economy – NW3

10th December 2013

Underground and bus fares freeze? Only for some

Winners include pay-as-you-go Oyster users, who will see no rise at all in peak fares at Tube and rail journeys starting or finishing outside Zone 1. The daily “cap” on pay-as-you-go charges also stays at this year’s prices, meaning a price cut after inflation.

But single journeys within Zone 1 rise by 10p to £2.20, a 4.8 per cent rise. A single bus fare with Oyster goes up 5p to £1.45, while the cash fare stays at £2.40.

Weekly Travelcards jump up 4.1% overall, in line with national rail services. A weekly Zone 1-6 card will rise 4.3 per cent from £55.60 to £58.

The few people still paying cash on the Underground, mainly tourists, will see a single fare in Zone 1-3 rise 20p to £4.70.

5th December 2013

The High Cost, for the Poor, of Using a Bank

Banks are often costlier for the poor than check cashers and other alternative financial services.

There have been a lot of reports lately on the growing numbers of people .. use alternative financial services such as payday loans. All this has convinced policy makers and many consumer advocates that low- and moderate-income people are victims of “financial exclusion.” They have therefore concentrated on moving these people to banks.

The numbers of “unbanked” and “underbanked” people are indeed growing. Seventeen million people nationwide are unbanked, up from 10 million in 2002; 43 million are underbanked. In very low-income areas like the South Bronx, where I worked, more than half of the residents have no bank account.

To understand why, consider loans of small amounts. People criticize payday loans for their high annual percentage rates (APR), which range from 300% – 600%. Payday lenders argue that APR is the wrong measure: the loans, they say, are designed to be repaid in as little as two weeks. Consumer advocates counter that borrowers typically take out nine of these loans each year, and end up indebted for more than half of each year.

It happens that banks offer a de-facto short-term, high-interest loan. It’s called an overdraft fee. An overdraft is essentially a short-term loan, and if it had a repayment period of seven days, the APR for a typical incident would be over 5000%.

To be sure, payday lending is a growing business, increasing from ten billion dollars in 2001 to nearly $30 billion in 2010. But Americans paid more than that on overdraft fees in 2011: a record $38 billion. (Banks are allowed to charge checking-account customers, on average, a hundred and forty dollars per day in overdraft fees.)

What’s more, many of the customers we interviewed told us that a lack of transparency at banks contributed to the costs they incurred; they found it difficult to predict when and what they would be charged. At RiteCheck and most other check cashers, in contrast, the fees for each transaction are typically displayed on large illuminated signs that span the row of teller windows, like the menu sign at a fast-food restaurant.

Joe Coleman, the president of RiteCheck, put it this way: “Banks want one customer with a million dollars. Check cashers want a million customers with one dollar.”

For low- and moderate-income people with few assets and some unpredictability in their income and expenses, banks simply don’t stack up well against check cashers and payday lenders. The number of people in a financially unstable position is rising. Yet policy makers continue to assert that banks are the answer.

4th December 2013

Battle over the minimum wage in US (and UK)

Much of this applies everywhere, UK including, see how Londoners’ argue for a ‘living wage’ to cover the higher city expenses.

A little Christmas thought for the many invisible and forgotten workers who keep our cities ticking over.

Unions are mostly behind the recent wave of protests, some reminiscent of the civil rights era, where “Fight for 15” has become the rallying cry – a demand for a new federal minimum wage law that would force companies to pay workers at least $15 an hour.

This summer, McDonald’s posted online a budget that was supposed to help employees make better use of their income. It led to mockery on “The Colbert Report”:

“All you have to do is follow their sample monthly budget where they estimate $600 on rent, $100 on cable and phone, and zero dollars on heating. No problem – just accumulate a warming layer of fat on your body.”

According to financial planner Sara Stanich, Nancy Salgado is part of the working poor – stretching her income about as far as she can. Salgado walks to work, has no credit cards, and gets help with childcare.

And yet, Stanich cannot budget Salgado to save money every month.

But with Congress seemingly stuck in perpetual gridlock, some states are taking action.

California will soon have the highest state minimum wage in the country: $10 an hour. Eighteen other states also require minimum wages above the federal level, which is currently $7.25.

[$7.25 is less than £5/hr]

Washington D.C.’s City Council tried to go even further this year, targeting just one business – Walmart – and demanding the retailer pay a minimum of $12.50 an hour. Walmart responded by threatening to stop construction of three of its six planned locations in D.C.

But in September, the district’s mayor vetoed the proposal.

“Since that bill was vetoed, we’re proceeding with all of our stores in Washington, D.C.,” said David Tovar, Walmart’s vice president of communications. “We had our hiring center open for one of the stores. And 6,000 people showed up for those jobs.”

