Category Archives: jobs

Wages of Welfare

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…or, in this case, Obamacare, or maybe just generalized government meddling in people’s lives through our free market.

Ken Adams has been turning to more part-time workers at his 10 Subway sandwich shops in Michigan….

He added approximately 25 part-time workers in May and June as he reduced some employees’ hours and replaced other workers who left.  The move showed how efforts by some restaurant owners and other businesses to remake their workforces because of the Affordable Care Act may be turning the country’s labor market into a more part-time workforce.

And

For the entire U.S. workforce, employers have added far more part-time employees in 2013—averaging 93,000 a month, seasonally adjusted—than full-time workers, which have averaged 22,000.  Last year the reverse was true, with employers adding 31,000 part-time workers monthly, compared with 171,000 full-time ones.

Because delays in enforcing Obamacare notwithstanding, businesses need both to get their full-time numbers down in order to reduce their Obamacare cost baselines, and absent repeal, those delays will come to an end in just 12 short months.  Indeed, the practical effect of the delays is simply to prolong and enhance the hiring of part-timers rather than full-timers.

Here’s a more direct example:

Rod Carstensen, owner of 11 Del Taco restaurants around Denver, began in April converting his mostly full-time workforce into one comprising mostly part-time help to minimize his health-care costs.  He estimates the costs could have climbed by as much as $400,000 a year without the change.

Jobs?

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We ain’t got no jobs.  We don’t have to give you any stinkin’ jobs.  Never mind that a feckless, if not outright dishonest, administration keeps claiming that there’s a strong, robust recovery in place.  For four years, now.

I wrote here about our new (and hopefully relatively temporary) national work force structure.  Mortimor Zuckerman, Chairman and Editor-in-Chief of US News & World Report, has some more information.

  • since the start of the year, the number of people with jobs increased by 753,000
    • 557,000 of these positions were only part-time
    • in June full-time jobs declined by 240,000
    • part-time jobs soared by 360,000
  • [there are] three million more part-time positions than when the recession began
  • [part-time workers are at] an all-time high of 28,059,000
  • the civilian workforce-participation rate is currently 63.5%—a drop of 2.2% since the recession ended.  [emphasis added]
  • the number of people leaving the workforce during this economic recovery has actually outpaced the number of people finding a new job by a factor of nearly three

Keep this in mind during the 2014 and 2016 elections.

One Aspect of the New Employment Numbers

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It’s temporary work, whether under contract or not.  It’s also part-time, whether under contract or not (OK, that’s two aspects.  Sue me.)

The nation’s unemployment rate still stands at 7.6%, but there is one area showing significant improvement: temporary and contracting work.

An estimated 17 million people are employed in these areas of the labor force, making up 12% of all employed people in the US.

Here’s a clue of why that is:

Full-time workers come with benefits packages that tend to include health care and retirement plans, which come with a hefty price tag for companies still unsure of the economic recovery.

Health care and pensions—for those employers still using these instead of 401(k)-like retirement plans—are horribly expensive.  And no, this isn’t another anti-Obama screed.  Even before Obamacare and public service union pension-caused city bankruptcies, health and pension benefits were horribly expensive.  The Panic of 2008 just brought those to light, and Obamacare only made a terrible health side worse.

And there’s that uncertainty about this failed recovery and when it will start in earnest.  Here’s James Sherk, senior policy analyst in Labor Economics at The Heritage Foundation:

In many cases, employers are not confident to bring in regular, full-time employees because it may hurt the entire firm.  This is the most disturbing trend, due to the weak economy.  It’s an economy and situation where employers aren’t seeing their shelves pick up, so they won’t commit to hiring a full-time employee.

“Hurt the entire firm.”  This is an area where Obamacare exacerbates an already bad situation.  A full-time employee costs the employer a minimum $2,000 in health benefits—that’s the fine the employer pays for not providing benefits that suit the Federal government’s definition of adequacy.  If the business isn’t there to cover that added cost, the employer would be stupid to hire that employee, at least full-time.

Another downside is that part-time workers or contract workers who know their contract expires in a few months (another version of part-time work) have their own uncertainty about the future—their future.  This makes them less willing to spend the money they do earn until they have to.  That reduced demand lowers the ability of employers to sell their product.  Those reduced sales lower the employers’ interest and ability to hire.  That reduced hiring incentive….

Good for the Latvians

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Mostly.  They are, after all, joining the Euro Zone next January, to their long-term detriment.  However, other than that, they clearly have the right idea, much to the chagrin of Euro Zone officialdom (given that chagrin, they’re still drawing Latvia into the fold.  What does that say about the consistency of officialdom’s judgment?).

Here’s why I like the Latvians, so far.

Latvia’s corporate tax rate is just 15%, far lower than the EU average of 23.5%.  Within the euro zone, only Ireland and Cyprus, each at 12.5%, have lower rates.

