Progressivism transforms “welfare to work” to “welfare to not work”

 Millions of Americans get some kind of financial support from the federal government. Some of them have earned it (Social Security and retirement recipients), some of them really need it (the poor and disabled), some need it temporarily (like those who can’t find a job in the non-recovering economy) and some don’t really need it, but get it anyway.

The widely reported number of Americans in poverty is 46.2 million, about 15 percent of the population. July’s Household Survey revealed that 11.5 million were unemployed; 2.4 million will work but aren’t actively looking; and 8.2 million wanted full-time work but could only a find part-time job. And the Civilian Labor Force Participation rate was a very low 63.4 percent.

Yet CBS News reported that a survey of 2,000 employers showed one-third of them said lots of jobs go unfilled for three months or more. Many of the roughly three million unfilled jobs are in skilled trades and pay good wages, making one wonder about the current “everybody needs a college education” mania that now grips the country.

Another reason that good jobs go unfilled is that the federal government’s assistance programs make it easy to not work, and frequently pay more than some jobs.

The Cato Institute’s Michael Tanner, writing in the Los Angeles Times (Online) notes that, “Contrary to stereotypes, there is no evidence that people on welfare are lazy. Indeed, surveys of welfare recipients consistently show their desire for a job.” Yet the “U.S. Department of Health and Human Services says less than 42 percent of adult welfare recipients participate in work activities nationwide,” he continued. “Why the contradiction?”

“Perhaps it’s because, while poor people are not lazy, they are not stupid either,” he writes. “If you pay people more not to work than they can earn at a job, many won’t work.”

In looking at federal assistance programs, Mr. Tanner noted that most reports on welfare focus on only a single program, the cash benefit program, Temporary Assistance for Needy Families. But he explained that “focusing on this single program leaves the impression that welfare benefits are quite low, providing a bare, subsistence-level income.” However, most get assistance from more than one of the federal government’s 126 separate programs for low-income people, 72 of which provide either cash or in-kind benefits to individuals.

In order to analyze how the federal assistance programs affect recipients, the Cato Institute created a hypothetical family consisting of a mother with two children, ages 1 and 4, and then calculated the combined total of seven of the most common benefits that the family could receive in all 50 states.

In Washington, D.C., and Hawaii, Vermont, Connecticut, Massachusetts, New York, New Jersey, Rhode Island, Maryland, New Hampshire and California, that group of seven programs provide benefits worth more than $35,000 a year. The value of the package in a medium-level welfare state is $28,500.

Since welfare benefits are not taxed, to put the benefits issue in perspective the Cato study calculated how much pretax income the family would need to earn in order to provide the same amount as a 40-hour-per-week job. This calculation took federal and state income taxes, earned income tax credits and the child tax credit into account.

The study found that welfare pays more than an $8-an-hour job in 33 states and the District of Columbia, and that in 12 states and the District of Columbia welfare pays more than a $15-an-hour job. And, in Hawaii, Massachusetts, Connecticut, New York, New Jersey, Rhode Island, Vermont and Washington, D.C., welfare pays more than a $20-an-hour job.

Comparing the results with specific jobs, the Cato study found that in California and 38 other states, it pays more than the starting wage for a secretary and in the three most generous states, welfare benefits exceed the entry-level salary for a computer programmer.

While not every welfare recipient gets these seven benefits, many do, and some receive even more than the package used by the Cato study. “Still,” Mr. Tanner concludes, “what is undeniable is that for many recipients in the most generous states — particularly those classified as long-term recipients — welfare pays substantially more than an entry-level job.”

Welfare is supposed to be a temporary thing for most recipients, not a career. Yet in many cases able-bodied men and women do not look for work because they can do better on welfare.

Such a system discourages people from taking responsibility for themselves and their families. It creates a large faction of government dependents; a status that deprives people of self-respect and the pride of accomplishment that results when one succeeds in life because of their own efforts.

Even a low wage job is better than welfare, as it often is only a first step to better jobs. U.S. Census figures show that only 2.6 percent of full-time workers are poor, while 23.9 percent of adults who do not work are poor.

This country became what it once was not by millions depending upon government to feed and clothe them, but by Americans making themselves successful through determination and hard work. That is the goal our welfare system must have.

