Tag Archives: jobs

Union Greed, Extended

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Included in President Barack Obama’s latest budget proposal was a 1% raise for Federal employees.  Of course, in this time of profligate spending and exploding debt, that’s not enough for public service unions.

David Cox, president of the American Federation of Government Employees, the nation’s largest federal employee union, said Monday that the 1% increase is “pitiful” and fails to compensate for sacrifice by government workers.

“Federal employees have endured years of pay freezes and cuts in retirement benefits,” Cox said in a statement.  “Federal employees deserve a meaningful pay raise, not a token increase that will be more than eaten up by rising living costs, including higher retirement and healthcare costs.”

And

Union leaders argue the planned increase is not enough to compensate for recent hardships endured by federal workers, who will see an estimated $120 billion in lower wages and benefits during the next decade due to the pay freezes, according to the American Federation of Government Employees.

“I strongly believe that federal employees deserve more, and this amount is inadequate,” [National Treasury Employees Union President Colleen] Kelley [said].  “There is no question in my mind that inadequate raises will have consequences on recruitment and retention.”

All Americans have been sacrificing in this failed recovery, especially in the private sector, where too many have no job at all in which to get a 1% pay raise, and some Americans have been sacrificing far more in defense of this country—and these government unions—against threats and attacks by our enemies.  Government union employees are hardly special, except perhaps in their own minds.  If government employees don’t like their “rewards” for doing their jobs, they don’t have to stay in those jobs.  Not even government employment is a jobs welfare program.

These guys “deserve” a pay raise based on what useful criteria?  The actual “meritorious” job performance of the IRS?  Of State?  DoJ?

What rising living costs are being claimed in an environment of artificially depressed interest rates and low inflation?

Rising healthcare costs?  You mean Obamacare, which you guys (and your private sector counterparts) enthusiastically supported?

Beuller? Beuller?  Anyone?

The bit about lower future wages and benefits is especially…amusing.  This is of a piece with the fantasy of future-year “cuts” that exist only in the minds of those trapped in the Beltway Imaginary Friends World.

As to those cried over consequences to recruitment and retention, that works for me; we have too many Federal employees, anyway.  During the recent Democratic Party shutdown of the government, the EPA rated 94% of its employees non-essential, for instance.  And see my earlier remark about nobody being held in a government job against his will.

Welcome to the Republic

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Isn’t this part of what the 10th Amendment is about, guys?

Maybe some States finally are figuring that out.

Governors…have a blunt message for Congress and the White House: They’re moving ahead on job-creation, infrastructure and other matters in the face of federal inaction.

Democratic and Republican governors gathering for National Governors Association meetings say they’ve been forced to fill a vacuum created by the partisan battles in Washington that have blocked agreement on a long-term fiscal plan.

“We’re not waiting.  It would really be great for them to solve the mess here, but in the meantime we’re going to do what we can,” said Michigan Governor Rick Snyder, a Republican.

It’s not their mess to solve, albeit they’ve certainly been actively enthusiastic contributors to it.  Your States’ citizens are your responsibility.  The voters elected you to deal with the problems not to foist them off on relay them to the Federal government.

And this:

“There’s no long-term infrastructure plan coming out of DC—none,” said North Carolina Governor Pat McCrory, a Republican.

Mr McCrory last year pushed through legislation changing the way North Carolina spends scarce transportation dollars.  Under the plan, projects that boost the economy, such as highways that link urban centers and relieve congestion, get priority.

In an interview Friday, Mr McCrory said the measure was partially a response to the failure of federal lawmakers to rework transportation funding.

You guys shouldn’t need one Federal action first; you should be acting on your own initiative.  When that happens, you get McCrory’s outcome: you finally stop feeding your addiction to Federal dollars, you start getting more efficiency and better prioritization, and you stop spending OPM willy nilly.

And this:

Colorado Governor John Hickenlooper, a Democrat, said the “cycle of partisanship and dysfunction” in Washington could ultimately benefit state and local governments by forcing them to rethink how they relate to the federal government.

