5000. The former program works better for us. Due to my daughters medical expenses, we use every penny of this $4000 every year and it is a huge help. Many other families with special needs kids have used it to great benefit also.

But Obama has to raise taxes somewhere. And this is a way to do it that won't bring a lot of news media or attention. An added benefit? It only effects those who REALLY need medical care, and will be forced to upgrade to more overpriced, government mandated plans that give the same coverage to special needs kids as to kids with runny noses.

So, in 2011 all over the counter medications will need a doctors order to be FSA eligible. Wow, that sounds cost saving. Where before I could have just gone and got the $10 worth of medicine, now I'll have to take them to a doctors appointment which is a $20 co-pay typically and counts towards my FSA limit.

On top of that, in 2013 the government will cap the FSA contributions at $2500. More revenue for them, more taxes for those in need of medical care. Win-Win for Obama.

Glad that he's looking out for the little man. I feel so cared for.

For more information, click here.

The Life of Benjamin Franklin

I recently finished reading the autobiography of Ben Franklin. I think this book should have been more aptly named “Excerpts and Principles from my life”. It is an enjoyable read, but don’t expect to have a complete chronological account. He wrote it at three different times in his life and there are gaps in the chronology. He does cover his formative years very well which is good, because it gives a lot of background on how he became who he was.

One of the interesting things he addresses is his religion. He states that he became a Deist, but soon left it off because he found it didn’t explain God fully. He returned to mainstream Christianity but, although he was raised Presbyterian, refused to join any specific denomination. He does speak twice of attending a church. The first was a preacher who seemed to think that his pulpit was a seminary classroom. He soon bored Franklin who stated that he felt that every sermon should have some moral or virtue, in other words, application to our daily lives. The second minister did a good job of this, but because he differed with the denomination on some points of doctrine was soon expelled. Unfortunately, we have the same issue in the modern church. We get so far beyond the essentials of our faith that we major on the mint, thyme and cumin and ignore the weightier matters of righteousness, justice and mercy.

Not being a member of any specific sect helped Franklin. He was able to be the mediator between sparring factions more than once and became a friend to many different denominations. He had an especially interesting relationship with the preacher George Whitfield. Whitfield did not see Franklin as saved, and attempted to convert him, but Franklin did not budge. Franklin was familiar with Whitfield’s oratory and went to listen to him one time, knowing that Whitfield was going to make an appeal for money for the orphanage he was putting together in Georgia. He made the firm determination that Whitfield would not get a penny. However, by the time Whitfield had finished, he had given all the money he had in his pocket! Interestingly enough, one of his few criticisms of Whitfield was that Whitfield printed his sermons. He stated that in print they sounded far different than when preached and that it gave rise to being taken out of context and criticized unfairly. The interesting part about this was that it was Franklin’s printing business who did all the printing for Whitfield in America!

Franklin also understood the need for experience. During the colonial period in the French/Indian war, the city of Philadelphia organized a militia to defend and watch the city. By this time he was considered one of the city fathers and could easily have demanded leadership in the militia. In fact, it was offered to him, but he refused and served as a private. He stated that as he had not been a military man before, and knew nothing of the subject, he would serve his city as a private. At a later time when he had the experience he accepted a leadership position.

Franklin understood business. Here I’d like to quote an excerpt:

Partnerships often finish in quarrels; but I was happy in this, that mine were all carried on and ended amicably, owing, I think, a good deal to the precaution of having very explicitly settled, in our articles, every thing to be done by or expected from each partner, so that there was nothing to dispute, which precaution I would therefore recommend to all who enter into partnerships; for, whatever esteem partners may have for, and confidence in each other at the time of the contract, little jealousies and disgusts may arise, with ideas of inequality in the care and burden of the business, etc., which are attended often with breach of friendship and of the connection, perhaps with lawsuits and other disagreeable consequences

In other words, business is about expectations. If you set the expectations correctly and then follow thru, much of the angst that can be caused will be avoided. Having said that, Franklin was in partnership several times and only one of his partners treated him fairly. The others ended up costing Franklin. He paid off the debts and did not seem bitter, but it still cost him dearly. His last partner worked out well and they were in partnership for 18 years. He had been a journeyman for Franklin for 4 years already so Franklin knew his work habits quite well.

Franklin was a man who was always trying to improve himself. He understood his faults and attempted to correct them. He had an interesting way of looking at it:

…My faults in it vexed me so much, …that I was almost ready to give up the attempt, and content myself with a faulty character in that respect, like the man who, in buying an ax of a smith, my neighbour, desired to have the whole of its surface as bright as the edge. The smith consented to grind it bright for him if he would turn the wheel; he turn'd, while the smith press'd the broad face of the ax hard and heavily on the stone, which made the turning of it very fatiguing. The man came every now and then from the wheel to see how the work went on, and at length would take his ax as it was, without farther grinding. "No," said the smith, "turn on, turn on; we shall have it bright by-and-by; as yet, it is only speckled." "Yes," said the man, "but I think I like a speckled ax best." And I believe this may have been the case with many, who, having, for want of some such means as I employ'd, found the difficulty of obtaining good and breaking bad habits in other points of vice and virtue, have given up the struggle, and concluded that "a speckled ax was best"

The system he is talking about is his 13 virtues. He found 13 areas of his life that he wanted to work on, wrote them each down on a card, and worked on one per week, letting the others fall to the natural chance. In doing this, he was able to improve his character. Below are his 13 virtues.

Temperance: Eat not to dullness; drink not to elevation.

Order: Let all your things have their places; let each part of your business have its time.

Resolution: Resolve to perform what you ought; perform without fail what you resolve.

Frugality: Make no expense but to do good to others or yourself; i.e., waste nothing.

Moderation: Avoid extremes; forbear resenting injuries so much as you think they deserve.

Industry: Lose no time; be always employed in something useful; cut off all unnecessary actions.

Cleanliness: Tolerate no uncleanliness in body, clothes, or habitation.

Tranquility: Be not disturbed at trifles, or at accidents common or unavoidable.

Silence: Speak not but what may benefit others or yourself; avoid trifling conversation.

Sincerity: Use no hurtful deceit; think innocently and justly, and, if you speak, speak accordingly.

Justice: Wrong none by doing injuries, or omitting the benefits that are your duty.

Chastity: Rarely use venery but for health or offspring, never to dullness, weakness, or the injury of your own or another's peace or reputation.

Humility: Imitate Jesus and Socrates.

He stated that his biggest issue was orderliness, which I can relate to.

Franklin was a giant of his time, and an example to ours and future generations of the benefits of hard work and benevolence to your fellow man. This book is highly recommended.