Southern piano rocker Marcia Ball has done what many entertainers do: Risked her popularity by taking a political position. After asking her fans to support the President’s reelection because of her support of the Affordable Care Act (“Obamacare”)’s coverage of children, she continues talking about politics..
“Call me kooky, but I’m kind of enjoying the dialogue that sprang up over my last political posting, so here’s something else to mull over: My question of the day: how is the President supposed to create jobs? Isn’t that what businesses do?
Well, maybe they just can’t afford to hire anyone else. There’s a recession, after all. Most people can’t even imagine how the very rich live because 95% of us will never get close to the places where the 1% hang out and the 4% who aren’t them but get in are serving them.”
Let’s take a look at what Marcia is asking.
First, “How is the President supposed to create jobs? Isn’t that what businesses do?”
There are two kinds of employers, Marcia. One is the private sector, what you refer to as “businesses.” The other is the public sector, or government workers on the national, state and local level. As of last June, public sector jobs during the Obama Administration have decreased by about 600,000. By the way, if you put those lost jobs back into the job numbers, the unemployment rate would be about 7.8%, not 8.3%.
The private sector, on the other hand, has created 780,000 net new jobs during the same period.
So, the answer is that the President has cut jobs, and businesses have created them.
Second, Marcia ponders whether businesses can’t afford to hire anyone else. There’s a recession, after all.
Well, there certainly was a recession. It lasted from December, 2007 through June, 2009. It may feel like there is still a recession because the average growth in gross domestic product (“GDP”) since that time has been 2.35%. Let’s take a look at that level of growth and see if we can explain why it has been slower than after most recessions.
2009
- First Quarter GDP was -6.7
- Second Quarter GDP was -0.7% – End of 2008/2009 Financial Crisis
- Third Quarter GDP was +1.7%
- Fourth Quarter GDP was +3.8%
2010
- First Quarter GDP was +3.9%
- Second Quarter GDP was +3.8% – Beginning of European Debt Crisis
- Third Quarter GDP was +2.5%
- Fourth Quarter GDP was +2.3%
2011
- First Quarter GDP was +0.4% – Egyptian President steps down, Libyan conflict begins, President Obama ratchets up sanctions on Libya, Oil prices pass $90/barrel, Japanese earthquake/tsunami
- Second Quarter GDP was +1.3% – Government shutdown narrowly diverted in Debt Limit debate, US Debt Rating lowered
- Third Quarter GDP was +1.8% – Oil prices below $90/barrel, Debt Limit debate resolved
- Fourth Quarter GDP was +3.0% – Oil prices again pass $90/barrel
2012
- First Quarter GDP was +2.0%
- Second Quarter GDP was 1.7%
Assuming that the European Debt Crisis shaves 1% from GDP growth, and oil prices account for -.2%, the effect of these two crises on 2012 growth total 1.2%. Adjusting for these issues, 2012 growth would have been just over 3%, which would keep job growth about even with population growth.
This is sub-par for after a recession, but definitely a better picture than the one we see.
Finally, Marcia says, “Maybe they just can’t afford to hire anyone else. Most people can’t even imagine how the very rich live because 95% of us will never get close to the places where the 1% hang out and the 4% who aren’t them but get in are serving them,”
Job creation is a function of demand, not wealth. Cash positions in businesses are at record highs, but hiring is slow because business is not convinced that the economy is growing fast enough to warrant the expense of expanding their staff. How could the President change this perception?
One way would be to create a more “business friendly” environment by resisting the urge to solve every problem with new rules. While the administration boasts that it has passed fewer regulations than Bush, this is a misleading statement. For instance, one of the regulations was the massive Dodd-Frank bill. While no one argues the need for financial reform, this enormous bill has some unintended consequences that should be considered. For example, small banks are unlikely to survive, as their regulatory compliance staff is inadequate to implement such complex reform. Do we really want to eliminate community banks? And, with limitations on fees that can be charged for certain services, banks are raising fees and minimum balances for other services. Do we really want to drive the poor from access to banks to usurious charges made by check cashing services?
Overall, the President has done an above average job with the U.S. economy. To improve that performance, he’ll have to create a more business friendly environment. That may go a long way toward improving private sector employment.
