Women and Men in the Exact Same Jobs are earning the Exact Same Income

Posted by PITHOCRATES - April 13th, 2014

Week in Review

The Democrats are running out of ways to buy votes.  Which they desperately need as more people suffer the ravages of Obamacare.  Who will be entering the voting booth angry this fall.  Looking for someone to blame for taking away the health insurance and doctors they liked and wanted to keep.  And being that Obamacare was passed on purely partisan lines (no Republicans voted for it) the Democrats are sweating bullets as the midterm elections approach.  So they turn to an oldie but goldie.  The pay gap lie (see What pay gap? Young women out-earn men in cities, GOP pundit claims posted 4/8/2014 on PolitiFact).

We watched the debate play out between conservative pundit Sabrina Schaeffer and liberal pundit Elizabeth Plank on MSNBC’s The Reid Report, and again later between former White House adviser Anita Dunn and conservative pundit Genevieve Wood on CNN’s The Lead with Jake Tapper.

“If you compare women to men in the same job with similar background, similar experiences that they bring to the table, the wage gap all but disappears,” Wood said. “Women have made great strides. Instead of celebrating that, this is a political year, the White House wants to portray this war on women…”

PolitiFact has given you the nuts and bolts about the 77 cents statistic — you can read the two most important works in this area here and here. Basically, there is a wage gap, but it tends to disappear when you compare women and men in the exact same jobs who have the same levels of experience and education.

Well, there it is.  Equal pay for equal work.  When men and women have the same education, experience and skills doing the same job there is no pay gap.  Case closed.  In fact, single women without children are actually earning more than single men.  Which is the key to this argument.  For a woman’s earnings fall with interruptions in her career as she takes time off to have children.  Or works reduced hours to care for her children.  This is where the pay gap comes in.  When you compare apples and oranges.  Comparing women who take time off or cut back their working hours or take lower paying jobs that allow her to spend more time with her children to men who don’t.  Because they’re single.  Or are married and have a wife who takes time off to spend more time with their children.

In fact, women are making great strides.  At the expense of men (see Is the Gender Pay Gap Closing or Has Progress Stalled? by Josh Zumbrun posted 4/11/2014 on The Wall Street Journal).

“There’s no question that one of the things that ‘77 cents’ doesn’t emphasize is that there’s been enormous gains,” said Harvard University economist Claudia Goldin.

Looking at the data above shows three clear trends that have emerged since the 1970s:

1) The spread between the sexes narrowed between 1970 and 2000. It has made little progress since.

2) Men have made no income gains in over four decades. Adjusted for inflation, men earn less today than they did in 1972.

3) Women continued to make gains until the recession began. Whatever forces slowed the income growth of men from 1970 to 2000 did not halt the income growth of women.

Simple economics.  Supply and demand.  Men were making more and more every year.  Until the Sexual Revolution.  When women began to flood the labor market.  With more labor available the cost of labor fell.  So as women gained education and experience the supply of educated and experienced workers grew.  Allowing employers to pay less for these now more plentiful educated and experienced workers.  Which is why as women enjoyed income gains men saw their income decline when adjusted for inflation.  Simple economics.  Supply and demand.

A long time ago in high school chemistry I remember my lab partner did not complete a homework assignment that was part 1 of a 2-part grade.  There was a homework part.  And a lab part.  Being a nice person I asked the teacher if we could share the grade on the homework part (which I had received an ‘A’ on.  Or a 4.0).  The teacher was more than generous.  He said, “Sure.  A 4.0 divided by 2 equals a 2.0 for each.”  Or, a ‘C’ for each.  Suffice it to say my lab partner did not get a 2.0 on the homework that went undone.

This is why men are earning less.  Because women have entered the workforce.  The revenue businesses use to pay their employees didn’t increase like the number of educated and experienced workers did.  So the amount of available revenue for pay and benefits was shared by more people.  Each getting less than a man did before the Sexual Revolution (when adjusted for inflation).  So instead of a single paycheck supporting a family these days it now takes two paychecks.  Because men are making less today since women have lowered the price of labor.  By increasing the supply of labor.  Not because they are paid less.  But because there are so many workers for so few jobs that businesses don’t have to pay as much as they once did to hire people.  Which is more to blame for pressure on wages than any pay gap.



