Shutting Ourselves Off From the Global Economy Won’t Protect American Jobs

Friday, May 31st, 2013

Editor’s Note: This article was originally published on Free Enterprise

Those who think we can protect U.S. jobs by turning inward have got it exactly backwards. In fact, we must look beyond U.S. shores and pursue lucrative opportunities in world markets if we’re going to drive stronger growth at home, create more jobs for U.S. workers, and compete in a global economy.

Expanding our reach in the world will allow American businesses to grow. Five percent of global consumers live inside of the United States—the remaining 95% are spread out across the world. Foreign consumers represent 80% of the world’s buying power and 92% of economic growth. We need to go where the customers are.

Existing U.S. jobs and key industries depend on trade. Altogether, trade supports 38 million American jobs—more than one in five. One in three manufacturing jobs depends on exports, and for every three acres of American farmland, one is used to grow food that is exported to a growing, hungry global population.

U.S. small businesses are some of the strongest drivers of trade. More than 97% of the 293,000 U.S. companies that export their products are small and midsize outfits. While large companies account for a majority of exports, small and midsize businesses account for more than one-third of all U.S. merchandise exports.

Trade is also a two-way street. If we say ‘no thanks’ to global partners who wish to import goods and services to our markets, U.S. businesses and consumers will suffer. Imports mean lower prices and more choices for American families as they try to stretch their budgets and for companies seeking raw materials and other inputs. Access to imports boosts the purchasing power of the average American household by about $10,000 annually.

It’s true that the playing field for trade isn’t always level. Many countries slap tariffs on U.S. exports that are ten or twenty times higher than our own, and a web of other barriers often shut out U.S. goods and services. That’s why we must negotiate trade agreements to remove those obstacles. U.S. exports to new free trade agreement (FTA) partners have grown four times faster than U.S. exports globally in the years after they are implemented. The expansion in trade spurred by U.S. FTAs supports more than five million American jobs. And while they represent just 10% of global GDP, America’s 20 FTA partners buy nearly half of U.S. exports.

If we don’t engage in the world, we’ll get left in the dust while our global competitors do more business with each other. The world’s strongest and most dynamic economies are aggressively pursuing their own preferential trade deals. Nearly 100 free trade agreements are under negotiation worldwide. The United States has to be in the game so American workers, farmers, and companies can compete and win in the worldwide economy.

Finally, we must think globally in order to tackle our domestic unemployment crisis. Nearly 12 million Americans are unemployed. We estimate the United States will need to create 20 million jobs by the year 2020 to replace the jobs lost in the recession and to meet the needs of our growing workforce. Trade is one of the fastest, surest ways to meet that challenge.

The business community can play a role in expanding U.S. commerce around the world by pushing a number of trade priorities. We must throw our support behind new trade deals, including the Trans-Pacific Partnership agreement in the booming Asia-Pacific region, the Transatlantic Trade and Investment Pact with Europe, and a Trade in Services Agreement with nearly 50 countries. These and other opportunities would drive growth and job creation here at home. Global trade is not the problem, it’s the solution.

33 graduate from 10,000 Small Businesses, create 100+ jobs

Wednesday, May 29th, 2013

Last week, the 33 small business owners graduated from Utah’s inaugural Goldman Sachs 10,000 Small Businesses program cohort. The program, an overall $500 million investment, helps entrepreneurs create jobs and economic opportunity by providing them with greater access to education, financial capital and business support services.

The 33 graduates were selected out of a pool of 103 applicants to participate in the program on scholarship. Eleven sessions and more than one hundred hours of training from Salt Lake Community College (Goldman Sachs’ education partner in Utah) supported business growth by boosting operations and creating job opportunities.

“Goldman Sachs chose Salt Lake Community College because of our commitment to advance economic and workforce development,” SLCC President and CEO Dr. Cynthia Bioteau said in her Salt Lake Tribune op-ed. “The college’s first cohort of 33 companies has already created more than 80 new jobs — a remarkable accomplishment with just months of training.”

