December 6, 2023

A Bill Allowing More Foreign Workers Stirs a Tech Debate

Mr. Doernberg worked in chip design, before that industry shrank, and then for a solar energy company, before that industry shrank, and has been unemployed since the middle of last year. By his own account, his skills are not ideal for the current job market. Nor does it help, he says, that at 53, he looks older than he is; youth is at a premium in his industry. So, too, is optimism.

“It’s a question of convincing someone that with these skills, I can do this job, even though I haven’t done it before,” he said. “I’m very optimistic. I know I will find a job.”

The questions of skills, jobs and nationality are a combustible mix these days.

Silicon Valley companies, warning of an acute labor shortage, say it is too costly to retrain older workers like Mr. Doernberg, and that the country is not producing enough younger Americans with the precise skills the industry needs. Their arguments have persuaded a majority of senators to give them what they want: a provision in the immigration bill to let in many more foreign professionals.

But Americans like Mr. Doernberg and the powerful labor lobby say that what the tech industry really wants is to depress wages and bring in more pliant, less costly temporary workers from overseas. If there is such a talent shortage, they ask, why are wages for most engineers not rising faster? Labor groups have pushed for a requirement to offer jobs to equally qualified Americans before hiring foreigners, a provision that the industry has fiercely resisted.

The pitched arguments of both sides, which are likely to resurface in the House when it takes up its version of an immigration overhaul, cloud a complicated reality. There is little empirical evidence to suggest that foreign engineers displace American engineers as a whole. If anything, one recent study suggests, the growth of immigrant workers in American companies helps younger American technical workers — more of them are hired and at higher-paying jobs — but has no noticeable consequences, good or bad, on older workers.

“In the short run, we don’t find really any adverse or superpositive effect on the employment of Americans,” said William R. Kerr, a Harvard business professor who conducted the study on the work force of 300 American companies. “People take an extremely one-sided view of this stuff and dismiss any evidence to the contrary.”

A recent analysis by the Brookings Institution reached a similar conclusion. It found that in the top 10 cities that bring in the largest number of high-skilled guest workers on H-1B visas, college-educated Americans — those who could compete for jobs with high-skilled guest workers — are not more likely to be unemployed.

At the same time, though, the industry’s claims of a labor shortage may be somewhat overblown. Most H-1B workers hold entry-level positions. Economists say that bringing in more of these workers would serve to keep wages down. It also saves employers the trouble of having to retrain workers.

There is a difference between what companies say they need and want, said Peter Cappelli, a management professor at the Wharton School at the University of Pennsylvania. “Saying we need people with these skills is like me saying I need a four-wheel drive,” he said. “They could retrain people.”

It is true that for certain categories of engineers, wages are not going up as sharply as one would expect if good engineering talent were indeed hard to find. But it is also true that engineers with certain specialties, like software development, are hard to find.

Intel, for instance, which has more than 50,000 employees in the United States, said it has 1,000 openings. Motorola Solutions said it was scrambling for software engineers. And unemployment among technology professionals is generally about half the national average, buttressing the industry’s claims.

Economists say there may be other reasons for opening the door to high-skilled immigrants. In cities where there are large concentrations of such immigrants in science and engineering, overall wages tend to go up, especially among college-educated American residents, and eventually, so do housing prices, according to a study by Giovanni Peri, an economist at the University of California, Davis.

The Congressional Budget Office weighed in this week too, concluding that the growth in high-skilled immigration would lead to “slightly higher” productivity and in turn higher wages overall.

Already, the fight over high-skilled immigration has led to arguments and counterarguments on the Senate floor, with one side warning that jobs will go to workers from overseas and the other rallying for Americans first.

But Ardine Williams, the vice president for human resources at Intel, said that hiring Americans is not always practical. Asked about hiring unemployed engineers in this country, she said, “I encounter those folks as well. They are skilled and have expertise outside of an area where we need engineers. In some cases they haven’t kept their skills current.”