Tags: , , , , , , , , , , , , , , ,

New York’s High Tax Rates makes it Difficult for People to Willingly Work in New York

Posted by PITHOCRATES - March 29th, 2014

Week in Review

If you ever wondered why the communists built the Berlin Wall this is why (see Man Takes Selfies for Proof to the IRS by Brian Koerber posted 3/18/2014 on 3/18/2014 on Mashable).

Anne Jarvis’ father, Andrew, is an architect that splits his time between his firm’s branches in New York City and Philadelphia. The commute became so overwhelming that he began to rent an apartment in NYC to improve his quality of life.

Upon further inspection of tax laws, Andrew learned that in order to avoid being taxed by New York, he would only be allowed to live in the city 182 days or less out of the year. In preparation for disputes against his living situation, he began taking selfies, as a way to prove to the taxman that he spends more time in Philadelphia, than he does in New York.

When a taxing authority taxes too much the natural inclination of free people is to move.  And that’s what was happening in East Berlin.  The best and brightest that drove the economy were walking across the street into the West.  Leaving behind only the less-educated and the less-skilled.  So to stop this brain-drain the communists built the Berlin Wall.  To keep the best and brightest from going to where life was better.

Those on the left will read this story and call this architect greedy.  For he enjoys the privilege of working and living in New York City part of the year.  And should pay for that privilege.  In particular so they can have more free stuff paid for by the best and brightest.  But if New York starts taxing his income that doesn’t mean Pennsylvania will stop taxing his income.  No.  They both will tax his income.  As if he’s two different people.  That is, he will pay the taxes of two people.  Is that fair?  Would even those on the left call that fair?  Of course if you suggest they should pay two cellular bills (theirs and somebody else’s) they would say, “Wait a minute.  That is NOT fair.”  But the architect?  They’d probably say something like, “He’s rich.  He can afford to pay the income taxes of two people.  And should.”

Being rich is a relative term.  It basically means anyone making more than you these days.  So even people who win the lotto don’t consider themselves rich when it comes to paying income taxes.  They’ll say that having to give almost half of their winnings to the taxman is unfair.  But having two states tax this architect is fair.  Because he can afford it.  For he earns that every year.  While they only won one lotto.

The way New York City is going they will have to build a wall around Manhattan if they expect to keep the best and brightest from fleeing their oppressive tax rates.  Or they’ll have to get the federal government to tax all states oppressively high so people have no better place to go.  Which explains why big-government liberals are all for expanding the power of the federal government.  For their oppressive liberal policies won’t work if the people can move to another state to escape them.



Tags: , , , , , , , , , , ,

FT213: “Rich liberals support a large welfare state to assuage their wealth guilt.” —Old Pithy

Posted by PITHOCRATES - March 14th, 2014

Fundamental Truth

Rich People become Liberals so People don’t Shame them for their Obscene Wealth

Rich people love being rich.  They love their mansions.  Their expensive cars.  Eating at the finest restaurants.  Drinking the finest wine.  Going on lavish vacations.  Going to the best parties.  Hanging with the beautiful people.  And rich men especially like the sex with beautiful young women their wealth can make happen.  To quote the Eagles song Life in the Fast Lane rich people love having everything all of the time.

Some of the richest people in the United States are liberals.  Yes, those same people who argue for income and wealth equality.  Hollywood stars.  Televisions stars.  Authors.  And music stars.  Who are everything they stand against.  They’re part of that evil 1%.   And they live very ostentatious lives.  Their wealth is over the top.  Bling.  Cars.  Cars with bling.  Nothing but the best.  And then some.  This wealth is okay, though.  But those in the 1% other than them?  Government should raise their taxes to take as much of it away as possible.  And we should all shame them for daring to have such obscene wealth.

Of course, rich liberals like their obscene wealth.  They want to keep it.  And they want to continue their lavish lives.  But they don’t want people shaming them.  They want people to love them and adore them.  So they buy whatever they’re selling.  Movies, televisions shows, books or music.  They don’t want anyone shaming them for their obscene wealth.  So they do something very simple to avoid that shame.  They become public liberals.

Only those Businesses that Continually Please their Customers Succeed

Liberals can have the most obscene amounts of wealth without anyone shaming them for that obscene wealth.  Why?  Because they belong to the ‘right’ political party.  The one that argues against income and wealth inequality.  So they get a pass.  Which is why so many rich people are liberals.  They want to be left alone.  And their call for higher taxes on rich people?  Well, they’re so rich that they can hire the best accountants and tax attorneys to help them shield their wealth from the taxman.  There’s a reason why the tax code is so convoluted and not a simple flat tax like conservatives want.  To help rich liberals keep their money.

