By T.L. HEADLEY, vice president, United Citizens for Coal

10426655_10200947184520689_4289823194501801814_nMany people in West Virginia and across the region — across the nation in fact — are worried about their jobs and about their future. Many had jobs they thought would take them all the way to retirement, jobs that had pensions and health benefits, and the future seemed secure. Recently, companies have begun to fail … to be forced into bankruptcy or drop retirement and health plans. For far too many people those jobs they once thought would make them financially secure are going away. They are getting layoff notices, notices of healthcare being dropped and retirement plans are disappearing. 

Why is this happening? 

For some, it is easy to place the blame on the companies or the owners. It’s convenient to blame the “rich guy” who sits in the “big office.” But is that really the case?

Let’s take a look at something…. if a company is making widgets and can get $1 each for the finished widget. That means the company has to reduce the cost to itself of making that widget to something less than $1 each in order to make any profit and stay in business. 

Now, let’s say that it costs that company 20 cents for material to make the widget, another 40 cents for the machinery, the utilities and the plant to make the widget, and another 20 cents for the taxes from various levels of government. That is 80 cents of the $1 right there. 

The company wants to make 5 cents on the dollar as a profit (5 percent which in business would be considered a very high profit margin, a level most businesses don’t even get close to). That leaves 15 cents for the wages to hire employees to make the widgets. 

Let’s take a closer look at those numbers and how they may change over time … the cost of materials isn’t likely to go down and neither is the cost of machinery or the level of taxes, so that 80 cents on the dollar is likely ONLY to increase over time.

The company expects to sell 100,000 widgets per year. That means the company will have $15,000 to pay its employees and provide for benefits (health and retirement). Granted this is a small number but it serves to show clearly the effects of policy. It also means the company can expect to provide $5000 in “profits” to its investors and management.

Okay, suppose the government decides that taxes aren’t high enough and decides to raise those taxes by another 20 percent (4 cents on the dollar). That means that between the profits and the payroll, the company has to cut $400 from the $20,000 (the $15,000 emp. Benefits & wages + $5,000 company profits).

Again, that doesn’t’ sound like much, but when you multiply that out to a company the size of a coal company it means jobs will be cut and the profit margin shrinks. 

Now, let’s say that same government decides it doesn’t like the WIDGETS the company produces and creates rules that make it harder for that widget maker to make and sell his widgets, while at the same time saying the guy down the street who makes GIDGETS is doing the right thing and has a “better product.” That government decides to put in place policies that take away about 40 percent of the demand for WIDGETS. Now your company that is making WIDGETS is selling only 60,000 widgets a year.

Let’s do the math.

The primary costs haven’t changed. It still costs the same amount for the machinery, the utilities and the plant. It still costs the same to make the widgets for each one made, so, where do we make up for the loss of 40 percent of the market? 

Well, if you are only making 60 widgets rather than 100 widgets you don’t need as many employees, so you have to begin by laying off people.

The company will absorb some of the loss by taking less profit because it wants to keep trained people working as long as possible but ultimately, unless things change, it has to lay off workers. Now, if the damage continues that means the company, in order to stay in business, may have to make more cuts. So ultimately, the company may have to cut benefits (such as health and retirement) in order to keep as many people working as possible and, again, to stay in business. 

So now let’s look at reality… Obama’s policies are taxing companies more and just as you are paying higher electric bills and higher prices at the gas pump the companies are seeing higher costs, which are eating into their profits and the amount they have to pay employees. Now along comes Obama and he has his EPA declare war on coal, stripping away about 40 percent of production in Appalachia especially. For those companies that primarily do business in Appalachia, how long do you think they can continue to provide jobs and pay the types of benefits so many are used to getting?

The bottom line is if you want to blame someone for losing your job or your benefits, start and end with the person who deserves that blame — OBAMA!