Thursday, July 17, 2014

For Investors Only -- July 17, 2014 -- Microsoft, Minimum Wage, ObamaCare


July 18, 2014: in the original post I mentioned "minimum wage" in Seattle and how it related to Microsoft's announcement to cut 18,000 jobs. I was informed by a reader that MSFT was headquartered in Redmond, not Seattle. I stand corrected. However, on further review, at least one huge campus -- a manufacturing facility -- is located in Seattle. My hunch is that MSFT has more folks working in Seattle (subject to minimum wage) than in Redmond. 

Later, 4:56 p.m. PDT: it looks like the market is finally starting to pay attention to the three shooting wars (Ukraine -- taking out civilian aircraft; Iraq -- Russia filling the void; and, Israel-Hamas -- the latter being stomped): the market fell today and futures show continued selling, while oil is quickly moving back to the $104 level (WTI crude).

Original Post
Perhaps the top story of the day for those not following the Malaysian Airline story is the news that Microsoft will cut 18,000 jobs as it "chops" (their word, not mine) Nokia. Reuters is reporting:
Microsoft Chief Executive Officer Satya Nadella kicked off one of the largest layoffs in tech history on Thursday, signaling he intended to shake up the aging PC industry titan, but leaving questions about how exactly he would transform it into a nimbler, Web-based rival to Apple Inc and Google Inc.
Microsoft Corp said on Thursday it will slash up to 18,000 jobs, or 14 percent of its workforce, over the next 12 months as it almost halves the size of its newly acquired Nokia phone business and tries to become a cloud-computing and mobile-friendly software company. 
The larger-than-expected cuts are the deepest in the software giant's 39-year history and come five months into Nadella's tenure.
There's no question this is due to the changing nature of technology and cloud computing, but one has to ask the question: what other factors played into this decision? Microsoft is headquartered in Seattle. Seattle recently passed a $15/hour minimum wage. Granted, most tech jobs pay way more than minimum wage, but minimum wage jobs are everywhere (food service, janitorial, landscaping, transportation, etc). For every ten to twenty high-paying tech jobs, there are support service jobs -- cafeteria, janitorial, building maintenance, etc. [A reader points out that Microsoft is headquartered in Redmond, WA, not Seattle. When I wrote this piece, I knew it was a stretch attaching minimum wages and even ObamaCare to the 18,000 jobs that Microsoft will cut. I should have just left it well enough alone. The good news, I learned a bit more about the enthusiasm with which Seattle is embracing that $15/hr minimum wage.]

The most interesting thing, however, and what is never mentioned in these articles is the cost of ObamaCare. Wasn't ObamaCare going to cost employers somewhere between $2,000 and $5,000 / employee? I've long forgotten the number, but for argument's sake, let's say, $3,000.

$,3,000 x 18,000 employees = $54 million every year.

I know a lot of folks will blow off these personnel costs as marginal, but I remember clearly the history of the railroads. At one time, it was required that the last car, the caboose, have an engineer. It took years to get the number of engineers on a BNSF train from three to two, just the two engineers in the pulling locomotives. It's hard to believe that one person made such a big difference but it was a big deal at the time to eliminate that position. [See comment below: a reader does a much better job recalling the transition from five FTE's on one train, to three, and finally to two.]

Whatever. Idle chatter.

That Pesky Global Warming

WKRG is reporting:
Forecasters say Mobile, AL, has broken a 128-year-old record with a low temperature of 64 degrees.

The National Weather Service says the low Thursday morning was 1 degree cooler than the low of 65 degrees set in 1886.

The weather service says Huntsville tied a record low for the date of 59 degrees set in 1945, and temperatures were in the mid- to upper 50s across north Alabama.
Others Have Noted The Same Thing: It's All A Scam
Bloomberg is reporting:
Australia’s decision to repeal its levy limiting fossil-fuel pollution makes it the first nation to turn back from a market approach to fighting global warming.
Prime Minister Tony Abbott’s government won final approval from Parliament yesterday to scrap a levy about 300 companies paid for their carbon dioxide emissions. The move leaves Australia, the largest polluter per capita among industrial nations, without a system for reducing greenhouse gases as it prepares to host a meeting of the Group of 20 nations. 
The first nation to turn back from a market approach to fighting global warming? None of these stories ever mention that Canada was the first signatory to opt out of the Kyoto Protocol some years ago. 

Global warming? I thought we had moved on. I did not know that it was called "global warming" any more; I thought it was "extreme weather." I guess sometime in the past couple of years we moved back to "global warming."

There has been no sign of global warming for the past 18 years. Just saying.


  1. Your clear recollection of railroad history is cracking me up...back when all trains had cabooses the standard crew size was five: a conductor and two brakemen in the caboose and an engineer and fireman in the lead locomotive.

    After years of debate, by the mid-80s, railroads had by and large been allowed to eliminate the caboose and the fireman and brakemen. The fireman had mostly been made obsolete a few decades earlier when diesel locomotives replaced steam engines, while many of the historical duties of the brakemen could be accomplished with improved technology (though some trains, to this day, still do have one brakeman to make operations easier). The conductor was moved up to the front of the train, and ever since the standard crew for a freight train has been an an engineer and conductor in the lead locomotive. There is wide speculation within the industry, though, that thanks to additional advances in technology and automation, sometime in the not-too-distant future, the railroads will push to eliminate the conductor and just have one crew member on most freight trains.

    1. Five to three to two. That sounds about right.