There are currently four (4) GOP Presidential Primary candidates.  To pick one out of four is not always an easy chore, especially when you have to rely on news media sound bites, the internet, political attack ads, and candidate stump speeches  for information.  Instead of trying to simply pick one out of six, another method is to compare each candidate vs. every other candidate.  Above is a 2012 Presidential Primary Each-vs-Other Candidate Picker.  It is similar to the mileage grid on a road map.

To use the 2012 Presidential Primary Each-vs-Other Candidate Picker, simply start with Candidate #1 on the left side and compare him to each of the other candidates listed in the column headings on the top of the form.  Go over, and then down from each name.  In the empty space where each pairing intersects, write in the number of the candidate you prefer.   Then, compare Candidate #2, and proceed down the list.

For example, when comparing Texans #4-Ron Paul  vs. #5-Rick Perry, write in the number “4” if you prefer Ron Paul or “5” if you prefer Rick Perry in the space where the two names intersect.

Click on the link below to view a completed example where a family or group might use this type of tool to vote on a flavor of ice cream (fiscal priorities.)

http://paycheckeconomics.wordpress.com/2009/10/30/what-is-your-fiscal-priority-taxes-government-services-job-creation-or-business-growth/

I included Democratic Presidential candidate Barack Obama in this exercise.  If your opinion is that a GOP candidate cannot beat Barack Obama in the 2012 General Election, you can save time and scratch that GOP candidate off your list.

After you have completed all the pairings, add up the numbers of times you selected each candidate.  Write the total count for each  candidate under the column entitled “NUMBER OF VOTES.”   Then, under the column entitled “NUMBER OF VOTES,” write in the ranking of each candidate.  The one with the highest number of votes gets the #1 ranking.

Having completed this exercise, you will hopefully have a better sense of who you will vote for on Primary Election Day, or at least thin out your list.

The economy moves through the cash register: business revenues,  jobs, taxes, etc.  To create jobs, money must move through the cash register.  To achieve full employment, you must first estimate how much money must move through the cash register.

An employee and their paycheck are business expenses.  Before incurring the additional expense of a new employee, a business must realize enough revenues to cover that cost.  The question then arises as to how much new revenue a business must realize to have the confidence to hire their next employee.

Click below to download an analysis showing examples of the estimated per capita, household, and business spending that are require to pay for new employees, create jobs,  and lower the unemployment rate enough to achieve full employment in a local area (Greenville County, SC.)

Full employment analysis for Greenville County, SC

Included is the above graph showing the weekly business spending required to pay the employee compensation costs (e.g., 2/3 wages + 1/benefits) for 1000 jobs.  Also included is the graph shown below that illustrates the amount of money from  weekly per capita spending that must be applied to pay employee compensation costs for enough jobs to achieve full employment in that county.

The graphs in the analysis follow the following progression to demonstrate the local economic activity required to achieve full employment:

• Number of jobs required to lower unemployment rate by specific percentages.
• Business spending required to pay for paychecks and employee compensation (i.e., jobs).
• Business spending required to change the unemployment rate by a specific percentage.
• Applied per capita & household spending required to pay for paychecks and employee compensation (i.e., jobs).
• Applied per capita & household spending required to change the unemployment rate by a specific percentage.

To generate the graphs, the following data was used:

• 2010 Greenville County, SC Population: 451,225
• 2010 Greenville County, SC Households: 176,531
• July 2011 Greenville County, SC Labor Force: 225,340
• July 2011 Greenville County, SC Employed: 204,946
• July 2011 Greenville County, SC Unemployed: 20,394
• July 2011 Greenville County, SC Unemployment Rate: 9.1%
• Number of jobs representing a 1% shift in the Unemployment Rate: 2,253
• Example Wage Rates ($/hour): $10, $12, $14, $16, $18, $20
• Employee Compensation (EC) Multiplier  (e.g., 2/3 wages + 1/3 benefits): 1.5

Population data: U.S. Census Bureau

SC Employment data: SC Dept. of Employment and Workforce

The motto for the Supplemental Nutrition Assistance Program (SNAP – a.k.a. Food Stamps) should be the standard reply I  give when asked what my favorite restaurant is: Cheap ‘n Filling.  Applying this philosophy, you could probably reduce the roughly $70 billion that the federal government spends annually on the program by $20 billion, for a ten year cost savings of $200 billion.