The debate over the effect of foreign engineers on American ones has obscured the critical issue of why more Americans are not going into the thriving technology sector. Students in the United States consistently rank low on global math and science tests, suggesting that relatively few are prepared to go into rigorous science and engineering programs.

In engineering programs at American universities, a little more than 40 percent of all graduate students were from abroad, according to data from the National Science Foundation. Even among Americans who do graduate with computer science or engineering degrees, a third pursue careers outside the tech sector.

Mr. Doernberg is keeping his fingers crossed. A resident of Woodside, Calif., an upscale town south of San Francisco, he spends his days scouring online job boards and attending networking sessions at diners and church halls across Silicon Valley. One of them is a Thursday morning group that meets in a church in Saratoga, a short drive from his home.

It was set up years ago by Hamid Saadat, an electrical engineer who came to this country from Iran as a graduate student in 1978, worked at a series of semiconductor companies in the area, became a United States citizen and went through the same rite of passage as Mr. Doernberg.

In 2001, just as the technology industry slumped, he lost his job. He was 47 and he soon learned one lesson. In Silicon Valley, it may not matter where you were born, but when.

“As much as we like to believe there’s no discrimination, being younger usually helps,” Mr. Saadat said.

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You’re the Boss Blog: House Republicans Try to Simplify Small-Business Taxes

The Agenda

How small-business issues are shaping politics and policy.

This month, Republicans in Congress unveiled proposals to radically remake the way many small businesses are taxed. As with many radical Republican proposals, this one from the House Ways and Means Committee chairman, David Camp, furthers a partisan agenda — if implemented, it would almost certainly reduce revenue to the federal government. But it also wins praise from independent tax experts for repairing what they call a body of law almost too complicated to comply with or to enforce.

The proposals would streamline the tax rules for flow-through entities — companies that do not file their own tax returns but instead are structured to pass their profits or losses directly to their investors, which is how many small businesses are organized. “The tax code ought to be easier to understand and less expensive for small businesses to comply with,” Mr. Camp said in a press release accompanying the draft legislation (pdf), “because every dollar they aren’t spending on taxes is a dollar they have to invest in equipment, start a new production line, hire a new employee or provide more in wages and benefits.” But it is unclear how much most small businesses will benefit from the changes Mr. Camp has proposed.

At the heart of Mr. Camp’s ideas, embodied in an early stage of legislation known as a discussion draft, are two alternatives to revamp the rules for the two main kinds of flow-through structures, partnerships and S corporations. S corporations, named for a section of the Internal Revenue Code, operate like regular corporations and are governed by fairly rigid rules, while partnerships are granted more flexibility.

The first alternative mostly tinkers with the rules to make it easier to operate as a flow-through company. The second option would repeal the laws regulating both kinds of entities and replace them with a single set of rules, regardless of whether the company is organized as a corporation or partnership. The new rules would be based mostly on current partnership law, with a couple of S corporation provisions thrown in (they also include most of the changes proposed in the first option). Any partnership or privately held company that is now eligible to elect S corporation status would be able to file taxes under the new arrangement.

Tax lawyers and analysts cheered the prospect of simplifying this area of business taxes. “Many professors and academics who study partnership law felt like the whole partnership system was falling apart, because it had become so complicated and not administrable,” said Martin Sullivan, the chief economist for Tax Analysts, the tax news and analysis publisher. “The I.R.S. was having trouble enforcing the law. Even the most sophisticated taxpayers could not comply with the law. Everybody had to adopt an informal, ad hoc process.”

Businesses, though, may be less enthusiastic about a one-size-fits-all regimen. Many more small companies are organized as S corporations than partnerships, and S corporations, especially those engaged in more complex businesses, may find that filing their taxes is more complicated under the new regime, though tax experts disagree on how much more complicated. On the other hand, Mr. Sullivan said, these businesses may appreciate the additional flexibility — for example, they would no longer be limited to just 100 shareholders or face restrictions on the type of shareholders.