As it turns out, those numbers are actually even stronger. The business owners who participated in the 10,000 Small Businesses program created more than 100 jobs in the last five months. Those efforts boost other job creation goals including the Utah Jobs Agenda, a ten-point plan crafted by the Chamber to create 150,000 in five years, and Gov. Herbert’s plan to create 100,000 jobs in 1,000 days.

The graduates had nothing but glowing comments about the program, saying the best of the best were teaching and mentoring them, and that the resources and support they received were immensely helpful in furthering their business.

“The program helped me secure a line of credit to expand our business,” said Frank Dsouza, the owner of Seaich Corp., a Salt Lake City designer and importer of women’s accessories. He added three new employees to his business with help from 10,000 Small Businesses. “I needed financial resources, and the next thing I knew, I was in front of angel investors and bankers willing to do business with me. Growing up in India, I did not have an opportunity to further my education, so this was a dream come true,”

The businesses represented by the 10,000 Small Businesses participants covered a broad spectrum of industries, including manufacturing, transportation, design, retail, human services and more. Of the 33 businesses represented, 17 were women-owned making this the largest group of women that have participated in a single cohort since the program launched.

“Most of our large companies are not growing U.S. jobs, in fact many are doing the opposite,” wrote Jackie Zehner, CEO of Women Moving Millions, who attended the 10,000 Small Businesses graduation. “But the clouds parted on my gloomy view and the sun came out. Actually 33 suns came out. They were the smiling faces of the 33 graduates of the first cohort of the Salt Lake City 10,000 Small Business Program. In sharing their stories they gave me renewed hope that we can create jobs and grow our economy one business, one person at a time. Congratulations!”

If your business is past the start-up phase and ready to grow, now is the time to apply for the next cohort set to start this August. The application deadline is, Monday June 3. Learn more about applying at www.slcc.edu/10ksb.

Click here for the Salt Lake Tribune’s story on the 10,000 Small Businesses graduation.

Across the nation, more than 1,300 small business owners have participated in 10,000 Small Businesses program. Within six months of graduating, approximately 63 percent report increases in their revenues and 45 percent reported creating net new jobs in that same time frame.

With support of Governor Herbert, Goldman Sachs and the Goldman Sachs Foundation the program launched in Utah in July 2012. SLCC delivers the education portion of the program while capital is provided by Mountain West Small Business Finance. the State of Utah, Salt Lake Community College, Mountain West Small Business Finance, the Salt Lake Chamber, the Utah Hispanic Chamber, the Pete Suazo Business Center and the Utah Small Business Development Centers Network.

The program is currently operating in Chicago, Cleveland, Houston, Long Beach, Los Angeles, New Orleans, Philadelphia, New York and Salt Lake City and capital only states—Kentucky, Montana, Oregon, Tennessee and Washington

Enterprising States Are a Model for Growth

Thursday, May 16th, 2013

Last week the president kicked off a Jobs and Opportunity Tour in Austin, Texas—a city that’s flourishing because state and local leaders have cultivated a good business climate and helped nurture a booming high-tech industry.

The president is smart to step outside of Washington to see how enterprising states, like Texas, are driving stronger economic growth and job creation despite many antibusiness and antigrowth policies coming from the federal government. These states’ pro-growth policies are helping businesses succeed and people get back to work—and they are providing a good model for other state and national leaders on how to advance strong and competitive economies.

The U.S. Chamber of Commerce just released its 4th annual Enterprising States study, which evaluates states’ policies in five areas essential to jobs and growth: exports and international trade, entrepreneurship and innovation, business climate, talent pipeline, and infrastructure.

