April 21, 2018

Economix Blog: Where the Raises Are: Trucking and Academia



Dollars to doughnuts.

I spoke today with Diane Swonk, chief economist at Mesirow Financial, who mentioned that she has been keeping an eye on which industries and occupations are giving raises. Unfortunately, not many fall under that category.

As of March, the Labor Department’s index for the cost of total compensation for all civilian workers was just 0.3 percent higher than a year earlier, after adjusting for inflation. To give some context, the year-over-year change in this index — which includes wages and salaries as well as benefits — has averaged 0.7 percent since 1982, the first year these data became available.

Source: Bureau of Labor Statistics, via Haver Analytics. Numbers are adjusted for inflation by Haver. Source: Bureau of Labor Statistics, via Haver Analytics. Numbers are adjusted for inflation by Haver.

Inflation has been very low in recent years, but it has still been substantial enough to mostly wipe out the meager raises that American workers have been receiving in nominal terms. (Before adjusting for inflation, compensation rose 1.8 percent year-over-year in March, compared with a long-term average of 3.7 percent.) Workers’ raises are also slightly lower if you strip out the cost of benefits, particularly since the rise in health care costs has generally outpaced the rise in wages. That’s probably not a coincidence; growing health care costs are eating up other forms of compensation that employers might otherwise provide.

Source: Bureau of Labor Statistics, via Haver Analytics. Numbers are adjusted for inflation by Haver. Source: Bureau of Labor Statistics, via Haver Analytics. Numbers are adjusted for inflation by Haver.

The lack of major wage gains across the board seems to contradict the idea that the economy is suffering from a major bout of skills mismatch. I have no doubt that employers in some industries are having trouble finding workers with relevant skills, but if skills mismatch were the primary driver of the country’s lackluster hiring in recent years, then we would expect to see many more businesses bidding up wages in pursuit of those rare skilled workers who are available.

The two categories that have shown the biggest year-over-year increases in total compensation are (1) occupations in transportation and material moving and (2) employees at junior colleges, colleges, universities and professional schools.

So what do truckers and professors have in common? Ms. Swonk observes that their jobs are both hard to either outsource or automate, unlike a lot of other occupations.

That is becoming less true for professors, though, in the age of massive open online courses, or MOOCs. MOOCs help schools cut down on labor costs by scaling up the number of students who can be taught by a single professor — in some cases, a professor they don’t even directly employ. And professors are worrying about being displaced. As The Chronicle of Higher Education reported Thursday, faculty members in the philosophy department at San Jose State University released an open letter saying they refuse to adopt a MOOC with lectures from a Harvard professor because they don’t want to enable efforts to “replace professors, dismantle departments, and provide a diminished education for students in public universities.”

On the other hand, MOOCs could still push up the overall level of wages for people employed at colleges by changing the composition of workers on those payrolls; the superstar professors whose lectures are featured in large-scale online courses will continue to be paid a lot, while the lower-wage professor jobs at community colleges and other strapped schools could be eliminated altogether, stripping out the bottom part of the pay distribution in higher education.

Article source: http://economix.blogs.nytimes.com/2013/05/02/where-the-raises-are-trucking-and-academia/?partner=rss&emc=rss

Media Decoder Blog: Southwest Broadens Approach in New Campaign

Southwest Airlines, for the first time in many years, is making major changes in how it presents itself to current and potential customers.

In an initiative that is scheduled to begin on Tuesday, Southwest is replacing its longtime humorous approach, as typified by ads with themes like “You are now free to move about the country,” with a smoother, more polished tack that is intended to help burnish the Southwest brand image by playing up the airline’s status as the biggest domestic carrier.

The new effort, which carries the theme “Welcome aboard,” is also the first work for the airline from TBWA/Chiat/Day Los Angeles, which Southwest added to its roster of advertising agencies in July. The funny ads for Southwest have been created by GSDM, an agency in Austin, Tex., that continues to work for the company on other assignments.

