Opinion

Felix Salmon

April’s jobs: Americans aren’t working

By Felix Salmon
May 4, 2012

There’s a lot going on in this month’s jobs report. The headline number of jobs created — 115,000 — is miserable: it’s basically just enough to keep up with population growth. That’s the number the markets look at. The number the politicians look at, however, is the unemployment rate, which ticked down to 8.1%. That’s still high, but it’s not a statistic to beat Obama round the head with.

The big news, however, lies elsewhere, in the fact that a whopping 522,000 people left the labor force joined the “not in labor force” rolls last month. When more than half a million people in one month decide that they’re not even going to bother looking for work any more, there’s no way you can say you’re in a healthy recovery.

Zero Hedge has the two charts which matter. First you have the number of people not in the labor force, which has been climbing steadily through the recession and the recovery, and is now approaching 90 million. The only time it fell was during the first quarter of 2010 — the census-hiring boom. This chart speaks volumes to me: it says that while Capital might not be in a recession any more, Labor still isn’t working.

People Not In Labor Force.jpg

Then there’s the even scarier one, which is the labor force participation rate — now down to 63.6%.
Participation Rate.jpg

This chart is just petrifying. The participation rate started falling after the dot-com bust, leveled off during the credit boom (but never really rose much), and then fell off a cliff when the recession started. You’d think it would have started to bounce back up by now, but no. Instead, we’re now deep into pretty much unprecedented territory. Yes, the participation rate has been this low before — back in 1981. But that was during the decades when women were still properly moving into the labor force.

As Mike Konczal noted this morning, a key indicator of labor recession is still in force: if you’re unemployed, you’re still more likely to drop out of the labor force entirely than you are to find a job. And as Dan Alpert noted, in a country of 314 million people, there are only 115 million full-time workers and 27 million part-time workers. It’s really hard to get a robust recovery when the number of people earning money is so anemic.

For demographic reasons — the retirement of the baby boomers — the labor force participation rate is naturally going to fall over the next decade. But go back just one year, to March 2011, and look at the official CBO projection of the labor force participation rate. The CBO saw a rate of 64.6% in 2012 — a full percentage point higher than we’re at right now. The participation rate wasn’t expected to fall to today’s level of 63.6% until 2017.

Politically speaking, the unemployment rate is still the number that people concentrate on. But increasingly, being unemployed is little more than a halfway house between employment and dropping out of the labor force altogether. Until the labor force participation rate stops falling and starts rising, the so-called recovery will remain a theoretical economic entity and not a real-world reality for hundreds of millions of Americans. We need jobs, and we need them now. Ben Bernanke, and Congress, are you listening?

Update: The labor force actually fell by 342,000, not 522,000. The working-age population grew by 180,000, however, so the number of people not in the labor force went up by 522,000.

Comments
54 comments so far | RSS Comments RSS

I wonder, how much of this is two-earner families dropping back to a single income? The spendable benefit from that second income is typically very small for a family with children — and with rising costs vs. flat wages, those slim margins are getting squeezed.

If I had kept my full-time job instead of quitting after my first child was born, we would be a couple hundred thousand dollars poorer today (or worse, since the stress could easily have driven us to divorce).

Posted by TFF | Report as abusive
 

As Jared Bernstein shouted from his blog, austerity doesn’t work.

TFF – I daresay that the phenomenon that you describe probably does not contribute very much to the workforce participation rate. Most families simply cannot afford to be single income families.

Posted by GregHao | Report as abusive
 

We will see how well you remember U6 unemployment and participation rates by the time the next jobs report comes around.. Because for an analyst you seem remarkably capable of cherrypicking. Constant revisions, constantly defining away the unemployed, yet all of this is only noticed in April. Where is the rigor..

More here on the “riddle” of dropping participation rates when the boomers aren’t even close to retiring in force yet. http://danielamerman.com/articles/2012/W orkC.html

Posted by Foppe | Report as abusive
 

I’M FLABBERGASTED THAT DESPITE THE OBVIOUS TRUTH IN THIS ARTICLE, NOBODY SEEMS TO PAY ATTENTION TO THE FOLLOWING IMMEDIATE SOLUTION: http://www.youtube.com/watch?v=Ff5tnfvrn vk&list=PL00096C320BF86917&index=1&featu re=plpp_video

A “Job Explosion Initiative” by Jack Worthington

Posted by sarkozyrocks | Report as abusive
 

My former next-door neighbor, a carpenter in his 50′s, lost his home to the bank. He and his dog had no alternative but to accept the largesse of one of my other neighbors. He has been living with that neighbor since last summer.

