Monthly Archives: March 2015

Gap is finding out whether boosting the minimum wage really boosts business

By Lydia DePillis

(AP Photo/Pat Wellenbach, File)

(Pat Wellenbach/AP)

Gap Inc. might not have raised wages before raising wages was cool, but it certainly beat a lot of other companies to the party.

Fully a year before Wal-Mart, Target and T.J. Maxx announced last month they would bump their baselines to $9 an hour, Gap — which has 65,000 employees across its brands in the United States — had already done so, making it among the first U.S. companies to announce an across-the-board hike in its minimum wage. The stated reason was clear.

“Our decision to invest in front-line employees will directly support our business, and is one that we expect to deliver a return many times over,” chief executive Glenn Murphy wrote in a letter to employees.

Those returns aren’t just important for Gap. They could also persuade other companies to pay workers more, as well, if the experiment turns a profit. It’s been almost nine months since the $9 wage kicked in. How’s that return on investment coming?

So far, there’s been one clear reaction, a Gap executive said at a conference Tuesday in Washington. For years, the company had tried to get more people to apply to work at Gap’s stores. Only the wage increase made any difference.

“Almost immediately, we saw our applications increase by double digits,” said Dan Henkle, the company’s global head of human resources, on a panel at the Council of Institutional Investors’ spring conference. That, in itself, should lead to better performance, he thinks. “The idea is, the more people who are applying to your stores, the greater the pool to choose from, you’ll get the best talent into your stores.”

As for things that impact the bottom line, like employee retention and in-store sales? Well, they don’t know yet.

“One of the things we’ve asked for is …read more


The list your college does not want to be on

By Danielle Douglas-Gabriel

File--In this June 17, 2013, file photo, University of Oregon graduates make their way through campus along 13th Avenue towards Matthew Knight Arena during the traditional Duck Walk preceding graduation ceremonies in Eugene, Ore., June 17, 2013. Oregon Treasurer Ted Wheeler has proposed a little-known measure that will appear on the November Ballot. Measure 86 would amend the state constitution, creating an endowment that could be used only for student financial aid. (AP Photo/The Register-Guard, Brian Davies, file)

File–In this June 17, 2013, file photo, University of Oregon graduates make their way through campus along 13th Avenue towards Matthew Knight Arena during the traditional Duck Walk preceding graduation ceremonies in Eugene, Ore., June 17, 2013. (AP Photo/The Register-Guard, Brian Davies, file)

Hundreds of colleges across the county that are doing a poor job of managing their finances are on a federal watchlist that could ultimately make it difficult to access financial aid dollars, a critical lifeline for universities.

On Tuesday, the Education Department released the names of 556 colleges that it has placed under tougher oversight known as heightened cash monitoring. Schools can end up on the list for a myriad of reasons, including turning in late financial statements, having accreditation issues or operating with a lot of debt.

Under Secretary Ted Mitchell said the problems ranged from “serious to less troublesome” and called the added scrutiny more of a “caution light” than a “red flag to students and taxpayers.”

Still, there is a lot more interest in the watchlist these days because of the collapse of for-profit giant Corinthian Colleges. The company, which ran Everest, Heald College and WyoTech schools, landed on the list last summer for missing financial reporting deadlines. The government delayed the schools’ reimbursement on federal student loans for nearly a month, leaving the company strapped for cash and on the brink of closing.

Corinthian pleaded with the department for a lifeline to keep the doors open and received $16 million in federal student aid funds under the condition that it would sell or close its schools. Several months later, student debt collector ECMC Group purchased more than half of Corinthian’s 107 campuses.

It’s unknown whether any of the schools on the watchlist are nearing the level of Corinthian. The government …read more


China’s stock market sure looks like a bubble

By Matt O’Brien

(Reuters/Aly Song)

China’s housing bubble is starting to pop, so, right on cue, its stock bubble is starting to re-inflate.

Now they’re nowhere near their 2007 highs—in fact, they’re barely halfway there—but Chinese stocks are still looking plenty frothy right now. They’ve actually, as BNP Paribas’ Richard Iley points out, been the world’s best performing asset class the last nine months, up almost 80 percent. And that’s despite the fact that China’s growth has slowed to a 20-year low and its industrial profits just fell 8 percent.

Why are stocks up so much if the economy isn’t? Well, there aren’t a lot of other places for Chinese investors to put their money. The government doesn’t let them move it overseas—although some people manage to get around this by pretending to pay more for imports—and there aren’t a lot of options at home. Banks are only allowed to pay people paltry interest rates, so that state-owned companies can borrow for less. And the property market, which had looked like the economy’s one good store of value, has become so overbuilt that not even the government’s attempts to prop it up, like making it easier to buy a second home, has stopped its boom from turning into a bust. Indeed, new home prices were down 5.1 percent in January.

So stocks have won by default, with a little help from the government. China’s state media told people over and over and over again last summer that stocks looked cheap, and eventually they listened. New stock accounts, as you can see in the chart below from BNP Paribas, exploded in the last six months or so. It’s gotten to the point that, unlike before when stocks were something only …read more