Middle-class dream fades as pay shrinks

Monday, March 23, 2009
Middle-class dream fades as pay shrinks

White House touts policies to address downward spiral of mid-income families.
Deb Price / Detroit News Washington Bureau

WASHINGTON -- The dream of a comfortable middle-class lifestyle is slipping further out of reach for many Michiganians as they've watched household incomes barely grow over the past
three decades.

The phenomenon is being experienced across the country, but is more pronounced in Michigan, according to a Michigan State University study, which found that those in the bottom half of the middle class have been hit particularly hard.

Little improvement in recent decades for middle-income households falling between $30,000 and $90,000 has raised alarms for the Obama administration, which has pledged to restore the middle class.

That help can't come quick enough for Dave and Deborah McCreless, who, like about half of Michigan households, fall in the middle-income range.

Dave, a 38-year-old stay-at-home dad in Dearborn, says his family is struggling to keep up with bills -- old student loans, credit card debt, gasoline and electricity, and prescriptions. Deborah, 44, the primary breadwinner who is a personnel officer at Wayne State University, last received a big pay jump seven years ago, he said.

"My father-in-law helps us with the mortgage. Otherwise, we could have lost the house last year," Dave McCreless said.

"It's one thing on top of another, and you can't catch up. There isn't a middle-class dream anymore."
Adding to the unease is the uproar over $165 million in bonuses for executives of troubled financial giant AIG, which hints at the kinds of "class warfare" fights that likely lie ahead over what the federal government can or should do to address income growth disparity.
Nearly 2 million households in Michigan fall into the middle-income range of $30,000 to $90,000 a year, said Charles Ballard, an economist at Michigan State University. Ballard and MSU economist Paul Menchik are studying the embattled middle class.

Those on the lower end of that middle-income spectrum have fared especially poorly.
The lower end of the range in Michigan saw inflation-adjusted incomes only go up 1 percent between 1976 and 2006, Ballard and Menchik found.

In the United States overall, the bottom end of middle-income households saw an inflation-adjusted income growth of 20 percent over the three decades, Ballard said.

The higher end of the middle-income spectrum has increased 22 percent in Michigan, versus 40 percent nationally over three decades, he said.

"Basically, if you are at the bottom (of the middle-income spectrum), incomes haven't changed at all, adjusting for inflation," Ballard said of national and Michigan household incomes between 1976 and 2006.

"It used to be lower-middle-class folks saw increases in their real income in the '40s, '50s and '60s, if you had a high school degree," he added. "But that stopped about 30 years ago."
The wealthy -- those in the top 5 percent of all households -- have seen their income jump almost 60 percent nationally, and in Michigan, more than 40 percent, Ballard said.
The White House's Middle Class Task Force is looking for policy solutions that might include, for example, ways to boost college graduation rates, reduce health care and education costs, bolster labor unions and create "green" jobs that are less likely to be sent overseas.

"This is not something the government can fix all by itself," said economist Jared Bernstein, the executive director of the task force.

"But the government can help to create certain conditions that balance out some of the excesses that helped to get us where we are."

Vice President Joe Biden, who is leading the effort, says the task force's goal is "to get the middle class -- the backbone of this country -- up and running again."

On the other end of the political spectrum, U.S. Rep. Thad McCotter, R-Livonia, agrees middle-class families are struggling, but offers different solutions "The demise of the manufacturing base is the No. 1 reason for the continuing erosion of middle-class prosperity," said McCotter, who wants the Obama administration to focus more on ways to strengthen and save manufacturing jobs.

"We have to get back to the basics of decentralized entrepreneurial opportunities for people, and the necessity of having a manufacturing base in this country. Those are the two big things that we really need to do," McCotter said.

While not all experts agree on the causes, Ballard and other economists say a number of factors have contributed to stagnating middle-class incomes:

• An economy that rewards education, particularly college graduates, at the same time that college graduation rates in the United States have risen slowly.
• Huge salaries and bonuses of top company officials.
• Competition from lower-wage countries, such as China and India, that has pushed U.S. wages down.
• Declining labor union clout.
• Drop in manufacturing jobs.