If you browse through the aisles and do a little comparison shopping at any grocery store, you get the definite impression that the SNAP program could feed twice as many people with half the money it currently spends.  From what I can determine, a root cause of many of the problems with the program, besides increased enrollment,  is not just spending or a lack revenues to support the program, but a lack of pricing control.  There seems to be little control of the cost of allowable items that food stamp recipients can purchase.

Pricing is the independent budget variable that drives the dependent variables of spending and revenues.  For example, you spend $3.50-$4.00 for a gallon of gasoline because that is the price at the pump, and you must have personal revenues (e.g. paycheck) that are sufficient to cover the cost.

STANDARD WEIGHT UNIT PRICE (SWUP) 

REDUCING FOOD STAMP EXPENDITURES BY 25% TO 50%.

Since food is sold by weight (e.g. cents/ounce), a straightforward way to control, and thereby reduce food stamp expenditures is to limit the amount of money that benefits recipients can spend for each ounce of food. Implement Standard Weight Unit Price (SWUP) as a cost and spending control method.  Determine the maximum amount of money for which food stamps can be used to purchase any food item.

A significant factor in food pricing is packaging.  Snack sized food packages cost a lot more than family sized packages to purchase the same weight of food.  Bottled water is a good example of this.  You can purchase a case of 24 bottles of water for $4 to $5.  Or, you can purchase 24 single bottles of the exact same water for $1 to $1.50 each, for a total of $24 to $36, or 5 to 10 times the cost of a 24 bottle case.

The following two questions then arise:

Q1.  Does the SNAP program allow food stamp recipients to basically spend whatever they want on any qualified food item?

Q2. Should food stamp recipients be allowed to spend whatever they want on any qualified food item, even if the retailer offers the same food for a cheaper cost (e.g., package size) in that same store?

There are two ways to implement SWUP cost control:

SWUP #1 – Maximum SWUP

For each type of food, determine the maximum SWUP (e.g., 2 cents/oz.) that can be paid with food stamps.

SWUP #2 – Maximum SWUP ratio

For each type of food, determine the minimum SWUP (e.g., 1 cent/oz.) that is available, and then establish a multiplier that represents the maximum unit price (e.g., 3X or 3 cents/oz.) above the minimum price for which food stamps can be used to purchase that food item.  The SWUP ratio is self-adjusting for food inflation.  As food prices rise, maintaining the SWUP ratio allows people to pay more for the same food items than when prices were lower.

Both SWUP methods offer SNAP aid recipients a fair amount of food choice.  What SWUP will also do is eliminate the purchase of high priced, gourmet items, such as the example below where food stamps were used to purchase lobster.   Purchasing gourmet foods and paying premium prices defeats the purpose of the SNAP program: to feed people for a month with the amount of food stamp money that they receive each month.

(A story behind the food stamp lobster cash register receipt)

http://www.snopes.com/photos/signs/receipt.asp

To test my SWUP cost control hypothesis, I did some comparison shopping for a hypothetical spaghetti dinner (pasta, tomato sauce, green beans, bread, bottled water.)  For this experiment, meat was excluded. Only packaged food items were evaluated to keep this simple.  For each food item, its price, weight, and packaging data were collected for 5-7 varieties on the grocery store shelf. The store’s discount card price was used where available.  The SWUP and SWUP ratios were calculated for all food items.  These are shown in the data and graphs below.
Below is a summary of the comparison shopping data, and a summary of the amount of food choices that would still be available with SWUP cost controls implemented.

