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As a St. Louis area resident this was a surprise to me: Dice.com has ranked St. Louis as the nation's fastest-growing tech hub!
St. Louis - The Golden Arch - The number of St. Louis-based technology jobs posted on Dice jumped 25 percent year/year. And those new tech jobs are coming at a higher price tag too: average tech salaries are up 13 percent year/year to $81,245. Popular jobs? Developers, programmers and consultants. St. Louis is becoming a start-up town, with support from the St. Louis Information Technology Entrepreneur Network.
Great news, since I plan to stay here for a while.
You probably know how much you earn per hour gross, on paper. Even if you're salaried this is usually easy to calculate: take your annual salary and divide by 2,080 work-hours per year. But is that really what your hard work is bringing home? Not even close. Here are some additional factors you need to put into your formula.
- Taxes. You only pay taxes because you have income, so they're a direct subtraction from your gross.
- Work-related expenses. These are other expenses that you only pay because you're working. Subtract these from your annual salary. This category includes things like:
- Child care
- Gas and depreciation on your car due to commuting
- Eating out at lunch
- Work clothes
- Lawn care or housekeeping that you pay someone else to do
- Now increase the number of hours in your denominator from 2,080 by including the amount of non-paid time you spend on work. This includes things like:
- Getting dressed and prepped for work each morning
- Driving to and from work
- Dropping kids off and picking them up from childcare
- Time spent away from home due to work travel
- Unpaid overtime
Say you earn a great salary: $104,000 per year! By normal calculation that would be $50/hour. Not bad, right? But let's incorporate some of the adjustments above.
- Taxes: 15% for state and federal, since you probably have some deductions. Could be higher. -$15,600
- Work-related expenses:
- Child care: $500/month (only one kid??) -$6,000
- Gas and car: $0.55/mile (national average) for 16 miles one-way is $17.60 per day, for 50 weeks per year. -$4,400
- Lunch: $30/week. -$1,500
- Work clothes: Who knows... -$2,000
- Lawn and housekeeping: You are cheap and do it yourself!
- Work-related time:
- Getting dressed and prepped for work: 30 minutes per day. 125 hours
- Commuting: 25 minutes each way. 208 hours
- Child care driving: Who knows... 10 minutes per day. 42 hours
- Work travel: Zero, right?
- Unpaid overtime: Zero, right?
So what's the net? Actual annual pay: $74,500. Actual work-related time cost: 2,455. Actual pay per hour: $30.34.
If you make $52,000 salary per year and have similar expenses and time-sinks you might only be taking home $14/hour or less.
Please note that these calculations assume no unpaid overtime, no work travel, only one child in paid care, no reduction in income due to Social Security or Medicare, etc.
So, how much do you enjoy your job now?
Mr. Money Mustache has an article about how to prosper in booms and busts that is interesting. I'll note a couple disagreements.
In booms he suggests:
- Ratchet up your job.
- Earn more and save everything you can. Crap is overpriced now, so don't buy much. Downsize your house or move to a rental.
- Reduce exposure to equities and buy more bonds. I don't agree with this, at least with regards to our current "boom". Interest rates are far too low to buy bonds now.
And in busts:
- Basically hunker down in your job and be glad that you didn't overspend during the boom times.
- Upsize your house, if desired. Buy rental property.
- Buy all the equities you can.
Overall these are good tips, at least if you're planning to make it to the next end of the cycle. One of the main components that MMM neglects is the effect of inflation. Inflation and interest rates are often not cyclical with booms and busts, and they can complicate all your rules-of-thumb.
No matter how much or how little money you make each year, the date you'll be able to retire depends on only one number: the percentage of your take-home pay that you save. It's obvious, but the more you save now the less you're spending. Lower lifestyle expenses means that the amount you save will last you longer in your retirement. Mr. Money Mustache has a handy chart to help you calculate how many years you'll have to work based on your savings rate.
The key insight is worth repeating: frugality now gets you double benefits. If you spend less now you will save more now, and your cost of living will be lower when you retire because you'll be used to frugal living. Here's the chart:
MMM saved 65% of his take-home pay and retired in around 10 years. I'm not doing that well, but looking at this chart sure inspires me to save more.
