Labor Day- A Holiday and a Time to Reflect on the American Dream

Hamdi_Ulukaya.jpgWe hope everyone had a wonderful Labor Day weekend. We certainly did. Labor Day always marks the “unofficial” end of summer. Time for school and work to begin in earnest. It’s also an excellent time to remember the contributions and achievements of American workers and to reflect on their chances of achieving the American Dream, which is “the ideal that every U.S. citizen should have an equal opportunity to achieve success and prosperity through hard work, determination and initiative.”

Last week, I read a very engaging interview in the NYT about Chobani yogurt’s founder, Mr. Hamdi Ulukaya (pictured above) and his quest of the American dream for himself and others.

Hamdi Ulukaya grew up in eastern Turkey with sheep, goats and cows. He and his family spent the spring, summer and fall in the mountains; herding animals and producing yogurt and cheese. They came back to their village in winter time. Hamdi went to a boarding school, but didn’t like it. He left school, got in trouble and then thought he should leave Turkey. A stranger suggested, “Why don’t you go to the United States?” Hamdi wasn’t sure, but decided to take the plunge in 1994, at age 22, and came to America with $3,000 in his pocket.

After several years of university study and odd jobs, in 2002 Mr. Ulukaya was encouraged by his father to start making feta cheese. Years of hard work and struggle ensued with little success. One day, Mr. Ulukaya saw an ad for a fully equipped yogurt plant for sale. Kraft was closing the operation in the dairy region of NY, near where Mr. Ulukaya lived. His attorney checked into it and reported back, “They’re looking for an idiot to unload this on. They probably have environmental issues. And, if they thought yogurt was a good business, they would not be getting out of it.” This was 2005 and at that time Greek yogurt represented about ½ of 1% of the yogurt market.

But, Mr. Ulukaya was convinced he could make it work. He pursued the deal and, on August 17, 2005, he had the “key” to the factory. Today, Greek yogurt is over 50% of the yogurt market. Chobani, which means “shepherd”, went from no sales in 2005 to over $1 billion per year by 2012. It continues to grow as the #1-best-selling Greek yogurt in America. BTW, it’s my favorite.

Chobani started with a few people and now employs thousands. They are known for offering generous wages and benefits and recently gave away equity to its employees. Mr. Ulukaya tells why: “Look, my background is a working-class background. One of my dreams was to make this company a place where everybody’s a partner, and the employees deserved a portion of what they have helped to build. If you make $7 or even $9 per hour, you can’t have a house. You can’t have good food for the kids. Forget vacations.” He continues: “Especially for rural communities, we (the employers) have to start worrying about our own employees, their families and their children’s well-being, and the school, and the firehouse and the baseball field. You have to get involved.”

Chobani needed people for its growth. Coincidentally, at this time people from different parts of the world were being settled in the Utica, NY area near the Chobani plant. Mr. Ulukaya, an immigrant himself, decided to start hiring them: “These are hardworking people-they’ve gone through a lot.” Today roughly 20% (500 to 600 people) of the Chobani workforce are immigrants from 19 different countries. In April 2016, Mr. Ulukaya gave his employees 10% of the shares of Chobani.

Labor Day is a perfect time for a holiday and perfect time to reflect on the American dream. Chobani’s Hamdi Ulukaya is a shining example that the American dream is alive and well. Mr. Ulukaya, now 45 years old, is worth $1.7 billion and is an owner, investor and philanthropist. And, as importantly, Chobani is helping keep the flame of the American Dream alive for its employees; by providing generous wages and benefits, including equity.   All 2,500 Chobani employees, some of them newcomers to the United States from other parts of the world and some whose families have been here for generations, could all celebrate in a very special way on Labor Day. The American dream is alive and well, particularly with entrepreneurs like Hamdi Ulukaya leading the way.

Happy Labor Day: Fun Facts!