Then there are rich liberals who have too much of a conscious.  And they feel guilty for having obscene wealth.  But not guilty enough to give their wealth away.  These liberals are vehemently pro big government.  They want a massive welfare state.  To assuage their wealth guilt.  So they can continue to enjoy their obscene wealth.  Their 1% wealth.  Without having to feel guilty about it.  Such as, presumably, The Daily Show’s Jon Stewart.

Jon Stewart is a very well-read and intelligent man.  He knows a lot of stuff.  Unfortunately, though, he draws many wrong conclusions with that knowledge.  He favors big government.  And a vast welfare state to help those in need.  He trusts government while distrusting corporations and businesses.  Because, as he has said, we have no vote with corporations and businesses like we do with government.  Via elections.  But he’s wrong.  We do have a vote with all corporations and businesses.  The moment they stop treating their customers right those customers go to other corporations and businesses.  Most new businesses fail within 5 years.  And some big companies that have been around for years fail and go out of business.  Why?  Because their customers DO have a large vote in whether they succeed or not.  And only those businesses that continually please their customers succeed.  Something you just can’t say about government.  For no matter how much they anger the people little ever changes.

Not only is there Income and Wealth Inequality there’s also Income Tax Inequality

Fox News has been talking about people scamming the welfare state.  Highlighting a surfer dude in California as a typical welfare cheat.  Stewart lambasted Fox News for that.  Saying one person (or two or three, etc.) does not mean all people on welfare are gaming the system.  Although he uses that very logic to point at corporations caught in wrong-doing.  Saying they represent all corporations and businesses.  And he joins the choir about how rich corporations and rich people are not paying their fair share of taxes.  And how some of these rich corporations and rich people are hiding their income and wealth from the taxman.  Despite their paying the lion’s share of all taxes.

According to the National Taxpayer’s Union, when it comes to income taxes it’s rich people paying the most.  So not only is there income and wealth inequality.  There’s also income tax inequality.  Through recent years the top 1% of income earners has paid approximately a third of all income taxes.  The top 5% has paid more than half of all income taxes.  And the top 10% of income earners has paid about 70% of all income taxes.  While the bottom 50% of income earners, the people rich liberals want to help, pay about 3% (or less) of all income taxes.

You don’t have to raise tax rates on the wealthy.  They’re already paying a disproportionate share of all income taxes.  In fact, if you cut tax rates and cut business regulations to help rich business and rich people get even richer more tax revenue would flow into the treasury.  This would be a good thing.  Rich people getting richer.  And more people becoming rich.  This should be what everyone wants.  Based on the amount of taxes rich people pay.  So we should stop trying to help the less fortunate by raising taxes on the rich.  And creating more onerous regulations for businesses that benefit the less fortunate.  Like Obamacare.  For it hurts the profit incentive.  Which prevents rich people from getting richer and paying more income taxes.  As well as dissuades people from becoming business owners or expanding their businesses.  Which means fewer jobs.  Fewer hours in those jobs.  And the replacement of costly people with machines.  It’s because of these things that median family income has fallen under the Obama administration.  Which is the last thing any good liberal should want.  This is why rich liberals have got to stop supporting a large welfare state to assuage their wealth guilt.  It’s killing the middle class.  And destroying the jobs that could pull the less fortunate into the middle class.  And beyond.



Tags: , , , , , , , , , , , , , , , , , , , , , ,

Men tend to get Paid More than Women because of the High Cost of Maternity Leave

Posted by PITHOCRATES - August 31st, 2013

Week in Review

There was a movie in 1985 called Head Office.  It lampooned corporate America.  In it there was this one character who was dying from heart disease or something.  But he refused to take time off from work.  Because if he did someone else would get his job.  He’d rather take a chance on dying than risk losing his job.  Because the corporate world was that cutthroat.  There was always someone waiting in the wings to take your job.  Which is why you never wanted to miss work.  Because if someone else did your job for you when you were away and they did it better than you they might just keep your job.  Leaving you to start your corporate career all over again.  And often with less pay and fewer benefits.

That’s the way it used to be.  Today, it’s a bit different.  Especially if you’re a woman (see As a boss, maternity leave is a nightmare for employers by Josephine Fairley posted 8/28/2013 on The Telegraph).