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"Living wage" mentality reflects misunderstanding of business reality

Fast food workers in seven cities were on strike last week demanding a "living wage" of $15 an hour, more than twice the $7.25 they currently make. Empathy aside, this expectation is a fantasy.

Every job has a value, but it is based not on what the person who has the job thinks it should be worth, or what sympathetic observers think it should be worth, but on its role in the business.

How important is the job to the business, compared to other jobs? Are other people who can do the job a scarce commodity, or are there thousands of them? Some jobs require substantial training, while others do not, and individuals with the required training deserve higher pay than those without training. Minimum wage jobs in the fast food industry require no formal training; the worker can learn on the job, and while the worker is learning to do the job satisfactorily, the boss endures lower-than-necessary productivity.

Who exactly works for the minimum wage? These jobs are entry-level work intended for people just getting started in the workaday world, like students trying to earn a little money while pursuing their education, or people with little or no skills or experience looking to get some skill and experience. About half of the 1.6 million minimum wage workers are under 25 years of age. The minimum wage is not intended to be, and cannot be, a “living wage.”

The minimum wage is, indeed, a low wage, but most of those workers get a raise in less than a year, and there are fewer of them today than in the past. The number of people making at or under the minimum wage today is 28 per 1,000 wage and salary workers, while in 1976 there were 79 per 1,000 wage and salary workers.

Most employers want the best workers they can find, so if most workers produce 10 of something an hour and Joe can produce 12 an hour, or if Mary’s work is of higher quality than other employees, the boss is likely to give them a raise to keep them on staff.

For people in minimum wage jobs with few or no skills, demanding their salary be doubled to a "living wage" is somewhat akin to high school students demanding they be given a college diploma. And anyone earning minimum wage that is unhappy with it can go look for a better-paying job. If they can't find one, do their best at the current job, and get some training that will qualify them for something better.

An organization calling itself Socialist Alternative illustrates graphically the failure of a “living wage" minimum wage in an article titled "Profit is The Unpaid Labor of Workers."

"Hypothetically, lets assume that our job pays $7.50 an hour and our boss wants us to work for twenty hours," the article says. "At $7.50 an hour for twenty hours, that’s a total of $150. In that same period of time, however, the work we do will probably make $300, $400, or $1000 worth of pizza."

And here's where it gets good: "What does this mean? Just for arguments sake, lets assume we only create $300 worth of pizza. After our boss gives us $150 for our week’s worth of work – meaning our own labor essentially pays our wage – he is left with an additional $150 that he did not work for."

There’s a brilliant bit of insight hidden in that paragraph: "our own labor essentially pays our wage." To the socialist mentality, the only cost of running the pizza parlor is what the boss pays the pizza maker. Everything else – flour, sauce, pepperoni, cheese, insurance, rent/mortgage, electricity, water, sewage, trash pickup, taxes, fees, etc. – the boss apparently gets for nothing, and the money collected for the pizza that is not paid to the pizza maker is ill-gotten gains.

The "living wage" strikers similarly do not understand business, and what happens when wages go up. Raising the minimum wage requires a commensurate raise in all wages, to avoid causing strife among the other workers, and that means price increases that make the business less competitive. That could lead to staff cutbacks or ultimately closing the business.

The strikers and the socialists fail to understand and appreciate the investments of the owner(s), who may have mortgaged their home to finance the business, and managers of larger businesses, who usually have spent years in training and working to get where they are, perhaps starting as a minimum wage employee themselves.

Owners get whatever is left over after everyone else – employees, venders, lenders, taxes, etc. – have been paid. Often, particularly in the beginning or during hard economic times, that is little or nothing. And, few employees work as hard as the owner of a small business, and particularly a new business, yet the Socialist Alternative begrudges them making a decent return on their investment of capital and time.

It’s easy to criticize the boss from the sidelines. The best course for these critics would be their forced entry into the business owner’s world. At their own expense, of course. They would undoubtedly see things differently in short order.