Labor Day in the 21st century means time for beaches, BBQ, ballgames and quality time with family and friends. For many, Labor Day signifies the last days of summer. But don’t worry, the official end of summer is September 21st so you still have some time to catch some waves and rays. Although Labor Day always falls on the first Monday of every September, there is a lot more to this holiday weekend than an extra day off from work and great sales. From a survey done by WalletHub, here are 10 facts about Labor Day that you may not know:

  1. 133 million Americans will enjoy a BBQ this Labor Day

 

  1. The average Labor Day shopper will spend $58

 

  1. 25% of Americans plan to get out of town

 

  1. The top three Labor Day destinations include New York City, Chicago, and Las Vegas

 

  1. Labor Day is America’s third favorite holiday behind Christmas/Chanukah and Memorial Day

 

  1. There are approximately 89 running races held over Labor Day weekend

 

  1. The number one hardest working city in America is San Francisco with an 8 hour average work day, and the laziest city in America is Columbia, SC with an average work day of 7.3 hours

 

  1. Labor Day is the unofficial end of hot dog season in America. From Memorial Day to Labor Day there are 818 hot dogs eaten per second

 

  1. Most Americans believe Labor Day is only an American holiday when really it was started in Canada

 

  1. Last but not least, yes, you really can wear white after Labor Day!

From everyone here at DWM, have a great Labor Day Weekend and enjoy some time with the family!

My, How Jobs Have Changed

Hope you had a super Labor Day weekend!  Wonderful to be with family and friends.  It’s amazing how jobs have changed over the years.  The NYT over the weekend illustrated how life is so much different for workers by comparing two janitors working for two top companies then and now.

Gail Evans was a janitor for Eastman Kodak in Rochester, NY almost forty years ago.  She was a full-time employee, received 4 weeks paid vacation, reimbursement for some tuition costs to go to college and bonuses. And, when the Kodak facility was temporarily closed, the company kept paying her and had her perform other work.  Ms. Evans took computer classes at night, got her college degree in 1987 and ultimately became chief technology officer for Kodak.

Marta Ramos cleans floors for Apple in Cupertino, CA.  She isn’t on Apple’s payroll. She works for one of Apple’s contractors.  Ms. Ramos hasn’t had a vacation in years-she can’t afford the lost wages.  Going back to school is out of the question. There are no bonuses and no opportunities for some other role at Apple.  Ms. Ramos earns $16.60 per hour, about the same as Ms. Evans did in inflation-adjusted terms.  But her only hope for advancement is to become a “team leader”, which pays an extra $.50 per hour.

Over the last 35 years, American corporations have increasingly focused on improving their bottom line by focusing on their core competency and outsourcing the rest. Part of the success of the Silicon Valley giants of today has come from their ability to attain huge revenues and profits with relatively few workers.  It’s led to huge profits for shareholders, helped grow the U.S. economy, but also has fueled inequality.

In 1993, three of the then tech giants – Kodak, IBM and AT&T – employed 675,000 employees to produce $243 billion of revenue in inflation-adjusted dollars.  Today, Apple, Alphabet and Google produce $333 billion in annual revenue with less than 1/3 of that number, employing only 205,000 employees.

Apple is quick to point out that its products generate many jobs beyond those who receive an Apple paycheck.  It estimates that 1.5 million people work in the “app economy.” However, research shows that the shift to a contracting economy has put downward pressure on compensation.  Many corporations hire full-time employees only for the most important jobs and outsource the rest; obtaining contractors at the time and place needed for the lowest price possible. It’s not just janitors and security guards that are outsourced.  There are also people who test operating systems, review social media posts and screen job applicants, for example.  It’s understandable: companies face really tough competition and if they don’t keep their work force lean, they risk losing out to a competitor that does.

In addition, outsourcing often results in a culture of transience.  Contracted workers are often changing jobs every 12 to 18 months, which obviously can be stressful to them and their family.  Contractors generally don’t receive stock options nor robust health insurance.  Also, retirement plans, even for full-time employees, have changed considerably in the last 35 years. In 1979, 28% of workers were covered by a company paid pension program and 7% had a 401(k). In 2014, only 2% of workers were covered by a pension plan and 34% had a 401(k) plan, which of course, means that most of the funding now is coming from the worker.

Here’s what’s really amazing.  With all these changes, job satisfaction has gone up.  For the first time since 2005, more than half of U.S. workers say they’re satisfied with their jobs.  This optimism has led to consumer spending increasing every month this year and a strong economy.  Apparently, after a decade of job cuts, minimal raises and reduced benefits, workers have lowered their expectations.  Rick Wartzman, author of “The End of Loyalty: The Rise and Fall of Good Jobs in America,” feels that young workers today “don’t even know what they are missing.”

On Monday, we celebrated Labor Day, honoring working people.  That’s particularly important these days as many workers don’t have it nearly good as it was 30-40 years ago.  Even so, American values, spirit and resiliency continue to be very evident in these ever-changing times. Perhaps we need another holiday, “Resilience Day.”  Time to get the grill heated up again!

