Category Archives: Business Economy

Big Banks Tap New Revenue Streams with Prepaid Debit Cards

Just because the bank thinks you are too risky to be provided with a checking account doesn’t mean you’re not good enough for them to take money from do business with you. The prepaid debit card industry has been growing rapidly over the past few years, and several big banks and even credit card companies want in on the action.

ID-100108399Prepaid debit cards aren’t attached to a bank account. You can load and withdraw as much money as you want onto them from ATMs, pay your bills, use the card to make payments anywhere that debit or credit cards are accepted, and make peer-to-peer payments. Some cards even allow you to deposit paper checks (via a photo from your mobile phone), write paper checks, and even have your tax return directly deposited.

It’s easily to see the appeal of prepaid debit cards. According to a recent survey by the Pew Research Center, the majority (59%) of prepaid debit card holders also have checking accounts. But, these cards allow them to better stick to a budget, avoid overdraft fees, and make purchases online without worrying that their account information will be compromised.

Another large population of debit card users are those who cannot qualify for a checking account at the bank (or who don’t want one). For such people, these prepaid cards are the best alternative to a checking account in that it allows them to make credit card purchases, and they don’t have to walk around with large sums of money in their wallets.

When they first came out, prepaid debit cards were pretty expensive. Users could expect to be hit with an assortment fees for practically any transaction or service. But today, as these cards have become more popular with consumers many of them are shifting their fee models to look more like… well, checking accounts. Instead of a litany of fees, users are charged a consistent monthly fee.

But guess what? Many of the most popular prepaid debit cards are issued by big banks and credit card companies, such as Chase, Us Bank, American Express, and Visa. So, whether you are not using a standard checking account by choice or by consequence, chances are you’ll still be doing business with the same big names.

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Where Have All the U.S. Workers Gone?

The Bureau of Labor Statistics (BLS) recently reported that the U.S. labor force has dropped by six million people since the Great Recession, and there has been little sign in recent years of this changing even as the economy has improved.

ID-100111821According to the BLS, those considered to have dropped out of the workforce are people who are experiencing long-term unemployment, yet are currently not seeking work. So, the million dollar question is: where did all these people go? Are there really millions of people out there who have despaired from ever finding employment?

A closer look at the situation reveals that the high unemployment rate may in part be due to the increase of those taking on contingent or freelance work. The two largest groups of the unemployed population are those age 25 to 35, and those over 55.

While it’s hard to get exact numbers on who is freelancing these days, according to the latest Freelance Industry Report, 75% of freelancers are between the ages of 30 and 59, and 12% of respondents were 60 or older. The largest group in the survey (26%) was the 30 to 39 segment.

Unless these freelance workers have officially started their own micro business, and/or are reporting every cent they make, it’s quite possible that the majority of them are just being labeled as “unemployed” by the BLS. If that’s true, then we can expect to see this same “unemployment” trend for years to come.

The economy has been quickly shifting to a more contingent workforce. This is largely due to a challenging job market paired with, advancements in mobile technology, the ubiquity of the internet, and a strong cultural push (among Millennials in particular) for the recognition that there is more to life than work. According to a study conducted by MBO Partners a couple of years ago, the number of freelance workers may surpass full-time workers by 2020, and the Freelancers Union estimates that there are approximately 42 million independent workers currently in America.

In short, as everyone chews over the latest labor report, just keep in mind that those statistics may not be telling the whole story. Not everyone there is much more to the labor market story.

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December 16, 2013

Three Interesting Facts About the U.S. Minimum Wage

Over the past few weeks, Congressional Democrats with support from the White House, having been pushing a bill to gradually raise the federal minimum wage to $10.10/hour from the current $7.25 and index it to the Consumer Price Index. Though most analysts agree that the bill has little chance of passing the Republican-controlled House of Representatives, there has nevertheless been much debate over the consequences of raising the Federal minimum wage- especially among smaller businesses where the increase in employment costs can have the greatest impact.

french-waiter-2-332033-mWhat is interesting, however, is that there a lot of misconceptions floating around about the Federal minimum wage that, when considered, dramatically change the whole picture.