As usual the banks are saved while the young and poor suffer. Capitalism? No, crony capitalism and socialism. The ongoing "debt crisis" is really just a fancy name for the financial rape of the young by their parents and grandparents.
Hope and Change economies are crony capitalist systems which pick winners and losers. They maintain the status quo at all costs -- and reward those who have captured government over those who innovate. Thus the Reuters headline "Banks saved, but Europe risks 'losing a generation'" is perfectly comprehensible.
What else would happen but that?
Naturally this plight is explained to the desperate voters as the consequence of the remaining vestiges of capitalism. The growing impoverishment, we are told, is occurring because socialism hasn't gone far enough. Only give the government more power and all will be well. And so the low information voters turn out in the streets offering to exchange what little freedom they have left for some low paying jobs and a little welfare. The poorer they are the more eager they become to trade their last liberties for one more benefits check.
Is anyone surprised that internet behemoth Amazon now supports an internet sales tax? Why would they do such a thing? The explanation is simple: the new law will be complex and difficult to comply with, which will shut down a lot of Amazon's online competitors.
The bill pits brick-and-mortar stores like Wal-Mart against online services such as eBay. Amazon.com, which initially fought efforts in some states to make it collect sales taxes, supports it too. Amazon and Best Buy have joined a group of retailers called the Marketplace Fairness Coalition to lobby on behalf of the bill.
"Amazon.com has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest-volume sellers," Paul Misener, Amazon's vice president of global public policy, said in a recent letter to senators.
Many people mistakenly believe that large companies generally resist regulation. In reality, large companies often lobby in favor of complex and expensive regulations because the compliance cost prevents smaller companies from competing.
Today's plunge in gold prices reinforces my broad, long-term investment strategy.
Gold plunged for the second straight day Monday, dropping more than 8% at midday in what was shaping up as the metal's biggest one-day percentage decline in 30 years. ...
"Everybody that's bought for the past two years, since April 2011, is losing money," said Ira Epstein, director of the Ira Epstein division at the Linn Group futures brokerage. "It's a sea of red," he said.
There's nothing magical about gold, but the fact that so many people treat it like a magic totem is enough to scare me away. Gold's movement is almost entirely irrational, so why would you want to play that game?
At least if you buy actual gold and maintain physical possession you can theoretically use it to buy things after the total collapse of global civilization, but what's the point in buying pieces of paper that say you own gold in someone else's vault? It's voodoo.
Everyone in the world with a bank account broke into a cold sweat when they learned about the EU and the Cypriot government raiding private bank accounts to bailout the banks. That could never happen here, right? Well, what's happening in the United States is much more subtle and also much more sinister. Thomas Sowell describes how inflation is worse than stealing bank deposits.
Does that mean that Americans' money is safe in banks? Yes and no. The U.S. government is very unlikely to just seize money wholesale from people's bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe? No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever politicians feel like using it for. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save before you are even aware, much less alarmed.
That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about "quantitative easing," what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do -- and has been doing in recent years, to the tune of tens of billions of dollars a month.
When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money.
This new money buys just as much as the money you sacrificed to save for years. More money in circulation, without a corresponding increase in output, means rising prices. Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government. Is that really different from what Cyprus has done?
The Fed has been printing money at a breakneck pace for five years now and we haven't seen a lot of inflation, right? Well, except for food and energy, which are conveniently excluded from "core inflation". Health care, ammunition and guns have gone up a lot, too. What's more, prices for goods that should be declining due to information technology improvements may instead be staying level, but that's a net level of inflation that's hard to measure.
Inflation has numerous advantages over stealing bank deposits:
1. Inflation lets the government tax everyone in the world who uses dollars. All dollars everywhere are devalued, which basically let's us "tax" all the countries and organizations who hold trillions of dollars in their foreign reserves. The Chinese can't just divest themselves of all those dollars, but they do complain a lot.
2. Inflation reduces the value of our national debt and deficit. This is the reason that I'm convinced that inflation is a goal for our government. There's simply no other way to pay off the debt we're accumulating. This is a good reason to be a borrower right now, as long as you can borrow at a fixed interest rate.