In the eyes of economist Timothy Bartik of the Kalamazoo-based W.E. Upjohn Institute for Employment Research, getting a higher education is critical to climbing the ladder and earning a bigger paycheck.

Bartik is alarmed by the relatively slow growth of U.S. college graduation rates over the past three decades.

In 1975, nearly 22 percent of those age 25 to 29 had a bachelor's degree or higher. In 2007, 29.6 of that age group had college degrees.

"Technology has changed in such a way that for workers with a high school diploma or less, their skills are less valuable in the work force," Bartik said.

Terrell Dubose, a 48-year-old shuttle bus driver in Detroit, said he's never had the resources to do more than take a few college courses, so he feels stuck financially with having only a high school diploma.

"The price of everything has shot up, so it feels like you have less," Dubose said. "The rich are taking more of the pie."

Tom Clementson, 57, a laid-off road construction worker in Indian River, said he's staying afloat until he gets back to work because of having unemployment checks, dipping into savings and having paid off his house.

But, as he looks back over the past 30 years, he feels he ran hard to end up pretty much in the same place.

"My income gradually went up, but it got to a point where it just stopped," Clementson said. "You think you are working all those years, and you get three or four years from 60 and you don't know if you will be able to retire."

You can reach Deb Price at dprice@detnews.com or (202) 662-8736.



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March 15, 2009

Direct Sales as a Recession Fallback

By EILENE ZIMMERMAN

http://www.nytimes.com/2009/03/15/jobs/15sales.html?_r=2&ref=business

THREE weeks before her third child was due, Susan Drucker Hunsaker had more than 20 women over to her home in Burlingame, Calif., for conversation and refreshments. She also invited them to look at Stella & Dot costume and semi-precious jewelry, which she had begun selling the week before.

Ms. Hunsaker, a former high school art teacher with a master’s degree in education, sells jewelry because she needs cash, and she needs it quickly. Her husband works on a commission basis in commercial printing sales; his income dropped by half in 2008, and he expects more of the same this year.

“We had already pared down as much as we could,” Ms. Hunsaker said. “I knew as soon as the baby came, I would probably have to go back to work. But with three children under 5, if I went back to teaching I wouldn’t make enough to pay for child care.” In the first two months of this year, she sold $12,000 worth of jewelry at six parties, taking home 30 percent of that as commission.

Ms. Hunsaker is not alone in turning to direct sales to make ends meet. Many direct sales companies report rising numbers of sellers signing up. In February of last year, 24 new sales consultants joined Stella & Dot; this February that number is 160.

The number of new sellers at Lia Sophia, another jewelry company, is up 26 percent from January-February 2008 to 2009; the number of sales consultants at the Cutco Corporation, a manufacturer and direct seller of high-end kitchen cutlery, was up 20 percent this January over last.

The average annual growth in direct sales in nonrecessionary years is 3.3 percent; during the last three recessionary years — 1990, 1991 and 2001 — it was 4.5 percent, said Amy Robinson, spokeswoman for the Direct Selling Association, the industry’s trade group.

People may use their earnings to pay off specific debts like credit cards or as a way to bring in cash while they — or their spouses — look for jobs, Ms. Robinson said. The barriers to entry are fairly minimal. Start-up kits — required by most companies — cost about $99 on average.

Products are generally sold at small parties and earn the seller a commission of about 20 to 50 percent on their sales, usually several hundred dollars a party. The median income from direct selling is $2,400 annually, according to the association, but those who recruit and manage others can earn significantly more.

People interested in direct sales often sell products they use themselves. Mindy Kershnar, who owns four Siberian Huskies, turned to selling pet products for Shure Pets of Chicago when she was laid off from her job in administration at Oracle in January.

Ms. Kershnar telecommuted from Greeley, Colo., where she and her husband recently bought a house. They need two incomes to pay the mortgage and credit cards, so Ms. Kershnar is selling Shure Pets products while looking for another job.

