U.S. Jobs Continue To Flow Overseas
Forty Percent Of U.S. Workers Delay Retirement: Poll
By Sara Murray | 6 October 2010
Middle-class Americans made their deepest spending cuts in more than two decades, slashing spending on such discretionary items as restaurant meals and alcohol during the recession. Households in the middle fifth of the population sliced their average annual spending to $41,150 in 2009, the Labor Department said Tuesday in its annual spending breakdown. That was down 3.1% from 2007 and 3.5% from 2008, the steepest one-year drop since records began in 1984. The drop came even as those households' after-tax income remained relatively stable over the two years, at an average $45,199. [[Ah, but credit dried up!: normxxx]]
Making Do With Less: How the recession has changed Americans' spending patterns from 2007 to 2009Click Here, or on the image, to see a larger, undistorted image.
Audio: Middle class cuts spending
Meanwhile, the poorest Americans spent more as prices for necessities like food and rental housing climbed. Spending rose 5.6% from 2007 to 2009 for the poorest fifth of consumers, the most of any other income group, despite a 5.5% drop in after-tax income to an average $9,956 a household. In some cases, elderly people and others with low incomes dipped into savings or relied on credit to get by.
"What you're looking at here is people at the bottom trying to hang on," said Timothy Smeeding, public affairs professor and director of the Institute for Research on Poverty at the University of Wisconsin in Madison. "You just can't go below a certain level". Average annual expenditures for people in all income groups dropped 2.8% from 2008 to 2009, the first spending decline on record. [[And, I suggest, largely involuntary.: normxxx]]
The numbers don't account for inflation, which has been significant in some areas such as food and rent. One consistently rising cost for all income groups was health care, where spending rose 9.6% from 2007 to 2009 as the cost of care climbed. "I've become a lot more cautious," said Doug Pendery, who owns a small Cincinnati-based plastics manufacturer and considers himself somewhere in the middle to upper-middle class. He said he has seen health care and taxes eat up a larger share of his income. "You're really not saving more," Mr. Pendery said. "You'd like to [but] your expenses and everything else continue to go up."
How to Maximize Your Income on a Budget: "Fox and Friends" is joined by personal finance expert Dave Ramsey to discuss how people can budget to maximize their income.Click Here, or on the image, to see a larger, undistorted image.
Middle-class households reined in spending mainly on discretionary items. On average, from 2007 to 2009, they cut spending 20.1% on alcoholic beverages, 15.2% on clothing, and 9.5% on restaurants and other food away from home. They also spent less on some groceries, cutting back on items such as fresh milk and cream, and seafood.
Some of the change in spending could reflect a shift to 'cheaper alternatives', such as picking McDonald's over sushi. Still, the relative austerity reflects a broader retrenching among consumers spooked by high unemployment and a sharp drop in the value of their homes and investments. The lowest earners spent 15.4% more on food last year than in 2007, shelling out more for cereals, meat and processed vegetables. Since many in the lowest income group may already rely on discount shops and make few discretionary purchases, it can be difficult for them to scrimp.
Among the poor, rent expenditures increased 5.3%. Those who managed to stay in homes they owned saw their mortgage payments rise 27.8%, suggesting that policy makers' efforts to reduce mortgage-debt burdens aren't reaching the most needy. Across all income groups, mortgage payments were down 7.6%.
Judy Sheppers, 69 years old, said she was doing her best to get costs down. Laid off as a receptionist at the end of 2008, Ms. Sheppers relies mainly on monthly Social Security of $1,422, which will put her in the lowest income group when her weekly $133 unemployment benefits run out. Ms. Sheppers said her group of friends in Aiken, S.C., who used to meet for cocktails and dinner every couple weeks, has created a more cost-friendly routine now.
"We've started doing more at-home entertaining, pot-luck-type things," Ms. Sheppers said. "Everyone brings a dish and someone brings a bottle of wine. In a way, that's nice". Even the richest fifth of consumers responded to the recession by closing their wallets. Their spending fell 2.6% from 2007 to 2009. "While their incomes are stable, their assets have declined," said Luigi Pistaferri, an economist at Stanford University in Palo Alto, Calif. "They're 'waiting' to buy the boat or the expensive watches," and trying to rebuild wealth instead.
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U.S. Jobs Continue To Flow Overseas
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Reporting from Washington—
One in a series of occasional reports about the U.S. unemployment crisis.
Though some American firms are bringing overseas work back home, evidence is growing that companies are moving more jobs than ever to China and other countries— a trend that could exacerbate efforts to bring down the nation's stubbornly high unemployment rate. One sign of increased offshoring is the rising number of applications for federal Trade Adjustment Assistance, which usually goes to factory workers who lost their jobs because their work was sent overseas or was undercut by cheaper imports. For the six months that ended Sept. 30, workers at about 1,200 offices and plants nationwide were approved for federal Trade Adjustment Assistance. That's about 20% more approvals than in the same six-month period last year, according to the U.S. Labor Department.