We found the following common practices among economically thriving states:

Enterprising states create low-tax environments that attract businesses from around the country and enhance their competitiveness. They invest in infrastructure to keep people and commerce moving smoothly and efficiently. They encourage and reward innovation and welcome start-ups. They see the tremendous value of free trade and embrace it. They cultivate people through workforce development and strong schools. They keep regulations light and curb lawsuit abuse. They enable the private sector to responsibly develop energy resources. They take steps to attract and revitalize manufacturing. And their state leaders often work closely with local and regional economic development organizations to support entrepreneurship and business expansion.

States that are doing all or many of these things are more resilient and better able to compete in the national and global economies. They have recovered much faster from the recession than states that haven’t adopted pro-growth policies. And they are watching their state economies expand, their unemployment rates fall, opportunities rise for their residents, and prosperity spread more quickly across their cities and communities.

As the president maps out his ongoing Jobs and Opportunity Tour, he may find the Enterprising States study to be a useful guide. By visiting the states that are growing and prospering, he would get a firsthand look at what works. And he would quickly see that an agenda of higher taxes, heavier regulations, and unsustainable spending is exactly the wrong way to get more jobs and to create greater opportunity.

To see where each state ranks in jobs, economic growth, and competitiveness, visit www.EnterprisingStates.com.

 

This article was written by Tom Donohue, President and CEO of the U.S. Chamber of Commerce, for Free Enterprise

Chamber Tackles Air Quality Issues, Saving Local Businesses Millions

Wednesday, May 15th, 2013

While clean energy progress remains slow at the national level, the Salt Lake Chamber has emerged as one of the top local chambers in the country driving economic development around clean energy, according to a first-of-its-kind report released today by Chambers for Innovation and Clean Energy (CICE).

With ten in-depth case studies of chambers located throughout the country, Local Chambers as Change Agents: Creating Economic Vitality through Clean Energy and Innovation provides the first comprehensive look into the role of the Salt Lake Chamber and other local chambers in attracting investment, supporting business growth and diversifying their local economies around clean energy and energy efficiency.

“Businesses look at our air quality as a major factor in deciding whether to relocate to the Salt Lake region,” said Lane Beattie, president and CEO of the Salt Lake Chamber. “By working with local businesses to reduce their fuel use or use cleaner fuels, the Salt Lake Chamber is helping to strengthen our economy and keep Salt Lake City competitive. The Salt Lake Chamber is proud to be recognized as a national leader in clean energy-related economic development.”

As highlighted in the new report, the Salt Lake Chamber founded the Clean Air Champions program in 2012, seeking to proactively address the impact of poor air quality on economic development along the Wasatch Front. Through its innovative program, the Chamber shares best practices and educates businesses on converting fleets to cleaner fuels, planning more efficient routes and using teleworking to cut fuel costs. The Chamber also recognizes companies that cut their fuel use—contributing to cleaner air—through its website and radio coverage.

Companies participating in the Clean Air Champions program include:

UPS, which has saved more than 10 million gallons of fuel since 2004 with smarter vehicle-route planning
Rio Tinto, a global mining company that operates in Utah and saves an average of $1.65 million per year with its no-idling policy for trucks
- Architectural Nexus, which has seen its travel expenses drop by nearly $72,000 annually after implementing a new video conferencing system in place of travel

“Our Clean Air Champions program shows fuel savings have a significant bottom-line benefit,” said Ryan Evans, vice president of business and community relations for the Salt Lake Chamber. “The program has helped establish the Chamber as a leader in addressing air quality challenges and has attracted many statewide partners to help convey they importance of clean air for Utah’s economy.”

“The Salt Lake Chamber’s Clean Air Champions program is improving the economic well-being and quality of life in Salt Lake City,” said Diane Doucette, executive director of Chambers for Innovation and Clean Energy. “Other local chambers can benefit by following the Salt Lake Chamber’s model of educating businesses on easy cost and fuel-saving techniques, and celebrating business champions that participate in the program.”