3. Equities and capital assets can float with (moderate) levels of inflation.
4. A weaker dollar enables greater US exports of all kinds.
5. Inflation helps moderate sticky economic factors, like wages and house prices. Unemployed people are very hesitant to accept jobs with a lower salary than their previous job. Homeowners are very reluctant to sell their house for less than they paid. Inflation allows salary and house price numbers to go up even though the value is going down.
So what's my advice?
1. Borrow at low fixed interest rates. Pay off your loans as slowly as possible, because future dollars will be worth much less than current dollars.
2. Don't sit on a lot of cash. Be fully invested in equities and hope they float with inflation.
3. Don't lose your job.
After quickly checking to make sure that my bank is wholly owned in the United States I literally laughed at Europe's new bailout template.
The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'," he said.
"If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders."
As Willie Sutton explained with regards to his bank robberies: "because that's where the money is".
Dijsselbloem's assessment of the economic incentives is basically correct:
"If we want to have a healthy, sound financial sector, the only way is to say, 'Look, there where you take on the risks, you must deal with them, and if you can't deal with them, then you shouldn't have taken them on,'" he said.
So now depositors have to share risk with shareholders, bondholders, and taxpayers. Most depositors aren't interested in that kind of arrangement, and they'll start withdrawing their money. Reserve ratios will drop. Interest rates will increase. Eurozone deficit spending will get even more expensive. The end of the euro.
What does it mean to "consider the impact on global warming" before the federal government approves development projects?
President Barack Obama is preparing to tell all federal agencies for the first time that they should consider the impact on global warming before approving major projects, from pipelines to highways.
The result could be significant delays for natural gas- export facilities, ports for coal sales to Asia, and even new forest roads, industry lobbyists warn.
"It's got us very freaked out," said Ross Eisenberg, vice president of the National Association of Manufacturers, a Washington-based group that represents 11,000 companies such as Exxon Mobil Corp. (XOM) and Southern Co. (SO) The standards, which constitute guidance for agencies and not new regulations, are set to be issued in the coming weeks, according to lawyers briefed by administration officials.
Stanley Kurtz says that Obama has found a way to shift blame for environmental restrictions from the government to environmental groups.
But let's concentrate on Keystone. The Bloomberg report makes it clear that Obama's order opens the way for further litigation and substantial delays on Keystone, whether the federal government officially blocks construction or not. That's because NEPA allows citizens and environmental groups to file claims against projects even after they win government approval.
So the Obama administration could green-light the pipeline, file a report that stops short of calling Keystone a major global-warming hazard, and still find the project delayed for years by environmental groups bringing court challenges under the new NEPA guidelines.
In this scenario, headlines loudly proclaiming Obama's approval of Keystone would shield him from Republican attacks. Simultaneously, the president could mollify the left by claiming credit for guidelines that effectively allowed his allies to stop the pipeline. And that would be right. Obama can publicly "approve" Keystone, while simultaneously handing the left the tool they need to put the project on semi-permanent hold. Environmentalists would take the political heat, while Obama would get off scot-free. Pretty clever.
By creating an opportunity for outside groups to challenge projects in court on global warming grounds Obama may have opened a can of worms. Will the most extreme environmental groups allow anything to be built without their blessing? What rents will they extract with their new standing to sue?
I'll get to the meat of his story in a second. But basically, with no record label and mostly just the suppot of his YouTube fans, he released his latest album in the UK the same day Justin Timberlake did.
Here's the result:
Read the whole interview and then watch Alex's video about why record labels are rubbish.
I'm on the edge, but my kids will live entirely in this new economy.
Mo' money, mo' problems? Apparently the ideal salary isn't infinity, at least if you're trying to maximize your happiness.
Additionally, the trend data shows quickly diminishing returns on incremental salary as employees near the $200k mark. Across all industries, professionals reported being less happy the more money they made after $170,000 per year. Think about that: on average, professionals making $240,000 a year reported being slightly unhappier than those making $40,000.
So who is the prototypical happiest worker in the country? Drumroll please...our analysis shows that a city-dwelling techie, who works in the northeast during the spring months, and makes six figures (but under $200k) is the happiest employee in the country. Conversely, if you find yourself working a sales job in Sacramento, perhaps this research will persuade you to pack your bags and take a cross-country road trip this spring.