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Unemployment, droning citizens, and sequester scare-mongering

February's unemployment rate fell from 7.9 percent to 7.7 percent, and the Labor Department’s survey of households found that 170,000 more people were working. But there's a downside: the survey also found that, despite the number of working-age civilians increasing by 165,000, the labor force actually shrank in size instead of growing, and 130,000 fewer people were working or looking for work in February.

The employment-to-population ratio (EPOP) was unchanged at 58.6 percent, exactly the same as the rate in February of 2012, and an anemic four-tenths percent above the low mark in the summer of 2011. This compares with an EPOP of 63.0 percent in 2007 before the crisis struck.

The Labor Force Participation Rate at 63.5 percent was well below the 66-to-67 percent rate that was normal over the last 20 years. The Bureau of Labor Statistics data show workers remain discouraged and many are unable to find full time employment, or have given up trying.

The U-6 number under the BLS’ “Alternative Measures of Labor Underutilization” includes persons who have given up looking for work, as well as the 7.7 percent who are unemployed. That number is 14.3 percent.

Compared with December 2007, when the recession officially began, there are 5.8 million fewer Americans working full time, and there are 2.8 million more working part time. Part-time workers, who usually work fewer than 35 hours a week, are still a minority of the work force, but their share is growing. When the recession began, 16.9 percent of those working usually worked part time. That share rose in 2008 and 2009 and has remained high since, and today stands at 19.2 percent.

This would not be so troubling if people were working fewer hours by choice. But that is not the case.

 * * * *

Isn't it interesting that the same administration that believes foreign terrorists should be brought into the U.S., given the same status in court as actual citizens, provided a defense attorney if they can't afford one, and put on trial as if they had merely shoplifted items at the local grocery store, would equivocate instead of forthrightly condemning the idea of potentially using a drone on U.S. soil to kill a U.S. citizen who was not posing an immediate threat, and do so with no more due process than that someone in the administration thought that person was a threat to the country.

Citizens are guaranteed protection from such third world practices by the 5th Amendment to the U.S. Constitution; non-citizen terrorists -- actual and suspected -- have no such guarantees, and deserve none. This small point apparently escapes the notice of the Obama administration.

Sen. Rand Paul (R-KY) had the good sense to force this issue to the fore by filibustering the confirmation of John Brennan as CIA Director in order to get the administration to furnish more information about its intentions. Some Democrats joined Sen. Paul in holding the administration accountable to the Constitutional protections afforded U.S. citizens.

Ultimately, Mr. Brennan was confirmed, but he took the oath of office by swearing not on a Bible, as is customary, but on a version of the U.S. Constitution that did not include the Bill of Rights.

* * * *

Two of the most prominent aspects of the sequester are the scare-mongering and duplicity of the Obama administration.

First, an example of the false predictions of catastrophe: “Starting tomorrow everybody here, all the folks who are cleaning the floors at the Capitol. Now that Congress has left, somebody’s going to be vacuuming and cleaning those floors and throwing out the garbage. They’re going to have less pay. The janitors, the security guards, they just got a pay cut, and they’ve got to figure out how to manage that. That’s real," President Obama said at a news conference on March 1.

Didn't happen, and was never going to happen.

And now, the duplicity: The Washington Times reported that "Animal and Plant Health Inspection Service official Charles Brown said he asked if he could try to spread out the sequester cuts in his region to minimize the impact, and he said he was told not to do anything that would lessen the dire impacts Congress had been warned of."

Mr. Brown was told in an email: "We have gone on record with a notification to Congress and whoever else that 'APHIS would eliminate assistance to producers in 24 states in managing wildlife damage to the aquaculture industry, unless they provide funding to cover the costs.' So it is our opinion that however you manage that reduction, you need to make sure you are not contradicting what we said the impact would be."

The Armageddon President Obama has forecast could easily be averted by a simple bill in Congress to allow the president to decide what spending to cut and what not to cut, or to allow managers to manage their own budgets. But if the APHIS directive described above reflects the president's attitude, Mr. Obama wants the maximum pain from his boondoggle, and also wants to stay as far away as possible from responsibility for the misery his idea produces.

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Looking at the United States of America by the numbers

By James Shott

As the end of 2012 draws near, here are some interesting and revealing statistics about our country.