Partnerships, meanwhile, would find some of their options limited, particularly when it comes to strategies for avoiding taxes. Steven Schneider, a Washington tax attorney and an adjunct professor at Georgetown University Law Center, said that S corporations and partnerships are often organized in different circumstances. S corporations often build their assets from scratch, for example, while investors in partnerships often contribute existing, and valuable, property to the venture. But one element of the overhaul, imported from S corporation law, could make investors reluctant to contribute that property to the partnership, because it would require those investors to pay tax on the asset’s built-in gains should the partnership dissolve. (Built-in capital gains are the increase in value of an asset that occurs before it becomes part of a new venture.)

“They took a rule that made some sense in S corporations because it’s simple but applied that to partnerships, which were intended to allow flexibility to allow people to get together and break up again,” Mr. Schneider said. “So if I want to do a joint venture with another big business, I’m going to really think about it if I’ll have to recognize all my inherent appreciation.”

Though provisions like these would force entities to recognize more taxable income, overall the proposal would likely cost the government money, said Mr. Schneider and Steven Rosenthal, a visiting fellow at the Tax Policy Center. That is because it would encourage existing C corporations — whose profits are taxed twice, first at the corporate level and then on shareholders’ individual returns — to convert to flow-through entities. The sweetener is a provision that would make it easier for the new entity to shield the built-in gains on assets it sells from a 35-percent tax. Right now, thanks to a temporary stimulus incentive, a company only has to wait five years before selling those assets to avoid the tax. In 2014, the waiting period reverts to 10 years. (The rule is meant to discourage companies from converting simply to avoid the tax.) Both Camp proposals would make the five-year period permanent.

It is not clear how much support either proposal will win from Democrats, though some elements of the first option have appeared in bills sponsored by a Democrat, Ron Kind of Wisconsin. In a statement, the top Democrat on the House committee, Sander Levin of Michigan, called for more study on small-business tax policy.

Mr. Camp and Mr. Levin have invited small-business owners who might be affected by the proposals to submit comments to the committee. The suggestion box will be open until April 15 — Tax Day. Of course, as always, Agenda readers can comment below.

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Business and Labor Leaders Urge Visa System for Low-Skilled Work

In the statement, signed by Thomas J. Donohue, the president of the U.S. Chamber of Commerce, and Richard L. Trumka, the president of the A.F.L.-C.I.O., the groups called for a visa system that would allow businesses to meet their demand for lower-skilled workers, while offering some protections for American workers.

“The United States will always be a nation of immigrants who have contributed greatly to the vitality, diversity and creativity of American life,” the statement said. “Yet, like the rest of America’s immigration system, the mechanisms for evaluating our labor market needs and admitting foreign workers — as well as recruiting U.S. workers — for temporary and permanent jobs are broken or nonexistent.”

The statement presented three general goals for addressing the issue of immigration by lower-skilled workers: the assurance that American workers should have “a first crack at available jobs”; a new visa program for lower-skilled workers that will adjust to reflect the changing needs to businesses as the economy shrinks and expands; and greater transparency, rooted in demographic and labor market data, in determining the market need for temporary workers.

Traditionally, labor unions have rejected the idea of a guest worker program for lower-skilled workers, which they fear could take jobs away from American workers and depress wages. Business leaders have lobbied for a guest worker program, arguing that they need low-skilled labor for jobs — in agriculture, for instance — that American workers cannot or will not do.

The principles outlined on Thursday required compromise from both sides. Labor unions, acknowledging that “there are instances — even during tough economic times — when employers are not able to fill job openings with American workers,” agreed that there may be a need for a new type of guest worker program. But in return, the unions insisted that American workers get a first shot at open jobs, and they secured an agreement that the number of incoming lower-skilled workers would not be set arbitrarily, but based on need.

