Monthly Archives: February 2014

Plan To Charge Stores For Paying Low Wages: Flawed But Has Merit

by Categorized: Economy, Jobs, Labor, Politics, Poverty, Retail Date:

Connecticut is already one of the three states with the highest minimum wages and it’s the only one with mandatory paid sick days. Now advocates for the working poor are pushing for a novel plan to address the crisis of below-poverty wages: Penalize employers that pay too little.

The controversial plan isn’t in effect in any state and was narrowly defeated in Washington D.C., where Wal-Mart threatened to pull out. The idea is to extract money from low-paying retailers and fast-food companies to help the state compensate for the income supports that low-wage workers receive.

Fair is fair, the logic goes. Why should taxpayers subsidize Wal-Mart, McDonald’s and Dunkin’ Donuts?

Tina Conners, a McDonald's employee in Manchester who lives in her car. Dan Haar/The Hartford Courant

Tina Conners, a McDonald’s employee in Manchester who lives in her car.
Dan Haar/The Hartford Courant

Care to get upset? A recent report by the Connecticut Association for Human Services showed that a family of four with two adults working a total of 60 hours a week at $10 an hour would be eligible for $29,147 a year in public assistance — much of it Medicaid. And that wouldn’t even include the earned income tax credit, which would push the total higher.

That means you the taxpayer are subsidizing you the shopper to the tune of thousands of dollars for every low-wage sales employee. Still feel good about those 12-packs of socks for $6?

Under the Connecticut version of the wage penalty bill, which had a hearing Tuesday before the legislature’s labor committee, any company with at least 500 employees in the state would have to pay $1 per hour per affected worker into state coffers if it paid less than the “standard wage” for its lowest job classification. For a minimum wage worker in fast food, for example, the standard wage is $11.31 an hour — 130 percent of the $8.70 minimum.

The idea has big problems, illustrated in the story of Tina Conners, who’s from Manchester and told lawmakers and Gov. Dannel P. Malloy Tuesday, in a meeting in his office, that she lives in her car.  Conners, 21, works between 10 hours and 20 hours a week  at a local McDonald’s. She’d like to have more hours but can’t get them.

Conners was at the Capitol to push for the low-wage penalty and a higher minimum wage, which Malloy wants. But what she needs more than a slightly higher wage is many more hours. She told me she’d prefer to log 20 to 30 hours a week, leaving her time and money to go to college and eventually, a career as a dentist.

The $1 an hour penalty wouldn’t come close to paying for the public subsidies that we the taxpayers have to shell out for low-wage workers, but it would be a start. And it wouldn’t help Tina Conners add hours to her workweek; if anything, it could lead to fewer hours.

Another problem: Franchisers such as McD’s and Subway are not the employers. No worry, advocates say. Franchisers would be liable even if they didn’t own the stores in question.

Bills like this come up precisely because low-wage employers are abusing the public trust. We as greedy, shortsighted consumers are the ones letting them do it — all the worse in the case of the poison we’re buying and ingesting from the fast food industry.

And so the bill is politically brilliant if only for the point it makes: The fines would not go to the workers, in effect an enforced wage; rather, the money would go back to the taxpayers.  “Politically, it’s a no-brainer. It’s a home run,” said Tom Swan, executive director of the Connecticut Citizen Action Group and a leader of the effort. “Morally, it’s the right thing to do.”

It’s not a home run for the Connecticut Retail Merchants Association and the Connecticut Business and Industry Association, who argue that the bill would raise costs in the state and drive out retailers that pay property taxes and offer opportunity to workers. “Our employers do the best job they can,” said Tim Phelan, president of the retail merchants group.

Well, no, they don’t. He can say that about his small retail members that are just getting by, but not about the big national chains and franchises that are transferring billions of dollars from taxpayers to shareholders by shortchanging workers. McDonald’s employees alone receive $1.2 billion a year in public assistance, an October, 2013 report by the National Employment Law Project showed.

Phelan and CBIA advance the idea that low-wage jobs are entry level. “They provide the learning experience,” said Eric Gjede, assistant counsel at CBIA, the state’s largest business group.

Certainly any specific worker can get ahead, but by definition the system will screw most people, simply because the wage structure at many big retailers is so bottom-heavy.