The problem here isn’t that Latvia’s tax rate is too low, as Euro Zone officialdom insists, it’s that the EU average is too high (never mind conflating the EU with the Euro Zone).  Moreover, officialdom—both Euro Zone’s and EU’s—arrogantly refuse to justify their claimed need for all that money, refuse to explain how all that money is better handled by them and not by the ordinary citizen of the EU/Euro Zone, refuse to justify the things on which they spend all that OPM beyond insulting generalities like “it’s good for everybody.”

Here’s more of why I like the Latvians:

Holding companies—firms that hold stock of other companies—enjoy further benefits in Latvia.  Since the beginning of 2013, their foreign profits earned via dividends and stock sales have been tax free.  Transferring such profits out of country is also not taxed.  Furthermore, as of 2014 Latvian holding companies will no longer have to pay taxes on interest and licensing fees they pay to foreign companies.

Business friendly is the same as jobs friendly, and jobs mean income and opportunity for the common man.  Oh, and revenue for government, whether that revenue is justified or not.

And

Markus Meinzer, an analyst with the Tax Justice Network, has already begun calling Latvia a “Luxembourg for the poor.”

What’s the downside of that, exactly?

Of course, officialdom objects to these things.

[T]he banking systems in both [Ireland and Cyprus] have collapsed—and both have been forced to seek emergency aid money from EU bailout funds.

Never mind that it was the knowledge of the existence of bailouts—at taxpayer expense, to boot—and too much regulation that led to the collapses.  Businesses that can be sure of bailout face no consequence from their decisions, and so no risk—and so make dumb, over-extensive moves.  Over-regulation compounds the problem by artificially constraining the range of moves allowed—constraints that the market can apply much more efficiently, much more broadly, much more flexibly, and much more promptly.

And

…money with shady origins keeps appearing.  In April 2012, the United Nations Security Council determined that Latvia’s Parex Bank (which has since changed its name to Reverta) assisted military officers from the Ivory Coast in circumventing international sanctions.

Of course, this has nothing to do with tax law or being business friendly.  Enforcing existing law against money laundering would handle this nicely.  To the extent the specific charge is true (if the UN says it, it’s automatically open to question), that’s a violation of such existing law; Latvia’s tax treatments are wholly irrelevant.

The Euro Zone needs a whole lot more tax havens within it—perhaps as many as 17 more.  It’s not the governments’ money, after all, and the governments for the most part don’t need it as much as the people do.

Democrats in the Way, Again

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Interest rates on student loans are set to double on Monday after lawmakers failed to find a bipartisan solution to keep the federally subsidized borrowing costs down.
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[T]he current, 3.4% interest rate on Stafford loans—the most popular funding for college students—set to expire on July 1….
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The higher rates would add about $3,000 to the total interest on a $23,000 student loan repaid over 10 years.

In fact, the rates will double to nearly 7%.  However, those $3k are mostly partisan hype: they work out to an extra $12.50 per month on the loan payment for graduates with jobs.  Oh, wait….

On the other hand,

In May, House Republicans passed a bill that would index rates on new loans to the rate on 10-year Treasurys (currently about 2.6%), plus 2.5 per centage points, with an 8.5% cap.  But with little Democratic support in the Senate, that bill is dead in the water.

Thus, the Senate Progressives are perfectly willing to burn students and their loans because these self-important Democrats couldn’t get their way.

Then there’s this minor set of details, courtesy of Glenn Harlan Reynolds, law professor at the University of Tennessee, in that same Wall Street Journal op-ed:

According to an extensive 2012 analysis by the Associated Press of college graduates 25 and younger, 50% are either unemployed or in jobs that don’t require a college degree.  Then there are the large numbers who don’t graduate at all.  According to the National Student Clearinghouse Research Center, more than 40% of full-time students at four-year institutions fail to graduate within six years.  The National Center for Education Statistics reports that almost 75% of community-college students fail to graduate within three years.  Those students don’t have degrees, but they often still have debt.

And

Now here’s where the real immorality kicks in.  The skyrocketing cost of a college education is a classic unintended consequence of government intervention.  Colleges have responded to the availability of easy federal money by doing what subsidized industries generally do: Raising prices to capture the subsidy.  Sold as a tool to help students cope with rising college costs, student loans have instead been a major contributor to the problem.

In the end, the way to work the student debt problem is to reduce the need for the borrowing: get school costs down to saner levels.  Reynolds suggested a way:

Remove the incentives for universities to accept government-subsidized student-loan money regardless of a student’s prospects of graduation or gainful employment.

To which I add the following:

  • the schools shouldn’t receive the subsidized loan monies—i.e., the schools would have to be reimbursed after the fact—until the borrowing student has actually graduated and begun working
  • subsidized loan monies—taxpayer funds—should not be available at all except to students in majors that have serious prospects of bettering our nation’s strength and prosperity (stated differently, making better off the taxpayers on the hook for those monies).  STEM majors would qualify; Gender, Women’s, and Sexual Studies majors or majors in General Literary Studies need not apply.

Naturally, Progressives will have a herd of cattle over such criteria; money grows on the trees of the rich, after all.  Too bad.