There’s no denying, of course, that for companies – especially really small companies – maternity leave presents challenges. Suddenly, a key team member isn’t there. And even more challengingly, there’s no way to know if she’s coming back – which makes it hard to plan for the future…

Right now, it isn’t legal to ask a pregnant woman whether she’s even thinking of coming back to work. There’s no imperative for her proactively to tell you proactively – never mind before the birth, but right up to the time that the 52 weeks of maternity leave are up. And my observation is that’s partly what makes it so hard to plan, and accommodate, a woman who’s on maternity leave…

I know several women who’ve returned to work after a few months, never mind a year of maternity leave, feeling like they’d landed on Mars because so much had changed while they were away.

52 weeks of maternity leave?  And they don’t have to say whether they’re coming back to work?  The boss can come in one day and find a key employee will leave for an extended absence in 6 months time?  And not know if she will ever return to work?

So they have to hire someone temporarily.  Who they will have to let go if she comes back from maternity leave.  Even if this temporary person turns out to be better in that position.  So a person that they hired and trained so well that they are better than the person they filled in for must lose his or her job.  Someone who may have taken that position because they didn’t expect that person to return from maternity leave.  And because it was the best job available at the time they took that chance.  Only to find the year they invested there was a year out of their life that they could have spent somewhere else.  Building a career where their hard work was rewarded.  Then spend time and resources training the woman returning from maternity leave.  So she can understand all the changes that happened in her absence.

This is why men tend to get paid more when they compare salaries.  First of all, with a lot of women taking maternity leave it does bring down the women’s average income when they take a year or two of income earning years out of their career.  And secondly, who do you think an employer will want to hire?  Someone that they have to accommodate for up to a year in maternity leave?  Or someone that isn’t going to walk in and say “I’m going to have a baby in 6 months”?  If they are working on a 2 year project they don’t want to worry about a key team member leaving in the middle of it.  It may be unfair.  But men can’t get pregnant.  They can do a lot of stupid things to ruin a big project just as women can.  But women have that one other variable.  That a business owner can’t have a contingency for.  What are they going to do?  Have two people doing the job of one in case one of them goes on maternity leave?  What if it’s two women and they go on maternity leave at the same time?  Do you have to make sure that one of the two people doing the job of one person is a man?  So he will always be available if the woman goes on maternity leave?  Of course, you know where that will take you.  Why not just hire a man and have one person do the job of one person?  And remove the need for any contingency in the first place?

Business owners hate uncertainty.  Pregnancy creates uncertainty.  This isn’t a man versus a woman issue.  A battle of the sexes.  For women own businesses, too.  And hate uncertainty just as any other business owner.  Some may make a stand for women in the workplace.  Hire women into key positions then deal with their maternity leave.  But they, too, would probably prefer hiring a man in some key positions.  So they can just worry about the usual things.  Like losing a key employee who leaves for a better paying job.  Of course if they do they at least can immediately start interviewing a replacement.  Without waiting 52 weeks.



Tags: , , , , , , ,

Cost-Benefit Analysis and Health Insurance

Posted by PITHOCRATES - August 19th, 2013

Economics 101

We do a Cost-Benefit Analysis before making a Buying Decision

We make decisions everyday comparing costs to benefits.  Any time we go to a store.  Any time we make a buying decision.  We ask ourselves how much are we willing to pay to enjoy the benefit of the thing we’re thinking about buying.

For example, people love boats.  For there is nothing like being on a boat on a beautiful summer’s day.  Especially if you’re a guy.  Because bikini-clad women love sunning themselves on boats.  You could even say that a boat is a magnet for beautiful, bikini-clad women.  But how much are you willing to spend to enjoy that benefit?  Being around beautiful, bikini-clad women?  For owning a boat is very costly.  Especially if you live in a northern clime with a short boating season.

First of all, buying a boat is very costly.  It could determine the size of your house or where you live if you’re making a boat payment.  Then there’s insurance.  Fuel costs.  Transportation costs.  And inconvenience.  Of the time, effort and wear & tear on your vehicle to haul your boat to and from the water.  Or you can spend even more money to dock your boat at a marina.  And dry-store it over the winter.

Young, Healthy People do not buy Health Insurance because it has no Immediate Benefit for the High Cost

It takes a pretty healthy income to enjoy the benefit of boat ownership.  Something business owners can afford.  Because they earn a decent income.  But they earn that income because they put in a lot of hours.  So many that their boat may sit in their yard for most of the summer.  Or in storage.  So while a boat owner continues to pay the costs for the benefits of boat ownership he or she rarely enjoys those benefits.  Especially if they get married.  And the spouse gets seasick.