I have worked side by side with him on various projects. He’s is highly skilled, but he can’t find enough work to sustain himself. They have expanded the vegetable garden.

It reminds me of stories my mother told me of her Wisconsin childhood during the depression, one occasion of strangers traveling to find work being allowed to sleep by the wood stove in the winter and another occasion of strangers overnighting in the barn during the summer, of her mother providing some food for them to take along on their travels.

Because of my neighbor’s story and other real stories of great financial harm, I was particularly enraged about the obscene bonuses gleefully accepted by those who caused this problem. Bernanke is probably ready to act, but I believe there is little the Fed can do in the absence of the cooperation of a functioning and fully engaged Congress.

Unfortunately, Congress is distant from the earthy reality of our nation’s economic problems… distant like anecdotes of misfortune during the Depression… sad, but of no real consequence.

That couldn’t be further from the truth. The consequences of the Collapse of 2008 are quite real.

Posted by breezinthru | Report as abusive
 

@GregHao, two incomes don’t necessarily generate any more SPENDABLE cash than one.

If you are a lower-income family, then the cost of child care is prohibitive. After-school care for a couple kids can easily eat up HALF the earnings of somebody making $15/hr. And the marginal tax rate on that income is already 30%-40%. Add transportation expenses, and how much is left over?

If you measure your household income in six figures (for two salaries combined), then the cost of child care can still eat up 10%-20% of the gross per child, with taxes taking another 40%-50%. Add transportation, meals out, and that nominal $60k second income is worthless.

Families aren’t choosing to give up that second job — they are losing them. But having lost the second income that was profitable, they find that it is cheaper to stay home than to take a 30% pay cut.

You can’t deny that the middle class is getting squeezed from both ends.

Posted by TFF | Report as abusive
 

Regarding demographics and the baby boomers, guess which age cohort is the only one with a substantial upward trending employment to population ratio?

Charts by age cohort: http://bit.ly/J7cjmH

Posted by david3 | Report as abusive
 

SSDI is good for about $1,100 per month, on average. If you’re older than, say, 45 or so, have any or several of the usual maladies (back aches, fibromyalgia, carpel tunnel, obesity-related ailments & etc.) it’s not a stretch to think that, with the right legal advice (available for a $3500 or so cut of your lump sum), you might have a shot at a very small, but basically guaranteed income.

As a bonus, you’ll also get crappy health care coverage–which is better than no health insurance at all.

That you now will have a “disabled” sign hung ’round your neck for the rest of your life is admittedly demoralizing. But it beats starvation.

Disability payments in this country have been expanding for several decades. They have been exploding for the past four years, and will continue to do so until we get serious about industrial policy, public health and comprehensive, universal medical insurance.

Posted by Eericsonjr | Report as abusive
 

I live in TN, and my family is from NE. I dont know anyone back home or here in TN that has lost a job and not been able to find work…..I simply dont get these job reports, or those that SAY they cant find work. I’ve talked to friends I went to college with who live in various parts of the country: Texas, Montana and California. They all say the same thing I do, we just dont see the mass unemployment being reported by the media. Not saying it doesnt exist, I’m just saying that i dont see it and many people around me do not either. To further my point, I know a guy who has several DUI’s and is still able to find work…

Posted by mxrolli | Report as abusive
 

Stop letting millions more foreigners come here every year and steal American jobs! Start training and investing in the future of American citizens. End of story!

Posted by CountryPride | Report as abusive
 

“We need jobs, and we need them now. Ben Bernanke, and Congress, are you listening?”

Bernanke can’t do anything about the shortage of jobs. If his primary contribution to maintaining a healthy economy is to manage the supply of money, then there’s not much he can do, as there is plenty of money out there. The problem is that it isn’t being used by those who have it.

The economy is the constant exchange of money for goods or services. People and businesses extract a profit from that exchange, and they exchange those profits for more things, and so on. But when too many of those profits are taken out of circulation, there is less money available for exchange, and the economy stalls or shrinks. If those with the capital to invest or spend choose not to do so, everything falls apart, and that’s where we are now.

