Posts Tagged 'Economy'

May 25, 2012

Tear Down the (Immigration) Wall ... Or at Least Install a Door

A few years ago, I went through a nightmare trying to get to permanent resident status in the United States. My file sat in a box for over a year, was lost, re-submitted and FINALLY rushed through by Ted Kennedy's office. And I was on a "fast track" due to a long record of published research and employment history. I had the means to pay lawyers and the time to repeat the filing and wait for a decision. If I didn't have the means or the time to wait for the process to complete, I don't know where I'd be, but in all likelihood, it wouldn't be here. It's no surprise that immigration reform is high on my list of priorities, and given SoftLayer's involvement in the USCIS Entrepreneurs in Residence program along with Lance's appointment to a Bloomberg committee focused on immigration reform, it's clear I'm not alone.

The bi-partisan Partnership for a New American Economy recently published a very interesting report — Not Coming to America: Why the US is Falling Behind in the Global Race for Talent — that speaks to a lot of the challenges plaguing the current US immigration policy. Because of those challenges, "the future of America's position as the global magnet for the world's most talented and hardest-working is in jeopardy." Here are a few of the projected economic realities of not reforming immigration laws to keep up with other countries:

SHORTAGE OF WORKERS IN INNOVATION INDUSTRIES: Jobs in science, technology, engineering, and math ("STEM" fields) are increasing three times faster than jobs in the rest of the economy, but American students are not entering these innovative fields in sufficient numbers. As a result, by 2018, we face a projected shortfall of 230,000 qualified advanced-degree STEM workers.

SHORTAGE OF YOUNG WORKERS: The US population is aging, baby boomers are retiring en masse, and the growth in the US labor force has slowed to historic lows of less than 1 percent. We cannot continue to produce the GDP growth the nation has come to expect without dramatic increases in productivity or welcoming more working age immigrants.

A STALLED ECONOMY: The US has faced years of stunted economic growth. History shows that new businesses are the biggest drivers of job creation, yet the most recent US Census data show that the number of business startups has hit a record low.

This concern isn't unique to the United States. With a global focus on innovation and technology, countries around the world are actively competing for the best and the brightest. In Canada, a report a few weeks ago spoke to Canada's need to double in size in the next few decades or risk losing relevance and becoming just another resource-rich colony. The nation's response? It's ready to open its doors to more immigrants.

The same applies to the United States ... It just may take longer.

Go back to how this country was built, and apply that to today. The biggest difference: The "skilled trades" we talk about in the most general sense are no longer carpenters like my grandfather but highly educated programmers, engineers and researchers. The idea isn't to replace the programmers, engineers and researchers in the US, rather it's to meet the existing unmet needs for programmers, engineers and researchers.

In all of SoftLayer's efforts to affect change in the US immigration policy, we have to make clear that our goal is not to drop the walls simply to add more permanent residents. It's about lowering many of the current artificial barriers that might prevent the next Fortune 500 founder from starting his or her business in the United States. If you don't think that's a serious concern, I'd point to a pretty surprising stat in the "Not Coming to America" report: "Today, more than 40 percent of America's Fortune 500 companies were founded by an immigrant or a child of an immigrant."

Immigration drives the economy. It's not a drain on the economy. Every country needs more smart people because smart people create new ideas, new ideas become new businesses, and new businesses create new jobs.

Because this is a politically charged issue, it's one I know many people don't necessarily agree with. Along with immigration, we have to look at how the education system can empower young people like my son to become the programmers, engineers and researchers that the US will need, and we have to be intentional about not simply adding permanent residents for the sake of adding permanent residents. If you have any thoughts one way or the other, I'd encourage you to share them with us here in a blog comment or link us to any of the resources you've found interesting in researching and discussing the topic.

-@gkdog

August 6, 2009

Punishing Success

Let’s say you worked for years to become a world class athlete. As a kid, you were in the gym while other athletes were at the movies. You were in the weight room on Saturday nights when no one else was there. You shunned pizza and soda in favor of grilled fish and fresh fruit. By the time Letterman hit the evening airwaves, you were well into restorative sleep. You were out the door for your morning runs while other athletes snoozed. As a result of all this, now you perform at an elite level and are very successful at your sport. Suddenly, you find that there are people who have a vested interest in helping you maximize your athletic potential. Your coaches, your managers, and companies who pay you to endorse their products all want to see you do your best. Why? Because doing your best helps them be more successful.