Summary of comparison shopping data

Food Item/ Max. SWUP (cents/oz.) / Min. SWUP (cents/oz.)/ Max.-to-Min. SWUP Ratio
Spaghetti pasta / 37.4 / 6.3 / 5.9
Tomato sauce / 10.7 / 5.1 / 2.1
Green beans / 9.4 / 5.4 / 1.7
Bread / 15.0 / 5.5 / 2.7
Bottled water / 8.5 / 0.9 / 9.4

Summary of food purchasing choices with Max. SWUP Ratio=2.0

Food item / Starting no. of food choices / Remaining food choices with Max. SWUP Ratio=2.0
Spaghetti pasta / 7 / 3
Tomato sauce / 6 / 5
Green beans / 5 / 5
Bread / 6 / 3
Bottled water / 7 / 4

The comparison shopping data suggests that the SNAP program could potentially reduce food stamp spending by 25% to 50% by simply limiting how much money is spent on each food item, on a Standard Weight Unit Price basis.  Many more people could be served at a lower program cost.

On the other hand, if the purpose of the SNAP program is to provide families with enough food to keep them from going hungry, then contract the service out to food pantries, soup kitchens, and other nonprofits , and just provide people with baskets of food each week, at the lowest possible cost.

An issue that confronts some aid recipients is the lack of transportation to food retailers that offer the best food value.  They may have to shop at the nearest, high priced convenience store.  To this, consider that Domino’s Pizza delivers, Meals on Wheels delivers, and many grocery stores deliver or could start delivering.  It would be well worth the cost of a modest food delivery fee to cut food stamp expenditure by $billions.

EXCERPTS (or something similar) :

ECONOMIC DEFINITIONS

A Model for Structuring Public Service Organizations to Optimize Service Delivery

Recipe for a Balanced Government Budget

A psychologist by the name of Abraham Maslow developed a theory to describe the influences (i.e.,needs) that motivate human behavior. These influences were grouped into categories that encompass a person’s bodily needs, their intrinsic drives, the environment, and interactions with other people. These categories are arranged into a Hierarchy of Needs.

Because a community is a group of people, certain needs must be met for it to function well, and for its citizens to realize a high quality of life. Because government exists to address many of those needs, Maslow’s Hierarchy of (personal) needs provides a logical structure for public service organizations, and for the delivery of public services.

The following is a model for aligning community services to meet the personal needs of citizens in a community.

The following is a process diagram showing show to structure a service organization and its resources for the optimum deliver of public services.

This is NOT to suggest that government does all things for all people.  The scope of government must be defined, along with the tax burden of its citizens.

]]> http://paycheckeconomics.wordpress.com/2011/04/15/a-model-for-structuring-public-service-organizations-to-optimize-public-service-delivery/feed/ 0 paycheckeconomics Kappler Hierarchy of Public Services Kappler Process Model to Align Public Service with Community Needs http://paycheckeconomics.wordpress.com/2011/03/04/economic-definitions/ http://paycheckeconomics.wordpress.com/2011/03/04/economic-definitions/#comments Fri, 04 Mar 2011 16:56:23 +0000 paycheckeconomics http://paycheckeconomics.wordpress.com/?p=463 ]]>

A business is a group of people.
A community is a group of people.
A government is a group of people.
Without people, there is no economy.
Without relationships, there is no economy.

By the above definitions, it should be a fairly simple matter to grow the economy by just having people consume in the right way.

Fixing any problem requires a methodology, or a recipe/process/method that is comprised of reasonable, practical, and cost effective steps that actually produce a reasonable outcome.  Regardless of the issue (e.g., unemployment, illegal immigrants, education, budget deficits,) you don’t often see public policy makers creating comprehensive, practical, step-by-step roadmaps to address them.

Here is a basic 16-step recipe to balance a government budget:

Step 1. Toss the numbers and start with plain English.

Realize that numbers get in the way of what you are trying to accomplish. Initially, put numbers aside when developing a system. Define the sequence of steps in plain English in order to create the process by which the system operates.

Step 2. Define the purpose of government.

Realize that government exists to meet certain needs so that society and communities might function and maintain a high quality of life. Evaluate current programs and determine if they meet the purpose of government, or not.

Step 3. Define the scope of government.

Decide which specific, public needs that government will and will not address, and set priorities.  Evaluate current programs and determine if they fall within the appropriate scope of government, or not.

Step 4. Start at the local level.

Realize that all tax money originates from the same place, and that all government checks are sent to that same place: some place with a ZIP Code.   Government programs and resources are utilized at the local level.