“Our challenge is to create a mechanism that responds to the needs of business in a market-driven way, while also fully protecting the wages and working conditions of U.S. and immigrant workers,” the statement said.

Meeting both the business and labor interests, the groups said, will require a better flow of information, and they proposed that a federal bureau in the executive branch be created to help evaluate the labor market needs for future immigration. “We agree that a professional bureau in a federal executive agency, with political independence analogous to the Bureau of Labor Statistics, should be established to inform Congress and the public about these issues,” the statement said.

The fraught issue of an immigration overhaul is slowly winding its way through Congress, with a bipartisan group of eight senators hoping to propose legislation by the end of March. In addition to the bipartisan talks occurring on Capitol Hill and with the White House, the A.F.L.-C.I.O and the Chamber of Commerce had been engaged in a parallel set of closed-door discussions for months.

But a full-scale immigration overhaul remains a far-off prospect. This week, Representative Bob Goodlatte, Republican of Virginia and the chairman of the House Judiciary Committee, came out against a pathway to citizenship for illegal immigrants — a crucial component for Democrats and President Obama for any immigration plan.

“People have a pathway to citizenship right now: It’s to abide by the immigration laws, and if they have a family relationship, if they have a job skill that allows them to do that, they can obtain citizenship,” Mr. Goodlatte told NPR. “But simply someone who broke the law, came here, say, ‘I’ll give you citizenship now,’ that I don’t think is going to happen.”

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Economix Blog: When $250,000 Isn’t Actually $250,000

Binyamin Appelbaum and I have an article in Friday’s paper about President Obama’s proposal to raise marginal income tax rates for married couples earning “more than $250,000.”

As we note, there are lot of couples earning more than $250,000 whose tax liability would not be affected.

There are two main reasons: inflation, and the very narrow way income is defined in this proposal.



Dollars to doughnuts.

First, the thresholds that Mr. Obama originally staked out – $250,000 for married couples filing jointly and $200,000 for single taxpayers – referred to policies he wanted to take effect in 2009, and he has been indexing most of them to inflation so that they’re higher today. The adjusted thresholds for 2013 are $266,100 and $212,850, according to the independent Tax Policy Center. Mr. Obama uses $250,000 as shorthand for the higher-income taxpayers the increases are aimed at — perhaps for consistency’s sake, and perhaps because $250,000 is a nice round number. (The White House declined to comment on why the president still uses the $250,000 number.)

Second, the thresholds refer to a specific accounting term called adjusted gross income, or A.G.I., that excludes a lot of categories of income.

Now, if you ask people how much they make, they probably don’t respond with their exact A.G.I. Instead they probably think about their salary, wages, pension income, and maybe a bonus and investment income if those categories brought in substantial money.

That rough mental accounting for how much you make would include some money not counted in A.G.I. (and exclude some money that is part of A.G.I.). In other words, a lot of people might have more than $266,100 flowing into their bank accounts during the year but still have an A.G.I. below $266,100.

A.G.I. includes wages, salaries, investment income and bonuses – the categories mentioned earlier that might be part of a quick mental accounting of how much you make. But it can also be reduced by subtracting items like certain business expenses; health savings account deductions; some moving expenses; contributions to some retirement accounts like an I.R.A.; alimony paid; most Social Security benefits; some income earned overseas; tax-exempt interest on municipal bonds; and college tuition, fees and student loan interest, subject to limits.

On the other hand, there are some categories in your A.G.I. that you might not think to include if someone asks how much you make. These include rents; royalties; income from operating a business; alimony received; share of income from partnerships and S-corporations; income tax refunds; and the ever-popular gambling winnings.

For example, a married couple might make $300,000 annually in salaries and investment income, but after subtracting health savings account deductions, alimony paid and I.R.A. contributions, they might have an adjusted gross income of about $270,000. That means they would probably not be affected by the tax increases aimed at “high income” people even though they are indeed near the top of the income distribution.

