Political Calculations
Unexpectedly Intriguing!
January 31, 2007

While we often make fun of economic prognosticators, we thought we'd take the opportunity to deflate our preferred method of forecasting future levels of GDP. Consider today's news that economic growth in the U.S. in the fourth quarter of 2006 (2006-Q4) grew at an annual rate of 3.5% to a level of 11,541.6 billion dollars after adjusting for inflation.

Now, this advance estimate is quite a bit off from the 11,625.2 billion dollar level the Climbing Limo method had forecast for the U.S. economy in the fourth quarter of 2006. This 0.7% error was produced using a model that only looked at inflation-adjusted GDP data for the third quarter of 2005 (Real GDP was $11,115.1 billion in 2005-Q3) and the first quarter of 2006 (Real GDP was 11,316.4 billion in 2006-Q1).

So, how did the forecast get so far off from where we've now seen the advance GDP data come in? Simply put, two big things have changed between the U.S. economy of 2006-Q4 and the U.S. economy that existed between 2005-Q3 and 2006-Q1: the housing market has decelerated and motor vehicle production in the U.S. has become a drag upon the economy.

In a nutshell, that's pretty much it. The Reuters article underscores this point with respect to domestic automobile production, noting that:

... motor vehicle output restrained GDP sharply. Excluding motor vehicle production, GDP would have been up at a 4.8 percent rate during the quarter.

Now, all this is just advance data and at this point, we would anticipate that the final numbers that will be released on March 29, 2007 will be revised upward, but not to the levels the Climbing Limo method had forecast.

In the meantime, here's our chart updated with the advance Real GDP data and an extra point showing where the economy could have been if not for Detroit's most recent problems. For added measure, we've included a datapoint showing where the economic consensus poll was forecasting when we got around to posting our prediction:

In reality, all this highlights the key weakness of any forecasting method that only looks at past data. Not only was the Climbing Limo off by a substantial margin, the collective wisdom of economic forecasters was overly pessimistic, even though they presumably were using far more up-to-date data in their own predictions. As they say in the investing industry, "past performance is no guarantee of future results."

Previously on Political Calculations

January 30, 2007

Warren Meyer over at The Coyote Blog has been playing with the numbers from his annual Social Security report, and he isn't pleased with what he's estimated to be the effective rate of return on his "investment" in Social Security.

We thought that kind of math might make for a neat project, so we've gone to Social Security's actuarial notes and mined the data to create our tool below, which will approximate what Social Security estimates will be your rate of return on the amount of money you will pay into Social Security over your lifetime. That is, assuming they don't hike your taxes or slash your benefits!

Update 25 August 2011: Before you go any farther, we've made an updated version of this tool available, which incorporates Social Security's actuarial projections as of July 2010! If you're game, we suggest comparing your results here with those from the updated version!

Birth Year and Household Income Data
Input Data Values
Your Birth Year
Your Average Lifetime Annual Income
Household Type


Your Estimated Rates of Return from Your Social Security "Investment"
Calculated Results Values
Low Rate of Return Approximation (%)
Average Rate of Return Approximation (%)
High Rate of Return Approximation (%)

High, Low and Average

If your birth year is before 1930, you can expect that your effective rate of return on your "investment" in Social Security is at the high end of the range presented above.

On the other hand, if your average lifetime annual income is high (more than $60,000), you can expect that the approximation is overstating your rate of return and that your effective rate of return is closer to the low end of the approximated range.

Otherwise, you should be pretty comfortably somewhere near the average approximate value!

Winners and Losers, Generally Speaking

In using the tool, you'll find that Single Males fare the worse, followed by Single Females and Two-Earner Couples, while One-Earner Couples come out with the best rate of return from their "investment" in Social Security.

These outcomes are largely driven by the difference in typical lifespans between men and women. For the typical One-Earner Couple, the household's income earner, usually male, dies much earlier than their spouse, who keeps receiving Social Security retirement benefits until they die. This advantage largely disappears if both members of the household work, which increases the amount of Social Security taxes paid without increasing the benefit received.

The Older The Better

Going by birth year, you'll find that those born in recent decades don't come out anywhere near as well as those born back when the program was first launched in the 1930s. This is primarily a result of tax increases over the years, which have significantly reduced the effective rate of return of Social Security as an investment.

For example, when Social Security was first launched, the tax supporting it ran just 1% of a person's paycheck, with their employer required to match the contribution. Today, 6.4% of a person's paycheck goes to Social Security, again with their employer paying an additional 6.4% into the fund as well. Since benefits are more-or-less calculated using the same formula regardless of when an individual retires, the older worker, who has paid proportionally less into Social Security, comes out ahead of younger workers!

The Poorer the Better

If you play with the income numbers (which realistically fall between $0 and $97,000), you'll see that the lower income earners come out way ahead of high income earners. Social Security's benefits are designed to redistribute income in favor of those with low incomes.

Living and Dying

There's another factor to consider as well. This analysis assumes that you will live to receive Social Security benefits (which you only get if you live!) If you assume the same mortality rates reported by the CDC for 2003, the average American has more than a 1 in 6 chance of dying after they start working at age 19-20 before they retire at age 66-67. Men have a greater than a 1-in-5 chance of dying before they reach retirement age, while women are slightly have slightly over a 1-in-7.5 chance of dying pre-retirement age.

Morbid? Maybe. But your Social Security "investment" isn't as without risk as many politicians would have you believe!

