Category Archives: Economics

Miscellaneous economy stuff

Jobs Mandates

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Nearby is a post concerning the jobs impact of Obamacare costs being imposed on employers.  Two other labor costs being considered for imposition by our Know Better, Progressive administration are minimum wage increases, and now an increase in the “minimum” wage of salaried managers.

Never mind what such a thing would do to productive company cultures:

…making more people eligible for overtime pay could remove the inherent incentive for lower-level managers to hustle to earn a promotion.

“You work hard, develop the maturity for a salaried position, and then move up,” [Emo Pentermann, owner of Bell ATM Service Inc] says.  “It takes away that whole level of maturity and freedom of choosing to get the job done in the time allotted.  So for all practical purposes, they just might as well be on a time card.”

Or, regarding that last, especially:

…a workplace environment that de-emphasizes keeping up with a time clock.  For instance, employees can take time off work to attend a child’s performance in school.  [Jeffrey Harris, owner of Inte Q] says his employees are more productive as a result of that flexibility.

He had plans to adopt a new, more formal policy this year where he would tell his salaried employees: “You know what your job is.  You’re responsible for it.  Take off when you need to, and we’re not necessarily watching day by day what you’re doing.”

But when he heard about the proposal, he said he immediately thought it would affect the type of work culture that has yielded results for him in both profits and employee retention.

Because our employers don’t have enough barriers for job creation or for business growth—and job creation.

Obamacare Jobs Impact

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The American Health Policy Institute has some data [emphasis in the original].  Although their study concerned itself primarily with the cost impact of Obamacare to large employers—those with 10,000 or more employees—the study’s outcome has implications for our economy’s jobs picture.

  • The cost of the ACA…is estimated to be between $4,800 to $5,900 per employee.
  • These large employers will see overall ACA-related cost hikes of…4.3 percent in 2016 and 8.4 percent in 2023 over and above what they would otherwise be spending.
  • The total cost of the ACA to all large US employers over the next ten years is estimated to be from $151 billion to $186 billion.

This comes after a downward trend in employer cost increases—to no and nearly no increase just prior to Obamacare’s passage—for employee health care benefits has been completely reversed by Obamacare, as this graph from the study demonstrates:

Now for those implications:

At the US median annual wage of $51,000 in 2013 (a decrease from 2012, an added bonus of President Barack Obama’s economic policies), and just taking the lower bound of the 10-year cost range, those $151 billion in added dollar costs work out to a jobs cost of nearly 3 million jobs over that decade—300,000 jobs per year—in a static analysis that ignores the economy’s response to the loss of those jobs: a loss that would increase by some amount each succeeding year as the economy actually responded.

Alternatively, that $151 billion cost is money not being spent on R&D or product development.  To put this in perspective, US companies spent some $424 billion on R&D in 2013; at $15.1 billion/year over the decade, that works out to a 3.6% cut in R&D.  This is a very large drop in a company expense that’s already very low in an increasingly competitive global economy (if not particularly competitive anymore in the US)—Apple’s R&D spending, for instance, amounted to just 3% of net sales in 2013; IBM and GM spent just 5-6% of total revenue on R&D.  This reduction leads directly to a commensurate cut in company profitability, with its own cascade effect on jobs in the US.

Of course, the true outcome will be somewhere in between—a loss of fewer than 3 million jobs, but still a large loss, and a cut in R&D of less than 3.6%, but still a significant cut—each and both with still significant cascade effects in future job losses.

The Ryan Budget Proposal

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House Budget Committee Chairman Paul Ryan (R, WI) has laid out the Republican budget proposal for the decade beginning FY2015.

It begins by balancing the Federal budget over those 10 years, a measure of fiscal responsibility to which the present crop of Democrats don’t even pretend—vis., the Democrat-controlled Senate’s refusal even to produce a budget their first four years of the Obama administration, and which refusal they’ve renewed in the current year, insisting that they don’t need to bring up a budget anymore.

It repeals Obamacare, with that act’s enormous deficit-increasing costs.

It increases Defense spending, contra Democrat—White House—desires.  Plussing up our military is an especially glaring need in this day of a resurgent Russia routinely invading and occupying parts of its neighbors—Georgia and Ukraine come to mind—and an equally aggressive, if more subtly so, People’s Republic of China and its territorial grabs of the East and South China Seas.

