A question on the mind of more and more Americans these days is, “why are my hours being cut at work?”
It’s not a new phenomenon, but it seems to have dramatically increased in frequency over the past 6 to 9 months. I’ve heard people complain about it in person, and even had some readers mention it on some of my posts.
As a personal anecdote, I was in the Traverse City, Michigan area this past week, a very nice town with nice shops in the downtown area. I asked one of the clerks about the number of hours she was working and they were reduced from 32 to 25, same as with numerous other shops on the same street. She did not understand why. She does now.
What he’s talking about is a surge of employers cutting workers’ hours back from full time to part time to avoid a $3,000 per employee fine that is central to Obamacare (also known by the Orwellian name of Affordable Health Care for America Act).
In essence, it is simply cheaper for companies to hire 2 part time workers instead of 1 full time worker.
Not all Hours Being Cut at Work
Obviously, this is not true in many fields of work. It’s very costly to hire and train people for certain jobs and the overall investment made by the employer is well worth the additional costs. But for low wage jobs, where workers are more easily replaced, many employers are deciding it’s not worth the cost.
This has largely been in the retail and leisure & hospitality sectors.
The implications of hours being cut at work for so many service sector employees are that they not only have to work harder for less (and likely lose benefits in the process), but the recent spike in positive jobs reports are temporary. As employers replace full time workers with part time workers, the “jobs created” number will be artificially high. Once the shift is made, the job “creation” will subside to the tepid rate that has become characteristic of this “new normal” in America today.
The “Greatest Generation” (so called for the ultimate sacrifice of so many to beat back the totalitarian menace of WWII) mostly avoided debt, and believed in saving a sizeable portion of their earnings. This is mostly due to having grown up in the Great Depression, but it was also before the world became awash in cheap credit.
Their offspring however have strayed from this path.
But as the Yahoo! News article above states, the Boomers retirement crisis is largely of their own making:
despite vanishing pensions, low 401k balances and threats to Social Security and other welfare programs, many retiring baby boomers have no desire to give up their current lifestyles.
Poor planning, and a feeling of entitlement have led to a generation completely unprepared for retirement. Because of this, Boomers are entering retirement with higher debt – credit card, mortgage and even student loan debt – than previous generations.
Debt fueled retirement crisis
While some of this debt could be attributed to rising health care costs, as well as student loan debt held from their children, a growing number of analysts also blame boomer efforts to keep up their lifestyles in retirement. Rising consumer and mortgage debt suggests that boomers believe their retirement incomes will be sufficient to support their desired lifestyles as well as service outstanding debts over the long haul.
This would be bad enough for the Boomers, but because they are so large a percentage of the population, their lack of preparedness will be a strain on an already stressed “social safety net”, which is a big part of why I no longer consider social security as part of my retirement planning.
Morality is such a downer, man
But what about the moral obligation to pay off these debts? Is it right to saddled future generations (and their children) with their debts?
Don’t ask the Boomers, they don’t see it as their problem:
roughly 80% of those surveyed indicated that they have no plans to pay off their debt anytime soon and would stay in debt throughout their retirement. The idea of boomers letting their heirs deal with the aftermath of their debts is also gaining prevalence.
In the 1960′s, their motto was: “If it feels good, do it!” Without any thought to the future consequences. it seems that spirit of “get yours while you can, and move on” is still alive and well with the 60′s generation.
Recession? What recession? In fact, everything is right back where we left off in 2008.
According to Experian Automotive, the average new car loan in the fourth quarter of 2012 was $26,691 and the term was an average of 65 months!
And that too is a record – one month longer than the previous record set in the third quarter of 2012.
This shows that automobiles are becoming less affordable with every passing quarter.
The average new auto loan also hit a new high – increasing by $272.00 to reach its highest total since the first quarter of 2008.
Why do new cars cost so much?
New vehicle prices have been steadily increasing in recent years as automakers have pushed new technology-like in-car entertainment/communication systems to differentiate their models. At the same time, as more Americans look to stay connected behind the wheel they are showing a greater willingness to pay more for the latest technology.
I suppose this is part of the problem, automakers feel they need to have such features just to entice 20-somethings into the show room. But the cost of technology comes down over time, so these new features alone can’t account for the hike.
What the article doesn’t tell you is that all the fuel mileage and environmental standards are hiking the cost of production greatly as well.
And there’s also the labor overhead. General Motors is on the hook for billions of dollars of benefits every year before a single car is made or sold. When GM was bailed out by the Obama administration in 2009 it avoided bankruptcy and as a result none of the contracts had to be renegotiated. I can only imagine how far in the hole GM is at the start of every fiscal year now.
Those costs have to get passed on to the consumer to some extent as well, and GM is not alone.
More subprime borrowers
As the economy has stabilized, lenders are increasingly giving auto loans for those with subprime or weak credit ratings.:
In the fourth quarter, there was a 30.9 percent increase in the number of new vehicles sold to those with deep subprime credit scores under 550. Loans to those with subprime credit scores between 550 and 619 jumped 11.5 percent.
That total is a whopping 43% of all new car loans in the fourth quarter of 2012 that went to subprime borrowers!
That’s the highest percentage of new car loans going to subprime buyers since late 2007.
The “New Normal” is looking more like business as usual to me.
In a nutshell, proponents of taxing the rich treat people as inanimate objects that will continue to engage in the same behavior at the same levels regardless of tax rates. Anyone who has to pay taxes knows this is ridiculous on its face, but then again many of the tax the rich crowd don’t pay taxes so that probably explains some of it…
Anyway, Sowell does a great job outlining how “Trickle Down Theory” is a political term – not an economic theory – and why “Tax Cuts for the Rich work”. Although “Trickle Down Theory” is a political phrase, it’s not a partisan idea – both Democrats and Republicans alike have tried tax cuts for the rich throughout the 20th century and they worked every time.
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