Archive for 2010

The board is responsible for “the promulgation of
rules and standards” for, among other things, food
protection, water supply, liquid waste, air quality
management, radiation control, occupational health
and safety, hazardous waste and solid waste.

No small feat for a board

that typically meets once a month.

Earlier this month, the board meet in Las Cruces to
consider two proposals regulating large-scale
greenhouse gas emitters in New Mexico. Like all
cap-and-trade bills, both would allow those that fall
short of meeting the proposed requirement to
purchase allowances from those that exceed the
standard.

A final decision is expected in November or
December. Which is convenient, because, while Gov.
Bill Richardson is a strong supporter of state
emissions standards, the candidates running to
replace him – Democrat Diane Denish and
Republican Susana Martinez – are both vehemently
opposed.

Meanwhile, the State Environment Department is
proposing sweeping new regulation for about 700
miles of rivers and streams, 29 lakes and more than
4,900 acres of wetlands in a dozen wilderness
areas. An amendment would add another 800 miles
of waterways.

It is something Richardson has been pushing for
since 2008. Last week the Supreme Court gave its
approval for hearings to begin.

I’m not questioning the merits of either proposal.
I’m all for clean air and water. But I do question

whether such important changes should be made byappointed boards in the final months of a lame-duck administration.

Walter Rubel has been a newsman for more than 25
years and is managing editor of the Sun-News. He
can be reached at wrubel@lcsun-news.com.

This Is Why There Are No

Jobs in America

By Porter Stansberry

Saturday, August 21, 2010

I’d like to make you a business offer.

Seriously. This is a real offer. In fact, you really can’t

turn me down, as you’ll come to understand in a moment…

Here’s the deal. You’re going to start a business or expand

the one you’ve got now. It doesn’t really matter what you

do or what you’re going to do. I’ll partner with you no matter

what business you’re in – as long as it’s legal.

But I can’t give you any capital – you have to come up

with that on your own. I won’t give you any labor –

that’s definitely up to you. What I will do, however, is

demand you follow all sorts of rules about what

products and services you can offer, how much (and

how often) you pay your employees, and where and

when you’re allowed to operate your business. That’s

my role in the affair: to tell you what to do.

Now in return for my rules, I’m going to take roughly half

of whatever you make in the business each year. Half

seems fair, doesn’t it? I think so. Of course, that’s

half of your profits.

You’re also going to have to pay me about 12% of

whatever you decide to pay your employees because

you’ve got to cover my expenses for promulgating all of

the rules about who you can employ, when, where, and

how. Come on, you’re my partner. It’s only “fair.”

Now… after you’ve put your hard-earned savings at

risk to start this business, and after you’ve worked hard

at it for a few decades (paying me my 50% or a bit

more along the way each year), you might decide

you’d like to cash out – to finally live the good life.

Whether or not this is “fair” – some people never can

afford to retire – is a different argument. As your

partner, I’m happy for you to sell whenever you’d like…

because our agreement says, if you sell, you have to

pay me an additional 20% of whatever the capitalized

value of the business is at that time.

I know… I know… you put up all the original capital.

You took all the risks. You put in all of the labor. That’s

all true. But I’ve done my part, too. I’ve collected 50%

of the profits each year. And I’ve always come up with

more rules for you to follow each year. Therefore, I

deserve another, final 20% slice of the business.

Oh… and one more thing…

Even after you’ve sold the business and paid all of my

fees… I’d recommend buying lots of life insurance. You

see, even after you’ve been retired for years, when you

die, you’ll have to pay me 50% of whatever your estate

is worth.

After all, I’ve got lots of partners and not all of them are

as successful as you and your family. We don’t think

it’s “fair” for your kids to have such a big advantage.

But if you buy enough life insurance, you can finance

this expense for your children.

All in all, if you’re a very successful entrepreneur… if

you’re one of the rare, lucky, and hard-working people

who can create a new company, employ lots of people,

and satisfy the public… you’ll end up paying me more

than 75% of your income over your life. Thanks so much.