Congress can solve this problem, but won’t as their ideological straightjacket won’t allow them to consider a solution outside their obsolete belief system. The Republicans believe that only tax and spending cuts will cure the economy, but that will not work in a national economy that no longer drives the global economy, but is more driven by external factors (e.g., there are better places to invest money than in a nation with a sagging economy). The Democrats believe that the only solution is for the government to stimulate the economy, but that is equivalent to jump starting a car with a dead battery, you can’t drive around with your car attached to another car’s battery. It has its place, but it’s not a medium term, let along long term, solution.

The government, if it chooses to influence the economy (and it will whether it wants to or not), must essentially force those with enough capital to invest or spend it. They can’t pass a law explicitly doing that, but they can make hoarding expensive and reward investment via the tax system. It’s the only sustainable solution, but I don’t see this or any congress in the near future willing to trade their century old sound bites for something outside of their out-of-date perception of reality.

So get used to the new economy.

Posted by KenG_CA | Report as abusive
 

@TFF –

I agree with you on almost all point (and very emphatically on your final one!). However, someone making $15/hr on a full time job doesn’t pay a top marginal rate of 30%~40%.

Tax Bracket Married Filing Jointly
15% Bracket $17,400 – $70,700

SSID, Medicare, etc, don’t I believe, effectively double their rate. But, it is kind of a minor point.

A couple both making $15/hr clocks in at $62.4K. Your point about spendable cash is well taken; but again, going back to your family where both parents are making $15/hr, they pretty much need all of both incomes just to live. And you’re right, a family that’s making over six figures a year probably can afford to reduce its income by 30% (along w/associated tax benefits) but realise the benefit of a stay at home parent. A family making mid five figures probably can’t afford to lose half its income.

Posted by GregHao | Report as abusive
 

@ mxrolli – it’s not really where you’re from or even where you live but actually your education level and relative prosperity. Like you, employment within my social circles is running at 90%+ but I have a graduate degree and am the least educated amongst my friends. However, people like me and my friends aren’t the norm and that’s why anecdotal evidence can be very misleading.

Posted by GregHao | Report as abusive
 

@GregHao wrote:
“As Jared Bernstein shouted from his blog, austerity doesn’t work.”

The USA hasn’t been implementing austerity under George W. Obama. What do you think TARP was?

Posted by matthewslyman | Report as abusive
 

Mathewslyman, are you serious? TARP was a massive welfare program for people who were already millionaires or billionaires. For the rest of the US population, it has been austerity and more austerity. Over 1M goverment jobs lost, for example.

Do you understand the distinction between TARP and everything else?

Posted by Dollared | Report as abusive
 

@KenG – you make good points, my friend – but agressively punishing people who are being prudent in the management of their personal finances? That’s a bridge too far for me – not sure it will work, either. What happens when the middle-class prudent are tapped-out?

Just a thought – the total of privately held wealth in the US is like $50Tril; the top 1% have more than a third of it. Taking like half of it away from them and an equal total amount from the next 9% could solve a lot of problems. Just remember – we’re looking for the “least bad” option here.

Posted by MrRFox | Report as abusive
 

MrFox, it wouldn’t punish those who are prudent, and especially not the middle class prudent.

I’m not advocating taking away any wealth – I think you were away from this site when I was arguing against a wealth tax. What I am in favor of is a tax system that rewards investment and punishes hoarding, and this would mostly impact businesses. I would increase the nominal tax rate on income, and provide generous credits for investment – in capital equipment, training and education, research and development, providing health care – anything involved in creating new ventures, products, or services. I would also exempt the distribution of profits from corporate taxes, to encourage paying dividends, and then tax dividend income for individuals at the same rate as ordinary income, while giving them the same credits for re-investing those dividends. Basically, I want to not tax income until it is converted into personal gain (i.e, a jet, a fancy meal, new clothes, a second home, whatever). I also don’t want that income accumulating in a zero-interest paying account, where it’s not being loaned out or invested anywhere.

Posted by KenG_CA | Report as abusive
 

Ken – Your way could work, I guess – it’s new to me and I need to think it over. But if it works, it’s medium/long-term growth stuff – we face an acute financial problem; big and right now. We’ve taken on tons of debt in the last five years, and the overhang of it ties our hands and burdens everything and is causing otherwise responsible people to (suicidally) advocate Weimar-type inflation as a supposed cure.

Myself, I’d rather get rid of the debt in one shot – by “asking” the richest among us to pay it off. They can handle it without any actual sacrifice in their quality of life. Maybe I’m missing something obvious, but I don’t see a way out of this without confiscating (one way or the other) someone’s assets.