Step 5. Adopt Responsibility Based Budgeting.

Decide exactly who should pay for various government programs and services.

Step 6. Assign responsibility for funding government.

Assignment of tax paying responsibility stabilizes the revenue stream.  Assign taxpaying responsibility through assessments (a tax bill with someone’s name on it.)

Step 7. Give credit for ALL tax payments.

Credit any type of tax payment to the taxpayer’s personal or business tax assessments first, including indirect taxes such as sales and excise taxes.  Electronic commerce technology allows for this.

Step 8. Focus on the funding of specific resources.

Consider the budget to reflect the scope of work, and to be a listing of resources (e.g., people, places, & things) that are required for government programs.

Step 9. Decide on whether to fund resources with or without collecting & spending tax money.

Realize that there are two ways that government can obtain the resources (people, places, things) needed for public service programs:  By collecting and spending tax money, or without collecting and spending tax money.

Step 10. Look to the taxpayer last.

Initially, consider the Taxpayer as the Funding Source of Last Resort.  First, seek to obtain resources without collecting and spending tax money by offering the resource provider with the appropriate incentives.  When tax money is not spent, it need not be collected.

Examples of the Taxpayer as Funding Source of Last Resort include the Adopt-A-Highway programs and volunteer firefighters, where taxpayers save $million by “borrowing” the labor to pick up roadside trash and put out fires.

Step 11. Adopt Tax Payment Choice.

When government must collect and spend tax money, adopt Tax Payment Choice.  Offer taxpayers a variety of options in how they pay their taxes, and the flexibility to effectively lower their tax burden.  Allow businesses the option of direct Payment-in-Kind (PIK) of goods and services as a form of tax payment.  With PIK, businesses would receive retail value tax credits at wholesale cost.

Step 12. Plan for a tax holiday every year.

When revenue requirements have been met for the fiscal year, plan to give people holiday from tax collection.

Step 13. Meet revenue requirements.

At this point, the budget is balanced.

Step 14. Declare a tax holiday for the remainder of the year.

The goal should be to have an annual tax holiday during the period of time that will have the maximum economic impact (e.g., Christmas shopping season.)

Step 15. Take a temporarily holiday from taxes.

With the plethora of available electronic commerce technology, we should all be able to just quit paying taxes at some point each year for the remainder of the year.

Step 16. Rebate any tax surplus back to taxpayers.

Government should take from it citizens only what is needed to deliver public services that fall within it appropriate scope of activities and that are defied by its budget.

The above recipe is one example of how to balance a government budget.  Many types of recipes can be created.  What is important is that the objective is articulated,  a series of steps is defined to meet the objective with reasonable success, and that the steps are executed to achieve a reasonable success.

Fixing any problem requires a methodology, or a recipe/process/method that is comprised of reasonable, practical, and cost effective steps that actually produce a reasonable outcome.  Regardless of the issue (e.g., unemployment, illegal immigrants, education, budget deficits,) you don’t often see public policy makers creating comprehensive, practical, step-by-step methods that actually result in reasonable success.

Here is a basic 4-step recipe to achieve Full Employment by focusing at the local level:

* Use the sales process as job creation process.

** Estimate business growth or sales to hire next employee or create next paycheck.

*** Estimate per capital or household spending required for different types of local businesses    to grow enough to hire their next employee.

**** Create a system to convert local spending into local paychecks.

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* Use the sales process as job creation process

All businesses must sell.  They must sell more of their goods and services to justify the risk and expense of hiring a new employee.  The Sales Funnel is a visualization of the selling process that represents a series of probabilities in the steps that lead to a sale.  When the Sales Funnel is expanded enough to result in a business hiring a new employee, it becomes The Jobs Funnel.

The Jobs Funnel – Using The Sales Funnel to create more jobs in your community.
http://paycheckeconomics.wordpress.com/2010/05/23/the-jobs-funnel-what-local-businesses-must-do-to-create-more-jobs-in-your-community/

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** Estimate business growth or sales to hire next employee or create next paycheck.