In addition, the most recent Commerce Department data show that employment at the foreign subsidiaries and affiliates of U.S. multinational firms grew by 729,000 in two years, to 11.9 million in 2008 from 2006. Over that same period, domestic employment by such firms slipped by 500,000 jobs, to 21.1 million. "The paradigm has shifted," said John Challenger, chief executive of outplacement and consulting firm Challenger, Gray & Christmas. "Most companies see the next phase or era of growth as global. That'll still create jobs here, just not on the scale when they were focusing on growth in the U.S."
That trend could further stall the recovery, which many economists believe will continue to lack vigor while unemployment remains at current levels— 9.6% nationally and 12.4% in California. The government is expected to report Friday that the economy added few if any jobs in September. Among the companies that have recently sent jobs overseas are Hewlett-Packard Co. in Palo Alto, CKE Restaurants Inc. in Irvine and Hilton Worldwide, the McLean, Va., hotelier that maintained a reservations center in Hemet employing 295 people.
Hilton's filing and comments indicated it was moving its entire reservations center to the Philippines to save money. "Across all aspects of its business, Hilton Worldwide is committed to maximizing operating efficiencies while maintaining service levels," Hilton said in a brief statement. Also moving to the increasingly popular Philippines this year were JPMorgan Chase's telephone banking operations, from Troy, Mich., and CKE is moving its technology assistance desk there.
HP is laying off an undisclosed number of human resources employees in California and nine other states, transferring their functions to Panama. HP, CKE and Hilton would not provide details of the job moves, which were disclosed in recent government filings. The offshoring of American production and jobs has been going on for more than two decades, with service firms more recently pushing the trend.
Experts say more offshoring could help U.S. firms better compete in the global economy, thus boosting sales and profits that will sustain them and generate new business. 'Eventually', stronger, expanding firms could create more opportunities for American workers, though that's not a sure thing. More and more, for example, upscale engineering and development for products manufactured in China are being done in China— not the U.S.— near the centers of production.
"When companies succeed abroad, people at home succeed," said Mihir Desai, a finance professor at Harvard Business School. Challenger agrees with that logic, but he also said that some companies continue to engage in "pure labor arbitrage," moving overseas simply for cost savings. That kind of rationale may do little for building long-term value in the company or its products and services.
Many others, he said, don't see much choice but to do more overseas given the prospects of a hobbled American economy. But whatever happens long term, current high levels of offshoring will add to the nation's employment hardships for workers with college training as well as for lower-skilled workers. PwC, the big accounting firm formerly known as PricewaterhouseCoopers, last spring and summer laid off about 125 support staff members in client services, transferring the work to Uruguay. Those positions were considered mid-level.
Dennis Donovan, a veteran corporate-relocation consultant, said many legal and engineering firms already have outsourced routine work overseas, and he sees a bigger wave of offshoring by the burgeoning healthcare industry. At the same time, he sees fewer companies moving overseas strictly on the basis of cost. "Now it's R&D centers and also for market penetration," said Donovan, a principal at Wadley-Donovan-Gutshaw Consulting in New Jersey.
He said some American firms were beginning to move call centers and other back-office operations— or "in-sourcing"— back to the U.S. because costs in China, India and other top outsourcing countries had risen sharply and quality hasn't been consistent. One example is Allstate Insurance Co., which in June opened a $12 million call center in San Antonio, where the company expects to have 600 employees by year's end. Customer sales and service reps earn a base salary of $27,000.
In picking Texas, the Northbrook, Ill., firm passed up sites in India and the Philippines, said Thomas Wilson, Allstate's chairman. "I'm a believer in offshoring," Wilson said in an interview, noting that his overseas offices have helped Allstate operate around the clock and compete with rivals that also have gone abroad for services. But even though labor will cost more in San Antonio than in India, Wilson hopes for a bit of a public relations boost from the move.
In a customer survey, he said, "81% of the people said they would think better of the company even if it costs more." Even so, Wilson doesn't see his company's overall domestic employment changing much anytime soon. And although there are some examples of in-sourcing, their numbers don't add up to a lot compared with the jobs being lost. President Obama has complained that the U.S. tax system encourages companies to invest and hire abroad, but a bill that would have ended certain tax credits and deferrals to companies expanding or moving overseas was voted down in the Senate last week.
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Forty Percent Of U.S. Workers Delay Retirement: Poll
By Helen Kearney | 5 October 2010
NEW YORK (Reuters Life!)— Forty percent of U.S. workers are planning to delay their retirement due to concerns about outliving their savings and fears of rising healthcare costs, according to a survey released Tuesday by consultants Towers Watson. Fifty-nine percent of workers who plan to delay their retirement cited the need to keep their healthcare coverage as a reason, while 56 percent also blamed the decline in the value of their employer-sponsored retirement plan. The majority of workers who plan to delay retirement expect they will have to work for at least three years more than originally planned.
The survey of more than 9,000 workers conducted in May and June this year found that two-thirds of respondents are paying off their debts— nearly double the number the company reported in its survey in early 2009. More than half of respondents have also cut back on their daily spending, the survey found. "The economic crisis has had a deep effect on employees' attitudes toward retirement and especially on risk workers continue to have a fear that they won't be able to afford retirement," said David Speier, a senior retirement consultant at Towers Watson.
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