Mark Perry for the American Enterprise Institute: When a random sample of American adults were asked the question, “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36 percent. …
How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly, they are off by a huge margin. According to a Yahoo Finance database for 212 different industries, the average profit margin for the most recent quarter was 7.5 percent and the median profit margin was 6.5 percent. Interestingly, there wasn’t a single industry out of 212 that had a profit margin as high as 36 percent in the most recent quarter…
Bottom Line: The public’s complete overestimation of how much companies earn in profits as a share of sales explains a lot. If $36 of every $100 in sales at a company like Walmart, McDonald’s, Home Depot, Ford Motor Co. or a local dry cleaner or restaurant really did turn into profits, then of course those companies could afford to pay unrealistic living wages of $15 per hour, accept unreasonable demands from labor unions, provide all sorts of generous fringe benefits including weeks of paid holidays, long paid maternity leaves, and gold-plated pension programs, etc. The public that believes in the fantasy-world of sky-high 36 percent profit margins would naturally think companies are just being greedy and stingy when they don’t pay higher “living wages” and have to be forced to do so through minimum wage, or living wage, legislation.
If the average person could realize that a 36 percent profit margin isn’t even close to reality, and that the typical, median firm has a profit margin of only 6.5 percent, or almost 30 percentage points below what the public thinks is a normal profit margin, then hopefully the average person would become a little more realistic about how the business world operates.
SMALL CITIES, URBAN CORES EMPTY OUT
Jacob Anbinder for the Century Foundation: We’ve been hearing for years now that the United States is becoming a country of cities. Not only is this maxim true, but the new Census Bureau data shows just how dramatic the change is.
The census recognizes 381 Metropolitan Statistical Areas in the United States, ranging from New York’s tri-state area to Carson City, Nevada. Over the 12 months studied, 78 percent of them gained population. The figure is even higher for the select few metros with more than one million people: Of those 55 regions, just four — Cleveland, Hartford, Conn., Pittsburgh, and Rochester, N.Y. — saw a net loss over the last year.
The picture is more dismal, however, moving away from urban areas, even relatively minor ones. The United States also has 537 “micropolitan” areas — smaller regions where the main “city” has fewer than 50,000 people (think Tupelo, Miss., or Paducah, Ky).
These are the places that people are leaving when they move to the bigger cities. Between 2013 and 2014, 55 percent of them saw their population decline, even as the country on the whole grew by more than 2 million people. …
For all the talk of Detroit’s comeback and Cleveland’s “eds and meds” economy, the Census Bureau data show that these places were still losing residents between 2013 and 2014. In that time, nearly 11,000 people left Wayne County, Mich., which contains Detroit. Similarly, 4,000 moved out of Cuyahoga County, Ohio, the central part of the Cleveland metro area.
Still, the decline of these cities isn’t foretelling the decline of their greater regions. Across the post-industrial Midwest, metro populations around these cities continued to grow modestly, even while the urban cores “hollowed out.”
This was the case not only with Detroit, but also Baltimore, Chicago and St. Louis. In Greater Cleveland, the population of the metro area did decline, but three of the area’s five core counties actually saw increases.
TAXES IN PERSPECTIVE
Kyle Pomerleau for the Tax Foundation: In 2015, America will pay $3.3 trillion in taxes to the federal government and an additional $1.5 trillion to state and local government. America’s total tax bill of $4.8 trillion is about 31 percent of the nation’s total income.
This is a significant amount and is more than America will spend on food, clothing, and housing combined.
No doubt that the taxes we pay go toward services that government provides, but it is important to understand how much those services cost the United States.
Compiled by Joseph Lawler from reports published by the various think tanks.