How Much do You Know About Labor Day?

We are all aware that Labor Day signifies the end of a summer filled with backyard BBQs, family and sunshine. It is the one long weekend of the year when families come together to say goodbye to summer, unwind and prepare for the changing seasons ahead. However, many of us don’t take the time to consider the true origin of Labor Day.

The concept of Labor Day dates back all the way to the Industrial Revolution in the U.S. during the late 1800s. The typical work day was 12 hours long, and the typical work week was seven days. Working conditions were far from ideal, and even children as young as four or five years old were commonly seen working in mills and factories to help their struggling families scrape by.

Many workers began organizing protests and strikes across the U.S. Unfortunately, many of these demonstrations turned violent and, in some cases, deadly. In 1894, Eugene V. Debs, with the support of the American Railroad Union, organized a strike and boycott of the Pullman Palace Car Company in Chicago. This strike effectively crippled all railroad traffic in the U.S., leading then President Grover Cleveland to deploy 12,000 troops to the area to dissolve the strike.

The use of military force on behalf of the U.S. government essentially poured gasoline on the already burning fire of discontent with current labor wages and conditions. Several people were killed during the Pullman strike altercation, and although the strike did come to an end, American workers were still unhappy and began to condemn President Cleveland’s aggressive response.

Meanwhile, union workers in New York City had been organizing and going on strike one day of the year in support of the idea of a national Labor Day that had been circulating around the U.S.

Later in 1894, which happened to be an important election year, President Cleveland decided to implement a nationally recognized annual celebration of American workers to appease his critics – and thus Labor Day as we know it was born.

Fast forward to 2017, where we at Detterbeck Wealth Management are fortunate enough to do what we are passionate about everday in a constructive and collaborative environment. We choose to use this year’s Labor Day as an opportunity to reflect on and appreciate how far the U.S. economy and workforce has come since those historic strikes in 1892.

From everyone here at DWM, have a great Labor Day Weekend and enjoy some time with the family!

We Americans Work Hard for Our Money- Our Money Should Work Hard for Us

money-tree-3We hope everyone had a wonderful Labor Day weekend and a great summer.  We certainly did.

We American workers work hard for our money and our money should work hard for us.

Our country was built by hard workers. The second industrial revolution (from the late 1880s to 1970) brought the U.S. from an insular growing nation to the greatest country in the world, a distinction we still hold.  Our country has led global prosperity for seven decades since WWII based on a multinational system of institutions, rules and alliances.  Now that prosperity is in jeopardy.

For the last 15 years, economic growth in advanced nations has been weak.  The US is still adding jobs, but with reduced productivity.  From 1947 to 2000, the per-person GDP rose by 2.2% per year.  Since 2001, it’s been less than 1%.  81% of the US population has had flat or declining real income in the last decade.  The slowdown in growth has two main components; people working fewer hours and less economic output (productivity) for each hour of labor.  Northwestern economist Robert Gordon, whom we discussed at last fall’s seminar, argues that the third industrial revolution which includes computers and the internet has not had the same transformative impact on growth as cars, electricity, airplanes and indoor plumbing did.

American workers’ jobs have changed considerably in the last four decades.  In 1979, 19% of our nation’s jobs were in manufacturing, today only 8% are in manufacturing.  Yet, the U.S. share of global manufacturing has held at 20% for the last 40 years with American companies getting more done with fewer people.  Globalization has helped boost our GDP.

U.S. multinational businesses pay their U.S. employees 25%-30% more than domestic employers do.  U.S. manufacturing workers whose jobs depend on exports earn 18% more.  Cheap imports save the average U.S. household about $10,000 annually.  Every month, the U.S. economy gains and loses 5 million jobs because of innovation, competition, changed consumer tastes and trade.  Lots of winners and losers.

Hence, there is a huge difference in how Americans see the economy.  Higher education means higher hopes for financial prospects.  The poor are understandably more worried about retirement income. Those living in the South and West are understandably more optimistic than those in the “Rust Belt.”

Millions of Americans and Europeans who have not participated in globalization and who are either unwilling to or incapable of change, want to close the door to their nation.   Politics is moving from Republicans vs. Democrats or left vs right to “open” vs. “closed.””   Economic dislocation and demographic change (aka “too many immigrants”) has millions thinking it’s time to pull up the “drawbridges.”  In Poland and Hungary, the “drawbridge-uppers” are firmly in place.  In France, Marine LePen, thinks the opposite of “globalist” is “patriot.” The populist vote in Europe has nearly doubled since 2000 despite the fact that trade alliances have long been a huge benefit around the world.  Both U.S. political parties used to back free trade. Now they bash it- neither Donald Trump nor Hillary Clinton supports the Trans-Pacific Partnership (“TPP”), which would be the largest regional trade accord in history.  When you add an anti-globalization movement to the existing productivity decline in the U.S. and Europe, world growth will likely continue to fall.