I'm in the process of divorce. He is finally moving out next weekend. I'm sorry for what happened to you.
Hi there,
Like JKL just noticed this post. Yes, I have a book on the subject. Sharing Housing, A Guidebook for Finding and Keeping Good Housemates Found 
Great thoughts as usual Kitty. (Sidebar: Im always amazed when celebrities think their stage gives them political insight or intelligence. Of course they are free to have opinions, but golly–some just aren’t very bright.)
Read an interesting article about Wall Street turning their back on Obama this election (when they actually tended to vote for him alast time, inspired by the change message.) Apparently they don’t trust he’s the right guy to turn the economy to one of rebound. They think he helped stop the hemorraging, but just aren’t keen that he’s the right guy at this time for what needs to come next.
http://www.theatlantic.com/business/archive/2012/09/this-guy-hates-us-why-wall-street-turned-against-obama/261936/change
Thanks for your insightful comments, Dallas Lady.
yes kitty, jobs are created by businesses which are often owned/founded by the wealthy. this president seems to have an issue with the wealthy, though, [al though he is fairly wealthy himself],which indirectly hurts the job market. but i must say,he enjoys receiving LOTS of campaign money from hollywood entertainers.wonder how many jobs THEY help create?!
Just curious Kitty…are the 780k jobs created by the private sector comparable to the 600k jobs lost in the governmental sector? By comparable, I mean in terms of salaries, benefits, possibility for advancement. I’d be really curious to know the stats on this. I see a lot of unwillingness in the corporate sector to share the wealth from the top down among the rank and file. This happens by asking existing workers to do more without higher reward…and it seems to work because people are fearful of losing the job they have. It also happens by creating “jobs” that have low salaries, that are temporary and thus have no future with the company…and this seems to work because when someone gets tired of there being no commitment and moves on, there’s always another worker in the wings that needs a job and will take the low salary and temporary status. I see a lot of greed in the private sector with CEO’s and top level management taking the lions share…taking advantage of the economic situation and fear among rank and file. I also see a lot of outsourcing of jobs because of the greed at top of many companies. This leaves workers in this country in even more precarious position and that contributes a good deal the economic woes.
Maybe there would be a more friendly feeling toward business in this country if the businesses acted more friendly to workers. But they don’t really, because they are pretty much about the bottom line. They are in business mode and yet they want to be friends. How’s that supposed to work.
Hi Manina, and thank you for your excellent question. My research tends to agree with that provided by Dallas Lady via Cato. Public sector workers tend to have higher benefit packages than private sector workers. That has not always been the case. In the 1960s, 1970s and part of the 1980s, public sector compensation was less than that of the private sector. To attract competent workers, public sector employers improved benefit packages, such as health care and retirement. Now, of course, you’ve probably read about the generous retirement plans that we must pay through taxes. That was a major reason for the recent bankruptcies in a few metropolitan areas, and the basis for which public workers in Wisconsin were striking. I hope that answers your question, and thanks again for your invaluable participation.
Cato Institute numbers that put the average federal employee’s salary at $79,197, compared to $50,028 in the private sector. (I think these stats are a few years old.)
So would you rather be one of the 800,000 former government workers who used to make $79,197 and now make $0? Or one of the 600,000 former unemployed private sector workers who used to make $0 but now make $50,000?
Is the governemnt worker overpaid? Is the private sector underpaid? Are they both overpaid? Both underpaid? There are no rights or wrongs, only opinions. I often hear the words “fair and equitable” bantered about when pay is disussed. I’m a former compensation consultant. (Kind of cool to get paid in order to opine about pay, huh?) We used to joke that “fair is where you buy a corny dog and equity is what you have in your house”.
In the private sector, compensation is almost always driven by supply and demand. A business owner is forced to pay enough to recruit and retain the staff needed to meet the demands of the business. Otherwise, they can’t get/keep employees and their business will fail. Can they/should they pay evven more than that? Maybe– if that gets them the very best and the very brightest and the very hardest working employees, and that in turns makes their businesses better, more profitable.
If an employee doesnt like the fact that business owners have the power, then they can guit and do what it takes to become a business owner themselves. The business owner takes the risks, has the full acccountability, and took the risk for failure. And most of them do indeed fail. Many of them multiple times. Owning your own business is a very risky endeavor. The returns can be there if successful, but most simply arent.