Of course, there are probably correlated factors that go along with higher salary that make people unhappy, and it might be possible to reduce those factors while still making a lot of money. In theory anyway!
Which is more important: income equality or growth?
To see the limits of this reasoning, consider two hypothetical scenarios. In the first, 99 percent of the population has an average income of $10 and the top 1 percent has an income of $100. In the second, we increase the income gap. Now, the 99 percent earn $12 and the top 1 percent earns $130. Which scenario is better?
This hypothetical comparison captures several key points. First, everyone is better off with the second distribution of wealth than with the first--a clear Pareto improvement. Second, the gap between the rich and the poor in the second distribution is greater in both absolute and relative terms.
The stark challenge to ardent egalitarians is explaining why anyone should prefer the first distribution to the second.
An underlying question, however, is whether or not the top 1 percent is extracting wealth from the other 99 percent, either through taxation, regulation or force. Absent some form of unfair dealing, everyone should prefer the second scenario even though there is more income inequality.
Just a friendly reminder that despite President Obama's continual promise to "focus on jobs" the unemployment rate is still higher in 2013 than when Obama took office in 2009.
The unemployment rate is 7.9 percent -- one tenth of a point higher than it was when Obama took office in January 2009. But the true toll of joblessness is far higher. The Labor Department's so-called U-6 rate, which includes people who want a job but have become so discouraged they have quit looking, is 14.4 percent. And a new study, by Rutgers University scholars, shows that 23 percent of those surveyed have lost a job sometime in the last four years, while another 11 percent have seen someone in their household lose a job. That is one-third of the American people who have experienced unemployment during Obama's time in office, along with many more who have experienced other hardships of the economic downturn.
I sincerely hope that the next four years are better for America than the last four.
How should you be investing? Well I don't know where to put your money, but you should be investing your time in keeping your job. US companies are reducing investment, which means there aren't many great new jobs just around the corner. The economy is likely to get worse before it gets better.
Megan McArdle has a great post about how we should treat problems, not just measurements.
Do the wealthy get to live in nicer houses and drive nicer cars than the poor? Yes, but I'm not sure how much this matters. I find the absolute quality of the housing stock and cars available to the poor much more important than the relative fanciness. Are their abodes warm and dry and safe? Are their cars reliable? As PJ O'Rourke once remarked, "The biblical injunction is to clothe the poor, not style them." You can argue that the poor do not have enough--enough safe homes, education, health care, reliable automobiles, etc. But they wouldn't have enough even if Bill Gates lost half his money.
Tyler Cowen also addresses "inequality":
The cyclically adjusted measures are an abstraction, and furthermore an abstraction based on estimating a modal quantity, namely potential output.
To give an analogy, I get uneasy when I read sentences such as "inequality caused X." "Inequality" didn't cause anything. Inequality is a statistical residue of some other actual processes. It is better to say what caused X (say "the rage and poverty of inner city residents") and, if relevant, connect this to inequality as well. Except that the cyclically adjusted deficit is an even more problematic causal concept than "inequality" because it relies on measurement of a modal, namely potential output.
The word "austerity" is a political concept and it does not belong in rigorous economics. Let's just say what happened. Note the simple causal language in my point #2.
Good stuff, and using proper terminology can help clarify thinking.
A cool in-class experiment that shows students the value of property rights and free trade.
... I go around allocating trinkets to students at random.
I then ask students to assign a value to the trinket they have just received ranging from 0 to 10, with higher values meaning cooler trinkets.
We then go around the room recording those values. Because students often bring their laptops to lecture, it is easy to find a volunteer to record those values, but you can have a teaching assistant do it. Once all values are recorded, total welfare (i.e., the sum total of the values students assign to their trinkets) is announced.
I then tell students that they have five minutes to trade voluntarily between themselves, insisting on the fact that trades must be voluntary (i.e., no stealing) and cannot involve dynamic aspects, or credit (i.e., no "I'll give you my cool dinosaur if you give me your awful trinket and you buy drinks on Friday night.")
Once students are done trading, we once again go around the room recording the values they assign to their trinkets. Once all values are recorded, total welfare is announced once again.