[It is worth noting that of all the corporations “Sunday Morning” reached out to, Walmart was the only one that would provide an interview.]

“We don’t want people to stay in entry-level jobs very long,” said Tovar. “We have clear data that shows that there is a tipping-point in terms of their productivity, if they stay in an entry-level job too long.”

[is that “use ’em then sack’em” thinking?]

Salgado is putting everything on the line: there’s a $15-an-hour price tag on her American dream.

“We’ll be able to spend a little bit more,” she said. “We’ll be able to shop a little bit more. We’ll be able to say, you know, ‘I live okay,’ you know? Like I said, I’m not looking for a rich life.”

“Well, you’re not going to be rich even on $15 an hour,” said Moriarty.

“Exactly,” said Salgado. “But what I’m looking for is to be able to be safe and living well.”

Yet governments in the West argue the best way of solving the current economic crisis is for people to spend [our way out of recession], so why isn’t this part of the equation?

It is always worth looking at the consequences (there are always some), a higher wage bill, and the associated payroll, benefits and employer’s taxes will put a strain on the company’s bottom line. These however, are tax deductible expenses so the tax man could be taking the greatest hit.

No doubt the companies will use this as an excuse to raise prices .. 😉

http://www.cbsnews.com/news/battle-over-the-minimum-wage/

2nd December 2013

Pope Francis understands economics better than most politicians

Its Monday, think about what you will do this week ..

The worship of the ancient golden calf has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings.

Economist Emmanuel Saez found that the incomes of the top 1% grew by 31.4% in the three years after the financial crisis, while the majority of people struggled with a disappointing economy.
[and where did that wealth come from?]

How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality.

As a result, federal and state spending on social welfare programs has been forced to grow to $1tn just to handle the volume of US households in trouble.

In the discussions of why the US is not recovering, economists often mention metrics like economic growth and housing. They rarely mention the metrics that directly tell us we are failing our economic goals, like poverty and starvation. Those metrics of income inequality tell an accurate story of the depth of our economic malaise that new-home sales can’t. One-fifth of Americans, or 47 million people, are on food stamps; 50% of children born to single mothers live in poverty; and over 13 million people are out of work. Children are now not likely to do as well as their parents did as downward mobility takes hold for the first time in generations.

No society can progress or grow when the majority are trying to meet their basic needs of food, shelter and warmth – Maslow.

Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.

It is easier for a camel to pass through the eye of a needle than for a rich man to go to heaven, the Bible tells us – maybe he needs to buy a bigger needle 😉

Make your own mind up, but a closing thought, in most modern democratic countries, the higher tax payers account for 60-70% of income tax revenue, so it could be said the rich are paying 70% of the welfare contribution. Sometimes we must be content with justice being in the detail, not the headline. Hopefully we’ll work on finding another tomorrow that is more capable.

13th August 2013

@Plusnet (#BT) price hike in October, yet still worth looking into – you decide

New prices will affect Plusnet’s customers from October 1st

Monthly line rental, including evening and weekend calls, increases to £14.99 (£1.00 more +7%).

If you currently pay for 12 months line rental in advance, the renewal charge will be £137.88, equivalent to £11.49 a month, after 1st October 2013, a saving of £42.00 a year.
In October 2012 this was only £113.88 (“just £9.49 per month, save £54.00 over the year”), but currently its £125.88.
So a £25 increase (22%) on a year ago, and reducing the advance payment discount by £13/yr, it will be nothing in a couple of years time. I dont know when they snuck up the annual by the other £12 – that makes 2 price hikes in the last 12 months!

Rather sneakily this was hidden in the small print
As of 1st October, a £1.50 surcharge will apply to broadband only subscriptions (where line rental and calling plans are not held with Plusnet). On a £6.50/mo plan, that’s a 23% increase to £8/mo!

[details taken from their email of July 31 2013]

I am pretty sure though, there will be a few customers leaving, just on the last point alone, and forsee arguments over the possible termination charges (which are increasing by 20% to £30).

In comparison to some consumer services though, these prices are still reasonable, probably beating BT’s (Plusnet’s owners fro the past few years). Have to ask if this is the slippery slope slowly towards BT making Plusnet irrelevant competition by equalising the prices? Might take a while yet ..

As an aside, I think the telcos’ policy of charging a ‘connection fee’ ludicrous, as is the price per minute if for out-of-bundle calls. Technology was supposed to drive down costs for consumers, not drive up profits for companies.

At least we have 6 weeks left to get a year’s line rental fixed at £126

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