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January 29, 2007

Is it really any surprise that goverment officials and bureaucrats who don't respect the private property rights of individuals don't care much about protecting any of their other rights too?.

Every year, when it's Nobel Prize time, a lot of speculation centers on whether or not it finally be the year that a certain New York Times columnist will win the Nobel Prize in economics. Rest assured that it probably won't happen, as it appears his understanding of the subject is somewhat limited....

Speaking of economists with really bad forecasting skills, one of the things we just don't get is the economic analysis that gets lapped up without serious question by the media these days. Here's a prime example from January 14:

Lehman Brothers chief US economist Ethan Harris on Friday boosted his forecast for fourth quarter 2006 growth to an annualized rate of 3.3 percent, a leap from the firm's prior call for just 2.0 percent growth.

"After slowing in November, the economy seems to have regained its stride," Harris said.

"With the last of the major data in, we are now revising fourth quarter GDP to an above-trend 3.3 percent. A wide range of indicators have been stronger than expected. Most important have been the strong consumption data and the surprising improvement in the trade balance."

But, then the analyst in question goes on to say this:

Harris at Lehman Brothers said "a natural question is whether the solid fourth-quarter growth is a fluke."

He said data could be distorted by things such as the introduction of the new Windows Vista operating system, shifts in holiday shopping patterns, problems in the auto sector, the plunge in energy prices and unusually warm winter weather.

Our translation of that statement: "We really have no idea at all what will happen, so let’s throw up a bunch of garbage and see if anything sticks!"

The truth is the economy may be driven a lot more by inertia than anyone really appreciates. In our view, it really takes some kind of government action or some other, more natural, disaster to derail the economy’s growth prospects. But, we guess that kind of commentary doesn't guarantee getting your name published in the news!

As for the U.S. having had a good fourth quarter in 2006, well, we could have predicted that nearly nine months ago (we didn't, at least publicly, until last month when we showed our forecast through 2007-Q2!) We are actually rooting for the numbers to come in as low as are now being forecast, mainly because we don't like that slope in our chart pointed downward from the first quarter of 2007 to the second quarter - we'd rather get to the same point on an upward slope!

January 26, 2007

Carnival Midway from The Jerk Welcome to the January 26, 2007 edition of On the Moneyed Midways, the blogosphere's weekly review of the best business, management and money-related posts from each of the week's major blog carnivals! Every week, we scan dozens of blog carnivals, seeking out the best posts and selecting one post as being The Best Post of the Week, Anywhere!(TM) As an added bonus, we also pick the near contenders for the best post of the week that was as being Absolutely essential reading!(TM)

The word that best describes this week's edition is "fracturation," which we've created by combining the words "fracturization" and "saturation" together. Where blog carnivals are concerned, we've seen a trend over time toward the creation of more and more blog carnivals (saturation) focused on narrower and narrower topics (fracturization). Since this week features more new blog carnivals that any of our previous editions, we thought it was a good time to pull the word out of storage and put it back into public consumption!

There's lots of good stuff this week, and there's a surprising amount of humor involved, so let's go straight on to the best posts of the week that was....

On the Moneyed Midways for January 26, 2007
Carnival Post Blog Comments
Brilliant Business Ideas A Dozen Reasons Why I Shorted Google Market Poetry We weren't going to include Brilliant Business Ideas among our covered carnivals this week, but Frozen Pozen's stock shorting rationale in rhyme was too good to pass up!
Carnival of Branding Choose the Identity that Defines Your Entity Aridni Todd presents the Business 101 pros and cons of the various types of business structures.
Carnival of Career Intensity Business Advice for Artists and Sensitive People Christine Kane Christine Kane offers 15 pieces of business advice that really aren't just for artists and sensitive types! Absolutely essential reading!
Carnival of Customer Service The Perversity of Measuring Trust Trusted Advisor Tom Peters is famous for saying "What Gets Measured Is What Gets Done." Charles Green shows how what gets measured can create perverse incentives against what you actually want to achieve. Absolutely essential reading!
Carnival of Debt Management Power Secret: A Must Read for Those 24 or Under SmartCoolRich How would you like to be "set for life" by the time you reach age 30? How would you like to be able to "call the shots" in our life (for once)? Burningchrome has the secret….
Carnival of Entrepreneurs Personal Training?... That Will Never Work! Renovate Your Life with Craig Craig Harper has grown his personal training business from 1 to more than 1000 clients, all without a formal marketing plan or an advertising budget and despite flashier competition. It's the "how" that's fascinating in The Best Post of the Week, Anywhere!
Carnival of Improvement Green Is Making Me See RED Wisdom from Wenchypoo's Mental Wastebasket Wenchypoo rants against rabid unreasoning environmentalists. Very contrarian and common-sensical at the same time!
Carnival of Management Tips Non-Financial Currencies Passion, People and Principles How can a boss can increase the compensation for their employees without increasing their pay? David Maister lists 15 non-financial currencies.
Carnival of Money Stories Good Debt, Bad Debt, No Debt Ask Uncle Bill Uncle Bill tells the story of his son's girlfriend Megan, a full-time student planning to take on two part time jobs as part of her plan to achieve her goals more quickly without going into debt.
Carnival of Personal Finance I'll Buy Sex When I'm Ready to Buy Sex One Year Exit Plan Paul's irresistable post is a fun snark on misdirected advertising. Sex or toothpaste, indeed!
Carnival of Real Estate We Can Always Reduce the Price Later The Real Estate Guide Many homeowners come to market with the idea of charging a high price and then, if their home doesn't sell, lowering it later. Athol Kay argues that it's a lot smarter to set the price at the right level when you first bring it to the market.
Carnival of Stocks Why You Should Use a Stop Loss and Profit Protect Discipline WhoActs.com Gerry Wollert discusses how these tools can minimize losses or lock in gains for an investment portfolio.
Carnival of Taxes Phaseouts for Tax Benefits AllFinancialMatters When it's tax time, the smart tax filers strive to take advantage of all the tax breaks they can get. Financial planner JLP shows where the fun stops.
Carnival of the Capitalists Insurance - Public and Private Penguin Unearthed Jennifer outlines what insurance is intended to do, then compares the different trade-offs various countries make for controlling insurance costs.
Personal Development Carnival Who to Compare Yourself With FredFullerberry.com Fred Fullerberry helps you uncover the individual you should use as a benchmark to measure yourself against.
Personal Growth Carnival I'm Okay, You're an Idiot Trusted Advisor Charles Green says that a certain cliché should be written "I'm an idiot, you’re an idiot. So let’s get over it, let’s work together and let’s do something great." Absolutely essential reading!
Real Estate Investing One of My Favorite Landlord Tools The Landlord Blog Anesia Springborn shares her discovery of a new invention for landlords- easily interchangable door locks with a master key!
Real Estate Investing The Big Picture About Cash Flow from Foreclosures Cash Flow Treasures Steve Burns talks through how stepping in at the right time may lead to a win-win scenario.
Working at Home The Paperless Home Office Mortaine's Blog Stephanie Bryant shares how she manages to cut down on the amount of paper she has to manage in working from home.