For starters, here are three facts about the minimum wage that you may not know about:

1. Almost half of the states in the U.S. have their own minimum wage rates that are in many cases significantly higher than the current Federal minimum wage. Nineteen states (plus D.C.) have set their own, higher minimums, ranging from $7.35 in Missouri to $9.19 in Washington State. (Some cities and counties have gone even higher — San Francisco’s minimum wage, for example, is set to rise 19 cents to$10.74 next month.) Those states collectively include 45% of the nation’s working-age (16 and over), meaning the federal demographic data don’t capture a significant share of the nation’s lowest-paid workers.

2. According to the Pew Research Center, when the Federal minimum wage is adjusted for inflation, it actually was the highest in 1968.  Minimum wage earners received the equivalent of $8.56 (in 2012 dollars) in 1968. Since the minimum wage was last increased in 2009, to the current $7.25/hour federal minimum has lost about 5.8% of its purchasing power due to inflation.

3. The most common worker to earn minimum wage is… a young, white woman working part-time. According to an earlier report by the Pew Research Center, most of the nation’s minimum wage workers are young: 50.6% are between the ages 16 to 24. They are also mostly white (78%), mostly women (half of the total minimum wage earners are white women), and a total of 64% are part-time workers.

In short, a raise in the Federal minimum wage may not be as dramatic as some critics are claiming since many states already have their own increases in place. It would also make sense given the current rate of inflation. Finally, the groups most affected may not be what most people are picturing. As more people are educated about the realities of minimum wage, it could dramatically change the nature of the debate.

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The Rise of the Independent Worker

Independent contractors, freelancers, consultants and micropreneurs have become an increasingly significant part of the workforce, and based on the findings of the Third Annual Independent Workforce Report from MBO Partners, it’s a trend that doesn’t look like it’s going away any time soon.

Why The Independent Work Force is Growing

home officeBefore I get to the findings of that report, I think it’s important to understand some of the reasons behind this trend, because it’s really the result of several factors:

Advances in technology enable and enhance remote working. Over the past 5 years in particular, there has been a renaissance in mobile technology and cloud computing tools and services. User interfaces across devices and platforms are becoming more streamlined, more intuitive, and more interconnected with relevant outside tools and networks. What this means is that there has been a major enhancement to the creation, exchange, and consumption of both data and media. This allows independent workers to produce quality results without being tied to a particular location.

Attitude shift regarding employment among employees. Job mobility is gaining in importance- especially among millennials. Many workers today are comfortable changing jobs every few years to advance their careers, and are using the skills they’ve gotten in an employment or intern situation to start up their own businesses.

Economic conditions are making job stability less likely. Going hand in hand with the above trend, over the past six years many big employers have been slashing benefits on things like healthcare, and retirement plans as well as cutting hours. Even though economic pundits have been calling these past few years a “recovery,” albeit a sluggish one, the fact is jobs in general have become less stable and often less attractive benefit-wise to employees. Given this, many workers may see running their own businesses as a more attractive alternative.

The independent worker lifestyle is being glamourized. Ever since the The 4-Hour Workweek began to enter the public conversation, it has become a defacto icon of the ideal work-life balance. This has been supported by the fact that tremendous media attention is being placed on a rolling roster of young, suddenly rich entrepreneurs who seem to have this elusive carefree lifestyle. The ironic thing is that in the majority of cases, it takes a significant amount of time and hard work to get a new micro business to profitability, and that fact is not getting the amount of attention it should. Driven by these ideals and by ideas that often sport low barriers to entry, it’s little wonder why more people are staking it out an independent workers.

The Current State of Independent Workers

Now, on to the study… Here are some interesting highlights about the state of the independent workforce today:

Independent workers are satisfied with their career choice.