Fun is, however, not entirely absent from the new initiative, which uses the song “Some Nights” by the popular rock band Fun. on the soundtrack of the first commercial.

In the first commercial of the campaign, Southwest is likened to entrepreneurs and mavericks who, according to an announcer, “find their own path, chart their own course” and “never stop moving forward and never, ever back down.”

Such people “believe the American dream doesn’t just happen; it’s something you have to work for,” the announcer proclaims, adding that at Southwest, “we never stop looking for a better way.”

“It’s how we’ve grown into America’s largest domestic airline,” the commercial concludes. “We are Southwest. Welcome aboard.”

If the commercial is somewhat evocative of a well-known television commercial for Apple from 1997 called “Here’s to the Crazy Ones,” that may be no coincidence. The TBWA Media Arts Lab division of TBWA/Chiat/Day creates campaigns for Apple.

The new approach for Southwest is not without risk in that it leaves behind the airline’s usual jokey pitches for a tack that may seem to many consumers more appropriate for a carrier with a buttoned-down, corporate image than one with humorous on-board safety announcements.

“People enjoy the humor on board, and that we don’t want to change,” Bob Jordan, executive vice president and chief commercial officer at Southwest, said in a phone interview on Monday.

But when it comes to the humorous ads, “our advertising in the past, while it’s been effective, has been one-dimensional,” Mr. Jordan said, in that “we’ve been using humor to drive home our points almost exclusively.”

“We haven’t told you enough about the things that make us proud,” he added. “We want to tell people we’re better, we’re innovators, and I don’t think people know or remember how innovative Southwest is.”

Also, the humorous tack, “while it’s very effective, speaks more directly to leisure” travelers, Mr. Jordan said, than to the “combination of leisure and business” travelers Southwest would like to have.

So the new effort is “faster-paced, younger, more energetic,” he added, to convey how “Southwest has really changed in the last five to 10 years” with offerings that include “live TV, video on demand on board, new planes and Wi-Fi.”

“We’re not taking a hard right turn,” Mr. Jordan said, because the ads will continue to “celebrate our customers and our employees.”

But “there is something about putting a more modern face, a fresher look, a fresher style” on the Southwest brand, he added.

Mr. Jordan said he had no doubt that consumers would see the new initiative and recognize that “we’re selling Southwest Airlines” by saying, “We’re like you, we’re innovators, we’re always trying to get better.”

And during the course of the next 18 months, he added, “maybe we’ll push a little further back into the humor” in the subsequent ads, which will be devoted to Southwest trademarks like low fares as well as features like new cabins.

Southwest Airlines spent $156.2 million on advertising last year, according to the Kantar Media division of WPP, less than the $247.8 million spent in 2011, the $198.7 million spent in 2010, the $189.7 million spent in 2009 and the $194.1 million spent in 2008.

The lower amount for 2012 may be because the company was planning to bring out the new advertising this year and spend more on it.

The new advertising is not risky or a gamble, said Carisa Bianchi, president at TBWA/Chiat/Day Los Angeles, because “the spot keeps the values and the persona of Southwest and is very much true to its character.”

But it also presents “a grown-up version of Southwest,” she added, reflecting how “Southwest has grown” as it has “democratized the skies.”

“That’s something their existing customers recognize,” Ms. Bianchi said, but is “new information for the business travelers they’re trying to attract.”

John Norman, chief creative officer at TBWA/Chiat/Day Los Angeles, said the echo of “Here’s to the Crazy Ones” may be derived from research that the agency did on Facebook.

“We looked at the people on Facebook who ‘like’ Southwest,” he said, “and there’s an extremely high correlation to innovators.”

“Upstart companies treat Southwest as their company plane,” he added. “They’re ‘the Crazy Ones’ of today.”

The new effort is not “quirky ha-ha-ha,” Mr. Norman acknowledged, offering instead “a charm and humanity” to consumers “rather than slapstick humor.”