I’m sure you’ll think my offer is reasonable and happily

partner with me… but it doesn’t really matter how you

feel about it because if you ever try to stiff me – or

cheat me on any of my fees or rules – I’ll break down

your door in the middle of the night, threaten you and

your family with heavy, automatic weapons, and throw

you in jail.

Economic stimulus, education, tourism, business advocacy – these issues are priorities for our community and priorities for the Chamber of Commerce. We have committees devoted to each of these topics and we are inviting local businesspeople to become engaged in these issues by joining a Chamber committee and making a difference in our community.

We cannot have a prosperous community filled with opportunities without a strong business climate. The Economic Stimulus Committee will build on the Chamber’s business development program in order to help businesses of all sizes find the resources they need to grow.

The Education Committee is focused on the CHOICES program which puts young businesspeople into SFPS classrooms to speak about making good decisions and the consequences of those decisions.

Tourism is our primary business sector and the Tourism Committee allows businesspeople from the industry together regularly to support ways to keep tourism strong and visitors to enjoy a positive experience in Santa Fe.

The Government Affairs Committee is the heart of the Chamber’s mission to be The Voice of Business in Santa Fe. The Committee works to create legislative priorities and be an effective advocate for business in the community.

If you have any interest in joining a committee please contact Marilyn Blessie at marilyn@santafechamber.com or 988-3279. Just come to meeting and see how you can help the community prosper while growing your business network.

Jun 2010

Minimum Wage Matters

Increasing the minimum wage may not help low-wage workers

Based on the Research of Ohad Kadan And Jeroen Swinkels

The impact of increases in the minimum wage has long caused controversy in political and management circles. Supporters of regular increases argue that those raises are necessary to keep working people from falling below the poverty line. Opponents contend that the increases actually prevent less qualified workers from entering the labor pool because employers can no longer afford to hire them.

Unfortunately, little data existed to support either side, until now. Recently, a Kellogg professor helped to build a model that gives an unexpected answer to the question in one particular type of situation: the service sector that employs minimum-wage workers who depend on incentive payments as part of their earnings, such as servers who receive tips and retail employees and sales staff who work on commission. In these cases, the model strongly suggests that everyone—employers, customers, employees who lose their jobs, and even those who stay—ends up in a worse situation when the minimum wage increases.

“We show the increase will reduce the level of service, hurting customers,” says Jeroen Swinkels, a professor of Management and Strategy at the Kellogg School of Management, who developed the model in collaboration with Ohad Kadan, an associate professor at Washington University, St. Louis. “You end up with a smaller number of workers, and even those workers who keep their jobs are less happy, because they’re forced to work harder for less attractive incentive pay. The surprise is that it’s a lose-lose-lose situation—even for people who keep their jobs.”

The surprise is that raising the minimum wage is a lose-lose-lose situation—even for people who keep their jobs.

Swinkels is quick to point out that the result is not an excuse to ignore the plight of the working poor, but that raising the minimum wage may not be the best way to affect change. Swinkels suggests that individual incomes can be lifted by helping workers find new, higher paying jobs, not by legislating higher pay. There are several ways to accomplish this, he says, from improving employer demand, to creating job-training programs, to improving labor market mobility. All help workers advance while insulating them from adverse market changes. As workers climb the ladder, Swinkels’ model shows their movements can also help the well-being of those who remain in their current jobs.

Unanswered Questions
Swinkels developed the model intending to answer a few longstanding questions: How does a firm choose to change incentives in response to a change in the minimum wage? Do the resultant incentives lead workers to work harder than before? What happens to employment? And are workers, even if they keep their job, better off? “The power of the model,” Swinkels says, “is in the way it tells how it’s going to come out in the wash.”

Swinkels and Kadan base their model on the so-called “moral hazard issue,” which itself stems from the “principal-agent problem.” This deals with situations in which the worker who undertakes specific actions—such as selling items in a department store or serving customers in a restaurant—has incentives that are different from those of the employer. In addition, what the worker does is not directly observable. “As an employer, I can’t see whether you work hard as a salesperson,” Swinkels explains. “I can see the sales you make, but I can’t directly observe whether you are doing the right things at the right moments. So the problem is one of how to provide incentives in this world.”