“Independent workers’ satisfaction remains strong, with 64% reporting that they are highly satisfied with their work style… The vast majority plans to continue as independent workers, with 77% saying they will either continue as solopreneurs (63%) or build a larger business (14%).”

The rise of the independent worker represents a structural economic shift.

“The 2013 MBO Partners Independent Workforce Index, a measure created to track growth of the sector, rose yet again: up 2.7% over 2012 and 8.2% over the base year 2011.”

40% of adult Americans are either currently working or have worked on their own.

“Almost one third of adult Americans currently not working as independent have done so during their work lives and about 8% of Americans do so today. Many of the former independents indicate an interest in returning to independent work…”

Independents are positively and increasingly effecting the US economy.

“Close to $1.2 trillion in total income was generated by independents in 2013, up 20% from 2012. They also spent over $150 billion on non-payroll/contractor expenses. Independents earn income both globally and locally: $43 billion came from overseas while a robust $700 billion came from their metro areas. Nearly 10 million households receive at least half of their income from independents.”

Independents employ other independent workers.

“Although the vast majority of independent workers are solopreneurs and don’t have traditional employees, they don’t work alone. Over the past year, 26% of independent workers spent a total of $96 billion hiring the equivalent of 2.3 million full-time workers via contract hiring.”

One in seven independents plan on building their businesses.

“Close to 2.5 million independent workers plan to launch larger businesses.”

Independent workers come from all walks of life.

“For the 3rd consecutive year, the 2013 MBO Partners State of Independence study shows that independents represent all ages, professions, educational levels and geography.”

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Obamacare Offers More Questions Than Answers for Small Business Owners

Well, the Affordable Care Act (ACA) has definitely gotten off to a rocky start. After its website, Healthcare.gov, officially opened for business, allowing uninsured Americans from 36 states to purchase health insurance online, it was quickly plagued by glitches that prevented many users from successfully signing up for an insurance plan. These hiccups have persisted, prompting critics of the ACA to call it a failure.

drWhile it’s too soon to tell if Obama’s signature legislation will go the way of the dodo bird, the whole episode is just one more point in an already confusing health care landscape for small business owners.

One of the corner stones of the new plan is the SHOP Marketplace, scheduled to fully open in 2014. The SHOP health exchange market place is a Web portal where eligible small businesses with up to 50 employees can shop for and buy private health insurance for their full-time employees.

The goal with this online marketplace is to supposedly give smaller businesses the advantage of group purchasing power and just make the whole system more affordable. In some cases, small businesses may be eligible for a tax credit on employee premium payments.

The problem is that there are still many unknowns, like how much smaller businesses will really end up saving. All the delays on top of the on-going government shut down brings up the question of when the system will actually be up and running as planned, or if it ever will. This is particularly agonizing for those small businesses that are required by the new law to provide an employer-based healthcare plan in 2014.

All of this brings up many questions- especially for those running a small business hovering around the 50 employee mark:

Should you offer employer provided coverage or not? If you are employing fewer than 50 people, then you won’t be required to provide coverage. But, health benefits play a significant role in employee satisfaction. Deciding whether or not you are going to offer a health plan to your employees is a choice that affects more than just your bottom line; it also affects employee morale and retention.

Should you risk hiring more than 50 employees? If your business is going through a growth spurt and you need additional workers that will put you past the 50 employee mark, should you hire now or hold off till things settle a bit? The government has delayed the implementation of the employer mandate until January 1, 2015. After this grace period, small businesses face steep fines for each employee not covered by a plan. It may be worth the “risk” to hire now and see how much revenue those extra hands bring in.

What kind of health coverage should you offer? If you would like to provide some kind of coverage for your workers, but money is a concern. What are your options, especially given that healthcare costs are still very much on the rise?