The Gross Domestic Product Growth Rate has been anemic all year, but had its biggest increase in the 3rd quarter, rising 2.7 percent. That was double the 2nd quarter’s 1.3 percent, and beat the 1st quarter’s 1.9 percent. From 1947 until 2012, the United States GDP Growth Rate averaged 3.2 percent.

* * *

In 2011 the population of the U.S. was 313.8 million and 153.6 million Americans were in the labor force. The nation produced total GDP of $15.1 trillion, roughly $49,000 in per capita GDP.

The U.S. Treasury collected tax revenue of a little more than $2.3 trillion and as a percent of GDP the economy is taxed at slightly more than 15 percent. However, the federal government spent about $3.8 trillion, creating a budget deficit of more than $1.3 trillion, or 8.63 percent of GDP. Each man woman and child citizen’s share of the cost of government is more than $12,000.

Currently, the national debt is roughly $16.3 trillion, which works out to about $51,000 per man, woman and child. This year’s federal budget deficit adds $3,500 or so of additional debt per citizen.

* * *

The November jobs report listed 146,000 new jobs and a U-3 Unemployment Rate of 7.7 percent, two-tenths lower than the October figure. Unfortunately, this news is not as good as it appears. To have a truly meaningful effect on unemployment, more than 300,000 new jobs must be created each month. The Labor Department revised downward new job numbers in October from 171,000 to 138,000, and from September in 148,000 to 132,000.

The drop in the unemployment rate resulted not from lots of people going back to work, but because 350,000 people dropped out of the workforce.

The Labor Force Participation Rate dropped from 63.8 percent to 63.6 percent. The 146,000 new jobs have a much greater effect on a smaller labor force than on a larger labor force. If the labor force remained the same as it was in January 2009, U-3 unemployment would be 10.7 percent. The more accurate U-6 Unemployment Rate, which includes not only those working and those looking for work, but also those who have become discouraged and given up looking for jobs, is 14.6 percent for November.

* * *

In June, a total of 142,415,000 people were employed in the U.S, according to the Bureau of Labor Statistics, including 19,938,000 who were employed by federal, state and local governments. By November, the total number of people employed had climbed to 143,262,000, an overall increase of 847,000 in the six months since June. In the same six-month period the number of people employed by government increased by 621,000 to 20,559,000. These 621,000 new government jobs equal 73.3 percent of the 847,000 new jobs created overall.

* * *

Back in July of 2008 candidate Barack Obama said this about the $4 trillion in debt that we incurred under the Bush administration: “The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents – #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic.”

According to the U.S. Treasury, on July 2, 2001, the national debt was approximately $5.7 trillion. On inauguration day 2009, the national debt stood at $10.6 trillion. Last Thursday, it stood at $16.3 trillion. That means the debt has increased $5.7 trillion during Mr. Obama’s first four years, and that is more than all presidents through Bill Clinton, and the first five months of George W. Bush’s tenure. In the name of U.S. taxpayers Mr. Obama has borrowed more than $49,500 per man, woman and child.

* * *

Inflation in October was 2.2 percent, up from September at 2.0 percent, August at 1.7 percent and July at 1.4 percent. The highest level of inflation since 2000 was 5.6 percent in July of 2008.

* * *

Are we drowning in regulations? Ayn Rand’s classic Atlas Shrugged in paperback has 1,088 pages. The 2011 Federal Register totals 82,419 pages, nearly 76 times more than Ms. Rand’s book. A popular estimate of the cost of regulations on the economy is $1.75 trillion annually, which is nearly 76 percent of total amount of tax revenue collected last year.

* * *

In 1913 the U.S. tax code was 400 pages. Today, it’s more than 73,000 pages, which means we added on average 730 new pages each year. It is estimated that U.S. taxpayers pay $431.1 billion annually, or 19 percent of total tax revenue collected last year, just to comply with and administer the U.S. tax system.

Cross-posted from Observations

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Items in the news: Three examples of labor unions behaving badly

By James H. Shott

Private sector labor unions have all-time low membership, which results from the fact that workers see a relatively low value in belonging to a union. Despite the lack of necessity for their continued efforts on the part of employees, unions nevertheless continue interceding to “improve” conditions that are already good enough for the vast majority of workers, a condition which threatens the continued existence of unions and thus threatens their leaders’ political influence and high pay levels.

