Trade unions and the modern work place; UK living standard keeps falling; India growth slowest in decade; Popular India cars fail crash test

1 Trade unions and the modern work place (James Adonis in Sydney Morning Herald) Jeez, you’d have to really hate being a union rep right about now. Seemingly everywhere you look there are examples of how the union movement’s relevance is plummeting, while its questionable behaviour is ramping up. In many ways, unions have morphed into the businesses they so despise. What they’ve spent so long opposing – the ruthless and greedy nature of the big corporates – they are now themselves guilty of, which is perhaps a reason why less than one in five people trust them to be their representatives at work.

Unions are unequivocally businesses – some are Big Businesses – selling themselves to potential consumers (industry workers) in return for a service (potential support). They engage in product development and marketing just like any other business, earning substantial revenue while paying their staff generously, much more than the workers they represent. They are, through and through, as much a product of capitalism as the organisations they oppose.

What makes this downfall tragic is that unions have historically been hugely successful at making this country great, significantly lifting the standard of workplaces across Australia. But that standard is now maintained by solid industrial relations legislation and intense competition for quality workers, the combination of which advantages employees irrespective of union involvement. Just because unions were useful in the past doesn’t mean they’re still useful today.

If anything, their existence and characteristic obstinacy are a hindrance to the workers they’re supposed to protect. When unemployment is increasing and the economy is stagnating, it’s essential for labour costs to be relaxed so that employers have an incentive to hire more people. When the situation reverses and the economy is booming, then those costs can rise once again. Unfortunately, trade unions seem to prefer higher wages even if it means fewer people are receiving them.

The economy aside, the irrelevance of trade unions is most evident inside organisations where poor-performing employees are frequently defended by union representatives seeking any opportunity for a contest against a leader. What unions don’t understand is that the poor performer’s colleagues are just as pissed off as the supervisor. Sick of being paid a similar salary for doing twice as much work, they too want the slacker gone.

http://www.smh.com.au/small-business/blogs/work-in-progress/the-trouble-with-trade-unions-20140130-31q2j.html

2 UK living standard keeps falling (Katie Allen in The Guardian) Living standards in Britain have suffered their most prolonged decline for at least half a century, according to official data that has been seized on by Labour as further proof of a cost of living crisis under the coalition. A report from the Office for National Statistics found that real wages have been falling consistently since 2010, the longest such period since at least 1964, when comparable records began. Statisticians put the deterioration down to several factors such as a change in the number of hours people work as well as a fall in productivity.

The ONS also highlighted different inflation rates between what is produced in Britain and what is consumed, helping to explain the divergence between productivity and real wage growth since 2010. In other words, the rate of inflation experienced by workers spending their pay was not the same as the rate of inflation in the goods their employers were selling.

The effect from hours worked in the labour market was to put downward pressure on real wage growth during the downturn but upward pressure more recently. Real wages may also have been affected by rises in non-wage costs of hiring, such as national insurance contributions, which can prompt firms to tweak workers' pay to manage their overall costs.

Worryingly for an economy still struggling to rebalance towards more manufacturing and away from reliance on consumer demand, there was some effect on real wages from the changing composition of Britain's workforce. That came particularly from the shift from higher paid workers in the manufacturing sector towards lower paid services industries.

http://www.theguardian.com/business/2014/jan/31/official-longest-fall-wages-living-standards-50-years

3 India growth slowest in decade (Khaleej Times) Indian government on Friday sharply revised down economic growth for financial year 2012-13 to 4.5 per cent from its earlier estimate of five per cent due to lower farm and manufacturing output. According to the first revised estimates of national income for 2012-13 released by the Central Statistics Office, India’s gross domestic product expanded by 4.5 per cent. This is the slowest pace of economic expansion in a decade. The country’s GDP expanded by 6.7 per cent in 2011-12.

The CSO data also showed lower than estimated growth numbers for exports, capital investment and consumption sectors, suggesting deeper underlying weaknesses in Asia’s third-largest economy, which grew at more than nine per cent before the 2008 global financial crisis.  


http://khaleejtimes.com/biz/inside.asp?section=internationbusiness&xfile=/data/internationbusiness/2014/February/internationbusiness_February9.xml

4 Popular India cars fail crash test (BBC) Five of India's most popular small cars have failed crash tests conducted by a UK-based car safety watchdog. The tests by Global NCAP showed that if involved in a crash, fatalities or serious injuries could result. Among the cars tested was India's talismanic Tata Nano, the world's cheapest car, as well as models made in India by Ford, Volkswagen and Hyundai. The cars were apparently stripped of safety features to make them cheaper for Indian buyers, correspondents say.