According to the new legislation, the health care insurance provided by the business must pay for at least 60 percent of health care expenses, and employees may not be forced to pay more than 9.5 percent of their family income (before deductions and adjustments) for their employer-sponsored coverage. However, how you as a business owner are supposed to know the amount of “family income” of your employees is not yet addressed. The U.S. Department of Health and Human Services (HHS), on their healthcare.gov site, also defines a “comprehensive package of items and services, known as “essential health benefits.”

That’s a pretty hefty list of requirements that can feel like even more of a burden if you are struggling with lackluster sales.

The bottom line: as Obamacare starts kicking in, it seems that it’s generating more questions than answers for small employers. For now, the safest thing may be to wait it out a bit- at least until some of the most prominent kinks get ironed out.

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Payroll Cards Gain in Popularity; How to Avoid the Pitfalls in Your Small Biz

As electronic payments become more common and the number of Americans without bank accounts rises, payroll cards have increased in popularity- especially among companies seeking to reduce payroll costs. But, if you are thinking of bringing payroll cards into your small business, make sure you choose your payroll card program wisely and that you are aware of the current legislation in your area.

cardWith a payroll debit card, the value of an employee’s wages is automatically loaded on to the card for each work period. The employee can then use the card to get cash at the bank, withdraw funds from an ATM, or make purchases. In other words, it works much the same way as any other debit card connected to a bank account. The difference is that no bank account is needed.

According to the research firm Aite Group, nearly $43 billion will be loaded onto these cards this year. That is double the amount reported in 2010. By 2017, Aite predicts that the total will reach $68.9 billion.

For the businesses that use them, payroll cards offer an easy way to reduce the cost of processing payroll and distributing paper checks. It also gives those workers who do not have a bank account a simple way to access their money.

There are drawbacks, however, especially for workers. Many payroll card programs come with exorbitant fees that can significantly cut into workers’ wages. This can have obvious, negative affects on employee moral. Some upset workers have even gone so far as to take the issue to court.

That said, if you are considering using a payroll debit card program in your small business, you should shop around for a program that doesn’t support an excessive fee structure, and you also need to be aware of both state and federal wage rules. The American Payroll Association and the National Consumer Law Center offer some helpful guidelines for employers. Here are a few important ones to pay attention to:

  • Employees must be able to access their full wages in cash at least once each pay period without fees. Free and clear access is required by the state wage and hour laws and is critical to the success of any payroll card program.

  • Employees must have a choice of wage payment method and be able to change it. Under federal law, employees may not be required to receive their wages on a payroll card and must have the choice of another payment method.

  • Employers should offer a payroll card that is widely accepted. The logo of a widely accepted payment brand (i.e., Visa, MasterCard or Discover) signals to employees that they can take their card to any bank that is a member of the payment brand and receive their full wages from the teller each pay period without fees.

  • Employees must be provided free and convenient access to account information. Employees need free access to account information to check their balance, spot unauthorized charges, monitor fees and manage their finances. They should not be charged a fee for responsible behavior, such as checking their balance using an automated telephone system.

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Small Business Earnings Trending Down, Capital Spending Remains Weak

According to some recent studies, it appears U.S. small businesses are still struggling where it counts years after the Great Recession officially came to an end.

Down graphSales generation continues to be a challenge. According to the Wells Fargo Business Insights Survey, almost half of all small businesses claim that in the past 12 months their company revenues either remained unchanged (27%) or have gotten worse (39%). Not surprisingly, a full 32% of the companies surveyed indicated that maintaining a good cash flow position continues to be a struggle.

The latest National Federation of Small Business (NFIB) Small Business Optimism survey seems to corroborate these results. The net percent of all small businesses reporting higher sales in the past three months compared to the prior three months plunged 17 points to a negative 24%. Earnings fell 13 points to negative 35%.

Capital spending among small businesses remains equally weak. According to the Wells Fargo study, more small business owners reported decreasing capital spending over the previous 12 months than those who reported an increase. This trend has persisted a since the middle of 2008. While the NFIB study, reported a 3 point increase in capital outlays over the past six months to 57%, it is still about 10% down from pre-recession levels.