* A "Bryan C. Fleming" production. For more about the Bryan C. Fleming universe of blog carnivals, see this excellent post by the Silicon Valley Blogger at The Digerati Life (or our commentary from the December 15, 2006 edition of On the Moneyed Midways. And for the record - he did appear again this past week!

Previous Editions

January 25, 2007

Pretend you're the President. You're sitting around the Oval Office and you get news that the Congress is working on passing a bill for raising the minimum wage and that you can expect that it will reach your desk in the very near future.

But what will be the impact? Some workers, particularly those in the range of the proposed minimum wage increase, will have their pay go up substantially. On the other hand, some can expect to lose their jobs as a direct result of the increase, while others will not be able to work the same number of hours as they had previously as their employers work to control their suddenly increased cost of doing business. Meanwhile, even if no one loses their job or has their hours cut, their employers might opt to increase their prices to cover their suddenly increased cost of doing business.

It's all just a matter of how much, and now it's time to figure that out with some back of the envelope calculations.

You know the following:

  • The current level of the federal minimum wage is $5.15 per hour. The proposed increase will see it rise to $7.25 per hour.

  • Approximately 6,663,431 people earn wages or salaries paid at an hourly rate of $7.25 or less, as estimated from your most recent data as of 2005. This represents 5.3% of the 125,612,000 members of the U.S. hourly workforce. If you choose to just take the 75,609,000 members of the U.S. workforce paid at hourly rates into account in your calculations, that percentage increases to 8.8%.

  • Although more people than this will be affected by the increase in the minimum wage (especially those who currently earn just above the proposed level), not all will be affected equally. We'll assume that this will be a good number to use for getting a rough estimate of the impact of a minimum wage increase. Likewise, the increased cost to employers will go up by more than what the employee will see in their paycheck (via the employer portion of FICA payroll taxes, etc.), but this will be left out of the calculations to keep them simple.

  • Over the past 25 years, the typical U.S. corporation's total employee compensation costs averaged roughly 64.7% of its revenue while non-labor costs account for 23.4% of revenue. Profits are 12.0% before taxes and are 7.4% after taxes. (Values determined using annual data between 1980 and 2005 from the Bureau of Economic Analysis).

And now you're ready to run some numbers:

Minimum Wage Data
Input Data Values
Current Minimum Wage per Hour
Proposed Minimum Wage per Hour
Business Cost and Profit Margin Data
Input Data Values
Percentage of Revenues for Total Employee Compensation Expenses (%)
Percentage of Employees Affected by Minimum Wage Change (%)
Business Profit Margin (%)


Minimum Wage Driven Changes
Change in Income for Workers Values
Percentage Change in the Minimum Wage (%)
Change in Costs for Business Values
Business Profit Margin After Minimum Wage Change (%)
Percentage Change in Total Costs for Businesses (%)

The Pros and the Cons

The Pros: As you expected, the biggest winners will those who will continue working in their minimum wage job following the increase, also assuming their hours for working will not be cut. These individuals can expect to benefit from a nearly 41% increase in their pay before taxes. In 2005, there were 479,000 individuals who were paid the minimum wage level of $5.15, and an additional 1,403,000 individuals who were effectively paid at rates below the federal minimum wage.

Likewise, approximately 4.8 million people who earn between $5.15 per hour and $7.25 per hour will benefit, although to an increasingly lesser degree. Those earning above the proposed minimum wage level may also benefit if their pay is indexed to the federal minimum wage.

The Cons: Here, the key number in the results is the Percentage Change in Total Costs for Business. This percentage represents the total amount of one or some combination of the following assuming businesses act to control their costs or to maintain their pre-tax profit level:

  1. The average percentage by which the workforce will be reduced (layoffs).
  2. The average percentage by which the hours available to be worked will decline (reduced hours).
  3. The average percentage by which prices will increase (inflation).