Based on surveys of hundreds of local chambers of commerce, CICE’s report highlights 10 chambers in Ohio, North Carolina, South Carolina, Illinois, Texas, Utah, Tennessee, Michigan, Massachusetts and California. By catalyzing clean energy projects in their own communities and convening stakeholders— including policymakers, regulators, entrepreneurs, investors, academics and labor groups—around clean energy efforts, these chambers are spurring new business opportunities for local companies and giving their member businesses a voice in policy discussions around clean energy and energy efficiency.

CICE’s report, Local Chambers as Change Agents, is available here. 

Chambers for Innovation and Clean Energy (CICE) is a national Clean Energy network and Information Hub for local chambers of commerce. Created and led by local chambers, CICE helps fellow chambers and their member companies successfully navigate and prosper in the clean energy space. CICE provides access to clean energy information, best practices, energy experts, incentives, and business opportunities. CICE’s Advisory Council includes Chamber CEOs from every region of the country. Visit CICE at www.chambersforinnovation.com.

Medical device tax hurts innovation, jobs

Friday, April 26th, 2013

 

Covidien PLC, whose surgical instruments are shown here, laid off 200 workers in the U.S. and moved production to Costa Rica and Mexico in part because of the medical device tax. Photo: David Maxwell/Bloomberg

Editor’s Note: This article originally appeared on Free Enterprise

In December 2012, Christine Jacobs, CEO of Theragenics Corp., wrote President Obama to explain why her company would begin shifting manufacturing of surgical and cancer treatment devices to Costa Rica.

The reason for the move: the 2.3 percent tax on medical devices in the president’s controversial 2010 health care law would make it difficult to maintain operations in the United States, Jacobs argued.

“I am sorry to admit we have to ‘throw in the towel,’ Mr. President,” Jacobs wrote. “Our 626 employees’ futures are now uncertain. The cost of regulation, legislation, and now the device tax has provided an atmosphere that is close to untenable.”

The new device tax, which took effect in January, takes a 2.3 percent bite from medical device manufacturers’ total revenues. That levy lands on a wide range of medical devices and health care technologies—everything from tongue depressors to cardiac stents to radiotherapy equipment. (Consumer medical goods purchased at the retail level, like Band-Aids, are excluded.)

The tax is a key funding source for the president’s health care plan: it’s projected to generate $3.2 billion per year in revenue over the next decade, according to the Tax Foundation.

But the tax also brings potential negative consequences for an industry that up until now has been a U.S. leader. Those unintended consequences include a slowdown in technological innovation, reduced quality of care for patients, and a hit to U.S. jobs in the middle of a sluggish recovery. And that has officials in Washington debating what to do about the increasingly unpopular tax.

Impact on innovation and patient care

Critics dub the medical device levy a “tax on innovation” for the effect it will have on technological development. They emphasize how over the last few decades, innovation in medical technologies and devices has contributed to improved health outcomes and longer lifespans for Americans. But taxing these innovations could prove costly, industry leaders warn.

Dan Moore (president and CEO of Cyberonics), Greg Sorensen (CEO of Siemens Healthcare North America) and Timothy M. Ring (chairman and CEO of C.R. Baird) warned of the effects the tax will have on innovation in the medical device industry in an op-ed published in Politico in November 2012.

The tax would land most heavily on many smaller companies and start-ups that are focused on bringing new cutting edge technologies to market, they wrote. Since these companies may have lower revenues and tighter profit margins, a tax on revenues will hinder their research and development of new products.

That crimping of innovation will have a real effect on the patients who are the end beneficiaries of new technologies, they argued, along with higher costs across the board.

“If the device tax goes into effect, the march of medical innovation will be inhibited and patient access to the next generation of medical technology won’t be realized,” Moore, Sorensen and Ring concluded. Their warnings went unheeded, as the tax took effect at the beginning of this year.

The inhibition of medical innovation is likely to be reflected in the president’s own priorities for federally directed research. To take one example, President Obama’s early April launch of the Brain Research Through Advancing Innovative Neurotechnologies (BRAIN) Initiative was pitched as an “effort to revolutionize our understanding of the human mind and uncover new ways to treat, prevent, and cure brain disorders like Alzheimer’s, schizophrenia, autism, epilepsy, and traumatic brain injury.”