The five models accounted for 20% of all sales in the country last year. Estimates say that about 80% of the cars sold in India have price tags of under $8,000. "It's worrying to see levels of safety that are 20 years behind the five-star standards now common in Europe and North America," said the head of NCAP Global, Max Mosley, the former chief of international motorsport. 

The car safety watchdog put five models through crash tests, including the Suzuki-Maruti Alto 800, the Tata Nano, Ford Figo, Hyundai i10 and Volkswagen Polo. None of these entry-level cars sold in India is fitted with airbags. They also lack the safety standards that the same models have when sold in North America and Europe, according to the watchdog.

http://www.bbc.co.uk/news/world-asia-india-25974754

'US stimulus rocking emerging markets'; Mobile is challenge area for Google; Generation Lost

1 'US stimulus cut rocking emerging markets' (Larry Elliott in The Guardian) India's central bank governor has blamed the US and other western nations for the financial tremors shaking emerging markets as he attacked the way the US was withdrawing its colossal stimulus programme. Important emerging economies – including India, Turkey and South Africa – have all raised interest rates to defend their currencies this week amid signs that the gradual phasing out of quantitative easing has led to investors becoming more jittery about high-yielding, risky markets.

The Fed announced on Wednesday that the US economy was strong enough for it to reduce monthly asset purchases from $75bn to $65bn and news that the economy grew at an annual rate of 3.2% in the final three months of 2013 left Wall Street convinced that further tapering was inevitable. "International monetary co-operation has broken down," Rajan, a former chief economist at the International Monetary Fund, said. 
"Industrial countries have to play a part in restoring that [co-operation between central banks], and they can't at this point wash their hands off and say we'll do what we need to and you do the adjustment.

"Fortunately the IMF has stopped giving this as its mantra, but you hear from the industrial countries: We'll do what we have to do, the markets will adjust and you can decide what you want to do," he added. "We need better co-operation and unfortunately that's not been forthcoming so far."

Rob Carnell, economist at ING bank, said growth in the fourth quarter of 2013 would probably have been close to 3.5% at an annual rate had it not been for parts of the federal government being shut down in October. While inflationary pressure was weak, Carnell added: "This should not be enough to detract the Fed from what looks like will be another $10bn taper at their March meeting, taking monthly QE down to $55bn."

http://www.theguardian.com/business/2014/jan/30/us-stimulus-emerging-markets-raghuram-rajan-india

2 Mobile is challenge area for Google (Claire Cain Miller in The New York Times) There is no denying that Google has become a mobile company. Now, Google — along with shareholders, industry partners and advertisers — is trying to figure out what that means. In mobile advertising, Google is wrestling with how to make as much money on phones as it has on the ads that appear on desktop computers. Its fourth-quarter earnings report on Thursday showed that it is continuing to struggle with lower ad prices on phones. 

But in other areas, like manufacturing smartphones, Google has decided that the business is better left to someone else. It has announced that it would sell Motorola Mobility, which it bought less than two years ago for $12.5 billion, to Lenovo for $2.91 billion. Google executives would prefer that people stop talking about mobile at all. 

“People aren’t distinguishing what they’re doing on different screens, so advertisers should be more agnostic about where they reach the user,” Nikesh Arora, Google’s chief business officer, said on a conference call with analysts. “The fundamental tenet is not to speak about mobile, mobile, mobile. It’s really about living with the users. What device are you on? What’s your question? How can we assist you? That’s a much broader and richer set of activities for us.” 

And while everyone else is still obsessing about smartphones, Google has moved on to new kinds of devices and even robots. Eyewear with tiny computers called Google Glass is expected to be sold to consumers this year, and the company recently bought robotics companies and agreed to acquire Nest Labs, which makes Internet-connected thermostats and smoke detectors. 

The company reported fourth-quarter revenue of $16.86 billion, an increase of 17 percent over the year-ago quarter. Net revenue, which excludes payments to the company’s advertising partners, was $13.55 billion, up from $11.34 billion. The fourth quarter is generally Google’s strongest because it makes money from retail advertisers during the holiday shopping season. Despite Google’s mobile challenges, among web businesses it might be the biggest beneficiary so far of consumers’ shift to mobile devices. Google services are the top web property on smartphones, reaching 87 percent of the mobile audience. Facebook is next with 85 percent. 

http://www.nytimes.com/2014/01/31/technology/revenue-and-profit-rise-at-google-but-mobile-struggles-continue.html?_r=1

3 Generation Lost (Khaleej Times) When billionaire bankers and CEOs of global corporates, meeting at an exclusive Swiss ski resort, talk of social inequality and rising unemployment, issues that are usually debated by activists of nonprofits, then surely there must be something seriously wrong with the global economy. This year’s annual World Economic Forum meet at Davos in Switzerland was different because the focus was not just on the usual metrics — GDP growth, interest rates, global FDI inflows, EBITDA and other esoteric acronyms — but on issues that affect millions of young people across the globe.