And that's usually where the magic happens. When I ran the Trading Game last week, my class' "aggregate welfare" went from 128 to about 180, if I recall correctly, and you could just see that it had become obvious to students that (in this context of well enforced property rights) trade not only left no one worse off, but it increased aggregate welfare.
This is a great game that should be demonstrated to every elementary school student in the world.
(HT: Greg Mankiw.)
Despite what the Democrats would have you believe the bailout of General Motors was not a success.
GM is once again flirting with bankruptcy despite massive government purchases propping up its sales figures. GM stock is rock-bottom. Losses continue to be revised in the wrong direction. According to The Detroit News, "The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That's 15 percent higher than its previous forecast."
The claims that GM paid back its taxpayer-funded loans "in full" -- a story peddled in campaign ads narrated by Hollywood actor Tom Hanks -- were debunked by the Treasury Department's TARP watchdog this summer. GM still owes nearly $30 billion of the $50 billion it received, and its lending arm still owes nearly $15 billion of the more than $17 billion it received. Bailout watchdog Mark Modica of the National Legal and Policy Center adds: "In addition to U.S. taxpayers anteing up, Canada put in over $10 billion, and GM was relieved of about $28 billion of bondholder obligations as UAW claims were protected. That's an improvement of almost $90 billion to the balance sheet, and the company still lags the competition."
GM basically got $90 billion for free. If Americans wanted to pour money into a successful car company we could have started one from scratch for a lot less cash than that. The GM bailout should be understood for what it was: a bailout of the United Auto Workers union at the expense of shareholders, bondholders, and taxpayers.
The Apollo 11 crew had a risky job and couldn't buy life insurance to protect their families, so they made their own!
About a month before Apollo 11 was set to launch, the three astronauts entered quarantine. And, during free moments in the following weeks, each of the astronauts signed hundreds of covers.
They gave them to a friend. And on important days -- the day of the launch, the day the astronauts landed on the moon -- their friend got them to the post office and got them postmarked, and then distributed them to the astronauts' families.
It was life insurance in the form of autographs.
"If they did not return from the moon, their families could sell them -- to not just fund their day-to-day lives, but also fund their kids' college education and other life needs," Pearlman said.
Brilliant... but then, they were astronauts.
President Obama likes to tout General Motors as one of his administration's big successes, but in reality the GM bailout has been a disaster for the company and for taxpayers.
Since GM's IPO almost two years ago, the broader S&P 500 has gone up about 30%. During that period, Ford shares have gone down about 15%, Toyota up about 15%, Honda up about 5%, Nissan up about 35%, Hyundai up about 60% and Volkswagen up about 85%. Make no mistake; GM is vastly underperforming the industry, despite an influx of approximately $50 billion of taxpayer funds. In addition to US taxpayers anteing up, Canada put in over $10 billion and GM was relieved of about $28 billion of bondholder obligations as UAW claims were protected. That's an improvement of almost $90 billion to the balance sheet and the company still lags the competition!
GM's performance is an embarrassment to its Obama-appointed leadership and an indication that the Administration has not fixed the underlying problems there. Worse yet, when a possible solution to one of the biggest overhangs, GM Europe, was on the table, the new leadership nixed the deal. And now an unstable management team, which seems to be constantly reshuffling as it tries to find direction, does not inspire confidence. Unfortunately for the taxpayers, it appears the damage is done and the ability to pull out a recovery is all but passed. There is no reason to continue the market-timing gamble that sees taxpayer money risked on a company that should be allowed to sink or swim on its own, without government input. It's time to simply cut the losses and dump taxpayers' remaining stock and end this failed experiment once and for all.
This failure in the market highlights that the Obama Administration's eyes are not on the bottom line, but rather on the number of union jobs propped up with taxpayer money.
"On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen," the president said. "Today, General Motors is back on top as the world's No. 1 automaker."
Even that's a stretch. GM edged tsunami-crippled Toyota by counting sales at its joint ventures in China, which aren't wholly owned subsidiaries. And the government is directly subsidizing new GM auto lines like the star-crossed Chevy Volt.
But GM is on the verge of bankruptcy again! When all is said and done, the bailout will be recognized as a huge failure and tons of jobs will be lost along with the billions of taxpayer dollars.