But in an April 15 Wall Street Journal opinion piece, Sorenson of Siemens Healthcare argues that the medical device tax will direct corporate dollars away from research to meet tax obligations—undermining the much-vaunted BRAIN initiative.

“The medical-device tax decelerates and devalues innovation at the very moment when medicine is on the verge of historic breakthroughs,” Sorenson writes. “It is foolhardy to believe that the medical technology community can spark new innovation while the government is overtaxing it.”

The tax’s unintended consequences will be felt even beyond the realm of health care for humans. A 2012 review of IRS regulations by the American Veterinary Medical Association (AVMA) found that the device tax would also apply to many devices and technologies commonly used by veterinarians.

“It’s reasonable to believe that the tax could increase the cost of providing veterinary medical care,” the AVMA analysis concludes.

Higher costs could spark industry exodus

For medical device manufacturers, the new tax is only the latest in a barrage of rising costs. Most manufacturers, large and small, are also contending with additional higher costs for employee health care, unemployment insurance, and heavier reporting and compliance requirements under new Dodd-Frank financial regulations.

The combined effect of these growing costs may be to drive medical technology manufacturers out of the United States in search of more hospitable locations around the world, industry leaders warn.

“If you put all those things together and you wanted to drive an industry out of this country, you couldn’t have decided it any better,” Steve Ferguson, chairman of the board of Cook Medical, said in a 2011 interview. “You’ve got a lot of factors in there, but this [the medical device tax] was kind of the final blow for companies. You put all those factors together and everyone’s saying, let’s just move out of the country.”

That dynamic is expected to have a negative impact on domestic employment, given that the medical device industry directly employs more than 400,000 workers and supports an additional two million jobs in the U.S., according to Moore, Sorensen and Ring. A studyconducted for the industry in 2011 by two leading economists estimated that more than 43,000 domestic jobs, representing more than $3.5 billion in employee compensation, could be lost due to the tax.

In addition to Theragenics’ shift to Central America, other medical device manufacturers driven by to move operations outside the United States in recent years in anticipation of the medical device tax include Covidien PLC and Boston Scientific. In November of last year, U.S.-based Stryker Instruments announced plans to invest $30 million in a new research and development facility in County Cork, Ireland.

Meanwhile, a leading medical device conference hosted by the Surfaces in Biomaterials Foundation moved to Dublin, Ireland, in 2012—the first time the conference had left the United States, suggesting the industry is broadening its horizons about opportunities abroad.

What will D.C. do?

In Washington, bipartisan opposition to the tax has mushroomed over the last several months.

In the House of Representatives, Rep. Erik Paulsen, a Minnesota Republican, has introduced legislation to remove the medical device tax, gathering 218 co-sponsors along the way. Meanwhile, in the Senate, 79 senators voted to repeal the tax in March during debate on the budget—but that was a non-binding vote.

“Not only is repeal important to the 400,000 Americans whose jobs this vital industry supports, but for the countless patients and consumers who benefit from the life-saving and life-improving technologies developed by our nation’s medical device innovators,” Paulsen says in a statement.

But is the Obama administration prepared to revisit the medical device tax? At a Congressional hearing on April 16, Treasury Secretary Jack Lew defended the tax but suggested it could be redesigned to lessen the blow to innovation. “The idea was not to target start-ups,” Lew said.

Thus far, that’s the furthest the Obama administration has gone in suggesting the tax needs rethinking. So for the time being, the medical device tax, and the perils it poses to a leading industry, remain in full force.

Utah’s economic growth continues, unemployment falls

Friday, April 19th, 2013

Utah’s economic hot streak continues. New numbers released today by the Dept. of Workforce Services show the state’s unemployment rate dropped while job growth continues at a pace above the historical average.