Both sides flash numbers showing why states should, or should not, force employers to pay higher wages or penalize those that don’t.  But ultimately, the states are just bystanders in a private-sector pay system that creates opportunity for a few and poverty for the many, to the benefit of us the consumers.

Maybe we should try the penalty. Flawed as it is, nothing else is working.

Hospitals Fire Back At Malloy: We Are 9 Percent Of CT Economy

by Categorized: Economy, Health Care, Jobs, Public finance Date:

Fresh from another snub by Gov. Dannel P. Malloy, the Connecticut Hospital Association is waving around a new report that claims its member hospitals account for nearly 9 percent of all economic activity in the state, and that every dollar the state gives them brings $2.33 from the federal government.

The first statement seems hard to believe, though without question hospitals are a huge part any region’s economy, especially the hard-hit cities.  The second statement about federal reimbursement is not exactly true but isn’t always wrong.

The hospital association’s report says the hospitals employ 55,000 people directly, with a direct payroll of $5.3 billion, or $96,000 per job. By spending money in the community, those employees indirectly create another 56,000 jobs for a total of 111,000 jobs, and $11 billion in payroll.

Separately, the hospitals themselves buy goods and services that directly or indirectly create another $8.1 billion in activity, and they spend another $530 million on buildings and other capital projects which multiplies to $1.1 billion in the economy, the report said.

Grand total: $20.2 billion in a state economy that’s $235 billion a year.

That’s a rebuke to Malloy, who, the hospital association says, shorted the hospitals by just over $500 million in Medicaid reimbursements and other costs last spring that they said they would need to keep providing the same level of services.

Then, when Malloy’s budget chief, Ben Barnes, was asked by reporters on opening day at the Capitol last week whether there was anything for hospitals in this year’s proposal, he said simply, “No.”  When pressed, he said he had looked at the state filings and thought the hospitals were doing fine.

They of course disagree.

As for the $20.2 billion, we see a handful of these economic output reports from industries, and this one seems to push toward the high side. For example, I know there are formulas to get there but it’s still not clear to me how a group of employees with $5.3 billion in their pockets can give rise to another group of people who earn $5.7 billion.

Yes, we are all connected in the economy.

And as for the federal reimbursement, the hospital association appears to be referring to the Medicaid formula when it says the federal “match rate” is 70/30. That means for every additional dollar we spend on Medicaid, we get $2.33 back.

But Malloy and Barnes say their plan did not cut back on Medicaid spending, only on the amount the hospitals wanted to receive from the state. They say the $1.7 billion for hospitals is actually up slightly, but of course the hospitals argue that Medicaid spending is up more than slightly.

To be continued this spring at a state Capitol near you.

Back9Network Moving Ahead With $7.5M Constitition Plaza Studio, Fox Sports Deal

by Categorized: Entertainment/Tourism, Media, Real Estate, Telecommunications Date:
Artist rendering of Back9Network studio at Constitution Plaza in downtown Hartford. Courtesy of Back9Network

Artist rendering of Back9Network studio at Constitution Plaza in downtown Hartford.
Courtesy of Back9Network

A lot of people in Hartford have been skeptical about progress at Back9Network, the golf lifestyle media outlet with a flashy culture, a plan for a studio on Constitution Plaza and the goal of launching a cable TV channel.

Back9 founder and CEO James L. Bosworth Jr. had hoped to have a cable deal and a working studio on the plaza in 2013, and neither one happened, fueling fears that the capital city would once again find itself snakebitten.

But I spoke with Bosworth on the day Comcast and Time Warner Cable announced their $45 billion merger — which could greatly affect Back9 — and he had plenty of good news to report.

That studio space in the former Spris restaurant location, briefly Braza, is not only going to open, Bosworth said, but it’s more than halfway there.  Without making any announcements, the company has spent $4.5 million toward the $7.5 million total cost of the studio, starting in 2012.

The firm is now seeking approval from the city of Hartford for exterior signs and large “video boards” that need a special permit, Bosworth said, and Hartford’s development director, Thomas Deller, confirmed.

A decision will take at least two months, Deller said.

CEO James Bosworth Jr. Nick Caito photo courtesy of Back9Network

CEO James Bosworth Jr.
Nick Caito photo courtesy of Back9Network

With no city permits in hand, there’s no timetable for an opening of the 6,500-square-foot space. An artist rendering shows a sign on the outside, “Clint Eastwood Studio,” which might make sense since the iconic Hollywood star is a shareholder and adviser to Back9.  But the name on the rendering is just a visual device, Bosworth said.