To make things even more confusing, note that some of the tax increases intended for “high income” people (using Mr. Obama’s stated $250,000 and $200,000 thresholds from 2009) will actually apply to even fewer people than this analysis so far suggests.

Those whose income exceeds those thresholds would be affected by new taxes created by the Affordable Care Act, including additional taxes on both their earned income and their investment income. (And here the thresholds are actually $250,000 and $200,000, with no indexing. All the other taxes aimed at “high income” individuals are indexed; for some reason the Affordable Care Act taxes were not.)

But many at those income levels will not be affected by the expiration of the Bush marginal income tax cuts for upper-income people. That’s because the Bush tax cuts refer to an even narrower measure of income called taxable income, which is basically a subset of adjusted gross income that many high earners can reduce substantially with the help of a skillful accountant.

Taxable income is calculated by subtracting personal exemptions and deductions (either itemized or standard) from adjusted gross income. Itemized deductions include things like home-mortgage interest payments, health expenses, state and local taxes, and charitable contributions. While subject to limits, those deductions can bey large. Generally the reason to go through the hassle of itemizing deductions, after all, is to reduce your taxable income by much more than the standard deduction would.

Mr. Obama has defined all the thresholds for whose taxes he wants to raise in terms of A.G.I. But again, tax rates are based on taxable income. Mr. Obama’s method of translating his A.G.I. cutoffs into taxable income cutoffs is to take the A.G.I. threshold and subtract the minimum amount a family is entitled to exclude: one standard deduction and two personal exemptions for married couples, totalling about $20,000.

So when Mr. Obama promises he won’t raise tax rates for married couples with a 2013 A.G.I. of $266,100, the policy translates to taxable income thresholds of about $246,000.

Those are conservative calculations for how much taxable income people with these levels of A.G.I. will report. Usually people at those A.G.I. levels choose to itemize their deductions, which reduces their taxable income.

If you have a lot of deductions and personal exemptions, you might end up reducing your taxable income by so much that you no longer fall into a tax bracket whose marginal tax rate Mr. Obama proposes to raise. (You might still be subject to the alternative minimum tax – a parallel tax system that basically says you have to pay at least a given share of your income, regardless of how many deductions you take – but you will not be hit by the higher marginal tax rates on earned income that Mr. Obama is proposing.)

For example, a married couple earning $300,000 in A.G.I. might have itemized deductions of about $50,000 and a child, which means three personal exemptions. This comes to a total of more than $60,000 in deductions and exemptions, meaning this couple would have taxable income below the president’s threshold for higher tax rates. In fact, about 70 percent of all couples in the $250,000 to $300,000 A.G.I. range in 2013 would be unaffected by Mr. Obama’s proposal to raise taxes on those earning over $250,000, according to Citizens for Tax Justice, a liberal advocacy group.

Remember that all these higher tax rates refer to marginal rates – the escalating rates on each successive tier of income – not average rates.

That means that even if you do earn enough in taxable income to be affected by the higher tax rates, not all of your income would be taxed at higher rates. Only the income above the thresholds would be subject to a higher tax rate under Mr. Obama’s plan. The first couple of hundred thousand dollars would be taxed at the same rates that now apply.

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In Shift of Jobs, Apple Will Make Some Macs in U.S.

On Thursday, Apple’s chief executive, Timothy D. Cook, who built its efficient Asian manufacturing network, said the company would invest $100 million in producing some of its Mac computers in the United States, beyond the assembly work it already does in the United States. He provided little detail about how the money would be spent or what kinds of workers might benefit.

Apple, which long manufactured parts in the United States but stopped about a decade ago, has been under pressure to create more jobs here given its market power. It sold 237 million iPods, iPads, Macs and other devices in the year ended in September.

“I don’t think we have a responsibility to create a certain kind of job,” Mr. Cook told Bloomberg Businessweek. “But I think we do have a responsibility to create jobs.”