Why are small businesses still struggling? Many point to several possible causes including: lack of real tax reform, the looming health care reform legislation, an over all slow down in the global economy, a fickle consumer confidence, and increased competition from big businesses.

All of these things coupled with the need to keep with the ever-changing trends in Internet-based marketing, are making running a successful business seem much harder now then it was a few years ago.

Whatever the case, it’s clear that small business owners still have their work cut out for them if they want to be successful, let alone operational, heading into the new year.

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September 4, 2013

Truckers Sidelined by Safety Regulations

In the trucking world, safety comes first, but continued concerns about lengthy workweeks and driver health are sending some truckers back to bed instead of onto the road. New regulations by the Obama administration, which will limit truckers’ workweek to 70 hours from 82, were announced in December 2011, but the industry had 18 months to implement the regulations.

The transitional costs over the 18-month period have already cost the industry roughly $320 million, according to Dave Osiecki, Vice President for Safety Policy at the American Trucking Association, and the Federal Motor Carrier Safety Administration (FMCSA) estimates that the regulations could cost the industry a half-a-billion dollars.

Along with a decrease in workweek hours, the rules require that after every 70-hour workweek truckers take 34 hours off to “restart,” which must include two 1-5 a.m. time periods. Additionally, truckers can’t be on the road for more than 11 hours at a time and are now required to take a 30-minute break during the first eight hours of any shift.

The biggest complaints about the new rules have come in the form of industry concerns about costs being passed on to consumers. Fewer truckers working fewer hours means less time transporting goods from place to place, meaning consumers might have to start paying more for products and shipping.

“If you buy more trucks and hire more people to close the gap, someone has to pay for those new trucks and people. On the other hand, if companies decided to operate at less capacity, that will also increase rates, and who pays for that? The consumer,” said Lyndon Finney, Editor of The Trucker.

There is one major upshot to the regulations, and that’s safer roads and an estimated $200 million in savings from better driver health.

“FMCSA developed the rule based on the latest sleep science and sought input from all sectors including small business owners, drivers, shippers, safety advocates and trucking companies,” said Anne Ferro, the U.S. Department of Transportation’s (DOT) Federal Motor Carrier Safety administrator.

The number of people killed each year in large truck crashes fell by almost 30 percent, from 5,282 in 2000 to around 4,000 in 2011, and, according to the FMCSA’s analysis, the new rules will prevent some 1,400 crashes and 560 injuries, saving at least 19 lives each year.

Despite these regulations going into effect, the battle continues. In March, oral arguments were presented in a lawsuit by the American Trucking Association asking the U.S. Court of Appeals for the District of Columbia Circuit to reverse the new regulations, but it is not clear when that ruling will be handed down.

For now, it’s hard to say what the true impact on truckers, the industry, manufacturers, and consumers will be, especially when fewer than 2 percent of drivers work the 82 hours per week. According to DOT, 85% of drivers won’t even be impacted by the new regulations. If anything, long-haul truckers that are paid by the hour and specialty shipments will be hit the hardest.

It will be a slow process for the industry to return to its pre-regulation productivity levels, but it’s not an impossible feat.

 

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September 2, 2013

8 Dangerous Email Scams and Tricks You Need to Watch Out For

hand-on-keyboard-8301-mEven the most sophisticated spam filters cannot keep out the wave of scam emails flooding inboxes world wide, and from all accounts, business for these cyber thieves is booming. According to the 2012 Internet Crime Report conducted by the FBI, there has been an 8.3 percent rise in cybercrime from the prior year. This works out to 290,000 incidents worth $525 million in financial losses to victims. The average take was $4,573.