Did you watch Hendry’s video in yesterday’s Counterparties? He and his client are where I am – they’re expecting what I’m proposing. I don’t think they would be if they could see any other way out.

Posted by MrRFox | Report as abusive
 

@GregHao – just what is austere about the U.S.’s current combination of near-zero interest rate monetary policy and a federal budget deficit expected to be 7.6% of GDP this year? Not to mention that U.S. fiscal and monetary policy has been similarly loose for the past 4 years.

Posted by realist50 | Report as abusive
 

MrFox, the impact would be immediate, as businesses with cash (and there are plenty) would either distribute it to shareholders, or increase investment, primarily in R&D and capital expenditures. Those investments will yield more jobs far faster than any government stimulus program would.

Yes, we have taken on an enormous amount of debt, and normally, that would be disastrous. Normally is the key word here. Times are not normal, as all industrialized economies have assumed massive amounts of debt. There is no one currency that could drive inflation, as their underlying economies are all in major debt. China might be able to inflict inflationary pain on the U.S. and Europe, but only at the expense of their export machine, which would cripple their economy. In all other times, deficit spending has led to inflation, but only because there was a strong currency somewhere to provide that inflationary pressure. We don’t have that now. The debt will simply lead to restructuring, not inflation.

Additionally, if increased private investment yields employment growth, government spending can decrease while revenues increase. As I have suggested before, government spending needs to provide negative feedback – decreased in growing economies, and increased in shrinking economies. If unemployment were to truly fall, there would be less calls and justification for stimulus spending.

Also, there needs to be a mechanism for encouraging US multinationals to repatriate their foreign profits. What is the value of having successful exporters if they don’t bring home any of their foreign profits? If they are willing to invest or distribute those profits, let’s exempt them from taxes at that level (they will ultimately get taxed at the most efficient/least disruptive point).

A wealth tax will be impossible to implement without distorting the economy. Are you going to tax only liquid assets with a known market value? That will create a rush into hard-to-value assets. Will we make people sell their homes to pay a one-time tax? Or take out a mortgage? Talk about punishing the prudent middle class.

If we assume the wealthy are getting wealthier (true in most cases, but not mine), then as they earn more money, they will get taxed.

I haven’t seen the video – I’m trying to get a new product done, and this is my only allowed diversion.

Posted by KenG_CA | Report as abusive
 

@GregHao – Good point about where you’re coming from (although I’d be willing to debate your claim that austerity doesn’t work). I grew up the son of a basic steelworker, and we called ourselves working class, even though it was pretty much paycheck to paycheck.

But thanks to my parents and the military, I got a college education and a first job as a military officer (and yes, they are well paid). As a result, my expectations were different than my peers – and soon the expectation was a six-figure income. And, oddly enough, my prospective employers also bought into that expectation. I’m pretty sure that others are paid half as much for the same work, but there is a wide variability in income for the same work. And it is driven by a set expectation that seems to be largely accepted in my network.

Posted by Curmudgeon | Report as abusive
 

@GregHao, that is a 15% marginal tax, another 13%(?) FICA tax (admittedly half covered by the employer), and a 5%+ income tax in many states. Already at 35%, and we haven’t even begun to address the possible tax credit phaseouts that might apply in a given situation.

Yeah, I know, these taxes aren’t really taxes. You’ll probably tell me that the FICA tax is a “benefit”, not a “tax”. And you probably won’t count tax credit phaseouts either. But it is still money included in the gross income that you don’t get to spend.

That second income simply doesn’t put as much money in your bank account as you might think. The first income already places you well into the 15% tax bracket, and the second income (even if modest) starts running into tax credit phaseouts. It is hard to make a blanket statement because every situation is a little different, but the fundamental principles apply to many if not most families.

Simpler situation if you are single (though not any more favorable).

For those in the mid-fives, child care is a killer that eats up the entire second income after taxes. For those in a slightly higher tax bracket, the 40%-50% marginal taxes they pay (along with child care) eat up 70%-80% of the gross income, and the remaining 20% may not be worth working for.

If you have any opportunities for part-time income without child care, that trumps two full-time jobs.