More than likely, some combination of the three will occur. Unless there's some almost magical technological innovation or better way of doing things than can take the bite out of such a hike in the minimum wage through substantially higher levels of productivity.

Alternatively, business owners and shareholders might accept lower profit margins, but that might negatively affect things like investment returns and the ability of businesses to borrow money. And if prices rise substantially, will the Federal Reserve act to raise interest rates to keep inflationary pressures under control, increasing the probability of recession? Definitely not good for economic growth.

Then again, not all businesses hire substantial numbers of low-wage workers or have low-profit margins. But those that do, such as restaurants, which typically operate with a 4 to 7% profit margin and hire more than 1 of every 7 minimum wage workers, will be disproportionately affected.

So if you were the President, what would you do?

Previously on Political Calculations

Jobs and the Minimum Wage
Our short look at who really benefits and who really hurts when minimum wage levels are set.
The Disappearing Minimum Wage Worker
Back in 1980, roughly 8.9% of the total U.S. workforce earned the minimum wage or less. Today, that figure is 1.5% of the total U.S. workforce. The minimum wage worker is a vanishing breed!
The Minimum Wage and Small Business
What if you were a small business owner whose employees include a good percentage of minimum wage workers? What would a change in the minimum wage mean for your business?
Estimating the Distribution of U.S. Hourly Wage Earners
Have you ever wondered how many people earn a particular hourly wage in the United States? Or how many people there are between two hourly wages? Our tool estimates the answer!
Data for the Slaves of Wages
How many U.S. workers work full time vs part time? What about minimum wage earners? And what's the age distribution of minimum wage workers anyway?
Low End Income Inequality in the U.S.
We all hear that growing income inequality is bad, but we never hear that it's even happening for the lowest 20% of income earners in the US!
The 10 Jobs That Pay the Least
What are the occupations of the lowest paid people in the U.S.? And how much do they make? We here at Political Calculations not only ask questions like these, we take time out of our busy days to answer them too!

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January 24, 2007

What are the occupations of the lowest paid people in the U.S.? And how much do they make? We here at Political Calculations not only ask questions like these, we take time out of our busy days to answer them too!

Our go-to source for finding out what industries or occupations represent the low end of the U.S. totem pole turned out to be the Congressional Budget Office, which published a study of the lowest-wage workers in the U.S. from 1979 through 2005 (available in this December 2006 report.) The report indicates that just six general fields account for more than half the employment of the lowest paid 20% of the U.S. workforce:

Now, let's find out what the actual lowest paying jobs are! The following table is taken from BizJournals.com's analysis of full-time private sector worker salaries in 2004. Since several of these occupations supplement their basic pay by collecting income from tips, an asterisk (*) has been added to indicate those occupations where substantial tip income has not been included. We've added the column for the Equivalent Hourly Rate, which we found by taking each occupations' average annual earnings for 2004 and dividing by 2080 hours (the equivalent of 40 hours per week, 52 weeks per year):

10 Jobs with the Lowest Annual Earnings
Occupation Average Earnings of Full-Time Workers ($USD) Equivalent Hourly Rate ($USD/hour)
Waiters and waitresses (*) 8,751 4.21
Waiters and waitresses' assistants 12,355 5.94
Bartenders (*) 13,284 6.39
Amusement and Recreation Facility Attendants 14,498 6.97
Baggage Porters and Bellhops (*) 14,970 7.20
Food Preparation Workers Not Classified Elsewhere 16,169 7.77
Early Childhood Teacher's Assistants 16,563 7.96
Maids and Housemen 16,609 7.99
Teacher's Aides 16,670 8.01
Food Preparation Kitchen Workers 17,529 8.43

We should note that these figures only apply to full-time workers. As we've previously reported, the vast majority of low hourly wage jobs in the U.S. are part-time positions, particularly those at the federal minimum wage.

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January 23, 2007

Waking up. Let's shine the light of truth here and admit that sometimes there really is nothing harder to do than to get up in the morning. Especially this time of year, when it's not just cold outside, it's *freaking* cold outside! What feels better than keeping under the covers until you *have* to get up?

But, if you want to become more productive (and who doesn't?), waking up earlier often makes the top ten list of things you can do to improve your life.

Whether or not you should wake up earlier comes down to a trade-off, as Garth Sundem put in in his book Geek Logik:

You know those five extra minutes can make or break your day, but it's a fine line between having more time to be productive and needing to stash your sleep-deprived self in the copier cabinet for a midafternoon power nap.

Well, once again, Garth Sundem has worked out the math to help you solve this dilemma, and even factors in the darkness level and ambient temperature of your bedroom! Our tool below automates the math as faithfully as possible!

Waking Data
Input Data Values
Hours of Sleep You'll Get Tonight
Hours of Sleep You Need Regularly in Order to Remain Civil with Telemarketers
How Important Is the Extra Five Minutes of Awake Time?
(On a scale of 1-10 with 10 being "in these five minutes I will solve the unified theory of everything!")
How Much Light Is in Your Bedroom When You Wake Up?
(On a scale of 1-10 with 10 being "I live next to Bob's Neon Signs and Spotlight Emporium")
What Is The Temperature of Your Bedroom (oF)?
Of the Last Five Times You Meant to Get Up Early, How Many Times Did You Hit the Snooze Button Until Reaching Your Normal Wake Up Time?
Are You Really Into the Snooze Button Thing?


Your Results
Should You Wake Up 5 Minutes Earlier?
Your Wake Up Call Index Value
(If greater than one, count on waking up earlier!)