The WEF, in its annual survey of 700 opinion-makers, has identified income disparity as the most likely risk to cause an impact on a global scale over the next decade. Other risks of significant concern include extreme weather events, unemployment and fiscal crises. Millions of young people, especially those below 25, in Europe, the US and other developed nations are now part of what is described as ‘generation lost.’ While central banks including the US Federal Reserve have injected trillions of dollars into the global financial system, these have only resulted in skyrocketing stock prices and soaring wealth for billionaires. 

The unemployment rate in the US, for those below 25, is as high as 15 per cent. While unemployment in the Eurozone is at a record high of 12 per cent, for those below 25 the rate is more than double. The International Labour Organisation warned recently that the global youth-to-adult unemployment ratio had touched a historical peak; while the global adult unemployment rate was 4.6 per cent, the rate for those between 15 and 24 was 13.1 per cent. While 202 million people were unemployed around the world, those below 25 accounted for nearly 75 million.

http://khaleejtimes.com/kt-article-display-1.asp?xfile=/data/editorial/2014/January/editorial_January62.xml&section=editorial

US Fed cuts $10bn more from stimulus; As China slows, the pain emerges; Facebook revenue up 63%; India IT sector enters middle age

1 US Fed cuts $10bn more from stimulus (Dominic Rushe in The Guardian) The US Federal Reserve has instituted a further cut to its massive economic stimulus programme, in a move that rattled stock markets already worried by recent poor jobs figures. After a two-day meeting – the last to be headed by outgoing chairman Ben Bernanke – the Fed announced a $10bn cut to its $75bn-a-month bond-buying programme, known as quantitative easing (QE). The decision received the unanimous approval of the federal reserve open markets’ committee, the first time no one has dissented since June 2011.

The cut follows an earlier $10bn reduction to the programme in December. At this rate, the programme, which started in September 2012, could be over by the end of the year. The Fed also repeated its pledge to keep interest rates close to zero, where they have been since 2008. Shortly after the December’s decision the Labor Department released disappointing jobs growth figures, showing that the US had added just 74,000 new jobs in that month. In previous months, the department had posted rises of 200,000 and above.

Further bad economic news has rattled investors in recent weeks. The Fed committee met amid new concerns of financial crisis in Turkey, as well as signs of slowing growth in China and other emerging markets. US stock markets, which hit record highs last year, have been losing momentum in 2014. Turkey’s currency crisis already seems to have spread. South Africa was forced to raise interest rates for the first time since 2008 on Wednesday in an attempt to halt a sell off by investors concerned about a crash in the emerging markets. Brazil, Indonesia and Thailand are seen as the next most likely emerging market to raise rates.

http://www.theguardian.com/business/2014/jan/29/federal-reserve-cuts-economic-stimulus

2 As China slows, the pain emerges (Keith Bradsher in The New York Times) Economists and investors around the world have been fretting in recent days about the effects on smaller emerging markets if China’s economic slowdown worsens. Those concerns have driven down share prices and currencies from Jakarta to Istanbul to Buenos Aires, although emerging markets staged a partial recovery on Wednesday. They helped to prod the central banks of Turkey and India to raise benchmark interest rates unexpectedly on Tuesday.

Yet the most vulnerable producers these days may not be the coal mines in Indonesia, palm oil plantations in Malaysia or soybean farms in Brazil, but the farms and particularly the mines in China itself. China’s steadily strengthening renminbi, persistent inflation and soaring blue-collar wages have combined to erase much or all of the cost advantage of domestic production for a long list of commodities. At the same time, tightened pollution regulations have made it harder for steel mills to use China’s low-grade iron ore reserves or for power plants to burn China’s low-quality coal.