It renews the Republican proposal to give “premium subsidies” to senior citizens enrolling in Medicare beginning in 2024—folks today who are not older than 56—and letting them shop for their own insurance in a free(r) market, rather than being dragooned in to Medicare.  Even so, Medicare would be one of their choices, and guaranteed to be no more than second least expensive.  Democrats deride this as a voucher system and object to it.  Aside from the fact that Democrats object to voucher systems in any form, I have to wonder why Democrats object so vociferously to older Americans making up their own minds, without the oversight of Democrat Betters.

It walks away from past practice of projecting budget effects into the future under the assumption that today’s conditions won’t change over the period being projected, including the premise that the economy won’t respond to spending changes by the Federal government—a static analysis—and makes use, instead, of the more realistic assumption that the economy does, in fact, respond to such inputs—dynamic analysis.

This is an outline that should be pursued, and Democrats who insist on continuing their profligate spending instead de-elected.

A Political Party’s Fiscal Philosophy in Microcosm

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The Wall Street Journal has the tale.

Today, a year and a half after the 2012 elections, the Democratic National Committee owes its creditors $15 million.  It closed out the 2012 election season owing $22 million, and after all this time, it’s only paid down a third of that debt.

Today, a year and a half after the 2012 elections, the Republican National Committee owes its creditors…zip.  Nada.  The RNC has no debt.  It also closed out the 2012 election season with…wait for it…no debt.  The RNC, in fact, had $3 million cash on hand.

And with those relative fiscal performances, the Republicans won everywhere—the House, with fewer than usual losses for the minority party in a Presidential election year; the Senate, with fewer than usual losses for the minority party in a Presidential election year; in the state houses, with net gains in legislatures and Governors’ offices—except the White House race.

The Democrats lost everywhere—the mirror image in a two-party system—but the White House.  And we’ve seen how effective this President has been.

Which party’s fiscal performance indicates which party is more fit to govern a nation?

Value of Your Tax Bill

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…if the money were left in your hands to put toward your own retirement.  WalletHub has looked at the differing state and local tax bites that they charge you for the privilege of living in their fair states.  Not surprisingly (to some of us) Red states take a sharply lower bite out of your money than do Blue states, as the figure below illustrates. 

But what does this mean in practical terms?  I looked at how the tax money could be used for an individual’s or family’s retirement program were the money left in the pockets of the earner.  Even though this study indicated that Wyoming’s state and local tax bite was the lowest, at $2,365, I used Texas’ more middling $5,193 take (middling because, even though Texas was rated as having the 7th lowest collection rate, the difference between Wyoming and Texas was $2,828, and adding that to Texas’ number got me to the neighborhood of DC’s $8,034, which was ranked 37th lowest) as my baseline because that’s where I live.

I also made a couple of heroic assumptions: working from WalletHub‘s assumption of a single filer, I fleshed that out to say he’s just turned 30 (yeah, he’s late to marriage), and he can afford to set aside the amounts identified below in his retirement program (actually, he chooses to afford, since he already can afford—he’s paying the taxes already).  Those amounts are the differences between the state and local taxes he’d pay in the state indicated in the table below and the taxes he’d pay in Texas.  I also assumed our young man can get a 3% return on investing his money, thereby roughly matching historical inflation.  As a 30-year old, he’ll work for 37 years before retiring.    Finally, this is a static analysis; it assumes no tax differential changes over those 37 years.

State, Local Taxes

Tax Difference from Texas

3% Investment Return

New York

$4,525

$172,300

California

$4,316

$164,400

New Jersey

$3,637

$138,500

DC

$2,841

$108,200

Even with that middling difference between Texas and DC, DC’s “state” and local tax bite is worth more than $100,000 over our man’s remaining working lifetime were he allowed to keep his money.  What does he get for that extra tax money taken?  A higher cost of living, and not much else.  More restrictions on individual freedom and responsibility—gun laws, for instance—and a denser population; although lots of folks like that part.

But think about what our man can do for himself with all that extra money—like visits to states with denser populations for all those attractions, while living more cheaply when he’s done with his vacation.  And more support for charities of his choice, through means of his choice, rather than those of government’s choices.