TBWA/Chiat/Day Los Angeles is, formally, the Playa del Rey, Calif., office of TBWA/Chiat/Day, a division of the TBWA Worldwide unit of the Omnicom Group. GSDM is also owned by Omnicom, as is a third agency with which Southwest works, Dieste.

Southwest also works with two agencies owned by WPP, VML and Wunderman.

Article source: http://mediadecoder.blogs.nytimes.com/2013/03/19/southwest-broadens-approach-in-new-advertising-effort/?partner=rss&emc=rss

Bucks Blog: Is a Penny Rounded a Penny Lost? Ask Chipotle

Customers line up at a Chipotle in New York City.The New York TimesCustomers line up at a Chipotle restaurant in New York City.

My children are fans of the food at Chipotle Mexican Grill. Soft, fresh tacos; black beans; melted cheese — what’s not to like? So I was intrigued when I read about a payment policy that the restaurant chain uses in some locations. It’s called “rounding” (which, by coincidence, my daughter is learning about at elementary school).

The Consumerist recently riffed on a column in The Star-Ledger, which reported on Chipotle’s practice of rounding the change in receipt totals for cash transactions at some restaurants. These locations do this so that cashiers don’t have to handle lots of coins, which tends to slow the lines down. If you’ve ever been to Chipotle, you know that the food is dished out in assembly-line style, where you place your order and then walk along the counter, telling the staff that, yes, you’d like some guacamole, please, but hold the rice. You pay at the end of the line.

As The Consumerist pointed out, rounding to the nearest nickel isn’t really a big deal, as long as the restaurant is rounding down. But if it rounds up, you pay extra — even if it’s just a penny or two.

In one sense, this seems like a smart idea. Who wants excess change clogging up their pockets, anyway, especially if it means you’ll get your food faster? But at least one customer objected to this “Chipotle-style math,” the New Jersey newspaper reported, and sent in his receipts for review:

“On the first, dated July 13, the nine items added up to $32.93. There was $2.31 in tax. The total should have been $35.24, but next to the ‘total’ line on the receipt, it said $35.25. The next receipt, with the same sale date, showed a subtotal of $8.64. The tax was $0.60, so the grand total should have been $9.24. But no. With Chipotle-style math, the total was $9.25.”

I called a Chipotle spokesman, Chris Arnold, who said the chain uses rounding in a few “high volume” markets,  including New York, New Jersey and some locations in Boston. The idea is to reduce the time cashiers spend doling out pennies, to keep the lines moving quickly. (In some locations, he said, “there are lines out the door as soon as we open.”) The total, he said, was previously rounded either up or down, to the “nearest nickel.” The result generally was a wash for the restaurant, he said. And for most customers, he said, “I think generally it’s been a nonissue.”

But a few penny-pinchers (my description, not Mr. Arnold’s) did object. So as of August, he said, the chain is only rounding down. (Also, receipts should now have a line showing the impact of the rounding math.) He said he didn’t know of other outlets that round receipts.

Do you think rounding of meal receipts — up or down — to eliminate pennies is a reasonable policy for a busy restaurant?

Article source: http://bucks.blogs.nytimes.com/2012/08/28/is-a-penny-rounded-a-penny-lost-ask-chipotle/?partner=rss&emc=rss

Two Wal-Mart China Executives Resign Posts

Anthony Rose, a company spokesman in Hong Kong, said the timing was a coincidence. Both left for personal reasons, he said, declining to elaborate.

Ed Chan, the chief executive and president of Wal-Mart China, and Clara Wong, the senior vice president for personnel at Wal-Mart China, have stepped down. Scott Price, the chief and president of Wal-Mart Asia, will temporarily assume Mr. Chan’s duties in addition to his own, while the company will name a replacement for Ms. Wong in coming days, Mr. Rose said.

In addition to the closings, the municipal government of Chongqing ordered Wal-Mart on Oct. 10 to pay $420,000. The penalties were in response to what the city government described as the mislabeling of pork as organic.