From March 2012 to last month, the Utah economy added 48,700 jobs, a strong performance that cut the unemployment rate from 5.2 percent to 4.9 percent.

“High unemployment was the scar of the Great Recession,” said Natalie Gochnour, chief economist at the Salt Lake Chamber. “Today’s economic report shows Utah is on the march to full employment.”

Perhaps more impressive than the declining unemployment rate is the job growth figure. For the second consecutive month Utah’s economy has grown by 4.0 percent. The state’s historical average growth rate is around 3.1 percent.

Compare Utah’s economy to the national picture and the numbers are even more impressive. The Beehive State now has unemployment more than 2.5 points below the national rate and the 4.0 percent economic growth far outpaces the national rate of 1.5 percent.

Beauty and the Beast: The Utah economy and the Sequester

Friday, April 19th, 2013

Editor’s note: This post was originally published on ksl.com. It is authored by Marty Carpenter, executive vice president of communication at the Salt Lake Chamber. 

Just over one month into the federal government’s self-imposed, across-the-board budget cuts—known as “The Sequester” like it is some kind of bad summer horror flick—it is worth some discussion of what the impact has been so far, how it stacks up to the pre-sequester rhetoric and what we can expect going forward here in Utah.

There was a lot of panic about the sequester in the final days of February. We were told it would hurt the government’s ability to properly inspect beef, defend our nation and a whole host of other things.

Politico reports President Obama saying: “Are you willing to see a bunch of first responders lose their job because you want to protect some special interest tax loophole? Are you willing to have teachers laid off, or kids not have access to Head Start, or deeper cuts in student loan programs just because you want to protect a special tax interest loophole that the vast majority of Americans don’t benefit from? That’s the choice. That’s the question.”

Peggy Noonan wrote in the Wall Street Journal that Maxine Waters, a 22-year veteran of the House from California, warned of “over 170 million jobs that could be lost.” Of course, that’s more jobs than we currently have in the entire country. So maybe some people were letting emotion get the best of them.

Just over 30 days later, a slightly modified message is taking hold. Over the weekend, Politico published a story saying the “much-feared budget ax is turning out to be a slow-rolling series of snips, with effects that have been much more gradual or modest than projected.”

The full impact of sequestration will not be felt all at once… but it will be felt. And just because it is designed as an across-the-board cut, doesn’t mean it will impact everyone equally.

You have probably heard that if you try to cook a frog by throwing him in a pot of boiling water, he’ll jump right out. But if you put a frog in a pot of water at room temperature and slowly turn up the heat, he will sit there until he boils.

Sequestration is a slow boil. Those claiming the impacts will not be felt are like a frog just waiting to boil.

The United States government spends more than it takes in—so much more, in fact, that you cannot close the gap by raising taxes. Not on the wealthy. Not on everyone. So we have to make some cuts. The basic failure of sequestration is that it exempts Social Security, Medicare and Medicaid. Without reforming entitlements, there’s no path to a balanced budget and the eventual elimination of the national debt.

What it does instead is cut national defense by 7.9 percent and must be applied equally to every “program, project and activity” across the board. We’re taking a butcher’s knife to the budget. What we need is a scalpel. Of course we need cuts, but we need to be thoughtful about them.

Sequestration in Utah New economic numbers released a last month show Utah’s economy measured by jobs is now growing at 4 .0 percent—well above our historical average of approximately 3.1 percent and far outpacing the national economy at 1.5 percent. Our unemployment has also dropped to 5.2 percent—also much better than the national rate of 7.7 percent.

I mentioned earlier that these cuts do not impact everyone equally. That’s good news for some. It’s not good news for Utah.

The Salt Lake Chamber estimates Utah is 25 percent more dependent on the federal government than the average state. That means the cuts will be felt here a little more than elsewhere. Federal workers, civilian defense employees and recipients of federal aid will feel the greatest impact of the federal cuts. Utah has 32,000 federal employees and 15,000 civilian defense workers.

