Unhappiness as a Business Expense

Unhappiness is not just all in one’s head: It shows up right on the balance sheet. New research has found alarming conclusions on just how much being dissatisfied at work affects productivity and how companies operate. The second half of this point concerns what companies are doing to combat the scourges of a dour workplaces across the country.

The entire U.S. economy alone loses an estimated $350 billion annually on account of workers not being happier while working. On a smaller scale, happier workers are measured to be 12% more productive than unhappy ones, so the opportunities can likely be felt from business to business too. The second part of this problem concerns fixing it: Now that many companies also realize it is an issue, what are they doing about it? The first tactic is to give more incentives to stay: Think Google’s new juice bar or Airbnb’s $2000 per employee allotment for them to travel. The second method is to find ways to get rid of unhappy employees. Zappo’s and Amazon are planning on experimenting with a pay-to-leave program; they are thinking of paying new hires to leave as soon as either of these companies detect intractable problems with workplace morale. This is to ensure that they do not go through the expense of training someone who will not make proper inroads with other employees.

Fixing any issues from there is also not cheap; the cost of replacing an employee for a position is 20% of the annual sala-ry for that spot. Along with lost productivity, companies should not have to incur this cost. Forgoing that costly opportunity of hiring a potentially unhappy worker is not just for the sake of fit or peace of mind: The bottom line will also be better for it.

-CL

Weekly Optimal Bundle: 28th October, 2014

The Optimal Bundle is a student publication run by the Penn State Economics Association’s Print Education Subcommittee about a single economic topic covered in-depth from multiple perspectives.

This edition of the Optimal Bundle features the Federal Reserve, as it prepares to announce the end of its quantitative easing.

This is an online version of the print edition of the Optimal Bundle.

Launch Optimal Bundle

 

Sell, Sell, Sell: Market Panic in Nigeria

Nigeria rode the wave of energy exports until it crashed in dramatic fashion. A fall in oil prices has been particularly detrimental to  Nigeria, which depends on oil and natural gas for 96% of its export revenues and 80% of its government revenues. The largest African economy has seen its currency, the Naira, fall to multiple all-time lows against the U.S. dollar in recent weeks. Nigeria’s economic troubles reinforce the value of a diversified economy and caution when investing in emerging market economies. The Nigerian central bank has actively responded to this dismal economic situation, but failed to reverse a weakening of the Naira. This month, it sold dollars and bought the Naira after the dollar was trading above 172 Naira. It also prohibited the import of goods  paid for in dollars and established a ceiling of deposits in its Standing Deposit Facility to 7.5 billion Naira to increase the amount of  Naira in circulation. Despite these moves, the Naira continues to weaken relative to other currencies. The dollar again climbed up to 173 Naira on Nov. 13. In a year-to-date measure, the Naira has lost 8% against the dollar and more than 4% since Nov. 1. Many investors are at risk of a negative return on their assets in Nigeria. The Investment Corporation of Dubai, Dubai’s sovereign wealth fund, bought a minority stake in Nigerian-based Dangote Cement worth $300 million in September. Some companies are not hesitating in trying to get out of the Nigerian economy immediately. Anglo-Dutch oil giant Royal Dutch Shell PLC signed agreements to sell all of the Nigerian oil assets it attempted to sell last year. In July, U.S. company ConocoPhillips sold Nigerian oil assets to Oando PLC, a local firm.

The rise in North American energy production suggests that the global fuel supply is likely to remain high for the foreseeable future. Along with the increase in market players, this means Nigeria should not expect a return to normalcy any time soon. To replicate its recent success, it must make its economy less dependent on oil revenue. Considering the massive extent to which the economy is currently dependent on oil revenue and the expected future decrease in prices, policymakers have an unenviable task ahead of them.

-JK

eBay to PayPal: “It’s not you, it’s me”

Corporate spin offs or split ups hardly signify doom and gloom. PayPal and eBay are plan-ning to split up because they are more profitable as separate entities. In general, splitting a firm can help focus management and maximize shareholder value.

In the case of eBay and PayPal, the costs of maintaining a unified business model dwarfed their benefits. A large por-tion of PayPal’s payment volume comes through third parties, which are often merchants that compete with eBay and are reluctant to indirectly benefit a competitor. Additionally, PayPal no longer needs eBay to pay for its accessories. PayPal depended on eBay for 50% of its payments in 2009, but it now obtains just 30% of its payments from eBay. If anything,

eBay is holding PayPal back, considering that PayPal’s revenue figure is growing at 19% com-pared to eBay’s 10%. The breakup will finally happen next year and make both parties better off. In agreeing to the breakup, eBay is telling PayPal, “It’s not you. It’s me.”

– WI

Tear Down This Wall!

Mr. Azevedo, tear down this wall! The President of the  World Trade Organization has a golden opportunity to promote international prosperity through free trade, but he will not be successful unless he debunks the claims of his detractors. The proponents of protectionist policies have a common misconception — free trade results in do-mestic job loss. Lou Dobbs, a CNN talk show host, argues that free trade has an adverse effect on the middle class,  but he ignores the fact that free trade allows cheap im-ports of better quality for the middle class that raise their standard of living. Protectionists lament on the loss of 360 million jobs since 1992, but fail to mention the crea-tion of 380 million jobs. By outsourcing production, com-panies are saving money and are using that money to ex-pand and provide better jobs back in America.

Protectionists love tariffs and quotas because they are  believed to save the domestic producers, and indeed they do save the domestic producers, but at the expense of consumers. Tariffs lead to deadweight loss, which is caused by inefficient domestic labor and the loss of con-sumer utility at a higher price. The whole economy suffers  because of these protectionist policies as the total loss of the consumer outweighs the benefits to the local produc-er. These restrictive measures not only have an unfavora- ble effect on the domestic economy but can also lead to a potential retaliation from the foreign country. In Septem- ber 2009, the U.S. made imported Chinese tires more expensive for consumers by increased tariffs on them from 4% to 35%. This provoked retaliation from China in the form of an increase in tariffs on U.S. chicken prod-ucts from 50% to 104% in 2010. Instead of poking the  bear, the U.S. should have let the invisible hand of the free market govern international trade.

Free trade allows competition, specialization, efficient use of resources, and lower prices for consumers which re-sults in a higher standard of living and economic prosper-ity. Organizations like the WTO, however, have a long way to go in tearing down the barriers of protectionism. A  WTO report issued on Nov. 6 said that of the 1,244 trade-restrictive measures G20 members had introduced since the Great Recession of 2008, only 282 policies were re-moved and these policies have continued to rise at the rate of 18 a month over the past year. A sledgehammer, not merely a scalpel, is necessary to tear down this wall.

–

WI