Wal-Mart issued an apology then for inconveniencing its customers because of the closing of stores. The company also said it was working with local officials to improve its operations in Chongqing, which employ 3,000 of the company’s nearly 100,000 employees in China.

The penalty for mislabeling pork was the latest of 21 punishments for Wal-Mart in Chongqing since 2006. The unusual series of penalties, in a country where enforcement of food labeling and handling laws is often weak, has prompted a debate on the Internet in China and among foreign executives over why Wal-Mart has so many troubles.

Chongqing has a reputation for being fiercely nationalistic, but also quick to crack down on organized crime and other illegal activity. So the debate has revolved around whether Wal-Mart has had consistently bad management in Chongqing or whether it is a victim of either populist nationalism or of local retailers allied with officials who dislike competition from a multinational.

Article source: http://www.nytimes.com/2011/10/17/business/two-wal-mart-china-executives-resign-posts.html?partner=rss&emc=rss

Staying Alive: How We Increased Our Manufacturing Productivity (and Turned a Profit)

Staying Alive

The struggles of a business trying to survive.

The other day, I was working on a budget for our current operations, part of which involved totaling up payroll costs per hour. Right now, the company employs 14 people, and the pay totals $337 per hour (assuming a 40-hour week, and pro-rating the salaried employees). With that number of workers, using our current manufacturing methods and equipment, we can produce $2 million a year worth of goods. The projected profit should be in the range of 10 percent, $200,000 or so.

Just out of curiosity, I looked at the same sum from a couple of previous years, and by coincidence found that in 2005 my payroll costs were the same: $337 an hour. But then I had 20 people on staff, and we were producing at a rate of $1.5 million a year. And we did not make a profit. Hmmmm. What happened?

First, the big crash of 2008. In the following 12 months, headcount dwindled to a low of seven people. In 2010 we started to grow again, but this time I invested in better machines and procedures along with adding staff. Of the 20 people I had working for me in 2005, six are still here and the others have been replaced. In 2005, 15 of the 20 workers were on the shop floor, 4 in the office and 1 in the finishing room. Now, there are five on the shop floor, six in the office, two in the finishing room and one in charge of shipping. The most notable change is the shop floor — 5 from 15, with a 30 percent increase in build volume. Changes in our product mix, our designs and our workflow have resulted in an enormous increase in work value per man hour.

If you are in manufacturing, this may be a familiar story for you. Raising productivity is not optional, if you intend to stay in business. If you don’t do it, your competitors will, and you will eventually be priced out of the market. This is what was happening to us in 2005. We were making residential furniture, dining tables and chairs for the most part, using tools and methods that relied on a lot of hand work and some simple machinery. Our sales volume was increasing steadily. But we couldn’t figure out a recipe to increase production and still make money.

The stuff we were making required highly skilled workers. My core crew of six people had the chops to do the job, but paying them the going rate for those skills meant that we couldn’t afford to distract them with teaching duties, which meant that newer workers never got real training. By the time we reached 20 workers, our shop floor was a circus. The best guys were still doing good work, but the new guys were constantly in their way, and the overall productivity was poor. We lost money for years. The wipeout in 2008 had a silver lining: I was able to rid myself of the lower-performing people and rebuild our capacity with a combination of skilled people and machines that actually produced positive cash flow. Which is a wonderful thing. Having some spare money means that we can devote resources to further improvements in training and equipment.

In the last two years we have added a couple of machines (one to glue pieces of veneer together, and the other a specialized sander) that have sped up our production significantly. That process was not smooth. The veneer splicer is a real dinosaur — it was built in the ’70s from a design that has been unchanged since the ’30s. Back then, a single worker would have been assigned to run the machine and would have done it for his entire career. The machine is quite tricky to set up and run, but once you get it going, it churns out product. Because we don’t do big runs of anything, we are using it differently.

