The Millennial generation is the future of the American public.  While the opinions of older generations might be set, this younger generation brings new perspectives on society that can change the perception of American business.  As the key to future perceptions of business, on what side will Millennials fall?  Will business garner a higher perception or a lower one from the youngest Americans?

This blog post is the first in a two-part series by the U.S. Chamber of Commerce Foundation on the topic of Millennials.  In this post, we will consider their role in changing the public’s opinion of business.  In the next post, we will consider a potential crisis of conflict among their generation.

The Issue of Trust

There are several reasons for the business community to be worried about its perception among the American public.  Survey research points to declining trust in big business, the financial system, and the CEOs who lead our companies.  In 2000, Gallup found that 23% of Americans expressed “very little” confidence in Big Business (essentially the same amount found in 1973 when they began asking this question).  By 2012, the number had risen to 34%, and nearly 80% of the public fell into the lower categories of “some” or “very little” confidence.  In a 2010 Bloomberg survey, when forced to choose between two extreme positions, 56% of the public preferred describing big financial companies as parasites having a negative effect on the economy, while only 40% preferred to say that they were a vital part of economic growth.  In 1966 Harris found that 55% of Americans felt a “great deal” of confidence about the people in charge of running major companies.  In 2010 that number was just 15%.

Not all results are negative.  Americans have much more confidence in people that run small businesses (50% expressed a “great deal” of trust in 2010) and in the institution of small business in general (63% expressed they had “quite a lot” or a “great deal” of confidence in 2009). In 2010, Gallup found that 95% of Americans had a positive image of Small business, 86% of Free enterprise, 84% of Entrepreneurs, and 61% of Capitalism.

The Good News

First off, as a generation, Millennials are very optimistic—41% of Millennials are satisfied with the way things are going in the country versus 26% of those over 30 years of age.  Hence, Millennials are more inclined to be positive about all institutions, business included.

In fact, according to a 2010 Gallup study (see table below), the age group of 18-29 year olds had the highest percentage with a positive image of free enterprise, capitalism, big business, and entrepreneurs.  Interestingly, they were also the group with the highest positive image of socialism too, reflecting the possibility that they are generally more positive than older generations.

Second, Millennials appear to have a more enterprising spirit when it comes to business.  In a 2011 Kauffman study, 54% of Millennials surveyed said that they would like to start their own business.  Of the 160,000 startups created per month in 2011, 29% were led by entrepreneurs between the ages of 20 and 34 years old. This is an impressive feat given that the youngest Americans have the least access to resources like personal capital.

Along the same lines, Millennials seem more proactive when it comes to communicating with businesses.  In one study, 86% of Millennials were willing to share information about their brand preferences online. This greater willingness to view business transactions as a two-way dialogue is an important way that Millennials differ from older generations.  Rather than being passive consumers, it appears Millennials feel empowered to directly interface with businesses through production of online content.

The Bad News

One of the most significant challenges faced by Millennials today is unemployment and underemployment.  Among those 25-34, 16.6% are underemployed (the rate is 28.6% among those 18-24). Among 25-29 year olds, 34% have “boomeranged” back to live with their parents. Their optimism in the face of these challenges is notable, but surely these levels of underemployment might leave them with a less-than-positive impression about the United States economy.

A second warning sign relates to Millennials and their education.  The Millennial generation is reaching unprecedented levels of graduation both from high school and college (72% and 40%, respectively).  Yet, this education may leave them sorely disappointed. Two-thirds of students predict they will perform in the top 20% of the population in their adult jobs. The mathematical impossibility of these expectations must lead to some personal conflict. What’s more, the cost of education is rising much faster than inflation, leaving many with student debt ($25,000 on average). This financial connection between education and debt may leave Millennials with a negative opinion about the economy, especially if their high expectations cannot be met.

Which way will they go?

Given the good signs and the bad signs, how will Millennials influence public opinion about business?  The best answer is that it is hard to say.  Millennials offer fresh challenges but also some unique opportunities.  If the business community seizes on these opportunities, this might be an especially influential time to shift public opinion by capturing the support of youth.

While the future is uncertain, one thing does seem clear:  Confidence in big business has declined persistently over the past 40 years. If we do nothing to engage them, Millennials will likely continue the trend toward less trust (especially since many suffered during the recession).  It behooves American business to adapt to this generation and seize upon their optimism.

 County Population Forecast
By Josh Lehner
Oregon Office of Economic Analysis Blog.