In an honest cost-benefit analysis few would buy a boat other than a business that needs a boat to do their business.  Like a fishing boat.  Or a harbor tug.  For these people there is a financial benefit that comes from boat ownership.  Income.  Unlike earning enough money to be able to afford a boat these people use their boat to provide an income.  Making the cost-benefit analysis completely different.  Instead of rationalizing the value of having fun they look at the revenue their boat will be able to provide.  And if it’s greater than the costs of owning that boat they will go ahead and buy that boat.

Sometimes we make these decisions based on impulse or desire instead of objective analysis.  Buying a more costly car when a less costly one would do.  But there are times when some go too far in the other direction.  Deciding not to buy something because they can’t see or enjoy the benefit.  Such as car insurance.  Or health insurance.  Things that have no benefit unless something bad happens.  And a lot of those going happily through life see no reason to spend a lot of money for something that brings them nothing good now.

Obamacare and the Individual Mandate make Generational Theft Law

This is why health insurance is so expensive.  Because FDR broke the health care system.  At least, the money-side of it.  When the FDR administration put in wage caps General Motors started offering a health insurance benefit.  This got around FDR’s wage cap and allowed them to offer more to the best workers to get them to come and work at General Motors.  And ever since we looked at health insurance as an employer benefit now instead of another cost in our everyday life.  Like food and housing.

After this our employment decisions changed.  People chose a job not based on what they would enjoy doing in life but by the size of their health care benefit.  The owner-provided health insurance.  At first the sky was the limit.  Because the U.S. automotive industry could charge whatever they wanted for a car.  And the price of cars began to climb to cover those very generous benefit packages.  Undoing what Henry Ford had done.  As the benefits pushed the cost of a car higher and higher it soon was not available to the average working man.  As they could only be afforded by the upper middle class and above.  Until competition entered and provided a lower-cost car that the less wealthy could afford.  As the U.S. automotive industry lost market share their sales declined.  So a smaller revenue had to pay for a growing number of pension and health care expenses of retired GM workers agreed to during the glory years.  Who were living longer into retirement than originally assumed.  And consuming a lot of medical services in those later years.  All paid for by the health insurance companies.  Causing health insurance costs to soar.

Young people are healthy people.  They rarely go to the doctor.  So when it comes to buying very expensive health insurance (to pay for the older generation consuming the bulk of health care services) they choose not to.  Because of an objective cost-benefit analysis.  Young, healthy people, today, are getting little benefit from paying an enormous amount of money for a health insurance policy.  Their parent’s generation (or their grandparent’s) is getting the benefit.  So they make a rational decision and NOT buy health insurance.  Which raises the cost of health insurance for those who do.  For today health insurance is not insurance.  It’s generational theft.  Stealing from the young to pay for the old because of FDR’s decision that made health care an employee benefit.  And an aging population makes it worse.  Enter Obamacare and the individual mandate.  Which made this generational theft law.  Forcing the young to pay for the old against their will.  Leaving little for them on their meager incomes to support or start a family of their own.  Preventing them from buying a new car.  While the thought of owning a boat is now a distant dream.



Tags: , , , , , , , , , , , , , , , , , ,

McDonald’s 2012 Annual Report

Posted by PITHOCRATES - August 6th, 2013

History 101

The Benefit of a McDonald’s Franchise is getting the Benefit of their Years of Building their Brand

Recently a late-night comedy show attacked McDonald’s for being greedy.  Because they don’t pay their minimum wage workers a living wage.  Because what were once entry level jobs are now the primary support for some families.  And why have entry level jobs come to support families?  Because the anti-business policies of the current administration have destroyed better-paying jobs.  But they don’t attack that on late-night television.  They attack a company actually providing jobs in a jobless economy.

Today McDonald’s is huge.  You can find them pretty much anywhere in the world.  Which can be a welcome site for a weary traveler.  For they know they can walk into a McDonald’s wherever they are and have the comfort of a meal exactly like that at home.  Which is pretty amazing if you think about it.  And why McDonald’s is so successful.  The sight of those Golden Arches can attract a foreigner in a strange land or a construction worker on a new project in a distant city.  They know exactly what they can get at that McDonald’s.  What it will taste like.  And what it will cost.  Even if they’ve never been in that McDonald’s before.