Some analysts are hopeful that the move by a big, innovative company like Apple could inspire a broader renaissance in American manufacturing, but a number of experts remain skeptical.

“I find it hard to see how the supply chains that drive manufacturing are going to move back here,” said Andre Sharon, a professor at Boston University and director of the Fraunhofer Center for Manufacturing Innovation. “So much of the know-how has been lost to Asia, and there’s no compelling reason for it to return. It’s great when a company says they want to create American jobs — but it only really helps the country if those are jobs that belong here, if it starts a chain reaction or is part of a bigger economic shift.”

Over the last few years, companies across various industries, including electronics, automotive and medical devices, have announced that they are “reshoring” jobs after decades of shipping them abroad. Lower energy costs in America, rising wages in developing countries like China and Brazil, quality control issues and the desire to keep the supply chain close to the gigantic American consumer base have all factored into these decisions.

“Companies were going abroad in pursuit of cost reduction, and it turns out there were a lot of unintended costs,” said Diane Swonk, chief economist at Mesirow Financial. “America has been looking a lot more competitive lately.”

Even so, the impact on the American job market has been modest so far. Much of the work brought back has been high-value-added, automated production that requires few actual workers, which is part of the reason America’s higher wages are not scaring off companies.

American manufacturing has been growing in the last two years, but the sector still has two million fewer jobs than it had when the recession began in December 2007. Worldwide manufacturing appears to be growing much faster, even for many of the American-owned companies that are expanding at home. General Electric, for example, has hired American workers to build water heaters, refrigerators, dishwashers and high-efficiency topload washers, but continues to add more jobs overseas as well.

Apple has not announced plans to move the complex, faster-growing portions of its product lines. Macs now represent a relatively small part of Apple’s business, accounting for less than 20 percent of its nearly $36 billion in revenue in its most recent quarter. The company’s iPad and iPhone products, which amount to nearly 70 percent of its sales, will continue to be made in low-cost centers of manufacturing like China, mostly on contract with outside companies like Foxconn.

Mr. Cook’s statements suggested Apple was planning to build more of the Mac’s components domestically, but with partners. He told Bloomberg Businessweek that the plan “doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”

Whether Apple’s newly announced plan might help create other higher-paying jobs along the supply line depends on the nature of the manufacturing.

Other computer manufacturing has been trickling back to the United States after largely shifting overseas in the 1990s.

Charles Duhigg and Quentin Hardy contributed reporting.

This article has been revised to reflect the following correction:

Correction: December 8, 2012

An article on Friday about Apple’s decision to build some Mac computers in the United States included erroneous information from the company about the source of desktops that Hewlett-Packard sold in Europe up until five years ago. Most of the desktops — not all — were from China.


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Economix Blog: Do College Grads Earn Less Now Than 40 Years Ago?

On Wednesday I wrote about how a college degree has gotten more economically valuable in the last few decades. A number of readers wrote in asking whether the numbers might be skewed by incomes at the very top. After all, the top 1 percent has received huge raises in the last few decades, and that group is mostly college-educated.



Dollars to doughnuts.

The second chart I ran — showing that the typical worker whose highest degree is a bachelor’s earns 5.3 percent more today than in 1994 — referred to medians, not averages. That means the outliers at the tippy top should not have had much effect on the numbers.

But there is actually another way in which the numbers are skewed upward: a much smaller share of working-age men, whatever their level of education, is working today than in past decades.

That means the pay of the “median” college-graduate worker is less representative of the total population of college-educated Americans than was the case in the past. By using the median wage for workers, rather than median wage for the full population, we’re only looking at what’s happened to the earnings of the most successful college graduates today, versus the vast majority of graduates in the past.

In a study for the Milken Institute, Adam Looney and Michael Greenstone at the Hamilton Project crunched numbers for the wages of all men, broken down by education, regardless of whether they were working. The findings are somewhat terrifying.