The new model emerged as part of a project to understand incentive pay in the context of a lower limit on what an employer can pay. “We haven’t had a good model for thinking about this before,” Swinkels says. “The standard model doesn’t allow the latitude to answer the question of how many workers the employer should spread the work among.”

To expand on the standard model, the two theorists relied on a couple of technical advances and a different mathematical approach. They also included recognition of the risks that employees experience when they operate in an environment of high incentives, such as working very hard for a sale that can’t be made for various reasons unrelated to the employee’s effort and ability. “The model incorporates thinking through what these contacts look like in the case of the minimum wage, or limited liability, or legal constraints,” Swinkels notes. “Finally, the model incorporates the ability of the firm to decide not only how hard individuals are working, but also to adjust the number of employees.”

That factor recognizes that employers have some flexibility in the face of an increase in the minimum wage. While the increase inevitably causes employees’ total effort to fall, because the minimized cost of the effort rises with the minimum wage, employers can deal with that decrease in effort in more than one way. For example, they can fire some workers and require everyone who remains to work harder. Or, they can continue to employ all their workers but, in order to maintain minimum overall costs, reduce (costly) incentives for extra effort—in effect, asking the employees to put forth a little less effort. Whichever path they choose, the employers have one end in mind. “It does not matter whether the word processing pool of a firm is typing up the notes of auto body claims adjusters or medical researchers,” Swinkels and Kadan write. “The right thing to do is to minimize the cost per page typed accurately.”

A Series of Trade-offs
For many positions, such as rental car clerks or restaurant servers, firms face the issue of finding enough qualified employees for the total pay package of wages and incentive pay that they offer. Raising the minimum wage would make it a little easier for those firms to recruit the right people. But then, Swinkels and Kadan observe, the firms would reshuffle their incentive pay because they are no longer as worried about recruitment.

This is just one of the possible outcomes of the new model. Overall, Swinkels continues, “We show increases in the minimum wage will reduce the level of service, hurting customers. The surprise is that you end up with a smaller number of workers, and even those workers who keep their jobs are less happy, because they’re forced to work harder for lower incentives. Once the firm has adjusted the number of workers and the market in which it operates has balanced, you end up with harder working, more miserable workers.”

Swinkels emphasizes that the model’s results have implications beyond service area firms and their employees. “Many of these factors will apply to relationships between a firm and its suppliers, involving penalties for suppliers’ poor performance,” he explains. “It can also apply to boards of directors’ treatment of CEOs. And the same piece of mathematics says how a firm will adjust when its employees have more attractive outside options.”

So far, the model remains a theoretical pursuit. “It screams for empirical testing,” Swinkels says. “We hope that it will excite empirical activity by people better qualified at that than ourselves.” Nevertheless, he continues, the project carries a strong message. “The implication is that if you want to help the working poor, this is not the way. There are smarter ways of doing so than by raising wages in the service sector.”

Chamber Rap

The American Chamber of Commerce Executives (ACCE) today announced the publication of a new study detailing the credit scores and payment behavior of ten local chambers of commerce across the United States, comparing their member businesses with other regional, state and national business averages.  Produced by Cortera™, a community-driven business credit bureau, on behalf of ACCE, the study includes the Bowling Green (KY) Area Chamber of Commerce, Greater Boca Raton (FL) Chamber of Commerce, Greater Durham (NC) Chamber of Commerce, Greater Omaha (NE) Chamber of Commerce, Helena (MT) Area Chamber of Commerce, Lake Champlain (VT) Regional Chamber of Commerce, Lubbock (TX) Chamber of Commerce, Salem (OR) Area Chamber of Commerce, San Diego (CA) Regional Chamber of Commerce, and Tulsa (OK) Metro Chamber.  According to the study, chamber of commerce members possess an average credit score of 629, compared to a 557 average score for businesses at large.  Such scores – the payment behavior from which they are derived — play a significant role in attracting lines of credit and securing favorable terms from lenders and suppliers.

