How are you doing in today’s variable economy? Your point of view will depend on your specific situation. In this blog we will try to look at different perspectives to explore today’s economic climate. The real question we are exploring is: “How’s your particular economy?”
As a “Typical American Worker”
Average Household income
The average household income in 2015 was $53,657, which is down from $54,462 in 2014 and far below the peak in 1999. The minimum wage nationwide sits at $7.50 hr and personal income is lower than it was in 2007. For the third year in a row, income has stagnated following 2 years of declines. The poverty rate is currently at 14.5%. Work related costs such as transportation, childcare, medical and tax expenses drove some people into poverty. These incurred costs outweighed the benefits of assistance programs such as food stamps housing vouchers tax credits etc.
Inflation, in all of it’s different forms affect the average American’s ability to purchase goods. The Consumer Price Index states that as prices go up, consumers ability to buy products is diminished. The employment cost index shows cost of labor increases and decreases over a period of time. Basically, if employee wages remain steady, but cost of goods increases, employees can afford to make less purchases.With wage inflation (higher pay), employees gain more purchasing power. One of the most common misconceptions is that when wages rise, prices on goods rise too. There is no evidence to support that claim, however.
Unemployment and Underemployment Statistics (2015)
As of 2015, 14.6% of U.S. workers are underemployed, though this varies from state to state. Unemployment declined from 2010 to 2014. It fell from 8.1% to 6.2% and is was at 5% in 2015.
Impact of Imports into the U.S.A.
Trade creates new jobs in exporting countries and destroys jobs when imports replace the outputs of domestic firms. Because trade deficits have risen over the past decade, more jobs have been displaced by imports than created by exports. While job-loss caused by rising trade deficits is the most visible effect of globalization, its impact on wages is a concern to an even much larger number of workers. Even if trade flows begin to balance and there is less job loss in the future, the integration of the U.S. economy with those of its low-wage trading partners will pull down wages for many American workers, and will contribute to the ever rising inequality of incomes in the U.S. economy.
As a small business owner
The Impact of Taxes and Regulation
The general consensus is that regulation hinders small business formation, growth, and job creation.Compliance with governmental rules and laws is a greater burden for small companies than large ones. Regulation increases operation costs for small businesses, especially because they do not have the larger infrastructure that a larger business has to deal with these challenges.
As Congress debates tax reform, it is necessary to keep in mind the issues that are most important to small business owners. High tax rates and the complexity of the current tax code are persistent problems for small business owners. Fundamental tax reform is one way that Congress can create an economic environment which helps small businesses thrive. High tax rates are a problem for small businesses because they depend on using the after-tax income that owners need to invest back in their businesses. This income is used to assure a company’s viability and growth as a creator of jobs. Low tax rates are also essential for small business owners so that they can keep more of their money to reinvest in and grow their business.
The 2016 Outlook for the Business Climate
The Index of Small Business Optimism fell 1.3 points from December, falling to 93.9. Neither the unstable stock market nor the Federal Reserve’s rate hike left much of a mark on small business owners beyond a drop in the Index represented by lowered expectations for business conditions and expected real sales volumes. Those two Index components accounted for most of the decline. The US economy is likely to continue its slow recovery, with the support of low energy prices, even with uncertainty about policy.
The Best and Worst type of Businesses to be in
There are many options for start-up businesses. As far as what types of businesses are a good or bad investment, some choices are better than others. Limousine services and computer shops have difficulty succeeding, as well as travel agencies, since their services are becoming obsolete. A very difficult business to get off the ground is a retail business because there are already so many retail stores to compete with. The restaurant business is also very difficult to get into and high-risk, so the success rate is low. There are good options out there, however. Some good choices for a small business venture are consulting and service businesses. These businesses help serve the growing market of tech-savvy consumers in need of these types of services. The best choice for most people looking to start a business is to invest in a franchise, as they already have a built-in customer base. Another good bet is to buy an existing business. There are many more options out there, you just need to see where your skill and interest fit in to find the right fit.
As a fortune 500 company
The Impact of Taxes and Regulation
The 500 largest American companies hold more than $2.1 trillion in accumulated profits offshore to avoid U.S. taxes and would collectively owe an estimated $620 billion in U.S. taxes if they repatriated the funds, according to a study released on Tuesday. The study found that nearly three-quarters of the firms on the Fortune 500 list of biggest American companies by gross revenue operate tax haven subsidiaries in countries like Bermuda, Ireland, Luxembourg and the Netherlands.
The 2016 Outlook for the Businesses Climate
As far as the outlook on the business climate forecast for fortune 500 companies, optimism is lower but planned spending is still on the rise. Companies still plan to invest on marketing, advertising and operational expenses.The Best and Worst type of Businesses to be in
Information technology, professional service, and consulting group companies are good bets. Some other fortune 500 companies that are succeeding deal in financial services and insurance. Biotechnology and pharmaceuticals companies are also very successful.
Some of the worst performers have seen a large drop in profits and stock prices as well as a decreased workforce. Some examples are Peabody Energy, a coal mining company, and MRC Global which makes pipes for oil drilling. Freeport- McMoRan, a gold and copper mining company who also dabbles in oil and gas drilling, is also affected. As technologies advance, services for older technologies decrease.
As a “Typical Employee”
Based on what your “disposable income” and household expenses are, how do you think you are doing financially? Are you actually better off now than you were in 2006 or 2007?. Expenses on goods and services has gone up, without a significant rise in income for the typical family. To help cover rising costs on everything from housing to food and bill expenditures, people are working harder and longer, and getting less payoff for their work.
The question remains; Are you better off working for a large vs. a small business for the foreseeable future? Working for a large company can provide a certain amount of job benefits and implied security, but the fact remains that as an “average employee” you are perceived as a very small cog in an enormous machine, a cog that is easily replaceable. Small businesses provide more jobs for people than large companies, so their success is crucial to maintaining our economy. We believe that small business is what the economy in the U.S. is built upon, and protecting and helping these businesses is what best exemplifies the embodiment of the American dream.
Fortune Magazine, (http://fortune.com/2015/06/25/fortune-500-worst-performing-stocks/)
The New York Times, (http://economix.blogs.nytimes.com/2008/12/10/the-impact-of-foreign-trade-on-the-economy/?_r=0)
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