After adjusting for inflation, the typical male college graduate earned about 12 percent less in 2009 than his counterpart did in 1969. Sounds pretty bad, right?

The numbers are even worse for men without a bachelor’s:

As you can see from the last column in this table, the median man whose highest educational attainment was a high school diploma had his earnings fall by 47 percent in the last four decades.

Workers who didn’t even graduate from high school had a median income decline of 66 percent, largely because so many of these high school dropouts subsequently dropped out of the labor force, too, once they saw what job opportunities awaited them.

The numbers do reinforce that college is still a good investment, at least relative to not getting any postsecondary education. But they also indicate that when you look at the median earnings of the entire population of Americans who have received a degree, a college education seems less economically valuable today than it did in 1969.

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Consumer Borrowing Soared in November

Americans increased their borrowing in November by the largest amount in a decade, the Federal Reserve said Monday.

Consumers took out more loans to buy cars and used their credit cards more to buy holiday gifts, a sign to some analysts of their growing confidence in the economy.

The Federal Reserve said total consumer borrowing rose $20.4 billion in November, the largest increase since a $28 billion gain in November 2001.

A category that measures credit card debt rose $5.6 billion, the most since March 2008.

Another category that tracks auto loans increased $14.8 billion, close to July’s increase, which was the biggest since February 2005.

The third consecutive monthly increase in overall borrowing is a departure from the thriftier habits practiced during and immediately after the recession, when credit tumbled and the savings rate climbed.

Many Americans are taking on more debt as the unemployment rate drops and the economy improves, albeit modestly.

Consumer confidence is up, holiday sales were solid and the domestic auto industry is coming off its best two sales months for the year.

That has prompted Americans to step up spending, even though their wages did not keep pace with inflation in 2011. Many are tapping into their savings or borrowing more as a result.

Borrowing has increased in six of the last nine months. And consumers saved just 3.5 percent in November. That is the lowest savings rate since the recession began in December 2007.

Americans saved less than 3 percent of their after-tax income in the three years before the recession began. But in 2008, as the unemployment rate began to rise and home prices fell, consumers cut back on spending, borrowed less on their credit cards and saved more.

The annual savings rate rose above 5 percent in 2008 and stayed above that level until 2011. At the same time, consumer borrowing fell for 26 consecutive months, from October 2008 until December 2010.

Economists caution that Europe’s debt crisis could slow growth in the United States. A recession in Europe could damp demand for American exports and weaken financial markets.

The Federal Reserve’s borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.

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Room for Debate: Waging War on Wages

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U.S. Home Prices Increased in July

The Standard Poor’s-Case-Shiller index shows home prices increased in July from June in 17 of the 20 cities tracked.

Over the last 12 months, prices fell in all but two cities — Detroit and Washington. Prices rose sharply in Minneapolis and Chicago. Prices in Las Vegas and Phoenix declined.

Housing is a major reason the economy has struggled more than two years after the recession officially ended. Home sales are on pace this year to be the worst since 1997.

Separately, a private research group said consumers’ confidence in the economy remained weak in September after dropping to a post-recession low in August as Americans continued to worry about high unemployment and low wages.

The Conference Board said its Consumer Confidence Index was at 45.4 points, up slightly from a revised 45.2 in August. Economists surveyed by FactSet had expected a reading of 46. The August reading, which was the lowest since April 2009, was almost 15 points below July’s reading of 59.2

A reading above 90 indicates the economy is on solid footing. Economists watch the number closely because consumer spending accounts for about 70 percent of American economic activity.

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G.M. Looks to Shepherd U.A.W. Pact

Both G.M. and Chrysler have been holding around-the-clock talks with the union for several days, hoping to reach a new deal before their current four-year contracts expire at the end of the night on Wednesday.

The third Detroit automaker, the Ford Motor Company, agreed with the U.A.W. on Tuesday to extend its contract until settlements were reached at the other two companies.