It may not be the answer you wanted, but if you're willing to let a web-based tool based on a tongue-in-cheek book make minor life decisions for you, you've gotta follow through!

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January 22, 2007

How badly are the lowest-paid wage earners doing in the U.S.? That's a question that we thought we'd ask after looking at the distribution of hourly wage earners in the United States last week. Fortunately, it turned out to be a relatively easy question to answer, since the Congressional Budget Office had already done the work for us!

The following figure, taken from the CBO's December 2006 report Changes in Low-Wage Labor Markets Between 1979 and 2005 shows the inflation-adjusted hourly wage being paid the lowest 1/10th (10th percentile) and lowest 1/5th (20th percentile) of hourly wage earners from 1979 through 2005. We've modified the chart by adding the gray lines to better show the difference in comparable hourly wage for each year since 1979 for each percentile group, and we've also added the hourly wage on the right to show the hourly wage percentile threshholds for 2005:

The chart reveals that, after adjusting for inflation, the hourly wages earned by the lowest 10% of U.S. hourly-wage earners in 2005 is nearly equivalent to what the lowest 10% of U.S. hourly-wage earners made per hour in 1979 - earning $7.44 per hour or less in 2005 while earning $7.43 per hour or less in 1979. More remarkably, it has only been since 2000 that the lowest 10% of wage earners have been paid above the equivalent 1979 hourly wage!

Meanwhile, the lowest 20% of U.S. hourly wage earners in 2005 has clearly come out ahead compared to their 1979 counterparts. Here, inflation-adjusted hourly wages have grown from roughly $8.60 in 1979 to $9.07 per hour in 2005, a comparative 5.5% increase. Here, the chart indicates that the lowest 20% of U.S. hourly wage earners have been ahead of their 1979 counterparts since 1998.

As the chart clearly indicates, the inequality in hourly wages earned by the lowest 10% of U.S. hourly wage earners and the lowest 20% of U.S. wage earners has grown substantially since 1979. While those in the lowest 10% in 2005 are roughly equivalent to slightly ahead their equivalent wage-earning peers of 1979, those in the lowest 20% of wage-earners have substantially increased their relative position above the lowest 10% of wage-earners over the same period of time.

Our question for the new Congressional majority: why is this growth in income inequality a bad thing? Or rather, what advantage is there in rigidly dividing U.S. wage earners into strata that never change with time?

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January 20, 2007

Carnival Midway from The Jerk Welcome to the January 20, 2007 edition of On the Moneyed Midways, the blogosphere's only weekly review of the best business, management and money-related posts from each of the week's major blog carnivals! Each week, we select the best posts from each of the blog carnivals we read, and we also select one post as being The Best Post of the Week, Anywhere!(TM) As an added bonus, we also pick the near contenders for the best post of the week that was as being Absolutely essential reading!(TM)

If you're a blogger who's going to be hosting a carnival in the near future, be sure to visit this week's Carnival of Debt Reduction for a good example of how to do it well. While you don't have to present your edition of a blog carnival in a Question and Answer format, you should:

  1. Only include contributions that are on-topic for the carnival.
  2. Clearly identify the contributor and their blog!
  3. Provide enough information about the contributed post so the reader can decide if they really want to read it!

Remember, as the host of a blog carnival you're really engaged in the task of marketing what is, more or less, a weekly online magazine. Make it worth the reader's time!

And now, on to the rest of the week that was....

On the Moneyed Midways for January 20, 2007
Carnival Post Blog Comments
Blogging for Cash Where Traffic Comes From The Scratching Post K T Cat provides an invaluable discussion of where blog traffic comes from and what it takes to build a base of regular readers.
Carnival of Career Intensity How to Channel Inspiration RealitySeeds It may all sound like new-age drivel, but Lorenzo shows how things like "shape-shifting" and "channeling" might help you get unstuck in solving a problem.
Carnival of Debt Reduction This Would Be an Argument FOR an Emergency Fund Blogging Away Debt Tricia's debt repayment strategy recently went off track due to unexpected expenses. Here, she finds that a small emergency fund may be a vital element in keeping financially afloat.
Carnival of Entrepreneurs What Makes a Successful Entrepreneur? BillDA Are entrepreneurs born or made? Bill D'Alessandro tackles the chicken or the egg question of how entrepreneurs become entrepreneurs!
Carnival of Entrepreneurs Defining Entrepreneurial Failure The Probabalist Johan Holmberg takes a detailed look into why entrepreneurs fail and how they're treated when then do.
Carnival of Fraud Avoid the Next Internet Scam: Tips for Selling Safely The Digerati Life The Silicon Valley Blogger identifies a new rip-off called "the second chance scam" that affects buyers on eBay and craigslist and provides advice on how to avoid it.
Carnival of Home Business The Elevator Pitch - Your Mission Statement ipop*in How do you answer the question "What do you do?" Kristen Harrell says you need to have a "rockin'" answer to the question, not just to spark interest but to inspire yourself too! The Best Post of the Week, Anywhere!
Carnival of Investing Another Approach to Retirement Planning: Balancing a Retirement Target Fund Myself The Simple Dollar Trent looked at investing in Vanguard's Target fund portfolios for his Roth IRA, but was put off by the required minimum investment level. So instead, he's developed a plan for building his own target fund!
Carnival of Personal Finance How the Poor Get Rich Dirty Mechanism Scott Lee presents a wealth of wisdom in a very short space - not to be missed!
Carnival of Real Estate Flip This House Lawsuit The FRAUDfiles blog Tracy Coenen discovers a blog dedicated to the lawsuit surrounding one of her favorite real-estate "reality" shows and why its original hosts are no longer making new episodes.
Carnival of the Capitalists Why Lean Six Sigma Works Only Sometimes The Scratching Post Lean Six Sigma, a method for improving processes, is only sometimes effective in improving a company's bottom line results. K T Cat finds where it works well, and where it doesn't.
Cavalcade of Risk Labor Optimization at Walmart: The Big Squeeze, Revisited Workers' Comp Insider Jon Coppelman reveals how Wal-mart's efforts to better match staffing levels to customer surges may lead to increased exposure to risk. Absolutely essential reading!
Festival of Stocks The Biotech Industry: 30 Years of Failure BioHealth Investor H.S. Ayoub investigates why biotech companies aren't living up to their hype, finding that Big Pharma is outperforming biotech companies by a widening margin. Absolutely essential reading!
Personal Development Carnival Don't Make the Same Mistakes George Constanza Did Instigator Blog Ben Yoskovitz lays out what the Seinfeld character could have done, and what you can do, to be successful.
Personal Growth Carnival* Personal Development Ideas: Top 10 Personal Development Ideas Gleb Reys summarizes the top 10 things you can do to improve your life that he's learned over the past year.
Real Estate Investing Do's and Don'ts for Home Remodeling Projects Rich Dad Says Jane finds the secret to getting the best results from remodeling contractors is communication. Be sure to scroll down to the end to see the results of her first remodeling project - not to mention the comments for some really good advice!
Working at Home Why Work Worldwide Success David explores the reasons why we work and how work is a fundamental part of success.