Learning how to set up the controls to accommodate all of the different woods we use took more than six months, with a lot of ruined veneer. Understandably, the guys on the shop floor grew to be very wary of the splicer, as they were never sure whether it would destroy their project. I finally tamed it by coming in over a weekend and taking closeup movies of the machine in action, which, when slowed down, finally revealed precisely what was going wrong. I confidently announced that our problems were solved at the next Monday meeting, and was met with blank stares. No one believed it. It took more months of cajoling, and a special program of recording the results of each session at the machine, to build confidence. Now we use the splicer every day, and it saves significant time.

The sander came to us in mediocre condition, and it also took several months to get the worn parts replaced, and the machine adjusted properly. Again I found myself browbeating the guys into using it, only to have something else fail. Another call to the sander technician, another thousand dollars for him to adjust a bolt or two, and we’d start all over again. The problems were eliminated, one by one, and now it, too, produces the results I anticipated.

With all of the machines functioning, the guys have had an outstanding August on the shop floor. We have a production target of $160,000 for the month, but they will complete jobs totaling $227,113. That’s a new record, by a huge margin. I gave them a paid day off on Friday to make Labor Day a four-day weekend.

Wouldn’t it be lovely to just let things be for a while? Unfortunately, I don’t feel that I can do that. The guys would probably like it — they are happiest when they know for certain that all of the machines they use will work and that they can rely on their current procedures to get the job done in time. They hate it when they try something new and it turns out to be worse than what they had been doing. So it can be tough to get them to buy into innovation, and I bet it’s going to be even tougher if our current methods are working well. I wouldn’t mind letting everything sit for a while, except I know that my competitors are out there, and I assume they are trying as hard to up their game as we do. So I’m going to have to find a way to improve things a little bit more. Maybe better machines, maybe different procedures — I’m not sure.

I fantasize about being in a business where this is not an issue, although such a thing may not exist. Maybe restaurants? Is it expected that, five years from now, you will serve the same number of people with 25 percent fewer staff members? Or plumbing? Can you suddenly fix a toilet twice as fast? That doesn’t seem possible to me, but — from a distance — other people’s businesses always seem to be easier than mine. Does anyone care to contribute their own stories of raising productivity, or why it’s not that important in your business?

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=2ad05170bb4b780fa87ff91d9aed5490

You’re the Boss: Finding Suppliers Who Meet Our Standards

Staying Alive

In late 2008 I got a phone call from the owner of a company in Michigan that manufactures and distributes metal table legs in a variety of configurations. We usually make our own wood bases for our tables, but there are times when we want to provide a simpler, cheaper solution than we can make ourselves. Metal legs are much less expensive than a custom-made base, so we can fabricate a very nice top and sell it at a lower price point than if we build the whole table in house.

The owner called me out of the blue in 2008 — quite a difficult year, as you may recall — because she was trying to find new clients for her company. She told me about her business, which was small, struggling and doing its best to keep American workers employed — a familiar story for me. I suggested that she send a catalog (her Web site was rudimentary) and I told her I’d keep her in mind for future projects.

During the next year and a half I asked her to price four or five projects, but we didn’t sell any of them. And then in the middle of 2010 I got an unexpected call: a client who had abandoned a project in 2009 for lack of funds had decided to move ahead, but needed to cut 20 percent from the project’s costs. By coincidence, this client was also in Michigan, so I suggested that we use metal legs instead of the original design, and I was able to tell a good story about locally produced components. The project was approved, but the client wanted both a custom color on the legs and a quick turnaround. As soon as we received our deposit, we placed the order for the legs, knowing that the timing was tight.

We built the table tops and waited for the legs. They showed up just a week before we had promised delivery. Disaster: a dozen legs had been placed in each box without any wrapping or padding, so they banged against each other the whole trip. The custom paint job was ruined by scratches, nicks, and dents on every surface. A panicked call to the leg manufacturer got results, and replacements were delivered with one day to spare, along with profuse apologies. Apparently, a new worker had packed the legs, and didn’t realize that they needed to be wrapped individually. All right, I thought, that’s plausible, although not encouraging. But in the end, the job went out and the client was happy.