The total compensation of some labor leaders places them firmly among President Barack Obama’s 1 percent of people making more than the $250,000 threshold that he believes should pay higher taxes, such as: AFL-CIO President Richard Trumka – $293,750; United Food and Commercial Workers President Joseph Hansen – $361,124; National Education Association President Dennis Van Roekel – $460,060; and American Federation of State, County & Municipal Employees President Gerald McEntee – $512,489.

In our still mostly-free country, if workers want to join a union they certainly may do so. But when you look closely, you see much union activity that does more harm than good, except for the relatively few workers that gain excessive benefits that hurt the businesses they work for and, of course, union leadership and the politicians with whom they are incestuously involved.

In one example from Thanksgiving week, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union was a party in a dispute that resulted in the closing of Hostess Brands, an 85 year-old company that made Wonder Bread, Twinkies, and 28 other products.

The company had 372 separate bargaining contracts for workers, 42 multiemployer pension plans, 5,500 separate delivery routes and a vast production system.

Hostess has had financial problems for several years and had previously gotten concessions from the 12 different unions that represent its workers, but in this last round the Bakery Workers, which represents about 5,000 employees, refused concessions, even after management said if concessions were not accepted, the company would shut down.

The union claims that vulture capitalists sucked out hundreds of millions of dollars by leveraging up the company, and that management had given itself millions in pay raises while demanding worker cuts.

Actually, Ripplewood Holdings injected $150 million in three rounds of investment as the company’s troubles grew, and lost every dollar. The raises were a tiny portion of the company’s losses of nearly $500,000,000 in two years, but Ripplewood rescinded the raises and made each executive work for a dollar per year.

Hostess paid out almost $100 million in health benefits for retirees last year, but over half of it covered workers who never had worked at Hostess. You see, the Teamsters’ “multi-employer pension plan” transfers the pension obligations of a bankrupt company to surviving rivals, speeding up the collapse of troubled companies.

Union rules designed to create more union jobs forced Hostess to run separate truck fleets for delivering bread and its sweet products. Instead of one driver delivering to each of Hostess’ thousands of customers, union rules required two, one for sweets and one for bread. Union restrictions on distribution routes made it unprofitable to serve tiny outlets, yet the union barred Hostess from using non-union distributors.

Workers were asked to take an 8 percent pay cut and pay 17 percent of their health-care costs, like most other workers do, instead of zero. In return, the union would have received 25 percent ownership of Hostess plus $100 million of debt to be paid back to the unions.

Instead, the union made a decision that closed the company, and nearly 18,500 workers will lose their jobs as the company shuts 33 bakeries and 565 distribution centers, and 570 outlet stores.

And then there is the Service Employees International Union (SEIU) that was voted out at Aviation Safeguards at Los Angeles International Airport by company workers who wanted out of the SEIU. In response the union brought in 1,000 members who weren’t employees of the company to block entrances to the airport, inconveniencing hundreds of innocent travelers.

“We petitioned to leave the SEIU almost a year ago, and the contract ended,” Frederick McNeil of Aviation Safeguards said. “And now they’re bringing in outsiders to block travelers who are just trying to get home for the holidays. It’s ridiculous.”

The United Food and Commercial Workers organized Black Friday protests against Wal-Mart, and the National Labor Relations Board refused to respond in a timely manner to a Nov. 17 Wal-Mart petition to prohibit the protest, saying the request would be dealt with the week after Thanksgiving.

Relatively few Wal-Mart employees participated, and one protester carried a sign that said: “I’m getting paid $5.50 an hour by the union to protest Wal-Mart paying $9.50 an hour.”

In the 1920s renowned union leader Samuel Gompers was asked what organized labor wanted, and reportedly answered, “More,” a philosophy that endures today. Unions raise employee costs beyond the competitive level, increasing prices to consumers and putting negative economic pressure on businesses. If unions are to survive, they must cease being enemies of business and become partners with them, working for the mutual success of companies and their workers.