The full impact of the cuts has yet to be felt, but unless a new deal is cut, they are coming our way soon.

Utah’s Silicon Slopes hit light speed with Google Fiber

Thursday, April 18th, 2013

Provo’s “epic” announcement was indeed exciting – as Provo residents and businesses soon will have access to maybe the fastest internet on the planet. Pending approval from the Provo City Council, a myriad of public hearings in the coming days and a few technicalities, Provo will become just the third city in the nation to be connected with Google’s ultra-fast internet access. Additionally, as Google plans to take over Provo’s already existing fiber backbone and upgrade the system, Provo will likely be the first Google Fiber system online.

Utah’s “Silicon Slopes,” already home to hundreds of tech companies, will now have a substantial competitive advantage with speeds up to 100-times faster than current service. This competitive advantage is also destined to spur continued economic development, entrepreneurship and innovation throughout the state.

The Salt Lake Chamber, Utah’s business leader, applauds the efforts of all those involved in making this partnership a reality. In combination with Google’s recent partnership with the Utah Transit Authority and now this substantial investment in Utah, the Chamber is excited for Google’s continued contribution and participation in our community.

Minimum wage, investment in education and good news in housing

Friday, March 8th, 2013

Editor’s note: This post was originally published on ksl.com, Wed., March 6, 2013, and is authored by Marty Carpenter, executive vice president of communication at the Salt Lake Chamber. 

If there is one problem with writing a monthly business column it is that there are often several topics you want to cover that come and go during those weeks in between publishing dates. So, today, I want to cover a few that didn’t quite line up just right on the editorial calendar.

Raising the minimum wage
During the State of the Union address last month, President Obama made his argument to raise the minimum wage from $7.25 per hour to $9.00 per hour. Just this morning there is news that a bill to raise the minimum wage to $10.10 per hour and tying the rate to inflation will be introduced in the House and the Senate.

Said the president in the State of the Union: “Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets.”

At first glance, he makes a compelling case.

That’s why things are almost always worth a second glance.

The problem with this approach—a government mandate of revenue distribution within a private business—is that it doesn’t increase revenue in any way.

Let’s say you have a business with 10 employees making the minimum wage. Suddenly the government increases the minimum wage by $1.75 per hour. That means with the same amount of money coming into your business you now have to pay more in compensation. You either need to make cuts somewhere else so you can increase the amount you pay each of these workers, find a way to do more with the same amount of workers and increase the overall revenue, cut the amount of hours those employees work or eliminate some of the jobs.

By my count that means there is, at best, a 50-50 chance the workers actually get the raise.

Raising the minimum wage actually has the opposite effect than what the president is arguing. It will cost some of the most vulnerable workers hours they count on and it will cost some their jobs.

If you are a minimum wage employee, you might think it sounds pretty good that the leader of the free world would like to give you a raise. I can understand that. But if you are one of the ten minimum wage employees at your business, you better hope you are one of the best and you better be willing to do the work of the three that are about to be laid off—because that’s most likely the next step.

No matter what your profession, consider what would happen if the government were to mandate you receive a salary increase of 24 percent. Do you think you would be more likely to show up at work the next day making more money… or do you think you would be more likely to have your position elinated?

This idea disproportionately hurts the low-wage workers it is trying to benefit and it makes it more difficult for businesses to hire young people making their first entrance into the workforce.

Of course, there’s also that nagging little detail that raising the minimum wage to $9 per hour still isn’t a great living. Full time work at the current minimum wage earns you just over $15,000 per year. At the rate the president is suggesting, it jumps to $18,720.

The way to make more money in a free enterprise system is to increase your value in the marketplace. You have to enhance your skills, increase your education or find some way to be of greater value to your employer.

Re-slicing the pie doesn’t make any more pie.

Funding education
Speaking of enhancing skills, education continues to be the big issue on Capitol Hill as we head into crunch time in the appropriations process. For those who don’t speak the language of the Legislature, appropriations is the process by which the House and Senate decide who gets the money and just how much.