What’s real, he said, is the company’s progress even without a cable deal.  Back9 is up to 43 employees at its offices and smaller studio space on the 10th floor of the Phoenix “Boat Building” across Constitution Plaza, and on the road making content about the culture and lifestyle of golf. Its web page, www.back9network.com, is up to 600,000 unique visitors a month, he said, with videos, stories, photo galleries and other features added every day.

Early next week Back9 will announce a new deal with FOXSports.com and Yardbarker, a Fox-owned blog site, in which Back9 stories and other content will appear on the Fox web sites, editors will collaborate and the companies will share advertising revenue.

Back9 would like to appeal to women, especially younger ones, not just the middle-aged men who make up the bulk of golfers. To that end, Back9 this week added reality TV star Audrina Patridge to its talent roster.

Audrina Patridge Courtesy of Back9Network

Audrina Patridge
Courtesy of Back9Network

Those two developments could give Back9 significant added exposure — and would be part of the company’s “what if” strategy of growing as an online-only platform, called “over the top” in the media industry.

The goal, of course, remains for Back9 to be a cable TV channel. And the planned buyout of Time Warner Cable by Comcast complicates matters.  The reason: Among all of the national cable TV and satellite companies in talks with Back9, Time Warner is the one that seems most excited about the channel, Bosworth said Thursday.

That does not mean a deal is near — Bosworth was adamant on that point.

“You’re never quite sure because they’re negotiations,” he said. “But outwardly, in terms of response and engagement, we’ve probably had the most momentum with Time Warner Cable.”

Comcast, by contrast, which owns the Golf Channel, told Bosworth and his team outright that it would not launch Back9.

Back9 has also had talks with DirecTV and Stamford-based Charter, among others. As Back9 builds an audience, the TV industry is starting to see the value of a network devoted to the stories and expensive lifestyles tied to golf, Bosworth said. There may only be 27 million golfers in the United States, but, he quipped, “Nobody buys a second home next to Giants Stadium.”

Bosworth rushed into the office in Thursday’s snowstorm to deal with the Comcast-Time Warner situation. He resisted the urge to call Jennifer Chun, the Time Warner Cable program acquisition chief, figuring she’d be plenty busy; they’re meeting next week anyway.

The merger announcement would seem to be more bad than good for Back9. But Bosworth sees an upside as regulators and critics eye the deal’s anticompetitive aspects.

Comcast “could be encouraged to carry alternatives to programming that they already own,” he said. “That’s a realistic scenario…And I think we could be one of the examples that they point to.”

Back9, meanwhile, remains in full compliance with the terms of its $5 million loan from the state Department of Economic and Community Development — and has raised six times that amount from private investors, 60 percent of them in Connecticut, Bosworth said.

That state assistance came under some criticism when Back9 posted a lewd video in late 2013. Show host Jennifer Bosworth, Bosworth’s wife and a former reporter at Fox CT, the Courant’s partner, did a spoof of a sex question-and-answer show, in which she offered raunchy answers, not repeatable on a family blog post, or a business blog post.

Jenn Bosworth Courtesy of Back9Network

Jenn Bosworth
Courtesy of Back9Network

James Bosworth called it a “skit that didn’t go right,” and said Back9 took it down quickly. “We apologized because we didn’t like it,” he said.

I can’t excuse it readily. As Eastwood said as “Dirty Harry” Callahan in Magnum Force, “A man’s gotta know his limitations.”  And so does a media outlet.

That segment was an extreme example of the wild, Hollywood style that Back9 is planting on the front yard of the buttoned-down Insurance City.  Bosworth is keenly aware of the cultural divide and insists his people work harder than anyone.

If they can deliver some zook to Hartford, great. The cable merger announcement comes at crucial time for the fledgling network and Back9’s optimistic company culture seems helpful. “I’m obviously very concerned,” Bosworth said, “But maybe it’s good for us.”

Auto Dealers Upbeat But Face Pressure As President’s Day Nears

by Categorized: Economy, Retail Date:

The region’s auto sales industry heads into the crucial President’s Day push with hopes of approaching an all-time sales record in 2014, but with pressures that are squeezing profits.

That was the assessment Monday by three industry executives in Connecticut and Massachusetts, who spoke with media outlets about the recession that wracked the auto industry and the recovery since.