The next time we used the supplier, later in 2010, everything went well, which made me feel better. We placed another order in April for a job that needed to be delivered on May 1. Again, timing was tight. The legs arrived just as we were finishing the tops. These legs were to be attached to the tops by eight screws through a 6-inch by 12-inch steel plate welded to the top of the post. The job consisted of 14 modular tables, each with two legs.

We unwrapped one leg to check the hole pattern drilled into the plate. The eight holes were evenly spaced in the plate, so we programmed that pattern into our computer numerical control (C.N.C.) robot’s final cut and drilled all 224 holes. Each hole was then filled with a threaded insert, so that our clients could quickly and easily bolt the legs to the top. We like to make sure little details like this are complete when the tables are delivered — it makes the assembly go smoothly and makes for happy customers.

After the last cut, the tops went into the finishing room, and emerged two days later. We needed to ship the table the same day, but we did a final assembly just to make sure everything was right, and so that we could photograph the finished table. We took all the legs out of the boxes and started to bolt them onto the table. Another disaster: every steel plate had the holes drilled differently, in a semi-random pattern, with variations in spacing up to 1 inch.

Not only was our predrilled pattern useless, but now each leg had to be individually numbered and marked to match a particular table. This would make the customer’s task much more difficult, as its people would have to match each leg with the proper table. It also added six man-hours of work to the assembly and packing process. And furthermore, it caused us to violate one of my own rules about our product — that it should be easier to assemble than a Lego kit. We go to great lengths to engineer the assembly sequences of our tables, so that anyone can put one together without difficulty. The random drilling made us look sloppy and promoted the impression that we don’t care about the experience of assembling our tables.

After some consideration, I sent the following e-mail to the leg maker’s owner:

“We opened up the legs we just received from you. The holes in the top plates vary considerably in their placement — every single plate is different. Hole locations vary up to an inch from plate to plate. This means that we have to individually drill every hole for every leg, instead of using our C.N.C. to cut them. We will have to mark each leg location with a number and orientation of the plate, and our client will have to then match up the legs and numbers on the bottoms of the tables. This is additional cost and trouble for my client, and makes us look as though we are incapable of making 28 pieces of steel identically.

“This level of quality is not acceptable for us. If I wanted random drilling, I would order legs from China. We will no longer be ordering from your company.

“I’ve been running a factory for 25 years and I know that it can be difficult to get people to perform as the boss would wish. The only reason I am writing to you is so that you can read this letter to your people, and hopefully spur them to do better work. As I said, we will find other suppliers for metal legs, but perhaps you will be able to bring your game up and do a better job with your other clients.”

The easiest way to drop a vendor is to simply stop calling them and move on. I wrote the e-mail because I was trying to give her something that is very hard to come by: negative feedback from outside your organization. I almost never get this myself. Customers generally don’t give it to us because we do good work. Prospective customers don’t want to give it because they can’t be bothered. Even when I ask, I usually get nothing, and the answers that do come in are vague to the point of uselessness. I guess people just feel bad about delivering bad news.

Some of you will probably suggest that I could have worked with this company, that it would probably do a better job the next time. Frankly, I feel that messing up two jobs out of three is all I need to know. It’s entirely possible that I’m the fussiest customer out there, and that her other clients would prefer a lower price over higher quality. I presume that the owner took my letter and used that feedback in a way that made sense to her. Maybe she read it to her people to show the consequences of small errors. Or maybe she threw it away with pleasure, delighted that she wouldn’t have to deal with me again. In any case she did not reply to the e-mail.

We got a bill from her with a $35 credit (on a total of close to $1,800), which I paid upon presentation. We have already found alternative sources for metal legs — they are something of a commodity. And we’ll alter our designs to obviate the need for regular drilling patterns, just in case. Was this the right decision? Possibly, possibly not. But it’s made and done. Time to think about other things.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=c51ee0a20e8ad396dc12cbb43d754855