Another profound change in Chinese society is also having an impact. Hundreds of millions of Chinese are eating more meat and drinking more milk. The extra animal feed, as well as chicken, beef and dairy products, for that shift is coming increasingly from farms as distant as Uruguay and Argentina. Chinese farms have grown uncompetitive because they tend to be small and inefficient and have a reputation for contaminated food. Charter rates for bulk freighters, often a good leading indicator of China’s commodity imports, have stayed strong. The shipping industry is betting that even when long-distance freight charges are included, new mines opening in Brazil and Australia will outcompete mines in China.

http://www.nytimes.com/2014/01/30/business/international/as-china-slows-the-pain-hits-home.html?ref=business&_r=0

3 Facebook revenue up 63% (BBC) Social networking giant Facebook has reported profits of $523m and a 63% increase in revenue for the fourth quarter, beating expectations. The boost in revenue was mostly due to stronger mobile advertising sales, a priority of boss Mark Zuckerberg. Advertising revenue increased 76% from the same period last year, with more than half of that coming from mobile.

Overall, Facebook said it had 757 million daily global users as of December 2013. For the full year for 2013, Facebook reported profits of $1.5bn and said its daily active users grew by 22%. "It was a great end to the year for Facebook," said Mr Mark Zuckerberg. Facebook turns 10 years old next Tuesday, completing a remarkable transformation from a project started in Mr Zuckerberg's student room to a global empire with more than 1.23 billion monthly users.

Two years ago, Facebook had no revenue from mobile advertising sales. Since then, the firm has made a concerted push to spruce up its mobile app in order to woo users and advertisers. According to research firm eMarketer, Facebook had a 16% share of all mobile advertising dollars spent in the US this year, up from 9% in 2013. This comes after Facebook surpassed Yahoo as the number two digital advertising seller in the US. Globally, Google is still the dominant player, with a 32.4% share of the $117.6bn spent on digital advertising in 2013.

http://www.bbc.co.uk/news/business-25954825

4 India IT sector enters middle age (Khaleej Times) As India's $108-billion industry enters middle age and its growth slows, the three-million-strong workforce is also getting older, making it harder to extract some of the cost advantages of the young, cheap labour for which it is known. “Middle-aged or married couples prefer to go back home on time, so don’t like to stay back at work till late or do weekends,” said Megha Jain, 34, a Bangalore-based employee of an Indian IT company. “There is more focus by the company to fine-tune policies around work from home and overtime.”

The likes of Bangalore-based Infosys and Wipro Ltd were built on a young, cheap and educated workforce that also drew global giants such as IBM Corp and Accenture to the country. In India, many in their first jobs continue to live with parents, whereas working in IT often meant moving to another city, such as Bangalore, Hyderabad or Pune. Now, many Indian IT firms have tied up with childcare centres to help working couples manage. Some offer flexible working hours or extended time away from work, options that exist with few other Indian employers.

IT firms in India are placing increasing emphasis on training and developing existing staff, while slower growth means they no longer recruit college leavers at the same pace. By March 2013, just over a quarter of nearly 157,000 employees at Infosys, the second largest industry player in India, were older than 30, compared with 15 percent of its 91,000 staff just four years earlier, according to an analysis by Barclays.
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Barclays reckons that every half-year increase in average employee age leads to a decline of 1 percentage point in EBIT (earnings before interest and taxes) margins for services provided within India at Infosys. The ageing of the workforce is partly the result of the industry’s push to offer higher-value services and break the linear correlation between headcount and revenue growth - an effort that so far has had mixed success.

http://khaleejtimes.com/kt-article-display-1.asp?xfile=data/editorschoice/2014/January/editorschoice_January7.xml&section=editorschoice

Smartphones reach the billion milestone; UK grows at 1.9% -- fastest since 2007; With 1,000 job cuts, Lloyds axes half its small business managers; Barclays to close 400 branches; Fear of another housing bubble

1 Smartphones reach the billion landmark (Khaleej Times) The smartphone market hit a milestone in 2013 with more than a billion shipped. Samsung extended its lead as the world’s biggest vendor, accounting for 31.3 per cent of sales, ahead of Apple’s 15.3 per cent, says a poll by market research and analysis firm IDC. IDC said vendors delivered a total of 1.004 billion smartphones last year, up 38.4 per cent from 2012. And smartphones made up 55 per cent of the total mobile phone shipments of 1.8 billion.

“The sheer volume and strong growth attest to the smartphone’s continued popularity in 2013,” said Ramon Llamas, an IDC analyst. “Total smartphone shipments reached 494.4 million units worldwide in 2011, and doubling that volume in just two years demonstrates strong end-user demand and vendor strategies to highlight smartphones.”