Connecticut lost 17 percent of its dealerships, 16 percent of dealership employees and 34 percent of sales in just two years from 2007 to 2009, according to BlumShapiro, the West Hartford-based professional services firm that released a report Monday. That sales plummet was about the same as the nation’s 35 percent drop.

Courtesy of BlumShapiro

Courtesy of BlumShapiro

Nationwide new car and light truck sales reached a peak of 16.9 million in 2005 and fell to 16.1 million in 2007 before collapsing to 10.4 million in 2009, the report said. This year, sales are expected to top 16 million again for the first time in seven years.

Connecticut is also nearly fully recovered in sales, but hiring is not all the way back, said Chip Gengras of East Hartford-based Gengras Motor Cars, a multi-brand seller. “I’m excited about 2014, there are certainly a lot of challenges,” he said. “The low interest rate has been very helpful to us.”

Gengras has about $35 million in inventory at any given time and must pay interest charges on that, he said — so the rate not only affects sales, but costs as well.

And as for employees, each person in sales must move 15 percent to 20 percent more cars now than before the recession, to make the same money. That’s because profits on each car are tighter as a result of Internet databases, but online information also means buyers come in closer to a decision.

The comments echoed those made in November at the Connecticut International Auto Show by executives in the Connecticut Automotive Retailers Association.

Gengras and Warren Waugh, head of a family dealership group in Massachusetts, bemoaned automakers requiring them to upgrade showrooms at huge cost, sometimes even after recent renovations. A BMW showroom rebuilt in 2010 must now be done over again, Waugh said, “and it breaks my heart … it’s just never-ending.”

Also never-ending is the search for service technicians, who can make $45,000 to start and up to $60,000 after just three years. Right now, Gengras said, “We could use a half-dozen to 10 technicians.”

With the slump in new car sales a few years ago, used cars are harder to find, making them more expensive — a good trend for new car sales, said Rick Parmelee, a BlumShapiro partner who works with auto dealers. “The new car is incrementally not that much more expensive,” he said.

  2009  10.4 million
2010  11.6 million (11.1% increase)

  2011  12.7 million (10.2% increase)

  2012  14.4 million (13.4% increase)

  2013  15.3 million (7.6% increase)

  2014  16.5 million (projected)

  2015  17 million+ (projected)

Investors Tell Morgan Stanley They’re Optimistic; More Fear In New York

by Categorized: Corporate finance, Wall Street, Wealth Date:

Investors across the nation with at least $100,000 in the markets told Morgan Stanley in a recent poll that they’re optimistic 2014 will bring gains, but those in the New York area, including Fairfield County, expressed more fear and caution.

Among about 3,000 respondents to the poll, by Morgan Stanley Wealth Management, “86 percent expect their investment portfolios to be ‘better’ or ‘the same’ at year-end, and 84 percent believe their financial well-being will be the same or better,” the company said.

The poll was taken during the fourth quarter of 2013, a bellwether year for stocks, before the declines of 2014.

Investors in the tri-state area were more concerned than those nationally about their families’ financial security, their ability to retire, having enough money for emergencies and market  volatility.  That makes sense, said Joseph Matthews, branch manager and first vice president at the Fairfield office of Morgan Stanley.

There is some familiarity bias associated with living in the tri-state area,” he said. “The people polled are more familiar with Wall Street.”

So, regardless of whether they actually anticipated the downturn that could become a full-on correction at the start of 2014, it’s less of a surprise to them, presumably.

As for types of stocks that might look good in 2014, technology firms led the way in the nation, at 79 percent, and in the tri-state area, at 72 percent, followed by energy, biotech and pharmaceuticals in slightly varying orders for the nation and the region. But other than pharmaceuticals, the sectors most prominent in the New York region, and especially in Connecticut, didn’t fare as well: finance, aerospace and insurance.

“The majority of investors nationwide said they were not knowledgeable alternative investments such as hedge funds, commodities and real estate although Tri-State region investors were more knowledgeable than other areas,” Morgan Stanley said in a written release.

The poll had a margin of error of plus or minus 3.9 percentage points in the nation and 6.7 percentage points in the region.

 

 

 

 

Connecticut-Based Challenge To International Machinists Union Gains Momentum

by Categorized: Labor Date:

A Machinists union battle that many members of that very union don’t even know about is heating up and could be poised to make history.

