Saturday, August 29, 2009

Pittsburgh and Ramblings

Pittsburgh is much more green, hilly, small and water based than I imagined. I envisioned a dirty city that had a true city core vibe to it. The opposite is true. The book An American Childhood once described Pittsburgh as a collection of neighborhoods. It is very true. The hills are pretty steep in some areas. The skies are clean & clear. I guess that is the product of enviro laws and costs pushing the steel jobs out to other states (Alabama) & foreign countries. It's charming as a community. The accents are funny and enjoyable. The food is going to make you fat and feel satisfied. I did have one crackhead ask me and a coworker for 80 cents. Yup, 80 cents. The city has been shrinking; it is half it's population of 1950. Sad. The best compliment I could give is I could live and enjoy a life there.

Air travel is even more painful now. Many airlines have cut many many direct flights. This means layover madness. I flew Indy to Charlotte to Pitts. Look at that on a google map. It's an almost equilateral triangle. I'm just going to drive it next time. The extra killer is the charge for checking baggage. No one wants to pay it so everyone carrys on bags that should not be carried on. You end up wasting 20 mins watching people bumblefuck trying to load their bags into overhead compartments. Air travel is way down which is why flights have been stopped. This is all with oil averaging $50 a barrel in the first half of 2009.

The businessmen I met work with many small businesses. Many of those businesses are scared to death about health care reform. These brokers are extremely well educated on health care; it's what they do & they want to save companies money. Maybe some 19 year olds who sit in their dorm rooms updating their web 2.0 self centered platforms could learn a thing or two about HC if they spoke with them? They knew things I had not heard in any newspaper article because they took the 1000 page bill and read it at the urging of their clients (if only lawmakers did that). Some of these brokers have strong union ties & are lifelong Dems (others obviously weren't). If reform passed as envisioned by the ultralibs, it would levy fines on small businesses not complying to medical insurance standards (who sets the standards?). It would also leave a loophole for businesses under 25 lives to not have to comply or pay fines. One broker hinted that many companies he deals with that are around 25 lives will cap themselves of full time employees at 24 and 'contract' out & temp others. Great, just what we need, finagling by employers to defeat the purpose of reform. At the heart of the matter though is that some employers don't want to face reality. They want their HMO with $10 copays to be the same cost forever despite their group getting older (especially if they haven't hired anyone in a while or laid off younger workers). As you get older, you are a worse risk, which means you pay more for the same plan. Change your plan to get costs down.

There is also a fear out there of doing business with companies that have accepted government money. These guys wish that those companies had been forced to sell their blocks of business to safe companies rather than take govt money and be in 'limbo'. Many of these brokers are paid commissions by insurance carriers, while some get fees from employers. Commissions also come with bonus programs. If the govt suddenly says all bonuses paid by TARP recipients are subject to the "pay czar", do broker bonuses get reviewed? They don't work for the TARP recipients but they get a bonus from them? It helps my company as we have had our ratings affirmed and do not take TARP money! Still, this does hurt small businesses as they suddenly have to change their insurance because of TARP fears by the brokers & employers. Who wants to do business with a TARP recipient?

Nothing was as sick as hearing the broker who told me his municipality and public sector clients don't mind cost increases because they think they can always raise taxes. He's tried to warn them that this isn't the case right now. He's paid to advise them & they are not taking his advice. He has advised cities & counties to do what the private sector has done for years and play hardball in these once in a generation economic hard times. As he said, "fiscal year 2010 has pie in the sky projections that will splat next summer, forcing more drastic changes". It would be wonderful to see newspapers investigate this.

The huge theme that I heard & witnessed through conversations with those connected to all sectors of the economy is that things are hurting with end user demand and will continue to hurt for a while. Companies are cost cutting with labor costs because this is a majority of their variable costs. Cap-ex is over and done with, and raw inputs they can hedge better now compared to 1975. Overtime is gone. The other thing is that employers are telling laid off ees that if they come back it will be for less hours or less pay. Why return a person to work for 35K in salary when they will gladly come back for 20-30% less just to get money in the door? Why have them work 40 hours, when they can work 20 and maybe get 75% of their productivity? One broker described how a client had laid off 15 ees out of 50 this winter. They have hired 5 back so far but at the cost of 4. Every worker took a 20% pay cut. Scary that they could do this. Scary that the workers had no alternative.

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