So, they provide you with all the things you need to maximize your potential. You get the best training gear and training regimens. You get the best nutrition. You get the right amount of rest. All these things help you maximize your potential. Thus the relationship is a nice symbiotic cycle – the more success you experience, the more success your coaches, managers, and endorsement companies experience. Win-win. Makes sense, right?

So, imagine the silliness if your coaches, managers, etc., made the decision that because you were so fortunate in your success that you had to “give back” almost half your resources to train the athletes who loafed, stayed out late, partied and gorged on pizza. Because you’re such a hard-working and smart athlete, you don’t need all those resources to participate adequately in your sport, they rationalize. Consequently, you don’t hit your potential, your coaches and managers don’t distinguish themselves, and endorsing companies don’t call you. You then feel that you’ve been punished for your hard work and success.

Sadly, much of our government policy falls under this flawed logic. The IRS just released their latest income tax stats for the year 2007. For that year the top 1% of earners paid 40.4% of all income taxes collected. We all know that right now we’re coming out of a recession and we really folks to invest in businesses and hire people to get the economy moving. So how do the 2007 numbers compare to, say, the 1980’s? During the ‘80’s, we managed to shake off the “stagflation” of the ‘70’s and get the economy rolling again. It was during this time that many technology juggernaut companies were spawned – Microsoft being a good example. So, how much of the income taxes in the ‘80’s were paid by the top 1% of earners? The average for the 10 years from 1980-1989 was 22.2%.

Let’s do some quick math. $1.116 trillion in income taxes was collected in 2007. Of that, $455.3 billion was paid by the top 1% of earners. If they paid 22.2% as in the ‘80’s, they would have paid $247.8 billion in taxes, and right now we’d have $207.5 billion MORE dollars invested in our economy. That would be quite a stimulus package! Our current policy punishes success and chokes off fuel from our economic engines while we’re trying to climb out of a worse recession than we had in the ‘70’s. Not smart.

Some may think that this would simply mean that our government deficit would be $207.5 billion higher. This is not the case at all. These folks that make up that top 1% didn’t get there by being lazy or not putting their money to work. I know some folks in that group, and they WANT to put their money to work! I know one gentleman who had to be told some legal docs for a deal could not be prepared over the weekend because Christmas was on that weekend. These folks are like the world class athlete I mentioned above – by and large they’re disciplined and hard-working. Their money will build new businesses and create more jobs, and the government will collect far more revenue from this new economic activity than it would give up in collections from these top 1% folks. Think about it – how many of us have ever been hired by a “poor” person? Instead of punishing economic success, we should encourage it!

Bottom line, if government policy were to make sense, it would encourage these folks to maximize their economic potential and find the correct balance of revenue to collect and yet still promote economic growth. What would we prefer? That the government collects 50% of $1 trillion or 30% of $2 trillion? Hint: 30% of $2 trillion is a WAY better deal.

At SoftLayer, we think very differently about things. We simply do not punish our customers for succeeding. We empower them to be more successful – why? Because if our customers succeed, we succeed. We get this.

Can we prove this? Perhaps a look at how customers vote with their feet is an indicator. For the past few months, SoftLayer has seen the lowest percentage of customers terminating business with us in our history. If we punished our customers for their success, they would go elsewhere.

April 2, 2009

We Need New Small Businesses

It is often said that small business is the backbone of our economy. According to the U.S. Small Business Administration, small business employs half of all private sector employees. Over the past decade, small business has produced between 60 and 80 percent of net new jobs. We need small businesses to prosper and lead us out of the economic mess in which we find ourselves.

I track growth in domain names every week. I think it indicates how quickly new small businesses are being formed. After all, what business can you think of today (large or small) that does not have some sort of web site? I can’t think of any. One of the things on any small business start up checklist today is the web site. Hence, most all of them register a domain name.

So what’s been happening with growth in domain names? Lately, it’s not too pretty.

Chart

With all the talk lately about stimulating the economy, one of the best ways to do this would be to encourage the formation of new businesses.

Some would argue that we need to fix the credit market mess to help banks be able to lend to small business startups. This couldn’t be further from the truth. How many small businesses do you know that started with a commercial loan from a bank? I cynically say that banks do not want to loan to businesses until the business can survive without need of a bank, and that was true even before the credit crisis. This was certainly true in SoftLayer’s case – when the founders were preparing for launch in late 2005, there wasn’t a bank anywhere that would touch the SoftLayer business plan. What I’m saying is that the credit crisis isn’t that much of a barrier to small business startups. Passionate entrepreneurs will find a way to get going.