Products moved through direct sales, like jewelry, cosmetics or home décor items, are sometimes considered recession-resistant because most are priced under $50. And economists have made note of the lipstick factor, a term coined when lipstick sales rose during the last recession in the United States, in 2001. The belief is that in tough economic times, women cut back on pricey purchases but splurge instead on inexpensive luxuries.

The need for quick cash, however, can lead some salespeople to sign on with companies that are really pyramid or recruitment schemes, rather than true direct-sales companies. Consumer watchdog groups and the Federal Trade Commission (ftc.gov/bcp/edu/pubs/consumer/invest/inv12.shtm) advise would-be sales representatives to scrutinize a company first. If a seller’s earnings grow mainly by recruiting other sellers rather than selling the product, that is a red flag.

“Most of the commission should go to the salesperson, not the recruiters above her,” said Robert L. FitzPatrick, founder of PyramidSchemeAlert.org, a nonprofit consumer education Web site. He advised asking a company how sellers are compensated

Another red flag: companies that require upfront purchases of their products, which could wind up unsold and sitting in the seller’s basement for years.

The Direct Selling Association, which requires member companies to go through a review and waiting period before admitting them, has at least one member — www.YourTravelBiz.com — now under investigation by the attorney general of California under suspicion of being a pyramid scheme. The company says the allegations are without merit.

There are many legitimate direct sales organizations, and in addition to the earnings, the experience itself — selling and possibly managing a sales team — can be valuable professionally, said Joel Whalen, academic director of the Center for Sales Leadership at the Charles H. Kellstadt Graduate School of Business at DePaul University in Chicago. He expects that about 30 percent of recent recruits will stick with direct sales even after the economy recovers.

THAT is Amanda McCrary’s plan. She began selling Mary Kay cosmetics in December, when her husband was told he might be laid off. “We decided we needed to be proactive and put together our own bailout plan,” said Ms. McCrary, who also works full time as a human resources manager.

The couple live in suburban Detroit with their young son and are paying off college loans and other debts. Ms. McCrary sold $1,500 worth of products her first month, pocketing 40 percent as commission.

“We are putting it all into savings until we find out if my husband is getting laid off,” she said. “If he keeps his job, we will use it to pay down our debt.”

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March 14, 2009

Weary of Looking for Work, Some Create Their Own

By MATT RICHTEL and JENNA WORTHAM

http://www.nytimes.com/2009/03/14/technology/start-ups/14startup.html?_r=1

SAN FRANCISCO — Alex Andon, 24, a graduate of Duke University in biology, was laid off from a biotech company last May. For months he sought new work. Then, frustrated with the hunt, he turned to jellyfish.

In an apartment he shares here with six roommates, Mr. Andon started a business in September building jellyfish aquariums, capitalizing on new technology that helps the fragile creatures survive in captivity. He has sold three tanks, one for $25,000 to a restaurant, and is starting a Web site to sell desktop versions for $350.

“I keep getting stung,” he said. And his crowded home office is filled with beakers and test tubes of jellyfish food. “But it beats looking for work. I hate looking for work.”

Plenty of other laid-off workers across the country, burned out by a merciless job market, are building business plans instead of sending out résumés. For these people, recession has become the mother of invention.

Economists say that when the economy takes a dive, it is common for people to turn to their inner entrepreneur to try to make their own work. But they say that it takes months for that mentality to sink in, and that this is about the time in the economic cycle when it really starts to happen — when the formerly employed realize that traditional job searches are not working, and that they are running out of time and money.

Mark V. Cannice, executive director of the entrepreneurship program at the University of San Francisco, calls the phenomenon “forced entrepreneurship.”

“If there is a silver lining, the large-scale downsizing from major companies will release a lot of new entrepreneurial talent and ideas — scientists, engineers, business folks now looking to do other things,” Mr. Cannice said. “It’s a Darwinian unleashing of talent into the entrepreneurial ecosystem.”

Even in prosperous times, entrepreneurs have a daunting failure rate. But those who succeed could play a big role in turning the economy around because tiny companies are actually big employers. In 2008, 3.8 million companies had fewer than 10 workers, and they employed 12.4 million people, or roughly 11 percent of the private sector work force, according to the Bureau of Labor Statistics.