We’re not talking cheesy requests from your “secret admirer” in Nigeria. These are some cunning, well-crafted attempts to get you to fork over your personal information. The following is a list of 8 dangerous emails containing the most sophisticated phishing scams circulating right now:

 

1. Failed Delivery Scam

Scammers send phishing messages that appear to be from UPS or FedEx notifying you that a package could not be delivered. You are then prompted to open an attachment that came with the email so that you can get everything sorted out. This attachment typically is loaded with malware or viruses that sift through your files and steal any personal information it can find.

2. Account Update Scams

You may receive “reminders” to update your personal information with your bank or your Paypal account. If you click the link provided, you will be taken to a very official looking web page in which you will be asked to provide some personal information. This information is then used to hack your accounts.

3. Charity Scams

Charity email scams typically reference some recent, well-known disaster and ask that you donate a small amount to a charity to help those who were affected by the tragedy. Ironically, the email itself may actually “warn” you to beware of online scammers! Typically, there will be a link to an official looking web page where you can make an online donation.

4. The Stranded Traveler Scam

Watch out for emails from “friends” claiming that they were robbed while traveling abroad and that they need money immediately.

5. Urgent Messages From a Bank or Government Agency

In one clever scam, hackers sent an email under the “strict security standards” of HSBC bank and requested that recipients report scam emails to the bank’s website. The link itself contained dangerous malware. Another popular scam involves the IRS usually claiming that you owe money.

6. The Cellular Carrier Email Scam

Scammers send emails directing people to a convincing clone website of their cellular carrier. They are then asked to enter their passwords and the last four digits of their Social Security numbers, in order to receive credits, discounts, or prizes. The data is then used to hack into the victim’s account.

7. The Fake Purchase Scam

Scammers send emails asking recipients to confirm purchases they never made, such as items on eBay or airline tickets. They are then directed to an official looking web form to enter their personal information.

8. The Old Friend Email Scam

Be on the lookout for emails from “old friends” that may actually come from scammers who have hacked old and unused email accounts. If your friend asks you to click on a link or download anything, be suspicious.

In short, email scammers are getting more and more sophisticated at their trade. In order to protect yourself make sure you only click links and download items from trusted sources, and if something looks too good to be true, it probably is.

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August 28, 2013

Why Have Revenues from Sole Proprietorships Been on the Decline?

According to statistics of income provided by the IRS, the average revenues of sole proprietorships has been on a downward trend for the last 50 years, with the average sales per U.S. sole proprietorship dropping by two-thirds since 1966. How can we explain these numbers? Does this reflect the state of small businesses since about three quarters of all U.S. businesses are sole proprietorships?

Sole Prop StatsWell… probably not. As alarming as these numbers may seem at first, there may be several explanations, and within them lies a deeper understanding of the trends that have been shaping small businesses over the past few decades.

One explanation is that the number of sole proprietorships has been increasing faster than the population, driving up the per capita number. In 1957, for example, there were 4.6 sole proprietors per 100 Americans; in 2010 there were 7.5. Part of this increase could be due to greater access to information and streamlined processes for business startup and operation that are readily accessible to the public.

Why would this make a difference? Starting and running a successful business is not for everyone. Many people are quick to quote the statistic from the SBA that half of all small businesses won’t survive past five years. So, it stands to reason as increasing numbers of people try to start businesses (those who maybe shouldn’t be starting them in the first place), it will push up the failure rate. If they hobble along for a few years before giving up, their low earnings could also push down the national average revenues.

Another explanation is that over the past 50 years, LLCs went from being non-existent to being one of the most popular type of new business formed in the United States. This includes many one-person businesses where the owners choose to form an LLC for its flexibility and liability protection. Without LLC numbers, it’s hard to speculate about what the IRS statistics really mean.

The final explanation really revolves around a culture shift: today, more people are seeking supplementary income. This means even if a sole proprietorship isn’t a full-time income generator, it is still being included as such.

Bottom line: there may be more parts to this story than initially meets the eye. Rather than considering the IRS’s numbers as such sombre statistics, they may actually be depicting a shift in the way small businesses today are started and operated.

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