Comments for Tanking Contributions May Accompany a "Jobless Recovery" at http://www.nonprofitquarterly.org , comment 1 to 4 out of 4 comments http://www.nonprofitquarterly.org Thu, 09 Sep 2010 13:00:31 +0100 FeedCreator 1.7.3 http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=1389:tanking-contributions-may-accompany-a-qjobless-recoveryq&catid=153:web-articles&Itemid=1#comment-291 Dear Alan: Thanks for your comment and, by the way, congratulations on the fine affordable housing work being done by Aeon (which some of us remember in its earlier CCHT guise). Regarding savings rates, you’re right that the spend-now consumerism that politicians posit as the backbone of the American economy is hardly a healthy practice. Most other countries have higher savings rates, such as France, Germany, Switzerland, Austria, and Russia, while the U.S. savings rate has been close to zero. The importance of increasing the savings rate is not simply more capital for investment, but devoting less money to taking and paying debt. The increasing savings rate reflects a deleveraging dynamic, that is, reducing households’ debt-to-income ratio. But in a jobless economy, however, many of the jobless don’t have disposable income that they can save, as they increasingly find themselves living on the edge. In healthy (or healthier) economies, deleveraging happens through a combination of increasing incomes and increasing savings. For many people in this economy, facing unemployment or underemployment and concomitant decreasing incomes, deleveraging is next to impossible without doing without household necessities. We need policies that encourage savings (such as IDAs, HDAs, college savings plans like 529s, youth savings plans, protected pension programs, and more) and at the same time policies that do not continue to encourage households, particularly lower income households, to take on perilously high levels of debt. Politicians of both political parties have emphasized increasing consumer spending even if it occurs at the expense of increasing household indebtedness. One would have thought that after the subprime mortgage debacle, our nation would be rethinking its addiction to borrowing. But I don’t see it, as many economic stimulus and other policies seem to be built on incentivizing households to take on more debt. Thanks for a really thought-provoking comment. - rick cohen Tue, 11 Aug 2009 17:35:01 +0100 http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=1389:tanking-contributions-may-accompany-a-qjobless-recoveryq&catid=153:web-articles&Itemid=1#comment-290 I always appreciate Mr. Cohen's thorough articles, but most thinking Americans already knew that this wasn't going to be a quick recovery. In the long term, if we learn from all of this, there is potential for progress on many fronts. A higher savings rate is good, not bad, including ultimately good for fundraising. An increasingly higher savings rate will lead to investment in productive enterprise. Productive enterprise, especially if focused on core needs, will eventually provide jobs. And I am happy that households are thinking and pausing about their expenditures. If we do not significantly shift our economy from one that emphasizes spending on luxury items to one that spends first on more important things, we will be doomed to an increasing underclass without access to the fundamentals, far beyond the ability of charitable giving to solve. - rick cohen Tue, 11 Aug 2009 17:33:32 +0100 http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=1389:tanking-contributions-may-accompany-a-qjobless-recoveryq&catid=153:web-articles&Itemid=1#comment-289 Addendum to the Jobless Recovery analysis: In our piece on the impact of a jobless recovery on charitable giving, we acknowledged the slower-than-predicted growth in unemployment claims this past month. Many commentators said that indicated an improving economic picture, though we indicated that it reflected hundreds of thousands of unemployed people simply giving up their fruitless quests for jobs. Today (August 10th), the Conference Board (a business membership and research association) released its July Employment Trends Index (ETI)TM numbers (see Conference Board press release #5359, August 10, 2009, “The Conference Board Employment Trends Index (ETI)™ Remains Unchanged in July”). A composite of eight indicators including the percentage of surveyed respondents saying they find jobs hard to get, initial claims for unemployment insurance, the percentage of firms with positions not able to fill, number of employees hired by the temporary help industry, and people working part-time for economic reasons, the index stayed at 88.3, exactly the same as it was in May and June, 20 percent lower than one year earlier when the ETI was 110.85. Conference Board economist Gad Levanon said that the flat ETI suggests employers in the aggregate are no longer cutting their workforce, but the weak economic recovery and the "record number of involuntary part-time workers" indicates no significant job growth for the next year. In the Wall Street Journal (http://online.wsj.com/article/SB10001424052970203517304574306414148814226.html), an economist explained why the job losses won’t be quickly or easily reversed. He noted that reports of increasing profits (or at least earnings higher than estimated) have been in companies such as Caterpillar, Microsoft, Intel, and IBM benefiting from non-U.S. business growth (Asian rim, China, etc.). He says that “(c)ompanies are thriving in spit of economic activity in the U.S., not because of it.” Because of their non-U.S. expansion, these companies see little reason to rehire laid off workers or increase their U.S.-based employment. He ominously concludes: “So we are facing a conundrum: Companies can grow by leaps and bounds—by double-digits—and yet unemployment can skyrocket and remain high. There is nothing on the horizon that would lead one to expect a turnaround in the employment picture...The weight of more than 20 million marginally employed or unemployed, combined with the increasing pace of economic activity outside the U.S., presents the prospect of permanent change in the American economic landscape: high unemployment, moderate to weak growth, and soaring corporate profits.” As the Conference Board numbers and this WSJ analysis suggest, the recovery still feels structural and jobless to us. Many people who typically would be charitable donors if they were employed are likely to be in line as recipients of charitable support even as the economy ostensibly rebounds. - rick cohen Tue, 11 Aug 2009 17:29:36 +0100 http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=1389:tanking-contributions-may-accompany-a-qjobless-recoveryq&catid=153:web-articles&Itemid=1#comment-283 This is a good article and nonprofits are not immune from restructuring their workforce and attempting to do more with less. One thing nonprofit employers need to be aware of is their right to opt out the state unemploymnet tax system. By doing so they can directly reimburse the state only for charges applied to their organization. Typically, an agency paying into the state UI system pays $2.00 in for every $1.00 paid out in UI benefits. Opting out should be a serious consideration for all 501 (c) 3 organizations. - Cheryl Jones Sat, 08 Aug 2009 08:01:46 +0100