Economists say there are some peculiarities to this wave of downturn start-ups. Chiefly, the Internet has given people an extraordinary tool not just to market their ideas but also to find business partners and suppliers, and to do all kinds of functions on the cheap: keeping the books, interacting with customers, even turning a small idea into a big idea.

The goal for many entrepreneurs nowadays is not to create a company that will someday make billions but to come up with an idea that will produce revenue quickly, said Jerome S. Engel, director for the center for entrepreneurship at the Berkeley Haas School of Business. Mr. Engel said many people will focus on serving immediate needs for individuals and businesses.

“It’s a very painful thing,” he said of the pressure people feel to find new ways to make money. “But it’s a healthy thing.”

Mr. Engel noted that the dot-com bust helped propel a pack of hardy companies. One of those, in fact, was Google. While it was started in the late 1990s, the company succeeded during the bust in part because it was highly focused and did not need much capital, Mr. Engel said.

Ryan Kuder, 35, understands the notion of scaled-down start-up fervor — and the worry and exhilaration that goes along with it. He was laid off in February 2008 from Yahoo, where he was a senior marketing manager. He job-hunted for a bit, then decided to start an Internet company that would let people do social networking at the neighborhood level.

Mr. Kuder and his business partner toiled until November, when he realized his big dreams had run headlong into reality. He needed money to pay the mortgage and buy health insurance for his family.

They transformed the company into a new one called Koombea that designs and builds Web sites for businesses. Koombea has grown to nine people, most of them in Colombia, where the cost of living allows them to do Web design relatively inexpensively.

Mr. Kuder and his wife agreed that he would give up working for Koombea at the end of January if he did not hit certain revenue goals. They narrowly missed the target. For a few days, Mr. Kuder sent out résumés. He found no work, so he is back investing himself full time in Koombea — and says he is feeling transformed.

“My sleeves are rolled up, and I’m dirtier than I’ve ever been before,” he said. “It’s incredibly nerve-wracking. I wake up nauseous everyday. But it’s probably easier right now to find a problem, solve it and charge people than it is to find a job.”

Monica Zamiska, 25, said it was “traumatizing” when she was laid off in January from her first postcollege job as a junior account executive with the public relations firm Ogilvy & Mather. After meeting with five recruiters, she began to realize how barren the job market was. “You can only send out so many résumés,” Ms. Zamiska said.

So she turned her full attention to a pet project called the Confoodant, a Web site with restaurant reviews written by a by-invitation-only network of food enthusiasts. Her main financial obligation is her rent, but with her savings and four weeks of severance pay, she is confident that she can devote at least six months to getting the project off the ground.

“I love working,” Ms. Zamiska said. “So I made work for myself.”

The surge of interest in entrepreneurship can be seen in the demand for related workshops and networking events. Monica Doss, director of FastTrac, an organization that offers training to aspiring entrepreneurs, said she expected participation to double this year from the 10,000 people it had last year.

“People are thinking, ‘These jobs aren’t going to come back in three years. I’ve got to find something else to do,’ ” Ms. Doss said.

Mr. Andon, for one, seems to have found his niche. He said he recently received an order for a large jellyfish tank that should sell for tens of thousands of dollars.

His entrepreneurial fever seems to be catching: at least four of his roommates are starting companies. Two of those — Erin Kitchell, 28, and her brother Andrew, 25 — are making laminated, fold-out language guides for travelers. In the next few days they plan to print their first 8,000 copies and start trying to sell them.

Ms. Kitchell took a voluntary buyout in June from Wachovia, sensing a layoff would come anyway, and is not sanguine about finding good work.

“This is as good a time as any to try something entrepreneurial,” she said. “There is not a lot of opportunity right now in finance.”

Matt Richtel reported from San Francisco, and Jenna Wortham from New York.

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Now is a Great Time to Start a Home Based Business

Now is a Great Time to Start a Home Based Business
by David Bohl

http://wistechnology.com/articles/5691/

I know we are all concerned about economic conditions these days, with massive job layoffs, declining housing markets, and plunging stock prices. Yet, the rise in unemployment has created a great opportunity for those who have entrepreneurial dreams.