* A "Bryan C. Fleming" production. For more about the Bryan C. Fleming universe of blog carnivals, see this excellent post by the Silicon Valley Blogger at The Digerati Life (or our commentary from the December 15, 2006 edition of On the Moneyed Midways. And for the record - he did appear again this past week!

Previous Editions

Carnival Midway from The Jerk Welcome to Political Calculations' running index for On the Moneyed Midways, the blogosphere's only roundup of the top posts from each week's blog carnivals dedicated to money, business, career and other related topics! Below, you'll find all the editions that we've assembled over the course of 2007, presented with the newest editions on top and the oldest at the bottom.

Be sure to visit each edition to find the posts we declared to be The Best Post of the Week, Anywhere!(TM) or Absolutely essential reading!(TM)

Looking for Newer Editions?

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January 19, 2007

The next edition of On the Moneyed Midways will be out tomorrow. In the meantime, we've been accumulating some excessively random thoughts....

This may be The Most Mind-Blowing Mathematical Function Ever!

If it takes an entire village to raise a child in the third world, and just one or two parents to do the same job in the United States, doesn't that say a lot about the productivity levels of people in both places? And why would lowering the productivity of U.S. parents be desirable, as one assumes Hillary Rodham Clinton would argue?

What's the matter with Pigou? Fans of Pigovian taxes keep coming up with proposals to tax the hell out of gasoline, but we wonder why they have never even mentioned imposing taxes on ethanol-based fuels, which by Pigovian reasoning, should have some pretty substantial taxes slapped on them? In effect, how is this any different from rent-seeking where the power of the government is used to pick winners and losers based on little other than the political connections of the players?

January 18, 2007

We have just updated our signature investing-related tool The S&P 500 at Your Fingertips! The tool now spans from January 1871 through December 2006 and incorporates all the available dividend, earnings and inflation data available for this time span.

Just playing with the numbers this morning, we find that the year-over-year gain in the S&P 500 from December 2005 to December 2006 provided for a nominal (non-inflation adjusted) returns of 12.23% without dividend reinvestment and 14.27% with the reinvestment of dividends.

If you factor the 2.54% gain in reported inflation over that time period, the real rates of return for the S&P 500 are 9.69% without reinvesting dividends and 11.73% with reinvested dividends.

All in all, 2006 was a very good year for index investors!

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January 17, 2007

After modeling the distribution by hourly wage of the U.S.' paid-by-the-hour workforce, we thought it might be fun to graphically present some of the data we encountered in various tables published by the Bureau of Labor Statistics. First up, here's a pie chart showing the relative numbers of hourly paid vs. otherwise paid U.S. workers for 2005:

Next up, let's see how much of the entire U.S.' 2005 workforce of 125,612,000 people worked in full-time jobs vs. part time jobs:

Now, let's look a little more closely at those who earn the U.S. minimum wage or less. How do they compare to the overall U.S. workforce with respect to working full or part time?

Isn't that amazing? If we add up everyone making the minimum wage or less while working near full time (35-39 hours per week), full time (40 hours per week) and more than full time (41+ hours per week), and assume that the 14.5% of the workforce whose hours vary from week to week are only working part-time, we have nearly two-thirds (66.3%) of minimum wage earners working part-time, and just over one-third (33.7%) who do work full time.

That's also way different from the average 17.6% of the U.S. workforce that only works part-time. It would seem that taking a minimum-wage position almost guarantees that you won't be working full time for your employer.

Our final chart for this post shows the distribution by age of the portion of the U.S. workforce that earns less than or equal to the current U.S. minimum wage of $5.15 per hours:

Pretty startling, eh? This chart confirms that the minimum wage is primarily earned by the very young. We find that 26.1% are between the ages of 16 and 19, and if we go up to age 25, we find that 53.3% of the people earning minimum wage or less fall into this group. If we add the 12.2% of the minimum wage earning workforce who are between 25 and 29 years old to this latter value, we discover that nearly two-thirds (65.5%) of the so-called minimum wage workforce is under the age of 30.

