Posted by: Dan Beucke on January 15, 2012 at 12:45 PM

Posted by: Dan Beucke on January 13, 2012 at 6:45 PM

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It's an uncomfortable fact of modern life that many iconic consumer products are built by people who could never afford to buy them. Yet there is great risk to these big, rich brands if they come to be seen as exploitative employers. Consider the case of Apple's iPads and Victoria Secret's panties.

For the past couple months, Bloomberg has been tracking the remarkable story of the children who are forced to pick fair-trade cotton in West Africa for a supplier to the fashionable clothing chain. The first story described the brutal life of 13-year-old Clarisse Kambire, who is beaten with a tree branch and must dig with a hoe because her employer can't afford an ox and plow. The contradiction, of course, is that "fair trade" is supposed to certify that a product is free of these conditions. (For those who don't have time to read 4,500 words, there's a stunning multimedia treatment.) But as the article points out, the higher prices paid for fair trade serve as an incentive for exploitative employers:

In Burkina Faso, where child labor is endemic to the production of its chief crop export, paying lucrative premiums for organic and fair-trade cotton has -- perversely -- created fresh incentives for exploitation. The program has attracted subsistence farmers who say they don't have the resources to grow fair-trade cotton without forcing other people's children into their fields -- violating a key principle of the movement.

Victoria's Secret and its parent, Limited Brands, say they don't tolerate child labor and are investigating. Now the U.S. government is, too.

Victoria's Secret is just starting to contend with something that Apple has been facing for years. The company is greatly admired for its sleek products and management under late founder Steve Jobs, yet questions persist about the conditions under which those products are made -- especially after worker suicides and threatened suicides at Chinese supplier Foxconn. What's new today is that Apple released a list of its big suppliers and became the first big technology company to sign up with the Fair Labor Association, which monitors workplace conditions for companies such as Nike and Nestle. Apple detailed the labor violations it found in the course of its annual supplier audit. That included about 200 facilities that didn't pay proper overtime or worked half or more of their employees more than 60 hours. Five factories were found to use underaged workers. Apple also detailed the actions it was taking to correct the problems.

Up to now Apple has closely guarded details of its suppliers, for competitive reasons. New Apple CEO Tim Cook must have decided that the risks to Apple's global brand -- the eighth most valuable, according to Interbrand -- outweighed any additional costs of outside oversight or loss of supply-chain secrets.

Photographer: Chris Ratcliffe/Bloomberg

Posted by: Dan Beucke on January 12, 2012 at 7:00 AM

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There's an interesting post and comment stream over at Lou Lavelle's B-schools blog, about an alternative plan for funding a college education in California. The Fix UC proposal would let University of California students pay nothing to attend if they commit to paying a flat 5 percent of their annual salary for 20 years after graduation. There would be adjustments -- you'd pay a smaller percentage if you worked in the public sector -- but the more marketable your degree, the more you'd pay for it. And you only pay if you're actually working. (As one commenter notes, this is similar to a system Australia has been using for years.)

On first glance, this looks like a deal for students. Student fees at UC San Diego for a California resident are $13,234 this year. Total for four years: $52,936. Twenty years of Fix UC payments at 5 percent of salary amount to one year's average salary. A recent survey of Georgetown University graduates puts the average salary for a 22-to-26 year old engineering student at $55,000; for an arts major, it's $30,000. The yearly payment gets bumped up, temporarily, if you use on-campus housing. Still, you're spreading your payments over 20 years, and not paying additional interest as you would with a student loan.

For the universities, the outcome is less clear. The proposal refers to a "compounding" effect. But money that is now paid upfront would instead be paid over many years to come. To borrow that $52,936 and repay it over 20 years would cost $98,814, at the rate of just 3.17 percent that California paid on bonds sold last year. Maybe if graduates' salaries rise with inflation, they come closer to paying that back. Except that college costs have been rising faster than inflation. It seems hard to make those numbers work.

Of course, you know some Wall Street number cruncher is already working on the tradeable financial product that monetizes the uncertain graduate income stream -- and the varying "tranches" of finance, science, and arts majors.