With very little capital outlay, now is a great time to start a home based business.
I did some research and found that there are over 16 million home based businesses in the U.S.

Some of these are service based and some sell products.

A recent Forbes.com article indicated a few of the best service businesses to start include event planning, home landscaping, computer repair, graphic design, consulting, and public relations. Home based businesses can also market products through network marketing, eBay, Amazon, or an affiliate program.

No matter what your dream is, I believe there’s an opportunity for everyone who wants to start a home based business. Whether you’re fed up with the restrictions of a stifling job or have been laid off, if you’re ready to be your own boss, you can start a business that uses your best talents and skills.

For example, secretarial skills can easily transform into a virtual assistant business. Or you may be a young retiree looking for a part time venture or a mother wanting to stay at home with the children. Whatever your reason, the home based business is a good bet for a slow economy.
However, you do need to get some basic business education before you hang out your shingle. You may be talented at the service you provide or have the greatest product on the market, but you have to have some business savvy to succeed. You could read business books, take seminars, get a coach or mentor, and network with other business professionals in your industry. Use search engines to research the business you want to start. See who the competition is, find out what you need to start a business, and get some marketing ideas.

According to the SBA (Small Business Administration), over half of all U.S. businesses are home based, and they provide more than $530 billion of income each year. If you plan to be among those businesses that not only survive but thrive in this economy, here are some helpful tips:
Start a business that fills a need or solves a problem. Do you have a product or service that is the solution to a specific problem? Do you know who your target market is? When you answer these questions, you will have a business that is focused on a need and targeted to a market. Then decide how you can deliver this product or service in a unique way that will stand out from your competition.

The virtual assistant, for example, solves the problem of how a home based business owner can get office support without having to hire an employee. The virtual assistant business may stand out by targeting a niche market, such as professional coaches.

Stay up to date with current trends.

As a business start-up, see if you can match the service or product you want to sell with a current trend such as the environmental and economic issues. Where is there a need that you can fill? What target market is underserved? Look for trends that have longevity rather than ones that may just be the next best thing.

Build your team.

You might not want to hire employees, but you could use contractors to build a team of people who have skills that you lack. Outsource your weakest skills such as administrative tasks, bookkeeping, writing, and web design. Conversely, your home based business may be a resource for other home businesses if you provide a valuable service like graphic design or computer repair.

Develop excellent customer and referral relationships.

To keep marketing costs at a minimum, focus on getting repeat business and referrals. To stand out from the competition, focus on extreme customer service. Make sure you follow up and stay in touch with prospects, past and present customers, business associates, and referral sources. Develop alliances with complementary businesses that can send you qualified leads.

Build an online presence.

Even if your service is locally delivered, you can still benefit from a website. Use it as an online brochure and lead generator. It will build your credibility and introduce prospects to your services. If you sell products, most can be sold online, so set up a payment service like PayPal and start getting people to your site. You can do this with blogs, articles, social networking, and joint ventures.

As a local business you can get listed in the local directory at Google and Yahoo.

Several successful businesses such as Microsoft and Disney began during recessions so I really believe now is a great time to start a home based business.

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New Home Based Business Information Website LaunchedBusiness

http://www.michiganpr.net/index.php?xnewsaction=fullnews&newsarch=032009&newsid=172

Chicago, IL - March 9, 2009 ( www.MichiganPR.net )A new site for information on home business has been launched. A spokesperson of the company while releasing this information to the media said that business.bizoppjunction.com will be an information sharing platform where users can get information about home based business. The site has been launched by professionals who have spent many years developing their own home based business. Therefore, they are in the best position to suggest buyers before they decide to start a home based business. A first look at the site will reveal that it has been very well structured. Within each category there are articles which will help a person interested in going solo of the best home business option available. The easy usability of the site has helped users to easily find information.The site publishes topics such as “High income business opportunities for stay at home moms”, “Benefits of starting a home business” and related topics.

