Tag Archives: jobs

The Future of American Youth?

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In France, we’re seeing the impact on the nation’s youth of their government-managed economy, magnified by the union-driven difficulty (near impossibility, actually) of getting rid of extraneous labor (or even bad workers).  Spiegel Online International offers some insight.

Kafui Affram doesn’t feel at home in either environment, not in the suburb where the 22-year-old still lives in his childhood room in his parents’ little house [or in Paris, his suburb’s parent city].

Still living with his parents.  Just like America’s youth, especially in the Age of Obamacare.

Some 23 percent of the country’s 18- to 24-year-olds live in poverty, according to a study by the National Institute for Youth and Community Education (INJEP).

The poverty rate for America’s youth as recently as 2009 was 20%.  It’s not going to improve any time soon; the unemployment rate for America’s youth was 17.1% in July 2012, at the height of the summer season for employing our youth, and the unemployment rate for their parents has been hovering around 10% for the last four years after factoring in the effect of our shrinking labor participation rate.  Then,

Youth unemployment in France has been high for some time, but it has now climbed to 26%.  For decades, regardless of their political affiliation, lawmakers have been promising to create a better situation for young people.  But exactly the opposite has happened.  Labor laws protect those who already enjoy steady jobs, while the economic crisis and recession have limited the number of new jobs created.

On Socialist President François Hollande and his program for creating of “future jobs,” Affram says,

We’re used to politicians constantly coming up with new ideas.

Yeah, we’ve heard that, too, and from the same sort of source.  With the same degree of confidence that Affram has:

I know I should be optimistic and have goals, but it’s mostly all just bleak.

Of Jobs Reports

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The latest Jobs report came out last week, and the unemployment rate fell to 7.7%.  We haven’t been this well off in years.  Or have we?  James Pethokoukis, writing for AEIDeas, took a closer look.

First, a graph that’s been run in several places before, repeated in Pethokoukis’ article, and here:

You remember this.  It compares President Barack Obama’s…claims…about the unemployment rate under his Recovery Plan vs his projection of unemployment absent his plan with the actual unemployment rate.  The data in the latest Jobs report add to this [emphasis in the original].

The two-tenths drop in the unemployment rate was because people gave up looking for work. The labor force participation rate fell to 63.6% from 63.8% in October.  If it had just held steady since then, the unemployment rate would be back over 8%.  Indeed, if the LFP rate was just where it was in November 2011, the unemployment rate would be 8.3%.  Some 542,000 Americans left the labor force just last month.

If labor force participation was at its January 2009 level, the unemployment rate would be a whopping 10.7%.  Now, some of the drop in the LFP is due to demographic reasons, primarily the aging of the US population.  But even taking that into account would give you a much higher unemployment rate than 7.7%.  If you go by the pre-recession CBO forecast of the 2012 LFP rate, the unemployment rate would be 10.4%.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.63.  Over the past 12 months, average hourly earnings have risen by 1.7%.  Unfortunately, inflation—as measured by the consumer price index—has risen by 2.2% over the past year, meaning average hourly earnings have fallen by 0.5% in real terms.

And

The number of long-term unemployed remains at a sky-high 40.1%, the same as in August.

As the next graph illustrates.

Yet the Progressives in DC think this is proper.

Gimme

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Collis P Huntington, President of the Southern Pacific Railroad (among others) is reputed to have said

Whatever is not nailed down is mine.  What I can pry loose is not nailed down.

Via Spirit of Enterprise comes this AEIDeas article of charts illustrating the attitude from a different perspective.  Below, some of those charts.

The rate of entitlement growth per capita has been nearly twice as fast as per capita income growth for the last fifty years

Note: Derived by author on the basis of data on official transfers, price changes, and population change. Sources: US Bureau of Economic Analysis, US Dept. of Labor, US Census International Data Base

And

In the 1960s, the federal government spent $2 on governing for each $1 it spent on entitlement transfers. Today that ratio has completely flipped:

Sources: Derived from: Federal government entitlement transfers: Bureau of Economic Analysis, Federal Budget Outlays: White House Fiscal Year 2012 Historical Tables

And

Here’s where the money goes:

Sources: Bureau of Economic Analysis, US Department of Labor, Bureau of Labor Statistics, consumer price index

And

As the Welfare State has expanded, Americans are working less.

Source: Bureau of Labor Statistics, One Screen database, Labor Force Statistics, Series “LNU01300001”, “LNS12300001”

And there’s this from The Daily Caller:

After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status.  State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.

Now it’s the culture of dependency which the Progressives have created that is making the demand.  And President Barack Obama is prying ever more loose, actively abetted by an increasingly pliant Republican Party.