Posted by TFF | Report as abusive
 

The drops at the end of the second chart are, the small drop just past the “2006″ mark when Demokrats took over Congress, then the levels begun to stabilize, until 2009 when Barack Obuma took office when the large drop started (and it continues)

Posted by m0derateGuy | Report as abusive
 

Where do tens or hundreds of millions of people go when they drop out of the workforce? If this were Europe or Asia or Latin America, they’d be out on the streets. But here they are just invisible. I’m seriously concerned for these people. With no unemployment or welfare to speak of, are they are selling drugs? Or themselves? Or their children? What is going on in America and why aren’t Americans screaming to be noticed, let alone to be helped? Why all the happy patter? Why did $100 million get spent — mostly by the unemployed youth — on the fantasy Hunger Games, when in fact the reality around us is more desperate? We are a nation losing its collective mind. As I write, I am overseas, with little inclination to return “home” — because the home I remember, America as it was or may have been, is now a forgotten memory. It’s a madhouse. A Bedlam. Hell.

Posted by Arturius | Report as abusive
 

“The labor force actually fell by 342,000, not 522,000. The working-age population grew by 180,000, however, so the number of people not in the labor force went up by 522,000.”

This is the basis for the term BREAKEVEN POINT defined years ago by economists who began econometric modelling and needed to account for the fact that the labor force grows. The amount of the growing labor force was variously estimated to be between three and five percent long-term. A year ago, the CBOE artificially set the amount attributed to labor force growth to 2.75%.

The effect of this breakeven point is that recession and depression should be defined relative to this growth in the labor force, not zero growth in GDP as nearly all of the reports in the financial media have mistakenly reported.

This means that a recession is defined as at least two quarters of less than breakeven growth. A depression is defined as at least two years of less than breakeven growth. This means that Nobel Laureate Paul Krugman is right (as well as most other bona fide economists) that the United States has been in a depression since 2007.

Depression, not “anemic recovery”, not “double-dip recession” – Depression. It’s the Third Depression.

Let’s stop the denial, accept the truth and deal with it.

Europe has been in a depression for five years and growing worse while the financial media has reported dozens of times that the Euro Zone crisis is over. It’s not.

The BRICs – Brazil, Russia, India and China – once the world’s shining economic stars are now declining too. Brazil is now officially in a recession.

If Krugman is right about the Depression (he’s latest book, “How to Get Out of the Depression”), then shouldn’t we listen to his proposed solutions?

Posted by ptiffany | Report as abusive
 

Ken, I have to turn-in now – 3:30 am here, so I’ll sum it up like this -

I don’t see your way coming into law in the current environment. It’s complex, subtle, and will likely be resisted by corporates and probably others. Also, it doesn’t have the same kind of appeal to people storming Wall Street that a wealth tax does. Without those people in the streets, IMO nothing happens.

Posted by MrRFox | Report as abusive
 

The awful truth of the whole thing is that this “country” has splintered into many different groups that do not care a thing about one another, but who pretend we are all “Americans”. Mostly, the well to do care for the unemployed even less than they care for the Chinese laborers who make them rich. They are predators.

The point is that there is major conflict brewing in these here United States. But then, if you think the unemployed and the poor are lazy, then you should not fear them getting their hands on automatic weapons either. You think they will just pawn them to buy another 30 pack of cheap beer, right?

Posted by usagadfly | Report as abusive
 

“Where do tens or hundreds of millions of people go when they drop out of the workforce?”

Some are dropping from two incomes to one in the household.

Some are hitting retirement ten years earlier than they had expected.

Some are living with parents into their 30s.

Some are on public assistance.

Those who are dealing drugs and leading a life of crime were probably not employed in the first place.

Posted by TFF | Report as abusive
 

One possibility nobody is considering is mass suicides among those 90 million people who cannot afford “life” (as defined beyond third world quality existence). If our government was on Mars, it would cut-off the air breathed by millions who could not afford to continue piping it into their dwellings. (Actually they would pump in stale re-breathed air that would spiral those millions into declining heath.)

In the “third world” people have accepted they will likely die out in the open with mouth agape and flies busy at work, without the dignity of a proper burial or cremation, without even a memorial service.

In the “first world” where we sit in a coveted chair, under a coveted roof, reading a coveted computer device, sipping a limited global supply of coffee that is doled out based on “money,” we were raised with higher expectations. Jim Jones raised the expectations of his church followers into the stratosphere (and beyond) back in the seventies with promises of a new world order, and they all drank his Cool Aid. If religion can lead to mass suicides throughout human history, why can’t protracted economic hopelessness do likewise?