But all the passion to start one’s own business doesn’t go very far in the face of the real barriers to starting a business. One of the real barriers that an entrepreneur must overcome is tax issues. Do they begin as a sole proprietor? A partnership? An LLC? An “S” Corp? Should they incorporate? All of them have different tax implications. All of them have to deal with either income taxes at the personal level or corporate level. Some have to deal with self-employment taxes. Others must deal with 941 taxes. Then there are state and local tax issues, such as the margin tax if you’re in Texas. And don’t forget sales taxes and property taxes either.

One of the strategies that allowed the Internet to cement itself in our society during the 1990’s was this: just let it develop without taxing it. Without that burden, the Internet took off like wildfire.

Ergo, if we’d like a bunch of new small businesses to get going, let’s ease up on the tax burden on new startups. This would cost the government hardly any money at all. Think about it – businesses that don’t yet exist do not pay any taxes. Workers that are not yet employed do not pay any taxes. Currently unemployed workers do not pay income taxes, except for a pittance on unemployment benefits. So allowing new businesses to form and employ workers and transact business “tax-free” for a defined start-up period would produce an EXPLOSION of small business startups.

How long should this tax free period be? Per the SBA, if a new business survives 4 years, they have a great shot at surviving long term. So why not give all new business startups a tax holiday for four years as they establish themselves? Can you imagine how big the tax base would grow as these healthy, strong 4-year- old businesses begin paying taxes?

It seems that the biggest issue facing our new President and his administration is how to pay for all the things they’d like to do. Let me suggest that expanding the tax base is the best way to grow government revenues, as opposed to increasing the rates on the current tax base. Allowing a flood of new businesses to take root and grow our tax base may be the best way to fund our growing public budgets.

Naturally, SoftLayer would be more than happy to assist these new businesses with our enterprise class data center outsourcing services so that the new businesses focus on their business plan – not their IT overhead.

August 24, 2007

Globalization and the Internet

Globalization is now, and forever will be, an ubiquitous topic in most political, economic, and social forums. The term "globalization" is defined by Merriam-Webster as "the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets." The latter of the traits has emerged as the strongest point of contention due to outsourcing. Markedly, Fortune Magazine recently published a story on a new "insourcing" trend. It's a trend so new that my spellchecker doesn't even recognize the word.

Though "free trade" and "free flow of capital" are explicitly declared in the definition of globalization, free flow of information is somehow absent. The role that the Internet has played in globalization and the development of the global economy cannot be overstated. Continued advancements in the Internet and Telecommunications have literally connected suppliers, vendors, sellers, and buyers that historically had been segmented by barriers such as geography and time zones. What this phenomenon has come to shape is the global marketplace, where products from across the world compete for the preference of an endless consumer base. With an increase in competition comes an increase in the consumer expectations for quality and performance. As a growing company with a significant international client base, SoftLayer continues to strive towards providing quality solutions and support that exceeds our customers' expectations.

Though the Internet has helped to fuel the soaring growth of the global marketplace in the recent decade, there are still many obstacles that impede its progression. Most of the hazards have a legal connotation surrounding hot-button issues such as Intellectual Property, Copyright Infringement, and most notably in the hosting world, Abuse (bandwidth theft, computer viruses, fraud, etc.). It's certainly enough to keep our abuse department busy as international standards and governing policies are fortified to help combat these areas of concern.

This observation merely skims the surface of globalization and the development of the global economy as there are many arguments both for and against its advancement. At the forefront or behind the scenes (depending on your vantage), you will find the Internet. It has been stated that “the Internet is the backbone of the global economy" with evidence cited in the form of web transactions going from "virtually nothing in 1994 to nearly $657 billion in 2000."1 Care to guess what that number is now? As SoftLayer furthers its commitment to quality, our objective is to continue to strengthen the platform from which our domestic, international, and multinational customers launch into and compete in the global marketplace.

-DJ

1Charles W. L. Hill, International Business: Competing in the Global Marketplace (Irwin/McGraw-Hill; Fifth Edition, 2004), p.13.

Categories: 
Subscribe to economy