In big huge conglomerate buisnesses are there abuses of exec comp? You bet. The good ole boy network, outrageous severance agreements, and sitting on each others’ boards (and comp committees) and scratching each others’ backs certainly exists.
But keep in mind that more Americans work for small businesses–under a couple of hundred employees–than these big conglomerates.
A good primer about small business economics in the USA:
http://web.sba.gov/faqs/faqIndexAll.cfm?areaid=24
Thanks so much, Dallas Lady. This is an excellent source.
Dear Dallas,
You ask, “So would you rather be one of the 800,000 former government workers who used to make $79,197 and now make $0? Or one of the 600,000 former unemployed private sector workers who used to make $0 but now make $50,000? “
No, but I wouldn’t like to be one of the ones who made 80k and now make 50k which is probably about what is happening. But I do appreciate you proving the point that the salaries in the private sector are often less than those in the public.
You also say, “Is the governemnt worker overpaid? Is the private sector underpaid? Are they both overpaid? Both underpaid? There are no rights or wrongs, only opinions. “
In my opinion it is wrong for corporations to have management teams and boards who’s decisions funnel the lions share of compensation to management and expect more for themselves while others take less and less for more and more work. And I am not swayed by quips like “We used to joke that “fair is where you buy a corny dog and equity is what you have in your house”.
Consider this, you can call it opinion, but we all know in our guts what fairness is.
You write: ”In the private sector, compensation is almost always driven by supply and demand. A business owner is forced to pay enough to recruit and retain the staff needed to meet the demands of the business. Otherwise, they can’t get/keep employees and their business will fail.”
The first part of what you write does appear to be true, and proves the point I am making about the glut of workers (the supply) and dearth of jobs (demand) creating an atmosphere in which corporations can and do abuse the power they have when the supply is high and demand low. The last 2 lines of what you wrote, even by you own logic, are not true in this kind of economic climate which is what we are seeing right now particularly with many corporations outsourcing their jobs. Check out for:
http://www.snagfilms.com/films/title/the_red_tail
You bring up small businesses, which I am very supportive of and have run myself, but I am not referring to those in the points I am making. I am referring to the 47.7 million workers who work for the larger (greater than 500 employee) corporations. People working for these companies often have college or graduate degrees or other special training to do their jobs…skills and knowledge they have invested their time and money in obtaining. That’s their capital and in this sense, these people are their own small business and have risked there being a good paying job available once their training is complete. That is a point I never see discussed when the idea of risk is brought up.
I’d like to raise another issue with regards to your statement:
“If an employee doesnt like the fact that business owners have the power, then they can guit and do what it takes to become a business owner themselves. The business owner takes the risks, has the full acccountability, and took the risk for failure. And most of them do indeed fail. Many of them multiple times. Owning your own business is a very risky endeavor. The returns can be there if successful, but most simply arent.”
The point is that is that not everyone is cut out to be a business owner, which is probably why so many endeavors such as this fail. Some people are best suited to working in a lab or studio where they can be creative and develop the products/techniques or processes that make a company successful. Not everyone can be the CEO nor should they try when their natural skills are elsewhere. But just because they aren’t at the helm doesn’t mean they shouldn’t be fairly compensated and I don’t mean with corn dogs
Even by your own statements, I think it’s clear you agree that things have gotten really out of hand with the big corporations.
I just want to say thank you for sharing the link to the gov site about small businesses. It is really good for us all to keep in mind that small businesses provide so much to our country and we need to support them. And we do in terms of tax dollars used to help in the establishment and development of small businesses. We should continue to do so and we’ll have more there to support these smaller businesses if the larger corporations are reined in.
Sincerely,
Manina
Hi Manina, and thank you so much for your thoughtful participation. As to your question, “are the 780k jobs created by the private sector comparable to the 600k jobs lost in the governmental sector? By comparable, I mean in terms of salaries, benefits, possibility for advancement,” these job numbers are “net,” not gross. As such, we are comparing millions of jobs and data as to salary, benefits, etc., would be very difficult to ascertain accurately, much less to compare. What I can say is that a significant number of jobs in the public sector are teachers, firefighters, police officers, and other public safety officials.