The trouble with this scenario many will claim as “unlikely” is it leads to the ultimate solution to the problem of non-participation in the labor force. That solutiion? Death. The dead are not counted in the statistics of those not participating in the labor force (many having been permanently excluded from participation in the future through corporate requirements employees must have recent work histories and now college degrees at the minimum). Many have chosen to depart this Earth for precisely these reasons. They were rendered obsolete.

Imagine if cars could feel. How they must feel after for whatever reason they are in the junkyard with all the time in the world on their hands, and only rats to keep them company.

Posted by DisgustedReader | Report as abusive
 

300,000 Boomers hit 65 monthly.

How many are truly laeving the full time workforce?

How does that impact the real workforce participation rate? What should we expect it to be going forward?

Posted by JNail | Report as abusive
 

@ KenG_CA
You don’t seem to understand macroeconomics any better than auto mechanics.

You say that you can’t jump start a car with a dead battery an drive around. Did you know the function of an alternator? It provides running electricity for the car. So long as it’s running, you can drive all day with a dead battery. Just don’t turn it off or run out of gas.

An economy in the throws of a capital strike, which is the US situation today (as it was during the depression), where the velocity of money has collapsed (there’s enough supply of it, but it’s not being used), can’t be taxed into recovery. The capital strike is because investors don’t expect a sufficient return on capital. If you tax the income generated by invested capital, investors will expect lower returns and move their money elsewhere. Yes, taxing capital gains less helps, but it only goes so far.

Taxing consumption higher than investment income is the better way to achieve what you are seeking. But that is highly regressive, and if there’s anything libs are against it’s regressive taxation. You could tax only “luxury” goods, but then you have to define luxury, introducing loopholes and game playing.

Or, you could shrink the size of government, reduce regulation, and encourage private capital formation alongside job growth. Nawww, that would help the wealthy. Can’t have that. Rather have an elaborate state structure introducing all manner of opportunities for manipulation, rent seeking, patronage, and vote buying.

Posted by mlebauer | Report as abusive
 

If only the Republicans could put forward convincing economic policies to turn this job recession around they’d win hands down. Unfortunately, we see corporate profits rising with no commensurate increase in employment, so clearly more tax breaks and/or incentives for corporations and “job creators” are not convincing policies. What’s the answer?

Posted by PCScipio | Report as abusive
 

Woof, that’ll teach me to work on a friday.

A couple quick run downs…

@realist50 – We can argue til the cows come home whether the government ought to engage in expansionary policies or not. However, current account deficit is a combination of government spending, including structural (e.g. social security, debt interest payments, etc) but also crucially, shortfall in government income through lack of taxation. So I don’t necessarily believe that by quoting the current account deficit, we can state whether the government is or is not practising austerity.

@curmudgeon – Undoubtedly, reasonable people can agree to disagree, and I would be intrigued to look at the reasoning behind your belief that austerity can work despite the evidence we’re looking at in Europe or history. Your point is well taken about expectations and as you yourself rightly point out, as your salary requirements/expectations increased, you started to associate with a people who had the same level of expectation and I daresay the unemployment rate amongst your social peers is probably also very low.

@tff –

>>Yeah, I know, these taxes aren’t really taxes. You’ll probably tell me that the FICA tax is a “benefit”, not a “tax”

Posted by GregHao | Report as abusive
 

“When more than half a million people in one month decide that they’re not even going to bother looking for work any more, there’s no way you can say you’re in a healthy recovery”.

- If they became self employed, do we still expect them to be looking for work?
- And if they start their own small business hiring one or more other people, do we still expect them to be looking for work?
- And if they join together to start a nmew business, do we still expect them to be looking for work?
- If next job report shows more than expected new jobs created, it would be partly the result of the number of those that are no longer looking for work, but have become self-employed and/or are hiring other people.

Posted by abbarick | Report as abusive
 

LOL, I wouldn’t do any such underhanded things! Especially since I had mentioned them myself up above in my comment. But you’re right, I suppose it all does add up to a rate that’s in the middle of the band you mentioned above. That is still the marginal rate and not the effective.

So, I ran the numbers roughly (effective federal income tax 12%, SSID/FICA 15%, state income tax 5%), a person making $15/hr has a net income of about $21K (before any deductions or other tax credits which for our purposes will ignore). I understand that childcare can be expensive but it’s “a killer that eats up the entire second income”? That is absolutely shocking to me (as a childless and unmarried person). Your point about the part-time income opportunity is one that I hadn’t thought about before and is well taken. I still find it hard to believe how a family can live off a single income which nets $21K/yr.