Cross-posted from Observations

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Trying to understand job numbers that appear to challenge reality

Commentary by James H. Shott

After three years of a lackluster economy, unacceptably high unemployment, serious policy gaffes and generally poor performance, President Barack Obama really needed some positive development. But he didn’t get anything positive at the first presidential debate with challenger Mitt Romney, which was, to be kind, uninspiring.

And then – magically, two days after the debate – the September jobs report came out and in one fell swoop wiped away that negative. From the jobs report we learned that the U-3 unemployment rate fell from 8.1 to 7.8 percent, a surprisingly large drop, given what we’ve seen over the last three years, big enough to get below the magic 8.0 threshold that dogs incumbent presidents.

But then the big surprise: There were 873,000 more people working in September than in August.

Really? Nearly a million people found work in one month?

That number is wildly out of line with months of job number reports. According to the Bureau of Labor Statistics (BLS), “In 2012, employment growth has averaged 146,000 per month, compared with an average monthly gain of 153,000 in 2011.” And suddenly, just when Mr. Obama needed it most, 873,000 people find work. What’s going on?

The BLS has two monthly surveys that measure employment levels and trends: the Current Population Survey – the household survey – and the Current Employment Statistics survey – the payroll or establishment survey – which the BLS describes thusly: “The household survey and establishment survey both produce sample-based estimates of employment and both have strengths and limitations.” The establishment survey has a larger sample size and smaller margin of error than the household survey. “However, the household survey has a more expansive scope than the establishment survey.”

Economists say that over a period of months the two different surveys will show similar results, however, the household survey is erratic, with wild monthly swings up and down, and it is not unusual for responses to the survey to be made by proxies, who may answer for the targeted respondent. Any single month’s results cannot be depended upon for an accurate picture of employment changes from the previous month, whereas the establishment rate moves more steadily up or down.

Illustrating that point is that the establishment/payroll survey showed total nonfarm payroll employment rose by only 114,000 in September, which is substantially lower than the monthly average of 146,000 for 2012, but more in line with average job growth than is the household figure.

“We believe part of the drop in the unemployment rate over the last two months is a statistical quirk (the household data show an increase in employment of 873,000 in September, which is completely implausible and likely a result of sampling volatility),” say economists John Ryding and Conrad DeQuadros of RDQ Economics. “Moreover, declining labor force participation over the last year (resulting in 1.1 million people disappearing from the labor force) accounts for much of the rest of the decline,” they conclude.

Just how implausible is that 873,000 new jobs number that appeared in only a month? It is the highest one-month jump in 29 years.

Further, the BLS explains that jobs reflected in the household survey are different types of jobs than are tracked in the payroll survey. They include those in start-up businesses, the self-employed, unpaid family workers, agricultural workers, private household workers, and some are people who can’t find a regular job and have started working from home, perhaps selling items on E-Bay; jobs that are excluded by the establishment survey.

While the U-3 rate fell to 7.8 percent, it is still too high. The sky-high number reported in the household rate may reflect a turn in the oh-so-slow rate of job creation. But it may not. We’ll have to wait and see what happens next month.

Following this “October Surprise,” to maintain a healthy perspective, other statistics must be kept in mind: The economy is grinding forward, with GDP a mere 1.3 percent last quarter. Most knowledgeable observers say we need 200,000 to 250,000 new jobs each month to drive unemployment down at a suitable speed, not the 146,000 we’ve been averaging. And while the Labor Force Participation Rate ticked up to 63.6 percent from 63.5 percent, it is still near the 30-year low.

More relevant, the U-6 unemployment rate counts those who are underemployed and those who have given up looking for a job, and now sits at the seasonally adjusted rate of 14.7 percent.

The number of persons employed part time for economic reasons rose from 8.0 million in August to 8.6 million in September, because many workers saw their hours cut back or because they were unable to find a full-time job.

“The household survey painted a picture of a sharply falling unemployment rate—down 1.2 points over the last 12 months,” say Ryding and DeQuadros. “Such a rapid decline in the unemployment rate would be consistent with 4 percent to 5 percent real economic growth historically. Of course, the economy is not growing 4-to-5 percent, not even half that.”

Despite this surprising bit of good news, the economy is still under-performing, and nothing has changed to warrant four more years of Obamanomics. It’s way too little, and far too late.

Cross-posted from Observations

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