Samsung saw growth of 42.9 per cent, allowing it to extend its dominance in the global market, the IDC data showed. Apple saw 12.9 per cent growth, slower than the overall market, resulting in a declining market share. Huawei narrowly captured the number three spot with a 4.9 per cent market share, ahead of South Korea’s LG (4.8 per cent) and Chinese maker Lenovo (4.5 per cent), IDC said.

http://khaleejtimes.com/biz/inside.asp?xfile=/data/companies/2014/January/companies_January67.xml&section=companies

2 UK grows at 1.9% -- fastest since 2007 (Angela Monaghan in The Guardian) The British economy grew at the strongest rate in six years in 2013, having ended the year on a strong note as the recovery became more entrenched. The UK's services and manufacturing sectors were the drivers of 0.7% growth in the fourth quarter, taking the annual growth rate to 1.9%, the strongest since 2007 before the financial crisis took hold.

The economy grew in every quarter last year according to the Office for National Statistics, providing a significant boost for the chancellor who has persistently argued that a burgeoning recovery is proof that his economic plan is working.

The prime minister said, "The GDP figures are another sign our long-term economic plan is working – more growth means more jobs, security and opportunities for people." Labour leader Ed Miliband has argued, however, that while growth and falling unemployment are to be welcomed, a severe cost of living crisis that is blighting millions of people in Britain has yet to be addressed.

http://www.theguardian.com/business/2014/jan/28/uk-economy-2013-fastest-growth-fourth-quarter-gdp

3 With 1,000 job cuts, Lloyds axes half its small business managers (Jill Treanor in The Guardian) Lloyds Banking Group is axing half of the relationship managers handling queries from small businesses as part of more than 1,300 redundancies. The latest job cuts by the bailed-out bank – 33% owned by the taxpayer – come amid mounting expectations that Barclays is also preparing to cut hundreds of highly-paid roles in its investment bank.

Under new boss Antony Jenkins, Barclays is thought likely to remove managing directors from the investment bank, already the target of more than 1,600 reductions a year ago, when it publishes its results next month. The potential for new cuts at Barclays came after it emerged Jenkins had demanded a clamp down on company travel to save costs.

The latest cuts at Lloyds are part of 15,000 redundancies announced by boss Antonio Horta-Osorio when he took the top job three years ago. Some 11,760 of those roles have now gone – on top of an estimated 30,000 roles lost when Lloyds rescued HBOS during the financial crisis in 2008. Of the latest round of job cuts, about 560 are relationship managers working in the commercial banking arm and working with small businesses, which is half of the team in an area that is being closely watched by politicians concerned about the lack of lending to small businesses.

http://www.theguardian.com/business/2014/jan/28/lloyds-bank-axes-small-business-managers-1000-jobs

4 Barclays to close 400 branches (BBC) Barclays plans to close a quarter of its branches in the UK and cut hundreds of jobs in its investment banking division as part of a restructuring. The lender is expected to replace about 400 branches with smaller outlets in Asda supermarkets. The job cuts come on top of 3,700 layoffs announced early last year.

Chief executive Antony Jenkins is also expected to unveil new five-year financial targets when the bank releases its annual results next month. He has been looking to improve profitability in the face of falling trading revenues and tougher regulations. Mr Jenkins, who took over from Bob Diamond following the Libor rate scandal, plans to reduce £1.7bn ($2.8bn) in annual expenses by next year.

Many major banks have been undergoing structural shake-ups due to the impact of the weak global economy and changing regulatory environment.

http://www.bbc.co.uk/news/business-25939803

5 Fear of another housing bubble (John Collett in Sydney Morning Herald) Most local economists say thre is no bubble in Australian house prices. So why is it that overseas economists - such as Nouriel Roubini, the professor at New York University and Yale professor Robert Shiller, joint winner of the Nobel prize for economics - beg to differ?

Another American economist, Harry S. Dent jnr, in his new book: The Demographic Cliff makes special mention of Australia. He believes that house prices are unsustainable. But while others warn of a bubble in Australian house prices, Dent also identifies a possible deflation trigger - a crash in the Chinese housing market.

While Sydney and Melbourne house prices are high at almost 10 times income levels, the ratio is 35 times in the major Chinese city of Shenzhen. Dent says the collapse of Chinese housing prices will be the biggest housing crash in history. It will cause commodity prices to rapidly fall and cause the fall of Australian house prices.

http://www.smh.com.au/money/borrowing/us-experts-claim-property-bubble-is-set-to-pop--but-have-they-missed-something-20140128-31jaz.html