Posted by GregHao | Report as abusive
 

I have a real simple question: my daughter was laid off almost two years ago from her job as an office assistant. She just got a part time job in retail. Where does she fit in the stats?

Posted by ncgirl | Report as abusive
 

Miebauer, I understand the purpose of an alternator, but if it’s not working, the car will die again. And you almost made my point – just don’t turn off the car, or the battery will die again. That’s what happens to the economy when you stop charging it (recycling money back into the economy, instead of just extracting profits from it).

You must not understand what I’m saying – I’m not saying to “tax the economy into recovery”. I’m saying to give those with capital no choice but to invest it – for those with cash hoards that are not investing are the cause of the problem.

Taxing consumption isn’t going to solve the problem if much of the money being extracted from the economy is just being held – there will be no taxes on it, and no recycling of it.

You’re trotting out the same old, tired and incorrect assumptions – that there’s not enough capital, and that if only taxes were cut, people could invest more. There is plenty of capital to invest, but not enough reason to, so the hoarders are either holding on to it, or investing elsewhere. Your allegiance to obsolete “conventional wisdom” is blinding you to reality. Regulations aren;t preventing any new businesses from being started, that’s a cliche that is never proven.

If the government instituted a “use or or lose it” tax policy, companies would use it, and take their chances investing and earning some kind of return, rather than paying taxes, and getting nothing back. The effective tax rates are at their lowest point in years, profits are up, and yet investment is down. It’s not working.

Posted by KenG_CA | Report as abusive
 

MrFox, I don’t see it becoming law, either, but not because it’s complex (I think it can be reduced to a much simpler system than what we have now, although that’s not saying much). It will be resisted by some corporations, but not ones that require constant re-investment. And the hoarders won’t like it, either. and they will financially support candidates who would oppose such a plan. I just offered it as an alternative to the two commonly proposed solutions, neither of which will work.

Or you just have to get people in the streets on this one.

Posted by KenG_CA | Report as abusive
 

@ncgirl – your daughter would be counted as employed.

Posted by GregHao | Report as abusive
 

You said in a country of 314 million people, there are only 115 million full-time workers and 27 million part-time workers. Also, the number of people not in the labor force is approaching 90 million. Does this 90 million include the self-employed and some old people above 65?

Moreover, could “not in the labor force” mean “unemployed” and “others unspecified”? Granted that, the unemployment rate must still be far above 8.1%.

The Labor Statistics only reports what the government wants the public to know. Hidden agenda would never be revealed. (mtd1943)

Posted by boonteetan | Report as abusive
 

Ken – you nailed it with this line –

“Or you just have to get people in the streets on this one.”

IMO that’s the only way to break the grip of the self-serving, self-perpetuating elites of both parties and accomplish anything at all. IF that comes to pass – we’ll be working from a clean sheet of paper and without any interference from pols or plutocrats, who’ll be too busy running for their lives to care about policy. Our task now is to decide what we want to see on that clean sheet of paper. IMO using the assets of the rich to discharge the debts of government is Item No. 1.

Posted by MrRFox | Report as abusive
 

@GregHao, remember that I’m talking about the SECOND income in the household, the lower of the two incomes. You might have one earner bringing in $50k, another earning $30k. Or one at $90k and one at $60k. The one income is often 50% greater than the second.

Also, I’m talking about the marginal taxation on the second income, not the total taxation overall. The federal income tax is very generous to married couples with children, with credits and deductions galore, but the marginal rate on earned income is quite high. You pay surprisingly little tax on the first income. You pay surprisingly high taxes on the second income. Doubling the income does not come anywhere close to doubling the spendable cash, even if there are no additional expenses incurred.

Child care in my state at a licensed day care center (the regulations are very strict) costs $250 per child per week. That takes a big bite out of the $21k net earnings you mention, and for a family that already has a $50k primary income there is no public assistance. Commuting costs can easily run $3k-$6k a year. And if both parents are working, you’ll end up spending more on other items as well, such as coffee, lunches, restaurants, etc…

Run the numbers carefully and you’ll find that for many situations, especially when there is a 50% or greater disparity between the two incomes, it does not pay to work. The second job does not double the spendable income. It does not even increase the spendable income!