Fortunately, the U.S. economy has held up fairly well- adding jobs driven by consumer spending.  However, as Federal Reserve Vice Chairman Stanley Fischer outlined in his concerns at the Jackson Hole summit, there is concern for longer-term prospects for the U.S. economy.  He called for more public investment in education and infrastructure.  Both Presidential candidates favor infrastructure spending.  Harvard economist Larry Summer suggests that paying workers to build roads and bridges creates more “demand” as workers become reattached to the work force. And this demand increases supply and produces more growth.

Conclusion:  Today, with reduced productivity and anti-globalization sentiment strong, we expect slower world growth and lower inflation to continue.  This means lower nominal equity returns. And, there are other continuing concerns, such as global terrorism and stock valuations.  Economists and forecasters are great at overstating the probability of worst-case scenarios. While, most often, their “expert predictions” of dire consequences don’t occur, we all have to endure the constant negativism from the media.

We recommend that investors remain invested in an appropriate asset allocation to obtain a reasonable return based on their risk profile.  In the long-run, equity markets have produced an equity “premium” over fixed income returns (aka a “real return” above inflation). Fixed income and alternatives have continued to provide a counter-balance to equities, traditionally remaining stable or going up when equities decline.   We’ve all worked hard for our money, and even in this new investment environment, we need to keep it working hard for us.

Happy Labor Day!

Labor-Day-Picnic-Clip-Art-PicturesWe hope you have a fantastic upcoming extended weekend. Although, I feel, the end of summer is a bit sad, there is much to look forward to come fall: beautiful mild temperature days, family visits to the pumpkin patch, leaves changing color, Halloween, and of course… football season. The shift always begins on the first Monday of September, or better known as Labor Day.

While most everyone is a fan of Labor Day and the three-day weekend, the history isn’t as well known. Labor Day is dedicated to the achievements of American workers and a celebration of how important they are. The state which first created the holiday, by legislative enactment, was Oregon on February 21, 1887; soon followed by Colorado, Massachusetts, New Jersey, and New York (the first state to propose Labor Day as an official holiday). By June 28, 1894, Congress made Labor Day an official holiday to be celebrated on the first Monday of September throughout all of the US.

Labor Day comes from one of the worst time periods to work in the trade, the Industrial Revolution. Many Americans worked 12 hour a day, seven days a week, and close to 365 days a year. In some states, families had to send children as young as 5 years old into the workforce, just to get by. With little regulation, workers were forced into extremely unsafe and unsanitary working conditions. With no other options, they had to take the chance in order to keep food on the table.

Eventually, enough was enough. Labor unions formed and, throughout the beginning of the 18th century, they grew larger and more vocal. For the first time, a group was standing up for the working man. Strikes, protests and rallies started to take place, demanding safe/clean working conditions and realistic pay. On September 5, 1882, over 10,000 workers left work to march from City Hall to Union Square, this would later be known as the first Labor Day Parade in New York City. The Unions made significant progress and eventually the idea of a “workingman’s holiday” started to float around.

In 1894, Eugene V. Debs of the American Railroad Union called for a boycott of all Pullman railway cars, crippling all railroad traffic throughout the US. This eventually led to riots and the deaths of many protestors, leaving government and worker relations severed. In an attempt to gain the trust of the American workforce, Congress officially passed the act to make Labor Day a legal holiday in the United States.

To this day, there is still a debate of who came up with the original idea of Labor Day. Many credit Peter J. McGuire, cofounder of the American Federation of Labor, while others argue it was actually Matthew Maguire, a secretary of the Central Labor Union, who originally proposed the idea.

Whether it was McGuire or Maguire, Labor Day is now a weekend that is always circled on the calendar. Working hard is part of our culture at DWM. We take pride in knowing we can add value and better the lives we touch every day. At the same time, we don’t take for granted the people whom we collaborate with and who allow us to provide more comprehensive service to our clients. So while it is a great weekend to barbeque with the family, it is also a great time to reflect on all of the hard labor done before us in order to make our lives better.