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  (Source: Jason Mick/DailyTech LLC)
Chinese unit is expected to be spared; remaining workers are pressured to "work harder"

Soon, approximately 27,000 workers at Hewlett-Packard Comp. (HPQ) will be out of the job -- almost 8 percent of the company's total staff of 324,000.

HP surprised with better than expected earnings for fiscal Q2 2012, announcing revenue of $30.7B USD, more than the analyst consensus of $29.9B USD.  Profit checked in at $2.3B USD ($1.05 USD/share), more than the $1.02 USD/share analysts predicted.  Optimism in the stronger-than-expected performance was tempered by estimates for the next quarter, which were lower than analysts expected, amid a slump on sales of printers, data-center equipment, and services.

The HP layoff program will be gradually implemented as part of a restructuring that wraps up by October 2014.  The layoffs will be the largest in the company's 73-year history.  News of the painful layoffs leaked last week.

HP has not revealed a precise timeline for when the job cuts will occur, within the 2012-2014 restructuring windows.  However, sources indicate that most of the cuts will likely come in the U.S. and Europe, while the company's Chinese unit -- a major growth target -- will largely be spared.

Meg Whitman
Meg Whitman is thinning the herd at HP, hoping to get the same amount of work out of less engineers. [Image Source: towleroad]

Remaining employees will have to pick up the slack for their departed co-workers under former eBay, Inc. (EBAY) CEO and new HP CEO Meg Whitman's vision for the company.  Still a bit of a silver-lining to this cloudy news is that Ms. Whitman did indicate that some of the $3.5B USD saved would be reinvested in working towards restoring HP Labs to its former glory.

Long a bastion of electronics industry research, HP Labs has continued to do novel work, such as inventing the memristor -- a long theorized circuit element, which could lead to new cheaper, more power-efficient kinds of storage.  However, the cutbacks have forced the star institution to operate on a shoestring budget, raising questions of whether HP will be able to continue to attract top talent.  The situation is so bad at HP Labs, according to The New York Times, that researchers are forced to use pirated software for their day-to-day work.

HP's deep cuts are bad news for its employees -- and U.S. engineers in general who will face greater competition in the jobs market.  However, they're hardly out of place in a post-recession U.S., where many companies have learned that they can boost profits by squeezing the same amount of work out of fewer employees.  That philosphy has helped to stifle job recovery, even as GDP growth has slowly come back to life post-recession.

Sources: Market Watch, Bloomberg, USA Today

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RE: Buy American?
By JasonMick on 5/24/2012 10:24:30 AM , Rating: 2

Jason, that's a common trick I see to try to make it look like U.S. corporations aren't paying their fair share of taxes. Frequently it's coupled with an argument that U.S. corporate tax rates need to be increased (even though they're already the highest in the OECD).

Looking at corporate tax receipts as a percent of GDP fails to take into account that the U.S. has a substantially lower overall tax burden than most OECD countries. In other words, it is not a valid data point for the question: "Are corporations paying their fair share of taxes?" (ignoring for this post that the difference between corporate and personal taxes is irrelevant)

The U.S. typically sits at 25%-28% tax revenue as percent of GDP, while the OECD average is around 35%.

If you take the average of the 2003-2009 data from the above two tables, you find that:
- U.S. tax revenue is 26.4% of GDP
- OECD tax revenue is 34.7% of GDP
- OECD tax revenue is 1.315x higher than the U.S.

- U.S. corporate tax revenue is 2.56% of GDP, 9.70% of total
- OECD corporate tax revenue is 3.41% of GDP, 9.85% of total
- OECD corporate tax revenue is 1.335x than the U.S.

In other words, corporations aren't being favored in the U.S. The ratio of corporate tax receipts to overall tax revenue for the U.S. and the OECD average are virtually identical. By OECD standards, U.S. corporations are paying their fair share of taxes. The lower tax revenue from corporations in the U.S. is almost exactly explained by the lower overall tax burden in the U.S.

(The difference isn't quite so close. Ideally, you should subtract the U.S. from the OECD average before comparing. But it's late, I need to get to sleep, and the U.S. represents just 1/34th of the average so the error is going to be very small.)
Fair enough, but bear in mind that the same kinds of job losses due to corporate tax dodging, out-sourcing, and downsizing are happening in other developed nations like the UK, France, Germany, Canada, etc.

Companies are relocating to the UK, Germany, Canada, etc. for their slightly lower tax rates. No, they're relocating to places like Ireland.

Except they're not REALLY relocating... they're just OFFICIALLY relocating. Most of these tax dodger maintain a minimal presence in these regions. So yes, they are giving money to Ireland, et al.'s gov't, but not they aren't bring jobs to these reasons.

Instead, jobs are being shipped to developing regions like Vietnam, India, China, Mexico, etc. To a degree this can be a good thing for both the U.S. and these developing regions.

The problem becomes when companies unilaterally commit to cutting American professional jobs and forcing the remaining individuals to work harder.

As I mention, it's somewhat of a myth that low effective tax rates alone create large numbers of jobs (companies will relocate to you, but their jobs will be focused on cheaper regions).

Tax evasion does COST jobs, though, because SMBs can not effectively tax dodge, in most cases. Hence they have an inherent competitive barrier set up and are more likely to fail.

Take two businesses:
Business A pays 18 percent in federal taxes.
Business B pays 35 percent in federal taxes.

Without knowing anything else, simple economics tells us that all thing otherwise equal, Business A is more likely to survive. Nearly all businesses have hard times, and keeping more of your money makes you more likely to survive them.

The issue is that Business A is almost always corporations, while Business B is almost always what SMBs qualify as. The American tax system is inherently geared, at present to put small to midsize businesses out of business (in a broad sense).

When these businesses fold, they cost American jobs as SMBs are inherently less likely to outsource and are more likely to maintain a decent-sized workforce (despite the smaller profit margins that entails). And ultimately corporations will swoop in and pick up the lost business, while outsourcing production and downsizing their workforce.

That's a somewhat separate issue, but both together these three tactics (tax evasion, downsizing and outsourcing) have a very damaging cumulative effect on the American high-tech jobs market.

The simple solution is a flat tax rate.

This will enable SMBs to compete, while not being inherently unfair to corporations.

"If you mod me down, I will become more insightful than you can possibly imagine." -- Slashdot

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