Just a quick update on inflation in Oregon and a interesting new way to illustrate the changes in the different components. (HT to the Federal Reserve Bank of Atlanta for the graph idea)

First a few primers on local inflation measures:

• No statewide CPI data available from BLS, just for the Portland-Salem CMSA
• Available on semiannual and annual basis, not monthly or quarterly
• CPI-U is for all urban consumers – about 88% of the population – and designed to reflect the average consumer’s spending patterns
• CPI-W is for urban wage earners and clerical workers – about 29% of the population – and designed to reflect the average worker’s spending patterns, which are different than the population at large

The semiannual frequency means there are only two data points each year: one for the January-June period and one for the July-December period. In terms of how local inflation tracks national trends, the follow graph illustrates CPI-U, the most commonly cited inflation statistic, since 1985. Overall inflation in the Portland-Salem CMSA closely follows the U.S. average over the past 27 years, although local inflation was a bit higher in the 1990s than the U.S. and a tad lower during the 2000s.

Now, a common refrain that is always out there is that the official inflation measures are too low. Have you seen the prices at the grocery store or at the pump?!?! Well, food and energy prices are more volatile than the majority of the other components in the CPI, but food and energy aren’t the only products or services we buy. The CPI basket of goods weighs the relative importance of different expenditure categories when arriving at the headline inflation figure. For the latest inflation reading in the Portland-Salem CMSA – the second half of 2012 – the graph below illustrates how each of these majority categories have changed over the past year. The height of the bars shows the price change over the past year while the width of the bars shows the relative importance – or weight – that each component has to the overall CPI basket of goods and services.

The weights themselves for Portland-Salem are from the latest U.S. Bureau of Labor Statistics publication I could find (see pg 9 of the PDF) and I think this graph provides a really neat, easy to understand summary of both the changes in prices and how the headline CPI figure is calculated. Again, thanks the Atlanta Fed for coming up with the graph.

I’ll leave to the side, for now, commentary on what is driving each of the changes seen in the graph. For more information on local weights relative to U.S. weights, plus much more on the CPI history and uses, please see this great article that state employment economist, Nick Beleiciks, wrote last year over at Employment.

For those of you more interested in the CPI-W, which is is sometimes used in COLA calculations, the corresponding graph looks like the following for the second half of 2012.

Data for the first half of 2013 will be released around the middle of August 2013.

Finally, there are a number of different measures of inflation, or price changes, available at the national level. There is headline inflation, core inflation, core pce, gdp deflator, trimmed mean inflation, median inflation and the like. Calculated Risk tracks a number of these measures on a regular basis and the latest graph can be seen following the link.

Powell’s Books

Powell’s Books recently announced the appointment of Miriam Sontz as CEO. Sontz takes over this position as Emily Powell remains the owner. Sontz is a 28-year employee, most recently serving as chief operating officer. As CEO, she will direct ongoing business operations and strategic planning.

Although digital readers and tablet computers threaten to squeeze the sale of printed and bound-books, Sontz appears ready to meet the challenge. In a news release to KGW, she said, “I look forward to steering Powell’s Books forward through our ever-changing book industry. We are well-positioned to continue efficiencies around operations so we can focus on our customers. Highlighting and expanding the unique experience people have when shopping at Powell’s is our top priority.”

Powell’s Books was founded by Walter Powell in 1971 and later managed by Emily’s father Michael. She became CEO in 2010. The company states in a release, Emily Powell “will step fully into her role as the owner of Powell’s Books, focusing on the stewardship of Powell’s long-term future, health, and vitality.”

Intel
Brian Krzanich (pronounced “ker-SAN-itch”) takes over as CEO of Intel as Paul Otellini steps down. Otellini has been with the company for 38 years, the last eight as CEO.

Krzanich, 52, joined the chipmaker in 1982 straight out of college. He has held positions as a process engineer, a manufacturing manager, a plant manager, the head of assembly testing and most recently as chief operating officer.

Intel, which employs 17,000 Oregonians, dominates the PC market. However, those sales are declining as smartphones and tablets become more popular. IDC reports a 14% drop in PC sales for the first quarter compared to the same period last year. But the company’s board believes Krzanich is the right person to help turn things around.

“The board of directors is delighted that Krzanich will lead Intel as we define and invent the next generation of technology that will shape the future of computing,” said Andy Bryant, chairman of Intel, in a prepared statement.

Finally. After months of negotiations and gamesmanship in the House, the Oregon Senate took the bull by the horns and stood strong with business on one of the most critical bills for Oregon business this session.

SB 678 makes it clear that members and owners of LLCs are protected under Oregon’s exclusive remedy law just like all other employers.

AOI introduced this legislation at the beginning of the 2013 Legislative Session to address the negative ramifications of last year’s Oregon Court of Appeals decision in Antonio Cortez v. Nacco Materials Handling Group, Inc.

The Appeals Court ruled in Cortez that the exclusive remedy provision of the workers’ compensation law does not protect the members (owners) of a Limited Liability Company (LLC) from liability stemming from a workplace injury.