Below is link to a short, informal survey I took with some small business owners in my community, at a networking breakfast. I asked them how much they would need to grow to hire their next employee. Half those surveyed indicated they would have to grow 100% or more to hire.  What is needed is a statistic or metric to better define that “growth,” and that can be related to consumer or household spending by industry or business category(e.g. NAICS codes).

Survey showing why job growth is slow: Businesses have to grow a lot to hire and they will only hire one new employee at a time.
http://paycheckeconomics.wordpress.com/2010/06/21/survey-showing-why-job-growth-is-slow-businesses-have-to-grow-a-lot-to-hire-and-they-will-only-hire-one-new-employee-at-a-time/

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*** Estimate per capital or household spending required for different types of local businesses to grow enough to hire their next employee.

By knowing the amount of revenue growth required for businesses to hire their next employee, and the amount of additional, local household or consumer spending required to generate those new business revenues, you can develop a road map to “full employment” (e.g., 5% unemployment rate [UR].)  You actually plan local job creation, base upon local, economic parameters.

With the labor force being approximately half the population, the ratio of population to jobs required to shift the UR 1% is 200 to 1.  That would require that $2/week per capita or $7/week per household to be converted into wages from consumer spending, or household consumption.

For example, to create a job that pays wages of $10/hour or $400/week requires $2/week from the spending of 200 people to generate those wages.  This would be multiplied by a factor for total new business revenues required for a business to hire, and create that next paycheck.

Below are some analyses that provides a measure of economic activity that would be a starting point for lowering the UR 1% in the United States (1.5 million new jobs), Michigan (50,000 new jobs), and South Carolina (20,000+ new jobs) where I live.

An Approach to Lowering the United States Unemployment Rate 1% (on about $20/week)
http://paycheckeconomics.files.wordpress.com/2009/10/united-states-1-unemployment-rate-reduction-03-09_r0.pdf

An Approach to Lowering the Michigan Unemployment Rate 1% (on about $20/week)
http://paycheckeconomics.wordpress.com/2009/09/13/an-approach-to-lowering-the-michigan-unemployment-rate-1-on-about-20week/

An Approach to Lowering the South Carolina Unemployment Rate 1% (on about $20/week)
http://paycheckeconomics.wordpress.com/2009/08/26/an-approach-to-lowering-the-south-carolina-unemployment-rate-1-2/

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.
**** Create a system to convert local spending into local paychecks.

An Approach to Lowering the United States Unemployment Rate 1% (on about $20/week)
http://paycheckeconomics.wordpress.com/2009/10/18/an-approach-to-lowering-the-united-states-unemployment-rate-1-on-about-20week/

For example, to covert local shopping into local jobs requires:

* a transaction system (to covert spending revenues into paychecks)
* a reporting system (to better inform and motivate people to shop locally and create paychecks)
* businesses willing to participate by offering some goods and services for this paycheck creation program
* incentives for businesses to participate
* people who are willing to shop locally
* incentives to motivate people to shop locally and create paychecks

.

The above recipe is one example of how to balance a government budget.  Many types of recipes can be created.  What is important is that the objective be articulated,  a series of steps be defined to meet the objective with reasonable success, and that the steps are executed to achieve a reasonable success.

At a  meeting with some small business owners, I asked the following question:

“HOW MUCH DOES YOUR BUSINESS HAVE TO GROW TO HIRE ITS NEXT EMPLOYEE (35-40 hours/week)?”

Businesses were categorized into the following groupings for Business Size (Number of Employees): 1 to 4, 5 to 9, 10 to 19, 20 to 49, 50 to 99, or 100 or more employees.

Responses for required Business Growth to Hire Next Employee were categorized as follows: 5%, 10%, 25%, 50%, 75%, 100%, 200%, or more than 200%.

Below is a summary of the results:

SURVEY RESPONSES: 14

NO. OF SURVEYED BUSINESSES WITH ONLY 1 TO 4 EMPLOYEES: 10

MINIMUM GROWTH REQUIRED FOR HIRING NEXT EMPLOYEE:  25%

AVERAGE GROWTH REQUIRED FOR HIRING NEXT EMPLOYEE:  >70%

NO. OF BUSINESSES REQUIRING 100% OR MORE GROWTH FOR HIRING NEXT EMPLOYEE:  7

PERCENTAGE OF BUSINESSES REQUIRING 100% OR MORE GROWTH FOR HIRING NEXT EMPLOYEE:  50%

Even though the sample size (14) Is small, I believe that it is a fair representation of the local business community.  For half the businesses to indicate that they would need to grow 100% for more in order to hire their next employee suggests why job growth will be slow.