As to your comment, “I see a lot of unwillingness in the corporate sector to share the wealth from the top down among the rank and file. This happens by asking existing workers to do more without higher reward…”, I’d like to address this with an observation with respect to economic cycles. Employment is often the last economic indicator to turn positive, not so much because of unwillingness to share wealth, but because employers historically wait until there is a degree of certainty that an expansion is underway (demand) before committing to adding full time employment. Generally, the trend is
Firing, layoff, attrition when the economy is slowing
Adding hours to existing workers when demand increases
Adding temporary staff, then
Adding full time staff.
It has been ever thus. Unfortunately, for two years the economy started the year very strongly, then faltered. Employers do not seem to be convinced that a recovery in under way. That is likely the reason that many large corporations are “sitting on a pile of cash” as opposed to hiring workers. It will likely continue until demand trends up in a convincing manner.
I hope this addresses the points you made, and thank you again for your participation in this discussion.
We have several points of agreement; and couple of difference no doubt. Largely the sense of “fair” which I see as very much an issue of gray. No I dont believe we all know what is fair in our gut. We all know in our gut what is fair to us. And psychologial studies show time and time again that people believe what is fair is what benefits them the most.
People are fallible and human and enormously self centered. We should love eachh other anyway.
I’m a capitalist at heart who loves business big and small. (In my house we have both: I’m an exec in a large regional business, my husband a small business owner.) The one thing we both agree to is government is big, bloated, overpaid and often doesnt add value. So he and I woujld both say the government workers are too many and overpaid. But the background that explains THAT is another post and decidedly off topic.
We agreer that there are excesses in corporate boardrooms. I would submit however that the most impacted in that is actually the shareholders. If abuses occur it reduces profits which should go to the owners. Thats a simplistic statement no doubt, to a very complex multi factorial issue. Yet again–the nature of supply and demand drives salaries. And the company has to keep up with the market to get/keep employees. (This is silent on the issue of reinvestment of profits for growth, for R&D, to create new services, potentially new jobs….which adds a layer of complexity to the whole fairness questin too when you think about it.)
Is it “fair” employees get some of the profits they helped generate? Of course it is to many staff and owners alike (hence profit sharing plans), but that should be at the discretion of the owner regardless of organizaitonal size–mom and pop or huge conglomerate who has shareholders). The owner (shareholders) bore the responsiility and took the risk that started the company–the profits belong to him/her–and he/she bears the risk of what happens if he doesnt use them wisely.
Like not treating your employees well.
After 30+ years inbusiness I do know this: The very best employees always have options. And as long as I can keep the doors open, I need to keep my best employees that add value to the organization.
I really enjoyed this discussion. I agree most strongly with Dallas Lady but would add or emphasize one point. Business, large or small, does not like uncertainty. A certain amount of that is inevitable but in today’s economy and political climate many find it difficult to budget or forecast revenues or expenses. When that happens the tendency is to be extremely cautious. Capital Expenditure slows down (part of demand) expansion and hiring stops. More available workers (another portion of that demand) keeps salaries dampened (though, the cream always rises to the top). It is vicious circle that will require some type of catalyst to break.
When times are hard in any society there is a propensity to find a scapegoat. In France, Germany, and Russia it was those that were perceived to be most privileged or dare I say successful. History will show you the brutal result of that kind of thinking. I don’t want to appear to be an alarmist but some of the things I see today look very like (think the Occupy movement) the beginnings of that. I am a Capitalist. I am not in favor of Socialism where the few support the many. I am very anxious to see our businesses thrive, spend and hire.
Let us all hope that after this election (regardless of your politics) we can all see the light at the end of the tunnel.
Hi Hawk Lady, and thank you for you comment. You couldn’t be more accurate in your observation about business’ dislike of uncertainty, and the propensity of finding a scapegoat during hard times. After all, it’s a lot easier to blame someone else than to come up with a solution.
I, too am a Capitalist, and was attracted to its promotion of greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication of democracy. Where some have pointed out its shortcomings during the recent financial crisis, I define capitalism as a commitment to economic growth AND I define economic growth as a commitment to a rising standard of living for the clear majority of citizens, Perhaps I am a bleeding heart capitalist.
Again, thank you so much for your comment, and I look forward to hearing from you again soon.
Thanks…..