With its stock price lagging 33 percent below its initial public offering price of a year ago, G.M. needs a deal that bolsters confidence in its comeback from its government bailout and bankruptcy.

And with the strongest balance sheet of the Big Three, G.M. is in position to sweeten worker bonuses and raise the pay of second-tier workers in exchange for flexibility in its plants and profit-sharing tied to quality and productivity.

“With a vastly improved balance sheet, G.M. has a distinct advantage in negotiation its U.A.W. contract,” said Mike Jackson, a senior analyst at the research firm IHS Automotive. “It is working hard to set terms that are more favorable to its own cause.”

Historically, the union reaches an agreement with one automaker first and expects the other two to follow the framework for wages, benefits and work rules.

Recently, G.M. has stepped up its efforts to devise a competitive cost structure that both the companies and the union can live with for the next four years.

Underscoring G.M.’s aggressive approach has been the presence of its chief executive, Daniel F. Akerson, at the bargaining table. In years past, it was rare for any Detroit chief executive to be directly involved in the talks until the end of the process.

The U.A.W. agreed not to strike G.M. or Chrysler as conditions of the Obama administration’s bailouts of the companies. But G.M. is still 26 percent owned by the American taxpayers, and its executives are eager to avoid a prolonged arbitration process if a deal cannot be reached.

“A failure to reach a settlement would be looked at as almost a repudiation of the government funding,” said Gary N. Chaison, professor of labor relations at Clark University in Worcester, Mass.

Among the top issues to be reconciled is how much workers should gain now that the companies have greatly improved their finances. G.M. earned $5.7 billion in the first half of 2011, and Ford’s profit for the same period was nearly $5 billion. G.M. also has a cash stockpile of more than $30 billion, which it has been using to pay down debt and create what it calls a “fortress balance sheet.”

A deal that investors see as favorable for G.M. could help reverse the slide in the company’s stock price. Shares of G.M. closed at $22 on Tuesday, one-third lower than the price for its initial public offering last November.

Instead of increasing wages — which have been frozen since 2003 — analysts expect the carmakers to offer workers large bonuses that they would receive as lump sums after the contract is ratified. That avoids permanently increasing the companies’ annual labor costs, and the signing bonuses most likely would amount to considerably less than four consecutive years of small raises.

The bonuses will probably be $5,000 to $7,500 at G.M. and Chrysler, and slightly more at Ford, predicted Arthur Schwartz, a former G.M. negotiator who is now president of the consulting firm Labor and Economic Associates in Ann Arbor, Mich.

Ford would pay more because it is healthier and thousands of its workers have filed a grievance against the company over executive bonuses. A hearing on that matter is scheduled for Thursday.

“Their pay rates are already competitive, so why they’re entitled to a pay increase by definition is certainly debatable,” Mr. Schwartz said. “A nice-size signing bonus would go a long way.”

A U.A.W. spokeswoman, Michele Martin, said reports that the union had asked for bonuses of as much as $10,000 were “inaccurate” and creating “false expectations” among workers.

The bonuses are meant to increase the chances of ratification by rank-and-file members, but a large amount would undoubtedly draw criticism from opponents of G.M.’s government bailout and could even cause workers to think they are being taken.

“Most workers could see a large signing bonus almost as a sign of a bribe,” Mr. Chaison said. “If it’s too large then they’ll get suspicious about what they’re being asked to accept.”

The companies are expected to slightly increase pay for workers on the entry-level pay scale, which currently starts at $14 an hour, or half as much as most autoworkers earn.

Workers said that they expected the new second-tier pay scale to top out at about $18 an hour. U.A.W. and company officials, however, have not confirmed an amount they are discussing.

The union also is seeking to protect as many jobs as possible, and specifically wants to persuade G.M. to reopen closed plants in Tennessee and Wisconsin. But G.M. officials have said they will need to restart those plants only if market demand is sufficient, asserting that they do not need additional capacity yet.

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