The issue stemming from the Cortez decision is that all employers across Oregon are protected from liability under Oregon’s workers’ compensation exclusive remedy statute – except for LLC owners and members.

SB 678 makes clear that owners, members and partners in limited liability companies and partnerships are protected from personal liability stemming from workplace injuries under Oregon’s exclusive remedy law, so long as they are acting within the scope of employment.

On Tuesday the Oregon Senate passed SB 678 by a vote of 25-0-5.

AOI thanks the chief sponsors of SB 678 – Senator Chuck Thomsen (R-Hood River), Senator Laurie Monnes Anderson (D-Gresham), and Senator Tim Knopp (R-Bend).

AOI also thanks the Senate Business Committee, particularly chair Senator Lee Beyer (D-Springfield) and vice-chair Senator Bruce Starr (R-Hillsboro), for their quick action to move this bill when it became clear that the House version of the bill (HB 2923) was being used as a political bargaining chip.

University of Oregon Regional Economic Indexes

While economic indicators softened in March, they still point toward continued growth in the Oregon economy. Highlights of the report include:

• Following two months of strong gains, the Oregon Measure of Economic Activity fell to -0.04 in March from 0.66 the previous month. Note, however, that this measure can be volatile. The three-month moving average, which smooths such month-to-month volatility, rose to 0.40 where “zero” for this measure indicates the average growth rate over the 1990-present period.
• The manufacturing and construction sectors contributed positively to the reports while the household and services sector were a net drag on the overall number. Overall, the Oregon economy is growing near to somewhat above its average rate since 1990.
• The University of Oregon Index of Economic Indicators™ edged down 0.1 percent in March, the first decline since last July. Initial unemployment claims fell again, reaching their lowest level since September 2007. This suggests that conditions in labor markets will continue to improve.
• Residential building permits, nondefense, nonaircraft capital orders, hours worked in the Oregon manufacturing sector, and the interest rate spread all remained largely unchanged in March. In contrast, consumer sentiment and the Oregon weight-distance tax, a measure of trucking activity both fell slightly.
• It is normal to experience occasional declines in the measures of economic activity during recessions. Both measures suggest continues growth in Oregon, although the pace of activity may ease in response to tighter fiscal policy (higher taxes and spending cuts, including the sequester) initiated in the first part of this year.

In a bold move to get out ahead, Coke has made a ve3ry public push to eliminate all of their ads that would involve target audiences of children under 12 years old. See the analysis behind this move in the Wall Street Journal News Video below.

A common conservative refrain is that immigrants, once they enter the U.S., “immediately begin to depend on government welfare,” as Sen. Jeff Sessions of Alabama recently put it.

That’s simply not true, according to a Cato Institute study by Professor Leighton Ku and lecturer Brian Bruen, both of George Washington University’s health policy department.

Ku and Bruen looked at social welfare programs ranging from Medicaid to the food stamp program to the Children’s Health Insurance Program. Their findings: Poor immigrants consistently use welfare programs less than their native-born counterparts. Furthermore, when poor immigrants do participate in welfare programs, the cost is less, resulting in a lower bill for the taxpayer.

Take Medicaid. Noncitizen immigrant adults and children are about 25 percent less likely to be signed up for Medicaid than their poor native-born equivalents. When they do sign up, poor immigrant adults consume $941 less on average than poor native adults every year. The story is the same for poor immigrant children. Looking at CHIP data, the study finds poor immigrant children consume 565 fewer dollars than poor native-born children.

One hundred native-born adults eligible for Medicaid will cost the taxpayers about $98,000 a year. A comparable number of poor non-citizens — immigrants who have not naturalized — cost approximately $57,000 a year — a 42 percent lower bill than for natives. For children, citizens cost $67,000 and noncitizens cost $22,700 a year — a whopping 66 percent lower cost.

Average food stamp use tells a similar story. A poor native-born adult on food stamps receives about $1,091 a year worth of benefits while a non-citizen adult receives $825 — a 24 percent savings. Immigrants are also much less likely to receive food stamps: a noncitizen child is 37 percent less likely than a poor native-born child to receive food stamps.

Certainly it is true that immigrants use fewer benefits because they are not eligible for them. Legal immigrants cannot get welfare for their first five years of residency with few exceptions. Unauthorized immigrants, of course, are not eligible for welfare at all. But doesn’t this in itself undermine the notion that new immigrants “immediately” become government-dependent, as claimed by Sen. Sessions and his ilk?

Furthermore, even when immigrants are legally eligible for welfare, few of them take advantage of it. Immigrants are drawn to America’s labor markets, not to our welfare programs. Unauthorized immigration in 2012 was less than quarter of what it was in 2007, the last year of low unemployment. Since then, the number of Mexican unauthorized immigrants who left the country is about equal to those who immigrated. Food stamps and Temporary Aid to Needy Family benefits are way up since the beginning of the Great Recession, but immigrants stay away because the jobs are gone.

