Explaining Southern California's economy

Bullet Points: Is the grocery workers' new contract a good deal?

Details on the new contract that the UFCW and the major California grocery chains negotiated — and that the union's membership has now approved — are still somewhat sketchy. I'm going to try to find out exactly what the numbers are, but in the meantime, here's a quick breakdown. 

  • According to the LA Times, UFCW members will now pay $7/week for individual health care and $15/week for family care, beginning next April. My understanding was that when a strike was in the offing, the chains wanted $9 and $23, for individuals and families respectively. But prior to this contract most employees were paying $0 for their health care, although so-called "second tier" workers — those hired after the strike in 2004 —were paying $7/$15. So my reading of the new contract is that ALL workers are now contributing to the fund. So while the stores didn't get the contributions they wanted, they did get everyone to contribute the pot, which means that...
  • ...the stores apprently don't have to up their contribution to the health care fund to insure its solvency. The fund had hit trouble because it had been running a deficit, tapping its reserve to cover health costs while operating under the terms of the 2007 contract. Back in 2007, the union and the chains had worked out a deal whereby the stores would be able to reduce their contribution to the health fund, from $3-4/hour to $2-3/hour, in exchange for not adhering to the provisions of the two-tier hiring structure. It bugged me that the union had in effect turned over what was a $260 million health-fund surplus to the stores, but a spokesman for the UFCW pointed out that this enabled the union to get many more families insured.
  • So under new contract, the UFCW's entire membership is insured, and although everyone is contributing. their contributions look like 2007 amounts, rather than 2011 numbers. That's a qualified win because the stores have successfully shifted a significant burden of health costs to workers who were formerly paying nothing. It looks as if they're "subsidizing" this with a wage increase. But there's a problem here, which is that health care costs are rising at a torrid rarte, much faster than wages can keep up.
  • The union was up against a very weak labor market and the threat from some of the chains to close stores. That probably took away some incentive to strike. But if you look at the cost of the last strike, estimated at $2 billion for the stores — not to mention their market-share loses to newcomers and upstarts — you could argue that the chains were willing to spend somewhere between $2 and $8 per union member or family per week, by reducing what they orginally demanded as a health contribution, to avoid losing money and share again.

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Visual Aid: Why self-employment isn't just for the young

This chart is from a Bureau of Labor Statistics working paper that was released in 2008, titled "Self-Employment Transitions among Older American Workers with Career Jobs." I know that's from a few years back — and the data itself is drawn from the 1997-2004 period — but you can see a clear trend: As workers age, they increasingly consider moving into self-employment. Particularly men. Some of this probably has to do with ongoing financial needs in retirement. But the data comes from a study of people aged 51-61, so the "transition" from full-time work to self-employed work is taking place well before the typical retirement age. 

Now connect this trend with what Sara Horowitz, founder of the Freelancers Union, has recently been saying about the changing nature of work in the Atlantic. You can then see that the "Gig Economy" isn't just about younger workers who are stuggling to find full-time jobs. It's also about older workers who are seeking new ways to work, either out of desire or necessity.

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Solyndragate: Picking winners will always be risky business

There's now pretty much a frenzy of Monday-morning quarterbacking going on with the Solyndra controversy. It boils down to essentially two core positions:

  • Solyndra was too risky a bet for the DOE to pony up a $535-million loan guarantee. The Atlantic's Megan McArdle has been grappling with this one, in strenuous detail, while somewhat evading the question of whether Solyndra needed to spend as much money as possible in a short period of time, to both achieve economies of scale and outrun a collapse in the price of silicon (Solyndra's solar panels didn't use this material).
  • Solyndra was a risky bet, but in the face of $30 billion in Chinese solar investment, the U.S. needs to leverage its innovation advantage to capture its share of the solar market. The government needs to subsidiize some of the risks and be willing tolerate failure in and effort to build up a new Green energy sector. I'm on this side, as is Wired's Jonah Lehrer and the New York Times' Joe Nocera. 

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Reportings: Yahoo takeover; Foxy Amazon; grocery contract; bad housing market

Fred Schuers ponders the various Yahoo-takeover scenarios: "No investor is more of a threat than hedge-fund powerhouse Daniel Loeb, who has recently acquired 5.2 percent of Yahoo's stock. Loeb has gone after companies he thinks are mis-managed before, but the level of vitriol -- and cash -- he’s throwing at the Yahoo board shows that he’s deadly earnest this time." (The Wrap)

 

Fresh off its sales-tax deal with California, Amazon lines up more streaming options from 20th Century Fox. The LA Times, unfortunately, has no details on the money involved. But then again, neither does anybody else. "News Corp.'s 20th Century Fox has reached a licensing deal that adds about 2,000 films and television shows from its library to Amazon.com's instant streaming service, bringing to 11,000 the number of titles available through Amazon Prime." (LAT)

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Visual Aid: California v. Texas on energy use

 

Gotta love Google Public Data Explorer and it's ability to generate cool charts. I like to keep track of how California is doing economically with respect to our big U.S. rival these days, Texas. So I checked out some data on energy expediture as a share of GDP — how much the U.S., California, and Texas are spending, out of all the money we rake in, on power, propulsion, and so on. You can see a big trend here: our energy expenditure peaked in 1981, declined for a long time, then began to climb back up in the 2000s before falling sharply again after the financial crisis in 2008. But look at where Texas has always been. Well above the national percentage, and waaayyy above the California numbers. I guess you could say that Texas, energy-wise, has always been a lot more expensive to power than either California or the nation as a whole.

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