Well, NSS.  Welcome to the world of independence and responsibility.

States’ rights come with States’ responsibilities.  Where you guys been?

Minimum Wage and Collateral Damage

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The CBO, the other day, looked into the Democrats’ proposal—demand, really—to raise the Federal minimum wage to $10.10 from the present level of $7.25 per hour.

The CBO found two key outcomes from such a hike.  The first is that the increase is almost certain to cost jobs, to increase unemployment.  While acknowledging that the headline number of jobs lost—500,000—is only an estimate, the CBO said quite clearly that the range of the number of jobs that will be lost from this forced wage increase runs from a “very slight decrease” in jobs to 1 million jobs lost.  Notice that.  No increase at all in job availability will ensue.  A “very slight decrease” in jobs is a decrease in jobs.  Full stop.

The other key finding is this: the

increase to $10.10 an hour by July 2016 would eliminate 500,000 jobs, but lift 900,000 Americans out of poverty from the total of 45 million projected to be living in poverty in 2016.

900,000 Americans will be able to use the wage increase to climb out of poverty.  But 500,000 Americans will be forever locked out of that opportunity, will be sacrificed in favor of those others.  Low-wage jobs—minimum wage jobs—are low skilled jobs, are entry level jobs, in which the worker can accrue experience with which to earn promotion, gain needed skills for better jobs, bring extra money home to the family so the family as a whole can have a chance to climb out of poverty.  These jobs are how teenagers, just starting out, can begin to learn a work ethic, can start earning some money for college or for a car, or just earn some walking around money.

These folks, though, apparently are just necessary collateral damage on the way to equal outcomes for the survivors.

So much for equality of opportunity.

The CBO’s full report can be seen here.

Obama’s Stimulus Promise Revisited

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James Pethokoukis at AEIdeas did the visit, and this graph is the highlight of it.

The red dots on the right axis reveal the Obama tale.  It’s an especially humorous, if simultaneously mendacious, one, given that in this auspicious quarter we were supposed to be in the same prosperous state with or without Obama’s promised stimulus benefit.  The benefit, after all, only was supposed to ameliorate the pain of the last five years.

Instead, those red dots demonstrate, not just the failure of Obama’s stimulus, but the active damage that “stimulus,” in concert with the rest of Obama’s economic and jobs policies, have done and still are doing to our economy.

In case the dots’ captions are hard to read, here they are, from highest dot to lowest, all for December 2013:

  • unemployment rate based on the 2009 Labor Force Participation Rate: 11.8%
  • unemployment rate based on CBO’s then forecast for 2013’s LFPR: 10.1%
  • unemployment rate based on 2012’s LPFR: 7.9%
  • unemployment rate, actual: 6.7%

These compare with Obama’s promised rate of 5%, or roughly full employment.

Can we really afford another five years of these destructive Progressive policies?  Or even two more years?

Moral Hazard and Obamacare Welfare

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The recent CBO report on the mid- and long-term effect on willingness to be employed of Obamacare hinted at the moral hazard of Obamacare and of welfare, generally [emphasis added].

In 2014, for example, a single person or a family whose income is 150 percent of the FPL [Federal Poverty Level] and is eligible for subsidies will pay 4 percent of their income for a certain “silver” health care plan purchased through an exchange; if their income is 200 percent of the FPL, they will pay 6.3 percent of their income for that plan.  An increase in income thus raises the enrollee premium (and reduces the subsidy) both because the percentage-of-income formula applies to a larger dollar amount and because that percentage itself increases.  People whose income exceeds 400 percent of the FPL are ineligible for premium subsidies, and for some people those subsidies will drop abruptly to zero when income crosses that threshold.

That’s the mechanism through which this particular iteration of moral hazard works.  It’s a tradeoff of a short-term gain of minor security in return for giving up the opportunity for better lives in the longer term and permanently through working more hours, including to the point of working full-time, thereby increasing their earned income.