A complete copy of the study, which includes both the aggregate findings, as well as the individual commercial credit scores for each of the ten local chambers, is available on the ACCE and Cortera sites.  The study was contracted by ACCE and performed by Cortera, which reviewed payment behavior for chamber member businesses.

“Chamber members have long been seen as responsible and reliable members of their community,” said Mick Fleming, president and CEO of ACCE.  “What this study indicates is that the perception is right.  From a credit standpoint, chamber members on average are better businesses, and as a result they have significant advantages in obtaining the funds they need.  In this economy and the tight credit environment we are experiencing, that’s especially important.”

“The economic health of the entire supply chain is dependent on the payment behavior of each of its stakeholders,” said Jim Swift, president and CEO of Cortera. “This study suggests that chamber members are among the most dependable participants in this ecosystem.”

About the American Chamber of Commerce Executives

Established in 1914, ACCE is the only national association serving the professional development needs of chamber professionals throughout the United States and Canada. Representing more than 7,300 individuals, ACCE enhances the knowledge, leadership skills, and management effectiveness of chamber executives and their staff through education, benefits programs, trend analysis, benchmarking, and network development. ACCE promotes the highest standards of professional excellence and integrity within the chamber profession.

About Cortera

In a sea of business information providers, Cortera is different. With over 15 years of experience serving finance professionals, Cortera combines premium business information and innovative tools with a fresh community approach to commercial credit.  It represents the first community for small business credit reporting and a fundamentally new way to capture the collective insight of millions of financial transactions. As a result, small businesses can make smarter, informed decisions to ensure optimal cash flow while attracting more favorable payment terms from existing and potential business partners. Free credit reports on millions of businesses are available at http://start.cortera.com.

A new study reveals that membership in a local chamber of commerce can significantly boost a business’s image among consumers, as well as among other businesses.  In a scientific survey of 2000 U.S. adults, The Schapiro Group, an Atlanta-based strategic consulting firm, found positive perceptions of chamber members in a number of areas, including overall favorability, consumer awareness and reputation, and likelihood of future patronage.

“We discovered that informing someone about a company’s chamber membership opens the door to substantial increases positive perceptions of that business,” said Alex Trouteaud, Ph.D., senior strategist for The Schapiro Group. “There clearly is a feeling by our respondents that chamber membership is synonymous with quality and desirability.”

To tap into this reservoir of goodwill, a small business should not only join the local chamber of commerce and participate, but also make sure consumers and other businesses are aware of that chamber affiliation.

The positive impact of perceived chamber membership is felt by big businesses, too.  For example, when consumers believed that a restaurant chain was a member of the local chamber of commerce, they were 40 percent more likely to eat at the franchise in the future.  And if a consumer believed that one of the major automobile manufacturers was a member of its local chamber, that consumer was 9 percent more likely to consider purchasing his or her next car from that automaker.

“This study reinforces research done in 2005 about the perceived capacity of chambers to lead businesses and lead communities,” said Mick Fleming, president of the American Chamber of Commerce Executives (ACCE).  “These new national findings point to even more direct benefits for companies willing to be stakeholders in their local chamber.”

The study results had good news for chambers themselves, where 82 percent of respondents indicated that a local chamber of commerce “creates jobs and promotes economic development.”

“The message from this national study is as simple as it is ground-breaking,” said Jim Blasingame, small business expert and president of Small Business Network, Inc. “Join your local chamber, be an active participant in your chamber’s programs and be sure to let your customers and prospects know you’re a proud chamber supporter when they come in your business and when they see your marketing material.”

J. Mac Holladay, CEO of Market Street Services, an economic development consulting firm based in Atlanta that helped create the study, said, “It is refreshing to learn what we have suspected for years — that chamber membership and community involvement are good investments.”

Click here to view the Chamber Study