Posted by TFF | Report as abusive
 

Reasons:

1. A massive structural change to the economy; tech. negates the need for white collar labor.

2. Cpital continues to flow, and will, to low(er) wage manufacturing based countries

3. R+D is shifting overseas

4. Corporations are holding on to cash (hoarding) to feed investors and not add more human labor unless a dire need arrives.

5. Schools and colleges are nor preparing young people for 21st C jobs / skills……social scince and business majors (except finance and acctng) are “screwed”

Posted by slimman | Report as abusive
 

If you do not have a job right now you do not want a job. Period. It may not be perfect but I see help wanted signs everywhere in SE Michigan.

Posted by grobbma | Report as abusive
 

No President has ever let his ideology damage the nation as badly as Obama has damage our nation! Massive wasted corrupt spending, Solyndra, truly nation destroying levels of debt, and for all that debt what has Obama bought? The worst recovery on record, the lowest employment rate since the terrible recession under Reagan, and record long term UNEMPLOYMENT. And why not? Why bother to work in Obama’s America? If you work 80 hours a week and are successful Obama denounces you as if you were a criminal, and says he’s going to tax you until your eyes bleed. On the other hand if you don’t work at all Obama will give you free healthcare and a nice monthly check courtesy of all those evil mean hard working people. In Obama’s America its stupid to work.

Posted by valwayne | Report as abusive
 

The annual unemployment rates for Bush’s 8 years are: 4.7%, 5.8%, 6.0%, 5.5%, 5.1%, 4.6%, 4.6%, and 5.8%. The annual unemployment rates for Obama’s 3 years are: 9.3%, 9.6%, and 8.9%.

SOURCE: US Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” Average Annual Unemployment Rates
(Use or click on the http address below)
http://data.bls.gov/timeseries/LNU040000 00?years_option=all_years&periods_option =specific_periods&periods=Annual+Data

Posted by rich_stats1 | Report as abusive
 

“If you do not have a job right now you do not want a job.”

…at the wages being offered. Wages have fallen over the last five years. Why should it be any surprise that fewer people are willing to work at the new terms?

There is also a bit of a skills mismatch, though. Some people would really like a job but their skills have been surplussed.

Posted by TFF | Report as abusive
 

at last, a columnist who is not blinded by reuters voodoo headlines and other economic propaganda

Posted by scythe | Report as abusive
 

@TFF –

1. re your comment to grobbma, precisely right.

2. Going back to your response to my comment, I think this reminder, “remember that I’m talking about the SECOND income in the household, the lower of the two incomes.” In all my various back of the excel calculations, I was using the assumption that the second income is the same as the first income. How realistic that is, I have no idea but that was an inference that I missed which led us down our meandering path.

This leads me to a question, at what point does it break even again for a two income family for the second income to continue to stay in the workforce? Something close to $100K?

Posted by GregHao | Report as abusive
 

“April’s jobs: Americans aren’t working”

What started as a series of local crisis, Greece, Detroit, Iceland, Ireland is slowly turning into a massive international crisis. I think a very clever and worldly Felix would start looking at trends in SE Asia. What happens to the Ozistan materials boom when China cuts back. The Rise of the Rest will be stopping soon. Correlations are going to 1.

Posted by ARJTurgot2 | Report as abusive
 

@GregHao, it is a highly individual calculation depending on the cost of commuting, the cost of child care, and the hours involved. (If both parents work 50+ hour work-weeks, you end up paying for a lot of household chores that you would normally do yourself.)

Several years back, I quit a $60k job because it wasn’t economic to pay $10k in child care and another $3k in commuting costs, but the alternative there was to self-employ at $30k with a quarter the hours, deductible commuting costs, and no child care bill at all. Toss in a second child, and 8 years of inflation, and $60k is roughly the break-even point where I live.

For those making six figures, it is a lifestyle choice. I continued to teach full time for half a year after my first child was born, but adding child care responsibilities to the 50+ hour work week was a killer. Those who can afford to stay home may choose to do so, even if it does involve a financial hit.

Posted by TFF | Report as abusive
 

Eli has noticed that many in his age group, (over 60s) who have built up a nest egg are headed for the exits, himself included. Wonder if this has had some effect.

Posted by EliRabett | Report as abusive
 

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Posted by Mystore365 | Report as abusive
 

Americans enjoy the season not work in the April
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Posted by nasirmahmood430 | Report as abusive
 

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