This mechanism is, in fact, an enormous marginal tax on the next dollar of earned income, and it hits our poor and marginal citizens the hardest.  This tax reduces the net value of the income increase from taking a better job or working more hours.  It’s a cynical poverty trap.

It’s not that these folks are lazy—that’s a question only in the minds of Progressives trying to distract from their failure by demonizing Republicans and Conservatives.  It’s that this iteration of moral hazard has honest men making entirely rational economic decisions—to stay on the welfare program(s).

Beyond the damage inflicted directly on these subsidized people’s true welfare and their morality, the moral hazard inflicts a broader failure, too:

Apart from harm to individuals, ObamaCare is also wasting human potential because fewer workers mean a less prosperous, less dynamic economy.  Contrary to liberal patronizing, many near-seniors, moms, and the rest like their jobs and contribute to productivity.  The 2.5 million worker ObamaCare job exodus, CBO estimates, translates into a 1.5% to 2% reduction in the total number of hours worked, which means less growth.

That failure, that slowed growth rate, reduces the ability of those who do wish to work more, who do wish to make things concretely better for their families, to do so.  It hits hardest, again, our poor, but this effect extends to the lower- and mid-middle class man who is working and looking to work more and earn more.

Here’s a concrete example, courtesy of Keith Hennessy, via AEIdeas:

  • A family of four with one wage-earner has $35,300 of income this year and no health insurance through work. Because of the significant Affordable Care Act subsidies, this family can buy health insurance for only $1,410/year.
  • The other spouse wants to take a part-time job to supplement their family income. This part-time job would earn them an additional $12,000 per year (gross).
  • But this additional income would reduce their ACA premium subsidy, so they would now have to pay $2,970/year for the same health plan.
  • This reduced subsidy, a direct result of the spouse’s part time work and higher family income, reduces the value of the $12,000 of added income by $1,560 (=$2,970 – $1,410). That subsidy reduction is 13 percent of the gross income increase.
  • So maybe this spouse chooses not to take the new part time job because the net financial benefit of additional paid work just isn’t worth it.”

When all the welfare payments (means-tested, also) for which a family in this income stratum is eligible are included in this sort of calculation, the subsidy reduction becomes a much larger per centage of the income increase—and even can be larger than that increase: a net income reduction from earning more through working.

This is illustrated in the graph below from Pennsylvania State Secretary of Public Welfare that shows how public benefits interact with each other to create welfare cliffs—income cliffs—that “phase” out as income smoothly increases.

What this means is that as people in these low-end earner brackets make more money, they face massive effective marginal tax rates—sometimes the equivalent of 100%.  Every dollar they earn would lose them more than a dollar in public assistance.

Hennessey extended his example [emphasis his]:

My back-of-the-envelope calculation, using H&R Block’s tax calculator, is that the ACA increases this moderate income family’s marginal effective [federal] tax rate by 13 percentage points, from about 37% to about 50%. The 37% includes very little income taxes, but a lot of reduced EITC and reduced refundable child credit, as well as higher employer and employee-side payroll taxes.

Then, the moral hazard question Hennessy asked, but which the Progressives avoid:

Finally, the hard one: do the benefits of the premium subsidy to this family outweigh the costs of trapping this family at this income level by killing the financial benefit they receive from more work, education, training, or other professional advancement?

This is moral hazard.  It’s economically more efficient, at least in the near term—that paycheck to paycheck, welfare payment to welfare payment time frame in which our poor and working poor exist—to not work more, to not earn more, but rather to continue the welfare payments.  This is not a matter of laziness; this is that cynically created poverty trap.

Again, it reaches beyond the welfare recipient, too.  Those who do make the choice to work more are forced by that choice to pay for those who choose to work less: the former are the ones who must pay the taxes that partially cover the welfare payments, with government borrowing covering the rest (a future tax on those working men and their children).