Milton Friedman, the free-market economist beloved by conservatives, had an interesting take on immigration: It’s “a good thing for the United States … so long as it’s illegal.” Translation: Friedman believed open immigration to be highly beneficial for the economy, provided those inexpensive laborers did not have access to welfare.

The findings from Cato’s new study should dampen the fears of free-marketeers who would support more legal immigration if it weren’t for the welfare concern.

What You Need to Know About the Internet Sales Tax

This week the Senate passed the so-called Marketplace Fairness Act by a vote of 69 to 27.  Here are some important things to know about the bill.

1. Allows states to capture $11 billion in taxable income. it allows the 45 states that currently charge sales tax (and the District of Columbia) to require online retailers to collect sales on their resident’s purchases. The law would apply to all online sellers with sales of over $1 million outside of states where they have a physical presence.In 1992 the Supreme Court ruled in Quill Corp. v. North Dakota that businesses that do not have a physical presence in a state are not required to collect sales taxes from their customers in that state. At the time there were no internet retailers, so it affected only catalog sales. The States claim this now costs them $11 Billion a year.

2. Debate over 9,600 tax jurisdictions.   Critics claim that the tax would opens a bureaucratic problem by forcing businesses to keep track of the 9,6000 taxing districts in the county.  Another compounding issue is the role of tribal taxing districts in America.  The bill is structured so that a business only pays one taxing entity in each state, but how that is implemented is a souce for concern.

3. Wal-Mart supports, eBay against.  The Retail Industry Leaders Association and the International Council of Shopping Centers has been supporting the bill.   Large brick and mortar retailers with an online store, like Wal Mart, who are required to charge sales taxes to their online customers because of their physical presence in taxing states, support the bill, believing it will eliminate a perceived competitive advantage of strictly online retailers not required to collect state sales taxes.   eBay, Free Market groups like the National Taxpayer Union and a small business coalition group called We R Here opposed the bill for its impact on small businesses.

4. Amazon flipped their support.  Virtually every online retailer opposes the bill, except Amazon. Why does Amazon, who spent millions opposing similar legislation in California a few years back, and even dropped its California associates to avoid collecting California sales taxes, support the bill? Amazon’s public answer is that it has been expanding into new states to support its same-day delivery service, and thus has to pay sales tax in several new states anyway. What Amazon Is not advertising – yet – is that they have developed a tax collection service for online sellers that charges 2.9% of all sales and use taxes and other transaction-based charges they collect.

5. Destination principle being utilized.  Internet retailers are now being asked asked act on the destination principle by trying to locate the residency of purchasers.  This is generally not applied to traditional retailers but would be of requested of internet retailers if the law passed and would represent a significant shift on how businesses relate to their customer and the importance of their residency.

6. Steps toward nationwide sales tax.   The Marketplace Fairness Act achieves an additional goal of moving moving the states one step closer to the possibility uniform national sales tax structure.    State and local government interests have been aggressively advocating for a national sales tax system but are handicapped by the biggest obstacle which is the different tax structures and tax definitions  used by each tax district.   The Marketplace fairness Act would be the first unifying principle uniting such different states even if it is just a small one.

7. Passage of bill uncertain.  The fate of the Internet Tax in the House of Representatives is uncertain. House Judiciary Committee Rep. Bob Goodlatte (R-Va), who will decide if the bill gets to the floor or not, is not a supporter. Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) have not taken public positions on the bill.

No Contractor’s License Means You Work for Free

Yet another California court decision has been issued requiring a contractor to return over $750,000 received for work he performed on a casino while he was unlicensed. In rejecting the contractor’s arguments against disgorgement, the court found that (a) California Business and Professions Code § 7031’s penalties applied to work performed for tribal corporations and on tribal lands by a non-tribal entity, (b) the contractor, a sole ownership, could not use his individual standing as the RMO for a licensed separate corporation contractor to cover work done by the sole ownership, and (c) the contractor did not meet substantial compliance with the licensure statute when he knew a license was required yet waited until the construction work was nearly completed to apply for a license. Twenty-Nine Palms Enterprises Corporation v. Bardos (2012) 210 Cal. App. 4th 1435, 149 Cal Rptr 3d 52.

While this contractor’s license failure was fairly blatant, the case serves as a reminder of courts’ consistent opinions that should a contractor allow its license to lapse for even one day from the time of contracting through completion, it may be denied payment or required to disgorge substantial sums already received. Contractors and owners alike should always ensure those contributing to the work of improvement are properly licensed. Both California’s Contractors State License Board and Oregon’s Construction Contractors Board have online license lookup services that are quick and easy. Checking these sites to ensure an active license may just be the difference between getting paid and performing significant construction work for free.