By contrast, at the old end of the age distribution, there were just 4.7% minimum-wage earning workforce members above the age of 60. Minimum wage earning would seem to mostly be a phase for the young!

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January 16, 2007

Have you ever wondered how many people earn a particular hourly wage in the United States? Or how many people there are between two hourly wages? For instance, just how many people are there who are paid at a rate between the current U.S. minimum wage of $5.15 per hour and the newly proposed $7.25 per hour?

To find out, we started with the most recent Current Population Survey data available from the Bureau of Labor Statistics (from 2005). From this source, we learned that there are 75,609,000 workers in the U.S. who are paid wages or salaries at an hourly rate (or 60.2% of the total U.S. workforce of 125+ million in 2005.) We also learned that 479,000 people are paid the minimum wage and that 1,403,000 people on average earn less than the current minimum wage level of $5.15.

Then, we went to a December 2006 report from the Congressional Budget Office that provided hourly wage data by percentile. For example, we learned from this document that 10% of hourly wage earners make $7.44 or less, 20% make $9.07 or less, and that 90% make $33.45 or less! What's more, we found out that the median wage earned by hourly wage earners is $14.82.

So, what can we do with these figures? Well, if we take all the values we found related to the distribution of hourly wages paid in the U.S., we can use ZunZun's online curve-fitting application to create a curve to fit our available data, and use that formula to estimate how many people there between any two given hourly wages!

So that's what we did! We recognized the basic data as having an "S" shape, so we opted to model the data using a Gompertz type distribution. Our modeled curve is below (x represents wages per hour and y represents the percentage of the hourly work force):

As you can see, the curve is pretty darn accurate for values between the 10% and 90% percentiles (on the y-axis), and generally reflects the trend revealed by our selected data points. Math fans will recognize that the basic formula for this kind of curve is:

ZunZun provided the values for a (0.93185), b (1.88835) and c (0.15855) in the equation above while e is a mathematical constant. Now, the curve shown above reveals this formula will seriously overestimate the number of workers at the low end of the scale and will underestimate the number of workers at the high end. Because it's of special interest right now, we've created a special formula for handling the low end of the scale, between 0 and 15% of the hourly wage workforce, that covers the range of workers for whom the new minimum wage increase proposals would affect. The formula we've used to represent the distribution of wage earners in this range is:

As before, x represents an hourly wage, and y represents the percentage of the hourly wage earning workforce that earns the hourly wage x. Our tool below does all this math, estimating the percentage and number of workers fairly well between any two hourly wage levels from 0 to 90% of workers paid wages or salaries at an hourly rate:

U.S. Wage Data
Input Data Values
First Hourly Wage ($USD/hour)
Second Hourly Wage ($USD/hour)


Estimated Hourly Wage Earner Data
Calculated Results Values
Percentage of Hourly Wage Earners in Selected Range
Number of Hourly Wage Earners in Selected Range

Now, for the sake of comparing the results of the estimated hourly wage earner distribution tool above and actual data, here are some select values of the actual distribution at the low end of the scale:

Selected 2005 Hourly Wage Workforce Distributions
Range of Hourly Rates Number Paid in Range of Hourly Rates Percentage Paid in Range of Hourly Rates
0 - 5.14 1,403,000 1.86%
0 - 5.15 1,882,000 2.49%
5.15 - 7.44 5,678,900 7.51%

The tool doesn't perfectly match the known hourly wage earner distribution for 2005, but should be good enough to provide data for use in other calculations!

Previously on Political Calculations

The Disappearing Minimum Wage Worker
Back in 1980, roughly 8.9% of the total U.S. workforce earned the minimum wage or less. Today, that figure is 1.5% of the total U.S. workforce (and less than 2.5% of the hourly wage earning workforce!) The minimum wage worker is a vanishing breed!
Jobs and the Minimum Wage
Our short look at who really benefits and who really hurts when minimum wage levels are set.
The Minimum Wage and Small Business
What if you were a small business owner whose employees include a good percentage of minimum wage workers? What would a change in the minimum wage mean for your business?

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January 15, 2007

Last week, we shared our recent discovery of ZunZun's online 2-D and 3-D curve fitting applications, which we found to be an insanely great resource for number crunchers. This week, we're continuing our discovery series of just what's possible in math on the web with the Wolfram Integrator, which goes a long way to making calculus a lot easier to do!

The application is, to say the least, insanely great. Developed by Wolfram Research, the outfit behind Mathmatica and other high-powered math software, it features a very simple interface where the user only needs to know how to present a mathematical formula in a format similar to formulas used in Microsoft Excel or in the more common computing languages. The tool will integrate the entered formula and provide the resulting integrated equation as its output. The output is presented as a formula that only requires the user to apply their boundary conditions to solve the problem offline.

The genius of Wolfram's web application is that it minimizes the amount of time needed to search through tables of integrals to find an appropriate form when solving problems that require integration. Wolfram's Integrator, in essence, automates the process by performing the integration given the original formula. As an added bonus, wolfram's output results will also include links to the mathematical functions used in the integrated equation, which can be invaluable for some of the higher level functions.

Truly a cool tool for the higher math set!