Last Sunday, Utah’s business community ran a full-page ad in both major daily newspapers thanking the members of the Legislature for their service and calling for three unifying elements of a bold, multi-year agenda:

1. Pass a joint resolution adopting the twin goals of 90 percent reading and math proficiency in elementary schools and 66 percent of adults with a postsecondary degree or certificate by 2020.

2. Make strategic investments toward these measurable goals. As a starting point, and with appreciation for the budget challenges Utah faces, we recommend the following new investments in education: $20 million for higher education’s 66 percent plan, $15 million for a STEM action center, $9 million for additional postsecondary certificates, $20 million for early intervention and children at risk, $1 million for ACT exams for every high school student and full commitment to fund computer-adaptive testing in Utah schools.

3. Commit to the development of a collaborative, 10-year unified education plan that can be adopted by the end of 2014.

Rarely is the decision to invest found on the path of least resistance. It is a difficult, yet time-tested principle that dedicating money you have today to grow opportunity and return on investment in the future is the right way to go.

The Legislature and the governor have a track record of making solid investments for our state—even in difficult economic circumstances. Utah’s economy is growing and we have some ability to invest. Providing the money for education will pay off.

Housing
Finally, a quick word about the housing market. My friend, Rob Brough, wrote earlier this week that the Utah housing market is ready to heat up. Housing experts across the state agree with him.

When the economy turned sour in 2008, the generally accepted refrain was that housing got us into the mess and housing would have to help get us out. One of the biggest problems we faced when the housing bubble burst was excess inventory. It takes time to restore balance in the market. Today, the number of existing homes available has dropped by 33 percent in the past 12 months. Since April 2012, home prices in the Salt Lake area have risen every month from the same month the year prior.

The analysis: housing—always a cyclical business—is primed for an up-cycle.

That’s good news for those looking to sell in the next 12-18 months in particular, and it’s good news for the rest of us, too.

 

Positive outlook for Utah housing market

Tuesday, February 26th, 2013

(L to R): Natalie Gochnour, Bryson Garbett, Grant Whitaker, Clark Ivory

When the economy hit a historic rough patch in the fall of 2008, it was housing that was hardest hit. But three housing industry leaders told the Salt Lake Chamber Board of Governors that things have turned around and they are optimistic about the future.

“The refrain was that housing got us into this mess and housing will be a key indicator that we’ve put it behind us,” says Natalie Gochnour, chief economist of the Salt Lake Chamber who moderated the discussion.

The Utah economy lost nearly 100,000 jobs during the Great Recession–some 60,000 were related to housing. While the state economy has regained all 100,000 jobs lost, housing has been slower to recover.

“Housing is definitely coming back,” says Grant Whitaker, president and CEO of Utah Housing Corporation. “From 2007-2011 Utah’s population grew by 237,000 people and they have to live somewhere. That’s made a big difference for us.”

While one in five Utah homeowners are underwater (they owe more on their homes than the home is currently worth) and many are hesitant to sell, the number of existing homes available has dropped by 33 percent in the past 12 months. Our experts say housing is a cyclical business and Utah is ready for an up-cycle.

“The biggest problem we have is finding subcontractors–dry wallers, roofers and plumbers,” says Clark Ivory, CEO of Ivory Homes. “That’s going to make growth more of a challenge.”

Ivory also says there has been a significant shift in the types of homes now in demand. In Salt Lake County, single-family homes are up, but there is a significant increase in homes for single occupants.

“The thing that is most positive is household creation,” says Ivory. “Utah is always strong in this area, but our in-migration has been stronger than in surrounding states.”

Bryson Garbett, president of Garbett Homes, also thinks the outlook for the next 24 months is positive.

“There have been a lot of changes in the way we build homes when it come to energy efficiency,” he says noting those improvements can save homeowners money and serve as an enticement to buy. “Things look very positive.”

Source: Garbett Homes