Business.bizoppjunction.com has already been popular with statistics showing an upward trend. The usability of the site and quality information has been a primary focus for the company. The site has been categorized into a single category called “Home Business” at present. All the articles are published within this category. The latest posts are displayed separately and the older articles are hosted as archives. The advanced keyword based search feature enables users to quickly search information. Going forward business.bizoppjunction.com will include more features which will make the site more user-friendly.The spokesperson added that users who want more information can post their comments and feedback on home based business. The editors of business.bizoppjunction.com make all efforts to respond to these comments and feedbacks. Solutions to some of the more relevant comments and feedbacks are published as articles. This initiative will help to make the site more informative and a popular destination of information sharing. She said that home based online businesses are perfect for ‘stay at home moms’ , executives who want an escape from their 9-5 routine and people who have lost their jobs in the current economic meltdown and do not want to go job hunting again. The spokesperson said that this site will definitely give authentic information, relevant in the current scenario. She added that users have given positive feedbacks about business.bizoppjunction.com, which will go a long way in offering better services. On the revenue of the site, she added that business.bizoppjunction.com draws its revenues from advertisements. Since business.bizoppjunction.com is an information sharing site, it will always remain a free site for users. The site is investing in a continuous mode to improve features and content. She said that people can expect much more from business.bizoppjunction.com in the days to come. The support from users has contributed a lot to the success of business.bizoppjunction.com. Unlike many other sites which offer options for money making, business.bizoppjunction.com is an information site only. It is updated on a regular frequency to add new happenings in home business. This will help business.bizoppjunction.com to take a leadership position among other similar online business information sharing websites.

For more information visit http://business.bizoppjunction.com/br>Name: Dianne LoganAddress: 75 S. Wacker DriveChicago, IL 60606United StatesTel: +1 312 782 0611Fax: +1 312 701 7712

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The Real Truth About MLM And Network Marketing

The Real Truth About MLM And Network Marketing

http://www.msokorea.com/networking/0,6600,454202,00.html

There are many reasons people fail in MLM. They may have gotten involved in a bad company with a poor compensation plan. The products may not be top quality or anything special, so there is no demand for them. They may have received little training, poor training, or even no training at all. They might have been abandoned by their sponsor. They may have had the wrong expectations-- thinking that the money will come pouring in without any effort on their part. But the biggest reason for MLM and network marketing failure is giving up!

On the other hand, compare this to traditional entrepreneurship, which has its problems, too. I am a college business professor, and I’ve had traditional businesses of my own, so I know the of success in starting up a traditional business are that 9 out of 10 new business will fail the first year. And then there is another 4 in 5 chance that those businesses who survived the first year will fail to make it to the fifth year.

Wow, when you consider the amount of money spent and/or borrowed to get those businesses running, that’s pretty scary! Add to that the time involved in running business. Often people put in 60+ hours a week, for less income than a job would give them. I’ve often seen dreamers who started their own traditional business find themselves crashing and burning with reality as they lost their credit, their homes, and in some cases marriages and families. Ouch!

I believe in entrepreneurship! I believe in the dream of having your own business-- no boss, no time card. Freedom to set your own hours, work where you want, live where you want, spend time with your family, travel and take time off whenever you want. That’s what its all about! And it’s not traditional business that brings this freedom, it’s network marketing.

I’ll take the odds in MLM and network marketing any day! I’ll tell you why. If the 95% failure figure is correct, then it’s including all the people who just sign up to try the product, or decide for whatever reason they don’t want to work the business.

The truth is, for those who really want to work at this business, 95% of all people who stay with their network marketing company 10 years will reach the highest level of their company’s compensation plan, which is usually at least $500,000 annually. And the income needed to start and run a network marketing business is nominal compared to a traditional business!

I’ll take those odds any day! You see, all you need to do is:

1) Find the best network marketing company you can.

2) Commit to learning and working your business.

3) And don’t quit.

Success in MLM and network marketing is a choice. Choose to do it!

I can do that. How about you?

This article may be freely copied as long as it is not modified and the resource box accompanies the article, together with working hyperlinks.



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