Saturday, December 8, 2012

The Self-esteem movement runs through our University system, but it is not from the students. University administrators need to stop patting themselves on the back. This is a MAJOR disconnect.

In a survey employers, providers (fancy way of saying educational institutions) and youth were asked to respond the questions at the bottom of the graphic.
Which entity is the odd-man out? Good Self-esteem runs through the halls of educational institutions throughout the land.

Maybe Denial IS a river and some really bad "stuff" flows through it.

Source: The Business Insider

Short explanation of why the Social Security Tax is a "regressive tax" and negatively impacts lower income people. Kinda important to know when discussing taxes in a larger context...

One of the discussions regarding tax policy pertains to "fairness" in the tax code.  One of the issues is that fact that it is possible for lower income people to have a higher "effective tax" rate on income than someone who makes lot of income.  I will use just one example to show how this works---the Social Security Tax.

The Social Security tax that an individual pays on earned income is 6.2%(note: RIGHT now that rate is 4.2% as a result of recent "stimulus plans" BUT this reduction is considered temporary, so I will just use the  6.2% for our  purposes here).  Also, keep in mind the individuals employer pays the same 6.2% of income on behalf of the employee, but we will ignore that as well.

This 6.2% tax is levied on all income up to $110,000.  The tax is NOT levied on the income ABOVE that amount, nor is it levied on dividends or capital gains from the sale of assets (physical or financial). This is an important point!

So, the maximum amount an individual would have to pay in Social Security Tax in a given year would be $6,820 ($110,100 X 6.2%).  Read that again. 

Let's do the math for someone who earns $50,000 and $200,000 per year and see the impact on effective tax rates for both of these people.

The person that makes $50,000 per year would pay $3,100 in Social Security taxes.  The "effective tax rate" for this individual (just for THIS tax only) would be 6.2% of income ($3,100/$50,000 X 100). Makes sense, right?

The individual who makes $200,000 would have the FIRST $110,100 of that income subjected to the Social Security tax BUT the remaining $89,900 would NOT be subjected to the tax. 

We already established at the outset, this would result in an maximum tax of $6,820.  As a percent of this individuals income, this would represent 3.4% of income earned ($6,820/$200,000 X 100).

So, while the higher income worker pays more in nominal dollars ($6,820 vs $3,100), the lower income worker pays a higher effective tax on their income (6.2% vs 3.4%).

This tax is termed a "regressive tax". Meaning the lower your income, the higher the impact the tax has on your total income (in percentage terms).

Is this "fair"? Not sure, but it IS the way it is---at least for now.

Now you know. Go dazzle your friends, family and teachers with this new found knowledge

Nice graphic showing where a majority of new jobs have been created in the last year. Is this a "Do you want fries with that?" economic recovery???

The graphic below shows the sectors where a preponderance of job growth has taken place in the last year.  The color key for each job category in along the bottom and the number of jobs created is on the vertical axis. The job categories are stacked to show the total jobs created in each sector.
""Leisure and hospitality, health care and social assistance, retail and temporary jobs — all low wage sectors — have been responsible for over half (51%) of the private sector job growth the last year.""---The Big Picture Blog
I ask my students to "go deeper" when confronted with a published headline statistic (whether it is a govt or private sector stat) reported in media.  It often does not tell the whole story.

It is not only the quantity of jobs created, but the quality of those jobs as well. 

I am not smart enough to know if this a good ratio---51% low wage jobs to 49% everything else. It is good for the workers who get those jobs, but what does it say about the overall health and longer-term outlook for the economy?  I don't really know. What do you think?

Source: The Big Picture Blog

Friday, December 7, 2012

Quick look at today's just release Employment Report. Unemployment rate decreased but probably for the wrong reason...

Basic data from the Employment Report for November that was just released today by the Bureau Labor Statistics (

The first graphic below (clipped from the actual report) shows the overall numbers used to calculate the Unemployment Rate. 

The primary reason the unemployment rate decreased from 7.9% to 7.7% is from a decline in the "Civilian Labor Force" (highlighted in yellow) of 350,000 people.  This means 350,000 people left the labor force for some reason.  It could have been they gave up looking for work altogether, they returned to school full time, or retired.  This last reason is probably a big mover of that number, but that is hard to parse from the avalable data.  It appears the rate is decreasing not because of significant job creation, but because of a smaller labor force as a result of people exiting the work force.

The civilian labor force is the sum of the number of EMPLOYED and UNEMPLOYED in the economy. 

Be careful! When I say "Unemployed" I mean the number of people OFFICIALLY classified as unemployed by the BLS according to their definition. 

This second graphic shows the general categories of jobs and how many (in thousands---add 3 zeroes to the numbers you see below) were created in each category. I higlighted the significant numbers.

Retail, as expected with holiday hiring, led the way.  The perponderance of these jobs are likely part-time jobs to staff stores and will dissappear in January/February.  These jobs accounted for 36% of the jobs created in November. If one is looking at the quality of jobs, it is open to intrepretation as to whether this is a positive sign or not.

Thursday, December 6, 2012

Interesting graphic showing how someone earning $69,000 or $29,000 ends up with the same income (cash and non-cash) after taxes/benefits/subsidies are factored in/out. Enlightening regardless of your politics.

This chart has been bouncing around various blogs. I tried to find something to counter the points made here but could not find anything substantial. I made some edits, just to highlight reference points to make it clearer.

The chart suggests that a single mother (with 2 children and lives in Pennsylvania) earning a gross income of  $69,000 in a year ("D") would have a net income (after taxes and adding in any cash and non-cash benefits) of $57,327 ("C").

IF a different mother earned a gross income of $29,000 ("A") in a year, she would have a net income (after taxes and adding in any cash and non-cash benefits) of $57,045 ("B"). 

Their after tax/after benefits (cash and non-cash) would just about equalize their income.  The mother with the $69,000 income would be a net "loser" of $11,673 and the mother with an income of $29,000 would be a net "gainer" of tax dollars/subsidies of $28,045.

Source: Here
This is interesting BUT there is more!  If this data is correct and this is the system people operate under, there is a GLARING unintentional consequence here.  Can you see it?

Look at the income level and benefit level at point "B", $29,000.  This this mother earns $1.00 more what happens to her level of benefits overall?  Yikes, they decrease by much more than the extra dollar she earned from, perhaps, a raise or a promotion.  This is a significant penalty for someone who is just getting by. 

So, what happens to the incentive to earn more, and by implication to be more productive? Notice the same thing happens to someone when they reach the $45,000 income level. The next dollar earned is VERY costly. 

People trying to get by and do the best they can are going to respond to the real-life, immediate, incentives put in front of them. 

This does not appear to be a system that promotes self-sufficiency as people climb the income ladder. 

Maybe I am looking at it wrong.  What do you think?  Tell me where I am going off the rails.

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