January 12, 2007

Carnival Midway from The Jerk Welcome to the January 11, 2007 edition of On the Moneyed Midways, the blogosphere's only weekly review of the best business, management and money-related posts from each of the week's major blog carnivals! Each week, we select the best posts from each of the blog carnivals we read, and we also select one post as being The Best Post of the Week, Anywhere!(TM) As an added bonus, we also emphasize almost-the-best post of the week that was with status of being Absolutely essential reading!(TM)

This week features some new additions, as we welcome the Carnival of Customer Service and the Carnival of Money Stories to our selections. This does bring up a good question - how do we find the blog carnivals that we select posts from each week? Well, the answer is we use Blog Carnival's listing of each carnival's latest editions to find them. We hope this also explains why some carnivals are included and others are not, as Blog Carnival can be really hit or miss in listing the latest editions of each carnival.

But are the new blog carnivals and how we find them are the big news this week? Oh, no! What is the big news? An actual human may have actually stepped into Bryan C. Fleming's universe of automated blog carnivals this week! It might actually even be "Bryan C. Fleming!" We hope this is a trend - there's nothing like seeing the hand of a human weed through the crap and spam that can clutter a perfectly blog good carnival. Then again, what if this turns out to be like those Bigfoot sightings, and he's never seen again?...

For all the links you need to learn more about "Bryan C. Fleming" and his universe of fully-automated blog carnivals, see our December 22, 2006 issue. As for us, this will be the last time we mention it for a while. From what we know, it's not a good idea to disturb and taunt Bigfoot, and we don't want to tempt fate. And now, on to the rest of the week that was....

On the Moneyed Midways for January 12, 2007
Carnival Post Blog Comments
Carnival of Career Intensity The Three Kinds of Self-Discipline Lunatic Wisdom Jake Danger says you can force yourself to do what you don't like for no good reason, make yourself do something you don't like for a good reason, or do something you like and find meaningful.
Carnival of Customer Service The 10 Best (and 10 Worst) Companies for Call Center Service CRM Lowdown If you care about the customer experience, then you need to find out who does it right and who doesn't!
Carnival of Entrepreneurs Tell Me Something I Don't Know Diary of a Startup How do you listen to the customer when they don't know what they want? Andrew MacGill takes on the question in The Best Post of the Week, Anywhere!
Carnival of Fraud The Battle with PayPal My Opinion on Everything Corey describes a monumentally bad experience with the online payment giant after being exploited by an unscrupulous fraudster.
Carnival of Home Business Top 5 Food Business Trends for 2007 Barbara Sundquist highlights an Entrepreneur magazine article that suggests that 2007 will be the year of chocolate, organics, healthy food, wine and decadent desserts. Is anybody else hungry, or is it just us?
Carnival of Money Stories IKEA, Deep Impressions and Ice Cubes Kirby on Finance Kirby recounts how the Swedish furniture giant's furniture, the deep imprints they made in his carpet, and frozen water came together to save money.
Carnival of Personal Growth* How to Predict the Future My Gratitude Journal Robert Hunt combines the thoughts of great thinkers, inventors, writers and erstwhile billionaires into a means of forecasting the world to come.
Carnival of Project Management Subcontractors: Pros and Cons Software Project Management Pawel Brodzinski reveals the dark side for project managers in outsourcing key tasks to subcontractors.
Carnival of Real Estate When Sellers Exit the Driver Seat True Gotham Douglas Heddings lays out how sellers convinced it's not a buyer's market in real estate are hurting themselves with unrealistic expectations. Absolutely essential reading!
Carnival of Taxes A Proposed Congressional New Year's Tax Resolution Mauled Again Congress is looking at doing something about the Alternative Minimum Tax this year. James Maule argues that if they really want to do good, they ought to start by fixing the regular tax code.
Carnival of the Capitalists Reminding the Mint of Gresham's Law Cap'n Arbyte's Blog The U.S. Mint has issued new rules that make melting coins for their metal prohibited by law. Kyle Markey finds another law that says the Mint's rules are doomed to fail.
Carnival of the Capitalists Bad Bosses on the Rise! The New Business World It's not your imagination - bosses are getting worse! A survey from Florida State University has the numbers.
Carnival of the Capitalists Soaring CEO Pay Shows "Market Failure" SOX First Leon Gettler reviews a new report that rejects the premise that CEOs get paid more because they take on higher risk. Absolutely essential reading!
Economics and Social Policy Why I Keep Quiet About My Salary Getting Green Matthew Paulson makes a compelling case for maintaining the secrecy of your salary from your co-workers and friends.
Festival of Investing* Sharper Image: Nerd CEOs Destroy Shareholder Value Long or Short Capital Johnny Debacle makes a strong case for nerd-CEO-free investing! How long before we have an Exchange Traded Fund for this sector?
Personal Development Carnival What Is the Best Predictor of Successful Leadership? Reasoned Audacity Jack Yoest passes on lessons learned from a Vietnam vet and top business leader that past success in sports is a key predictor of future ability to lead. Absolutely essential reading!
Real Estate Investing Rent or Buy? Not an Easy Comparison A Little Eclectic Place on the Web Roi Erez discusses the things that you should consider when considering where you should live!
Wealth Building Ideas* Yahoo! Google Swallows YouTube: A Commentary The Digerati Life The Silicon Valley Blogger looks at the high-tech coupling between Google and YouTube and examines the marriage of technical and business know-how that leads to making multi-millions out of nothing

* A "Bryan C. Fleming" production. For more about the Bryan C. Fleming universe of blog carnivals, see this excellent post by the Silicon Valley Blogger at The Digerati Life (or our commentary from the December 15, 2006 edition of On the Moneyed Midways.

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