The results of my small survey seem to agree with the data in a BLS paper on Business Employment Dynamics.   The data is for business establishments that had employment gains from business starting up or expansion,  and employment loss from business contraction or closure during a yearly quarter (2Q 2008.)   The employment changes are divided into three groups: 1 to 4 jobs created or lost, 5-19 jobs, and 20 or more jobs.

“Business employment dynamics: tabulations by size of employment change”
http://www.bls.gov/opub/mlr/2009/04/art2full.pdf

The data shows that the vast majority of businesses added or lost only 1 to 4 jobs during the time period for that data. (Most businesses hire one employee at a time.)  In the report, 84% of businesses that either added or lost jobs changed employment levels by only 1 to 4 employees.  This is shown in Table 1 and Charts 3 & 4.

Chart 7 shows that the gross job gains & losses as a percent of employment for the decade of the 1990′s was greater than the following decade.  Chart 9 shows that the average job gain for establishments adding jobs, and the average jobs loss for establishments losing jobs also declined.  The report does not give reasons, but I suspect that moderation of job gains/losses relates to the loss of manufacturing. Production lines tend to add or lose large numbers of jobs at one time as the production schedule increases or decreases. As we have lost manufacturing plants, the average employer changes the size of the workforce less during any quarter.

CONCLUSION

It seems that jobs growth will be slow because businesses will have to experience significant growth to justify the expense and risk of hiring, and most  companies will hire only one new employee at a time.

All businesses must sell.
All businesses must sell to stay in business.
All businesses must sell to pay the bills.
All businesses must sell to earn revenues.
All businesses must sell to make a profit.

Until businesses sell more, they will not create more jobs.

A common planning tool in the sales process is the Sales Funnel.  It is a series of steps that lead to the customer purchasing the product.  Each step in the funnel has a probability of success or failure.  A customer can continue to the next step in your funnel, or walk away and hop into someone else’s funnel, or make no purchase at all.  Some prospects will walk away after each step.  The Sales Funnel narrows, with fewer prospects at each subsequent step as the end of the sales process is approached.

Success in selling is a matter of persistence and numbers.  The wider the funnel, with more prospects going into the opening, the more actual sales that will come out of the end.  Below is an example visualization (your vision may vary) of The Sales Funnel.

SALES FUNNEL  STEP ………………………….. ………………..PROSPECTS

Sales Prospects __________________________________ 100

Sales Leads ____________________________________ 50

Proposals ___________________________________ 25

Price Quotations____________________________ 10

Negotiations _____________________________ 5

Customer Orders & Product delivery_______ 2-3

For a business, the ultimate goal of The Sales Funnel is a happy, returning customer who will yield revenues and profits.   A goal of Economic Development is the creation of jobs.  When businesses sell enough of their goods and services to create more jobs, The Sales Funnel becomes The Jobs Funnel.

Below is an example visualization (your vision may vary) of The Jobs Funnel creating more jobs from more sales.

JOBS FUNNEL STEP ……………………………………………………..PROSPECTS

More Sales Prospects ______________________________ 150

More Sales Leads ________________________________ 75

More Proposals ________________________________ 35

More Price Quotations_________________________ 20

More Negotiations __________________________ 10

More Customer Orders & Product Delivery____ 4-6

More Revenues & Profits

More Jobs

The Jobs Funnel is best suited to helping existing, local businesses grow enough to create more jobs in their community.  Most communities can do little to help their manufacturers grow.  This is because the majority of manufactured products are shipped & sold to customers outside of the community or outside of the state they are actually manufactured in.  The primary, target Prospects of The Jobs Funnel are local customers or local shoppers.

The Sales Funnel represents what businesses must do: sell.

The Jobs Funnel represents what businesses must do to create more  jobs: sell more.