Jay Cronk, a Metro North Mechanic in New Haven and former national organizer at the International Association of Machinists and Aerospace Workers, is challenging Thomas Buffenbarger, the union’s international president.

Jay Cronk Rick Hartford/The Hartford Courant

Jay Cronk
Rick Hartford/The Hartford Courant

In order to force a national election — which hasn’t happened since 1961, and even then not for president — Cronk needs to win the endorsement of 25 out of more than 1,000 local lodges. He already has 14 in hand, a U.S. Department of Labor official told Cronk’s camp.  Another 83 lodges, including four in Connecticut, will hold endorsement balloting on Saturday.

Cronk’s slate of seven candidates had to gain in-person nominations at locals on Jan. 25, to set off this coming Saturday’s endorsement votes. Among its 97 nominations, the slate was unopposed in 14 — meaning not one person in those locals nominated the national slate headed by Buffenbarger.

The election was the result of a settlement between the Machinists and the U.S. Department of Labor, which accused the union of illegal and improper practices in a 2013 election, in which a challenge candidate did not win the needed 25 endorsements.

Cronk, was fired in November from his national job in the Maryland “Grand Lodge” as a staff representative after he announced his challenge, and in December returned to his Metro North job of 22 years earlier.

The challenge slate has received an endorsement from the executive board of the largest local, with 18,000 members at Boeing in Washington state, where many members were upset about Buffenbarger’s position in a recent contract vote.  Despite that, it’s a major effort for the challenge slate just getting word out to union members that there even is an endorsement election this weekend.

I could find no mention of the vote on any union websites in the state, and a union member in Connecticut told me that his local put out no notice of the nominations.

“We have very little confidence that the IAM will allow a free, fair and legal vote on Saturday,” Cronk said in a written statement in which he accused the union leadership of coercion, illegal campaigning and other violations, “so appalling that we hear it’s backfiring against the incumbents.”

Rick Sloan, a spokesman for the incumbent slate including Buffenbarger, said Cronk lied to me in a January interview — though he declined to say how. He said the accusations were the comments of  “sore losers before the fact,” and said, “The fact is the Cronkettes are expecting to lose…because they have had virtually no support throughout the International Association of Machinists.”

Tracking The Postage Stamp And The Minimum Wage

by Categorized: Economy, Labor Date:

wagestampsNEW

 source: Bureau of Labor Statistics, U.S. Postal Service

Look at the price of postage stamps compared with the federal minimum wage since 1950.  An all-too-familiar pattern emerges.

For more than 20 years, until 1971, the two measures rose in near-lock-step. The minimum wage was 25 cents an hour for every penny the U.S. Postal Service charged to mail a letter.

Then rates started to pull apart — in that fateful time of inflation, the Arab oil embargo, Nixon’s wage and price controls, women entering the workforce in great numbers, the birth of the computer age and the Japanese threat to U.S. manufacturing.

By 1974, a stamp cost a dime and the minimum wage had fallen behind. Instead of $2.50, it was $2. And we’ve never looked back.

Stamps rose mostly in step with the Consumer Price Index until last month, when the 3-cent increase exceeded the inflation curve. And remember, postage prices are controlled by a (quasi) public agency.  As for the minimum wage, we all know it has lagged since the early ’70s.

That latest stamp hike is supposedly for just two years but of course it will never go back. If the minimum wage had kept up with postage prices, it would now be $12.25.

By no coincidence, the early ’70s was precisely when American workers stopped sharing in all they produced. Put another way, the income and total output are in place but workers aren’t seeing it.

Sure, some states, like Connecticut and Oregon, have pushed ahead of Congress by setting a minimum wage in the $9 range. Connecticut started to pull ahead of the nation for good in 1999. But no state has come close to keeping up.

Now President Obama wants to push the federal minimum to $10.10 an hour, and Connecticut Gov. Dannel P. Malloy wants the state to match that amount even if Congress doesn’t act — which would help many workers and hurt others.

Connecticut would be a lot better off if Congress raised the national wage. What should Congress do?  Even a wage of $12.25 an hour is barely enough to get by, and while it’s politically impossible to adopt, we’re basically paying it anyway with food stamps, rent subsidies and the earned income tax credit.

But it seems clear that Congress needs to give a raise at least for workers in a job for, say, 500 hours, and perhaps for everyone. Pass it and put a stamp on it.