Comments on economics, mystery fiction, drama, and art.

Wednesday, May 13, 2009

Steel, again

The shoes appear to have dropped--in northwest Indiana, in Cleveland, and in Georgetown, SC. But the really big shoe dropped in Europe, where workers are rioting in Luxembourg, and where Mittal has shut down 16 of its 25 blast furnaces. Lakshmi Mittal is quoted as expecting an additional 15% to 20% drop in world steel output this year, and this comes on the heels of a nearly 50% drop since the middle of 2008.

In northwest Indiana, steel employment had continued to rise until at least February, when it was fractionally above the February 2008 level (about 17,000). However, Mittal began to lay off workers in April, and US Steel had to shut down part of its operations in Gary for emergency maintenance. (USX has been shifting production from the rest of the country to Gary).

With the 980 layoffs announced today, and the additional layoffs I've been able to identify, it appears that employment in steel in northwest Indiana has declined by something in excess of 1,500 in the last month or so. With the declines that have already occurred in steel output, and if Mittal is correct about continuing production declines, we're going to lose more jobs.

While this is not as devastating an occurrence as it would have been 30 years ago, when more than 25% of local employment was in steel (compared to less than 6% now), steel workers continue to earn much, much higher wages than the average. These layoffs will cost northwest Indiana families about $2.7 million a week in wages, with spillover effects in other industries.

The recession has, I think, finally come home to northwest Indiana.

Sunday, May 10, 2009

NFL decides to stiff its coaches

The National Football League (well, actually, the owners of the NFL teams) has voted to allow individual teams to withdraw from the current league-wide pension plan for coaches (here and here). And, apparently at least nine teams have already done so (I say "at least," because, apparently, the teams are not moving rapidly to tell their coaches what they're doing). A number of members of NFL coaching staffs have decided to retire now because of this change.

The change is not simply that teams will be able to have their own pension plans for coaches, but also that lump-sum distributions from the existing pension plan will soon be restricted. And, just as a side benefit, the NFL has also made it very difficult for coaches to retire, take their pension benefits, and then come back, on a contract, non-employee, basis, as "consultants," for the same (or a different) team.

The move to team-based pension plans will almost certainly lead to reduced pension benefits for coaches. This is almost certain simply because most pension plans have minimum vesting periods and, in defined-benefit plans, benefits are based on years of service and earnings, and rise faster than years of service--long-term employees get larger benefits that the same employees, with the same earnings, would receive if they had split their careers between employers. It has long been common, in industries in which workers move frequently between employers (construction, for example, or coal mining, or trucking) to have multi-employer pension plans, often negotiated by unions and at least co-administered by unions.

It appears clear that the primary justification for this move is to reduce team costs. And this will happen as teams move to defined-contribtution (401K-type) pensions and, for those teams that continue to provide defined-benefit plans, from a reduction in expected benefits.

So this change will almost certainly reduce the pension benefits of NFL coaches, many of whom are long-time assistant coaches who do not earn the multi-million dollar salaries that "star" coaches receive and who were never highly-paid star players, either.

The restriction on lump-sum distributions flows directly from the declining balances in pension funds that have resulted from the stock market decline. Allowing lump-sum distributions also means requiring larger current contributions to the pension plan. But is also reduces the flexibility that retiring coaches have in doing retirement planning.

The NFL's public position is that this makes pensions for coaches more like pension plans elsewhere--employer-based. But this is clearly not true for the professional sports business, and, as I note above, also not true for a wide range of industries in which the employee's primary identification is with a skill or profession, not with an employer.

This is about reducing costs, and doing so by inflicting losses on a group that cannot effectively fight back. (There is an NFL Coaches' Association, but it does not bargain for the coaches. The NFL argues--I think correctly--that coaches are management, and thus not afforded the same orgainzing rights under the National Labor Relations Act as the players are.)

Legal? Sure. Cost effective? Undoubtedly. Fair? Not so much.

Saturday, May 02, 2009

Things about my job

There are things about my job that I really like a lot. And then there are things about my job that I really dislike a lot. One of the things I really dislike a lot is writing final exams (although writing them is more fun than grading them).

Guess what I'm supposed to be doing right now?