Welfare and Work Incentives

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Casey Mulligan has a book out that looks hard at the Panic of 2008 and explores its causes.  The book is called The Redistribution Recession, and I strongly recommend it.  Here are some highlights.

In this way, the simple supply and demand model…explains 81 percent of the labor market contraction from 2007-Q4 and 2009-Q4, as long as it incorporates the labor supply effects of the expanding social safety net.  The remaining 19 percent of the contraction is “explained” by unmeasured market distortions—that is, still unexplained by the measured factors present in the model.

And

The (theoretical) effects of the reward to working can also be seen from the perspective of wages.  The more that the safety net pays for not working, the less reason people in low-wage jobs have to keep their job and the less reason unemployed people have to accept a low-wage job.  In this way, the safety net raises wages, to which employers respond by hiring less.”

And

When food stamp or unemployment programs pay more, the sacrifices that jobs require do not disappear.  The commuting hassle is still there, the possibility for injury on the job is still there, and jobs still take time away from family, hobbies, sleep, etc.  But the reward to working declines, because some of the money earned on the job is now available even when not working.

Note that, as long as the government involves itself in the economy through its penchant for social engineering/safety nets, this creates a feedback loop.  The safety net (the parts of which Mulligan enumerates, but which I use here expansively to include the entire suite of components) reduces the incentive to work by replacing monies lost from not working, thus driving up costs to employers of attracting workers he otherwise would be interesting in hiring, reducing employers’ hire rates, leading the government to try to further expand the safety net, further reducing work-seeking incentive, driving up labor costs,….

And

…studies: Hoynes and Schanzenbach (2012) show how potential participants stopped working or reduced their work hours when the food stamp program was introduced.  Studies of unemployment insurance find that program rules have a statistically significant effect on how many people are employed, and how long unemployment lasts.  Yelowitz’s research (2000) shows how a number of young single mothers found employment exactly when, and where, state-level Medicaid reforms increased their reward from working.

And so on.  Note that none of this is to disparage people who make use of the safety net; they’re behaving entirely rationally in an economic sense.  Mulligan’s purpose is only to show how incentives of safety nets work.

The Obama Tax Increases

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Here’s a partial enumeration of the taxes which President Barack Obama is willing to blow up our economy in order to get.

Income tax: Across the board.  Top rate rises to 39.6% from current 35%, bottom 15% rate disappears.  Obama claims to be interested only in the top rates, but his evident lack of seriousness in his proposals counters this claim.  See the table below

Self-employment tax:  Rise from 2.9% to 3.8%.

Exemption Phase-Out: Otherwise allowable exemption amounts will be reduced by 2% for each $2,500 or part of $2,500 ($1,250 for married filing separately) that the taxpayer’s AGI exceeds the AGI threshold for the year based on the taxpayer’s filing status.

Itemized Deduction Phase-Out: Resumed income-based phase-out of these deductions: taxes, interest (except investment interest), charitable contributions, employee job expenses and other miscellaneous itemized deductions, etc.  Additionally, and independent of income (in the sense of a phase-out), the threshold for deductibility of medically related items rises from 7.5% to 10% of AGI.

Long-Term Capital Gains Rates Increase: See the table below

Coverdell Education Accounts: Dollar limit on contributions for any one beneficiary is reduced to $500 from $2,000, contributions can be made only by individuals; the income phase-out range for the annual contribution limit rises from twice the amounts for single filers to a hard $150,000-$160,000 for joint filers instead of simply; contributions for special needs students age 18 or over no longer allowed; qualifying expenses elementary or secondary school expenses no longer allowed; contributions to a Coverdell account and a Sec 529 Qualified Tuition Program no longer allowed in the same year; education credits in a year in which a Coverdell withdrawal is made no longer allowed.

American Opportunity Tax Credit: Disappears.

Child & Dependent Care Credit: Falls from $3,000 ($6,000 for two or more qualifiers) to 2,400 ($4,800 for two or more qualifiers).

Estate tax: Rise to 45% from current 35% (and from 0% just a couple of years ago) on everything above $3.5 million estate value, down from current $5.12 million exclusion.

Investment surcharge: An Obamacare tax for 2013 and beyond—higher-income individuals hit with an additional 3.8% Medicare tax on net investment income, including long-term gains and dividends.

Medical device tax: 2.3% on top-line revenues of companies making devices such as prosthetic limbs, pacemakers, and operating tables.  This is levied even if the respective company doesn’t earn a profit.

Employer Health FLEX-Spending Plan Contributions: Maximum amount available for reimbursement of incurred medical expenses in an FSA for a plan year cannot exceed $2,500, down from…unlimited.

Codification of the “economic substance doctrine“: Allows IRS to disallow tax deductions and other tax-minimizing plans solely on the IRS opinion that the matter lacks “substance.”