(Photographer: Chip Chipman/Bloomberg)

Posted by: Dan Beucke on January 11, 2012 at 12:00 PM

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Ronald Reagan famously popularized the Eleventh Commandment, "thou shalt not speak ill of any fellow Republican." Now that my colleague Josh Green has obtained a copy of the highly anticipated attack video on Mitt Romney by Newt Gingrich supporters, it's clear the Eleventh Amendment is not only no longer operative. It's been replaced by something akin to "thou shalt roll with anything that smites thy GOP neighbor, shewing no mercy."

Josh says the 28-minute video, funded by the organization Winning Our Future, portrays the misery of workers purportedly fired as a result of Romney's Bain Capital restructurings. (A snippet is viewable on the group's web site; screen grab above.) Romney is portrayed as "rich beyond imagination" and out of touch with common folks. It has Romney laughing while he says, "Make a profit. That's what it's all about, right?" Many Republicans and other supporters of laissez-faire capitalism might quibble only with the last word of that statement, possibly suggesting "duh!" instead. But Romney's rivals are desperate to derail his Inevitability Express, and have seized on a narrative of a "ruthless capitalist" heading into the Jan. 21 primary in South Carolina, where unemployment lingers at 9.9 percent. To add one last kick, Romney is shown in the video speaking ... in French.

Josh says several facts -- including Romney's net worth and the number of homes he owns -- are misstated. He quotes a consultant who compares the video with the notorious "Swift Boat" treatment that Democratic Presidential candidate John Kerry got from an outside political group in 2004.

The Romney campaign says this is "the type of criticism we've come to expect from President Obama and his left-wing allies at MoveOn.org." Indeed, somewhere an Obama campaign official is probably counting the ad dollars they just saved.

Posted by: Mark Gimein on January 10, 2012 at 7:00 AM

On the surface, the best news in last week's generally positive employment data was the big fall in the number of "discouraged workers"--folks who want work but have stopped looking because they don't see any jobs. From December 2010 to December 2011, that fell by 373,000, a big 28 percent year over year drop.

Figuring out what exactly this means is no simple thing. All the old cliches about statistics are doubly true about labor force data. If you're looking for work, you're "unemployed." If you've stopped looking, you're "discouraged." But if you haven't looked in the last year at all, you're no longer "discouraged." You're not counted in the labor force. So what happened to all those discouraged workers? Did they find jobs? Or drop out of the labor force altogether?

Unfortunately the best bet here is door number two. The thing about discouraged workers is that they are (by definition) not looking for jobs, so they tend not to find them. Since December, 2010, the labor force participation rate has crept down by 3/10 of a percentage point, going from 64.3 percent of the population to 64.0 percent. That sounds like a small number, but it adds up to a lot of workers: if the labor participation rate had stayed the same, 815,000 more Americans would be working. That's more than twice the decline in the number of discouraged workers.

Derek Thompson at The Atlantic has already pointed out the falling participation ratio. Thompson thinks (or hopes?) that as the economy improves the participation rate is likely to go up. Or, says Thompson, the long-term unemployed who've fallen out of the workforce

will represent a kind of permanent shadow-group of people neither working nor counted as unemployed.

Alas, that sums up the actual situation pretty well. My own father never recovered from losing his job in the early 1980s. For him, as for many others, unemployment faded into an awkward and uncomfortable retirement, while my mother went to graduate school and became the primary breadwinner. I may be biased by my own family's experience, but that seems to me to be a fairly common experience.

The economy is clearly getting better. More folks are getting jobs, and fewer are moving into the discouraged pile. Bloomberg's Timothy Homans reported yesterday the sharp drop in the number of underemployed--those who've had work, but not a full-time job. Those are the people who are in a position to benefit from the improvement. For those who did not manage to hold on to a part-time job, blew through their unemployment benefits, and gave up looking, there is no clear way back. The fall in the labor force participation rate seems to confirm what a lot of folks have suspected: that the path from long-term unemployment to discouragement to permanent joblessness is a more or less one way street.

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