This is because McDonald’s has very successfully built their brand.  Which is one of those intangible things.  It has great value.  But you can’t physically touch it.  Those who own a McDonald’s franchise can enjoy a thriving business.  From day one.  Without doing any marketing to get people to walk into their restaurant.  They don’t have to.  Because McDonald’s has already done it.  And continues to do it.  This is the benefit of the franchise.  You get the benefit of all those years of hard work McDonald’s did to build their brand by simply paying a franchise fee (see Restaurants and Franchises posted 8/5/2013 on Pithocrates).  It’s not cheap.   But it’s such a fair deal for both franchiser and franchisee that McDonald’s had 27,882 franchised stores in 2012 (see McDonald’s 2012 Annual Report, page 11).

Owning a McDonald’s Franchise allows you to own a Restaurant that has been Successfully in Business for 72 Years

In addition to the intangible value of the brand the franchise fee also includes rent.  For McDonald’s “owns the land and building or secures long-term leases” for the franchisee’s store (see McDonald’s 2012 Annual Report, page 11).  While the franchise needs to foot the bill for the “equipment, signs, seating and décor.”  This makes sure all stores are modern and up to date and uniform.  Helping to maintain that comfortable familiarity for the customers.  While splitting the capital costs between the franchisee and franchiser.  So both parties have a major investment in the business.  And each shares in the profits of the business.  Perhaps the best of the deal for the franchisee is getting a mentor.  And a detailed operating manual telling them everything they need to know and do.

Owning a McDonald’s franchise is costly.  But you get to step into a restaurant that has been successfully in business for 72 years.  Give or take.  Considering that half of all restaurants fail within the first five years of business this is a HUGE benefit for the franchisee.  And something well worth the franchise fee.  As evidenced by 27,882 franchised stores in 2012.  So what is that franchise fee?  And how much money does the franchisee get to keep after paying the franchise fee?

Well, if you do a little number crunching with the financials included in the 2012 annual report you can get an approximate number.  McDonald’s also has stores they own and operate.  In 2012 they had 6,598 company-owned stores.  The average per store revenue was $1,358,594 (calculated by dividing the total revenue from the company-owned stores by the number of company-owned stores).  A similar calculation gives an approximate $667,205 franchise fee per franchised store.  Subtracting the typical franchisee fee from the typical store revenue (assuming all stores have the same average revenue as the company-owned stores) gives the franchisee an annual income of $691,389.  From this income the franchisee has to pay for food, labor and overhead.  And whatever is left over is profit.

High School Kids and College Students work at McDonald’s because they need no prior Restaurant Experience

The rule of thumb in restaurants is that costs are broken down into thirds.  One third is food cost.  One third is labor cost.  And one third is overhead and profit.  So if we divide that $691,389 by 3 we get an annual food cost per franchised store of $230,463.  Ditto for labor.  And overhead (gas, electric, water, insurances, taxes, licenses, fees, waste disposal, light bulbs, toilet paper, soap, garbage bags, etc.) and profit.  Let’s look at the labor cost more closely.  To see if McDonald’s is greedy when it comes to paying their employees.

The benefit of owning a franchise is that it comes with very explicit instructions.  A McDonald’s distributor delivers prepared food ready for the grill and fryer.  As delicious as it is, though, it doesn’t take a highly skilled chef to prepare it.  As the franchisee operating manual has it down to a science.  Which is why high school kids and college students work at McDonald’s.  They need no prior restaurant experience as it is an entry level job.  Typically their first job.  Where they learn what it’s like entering the workforce.  The importance of being on time.  Following instructions.  Being responsible.  Skills that they will use in later jobs.  Which most do.  As there is a high turnover of employees at McDonald’s as there is for all fast food.  Because these are entry level jobs for unskilled workers.  Who learn the skills they need on the job.  So let’s assume a restaurant that is open 24 hours a day, 7 days a week.  Assuming an hourly rate of $8.50 and an overhead of 40% for direct labor costs (workers’ compensation insurance, unemployment taxes, health insurance, uniforms, training, etc.) the average hourly labor cost comes to $11.90.  Dividing the labor cost of $230,463 by this hourly cost gives us 15,758 annual labor hours.  Or about 53.06 hours per day.  Or 17.69 hours per 8-hour shift.  Giving us an average of 2.21 workers per 8-hour shift.

During the breakfast and lunch rush a typical McDonald’s may have between 5-8 people working.  With fewer working in the evening.  And a skeleton crew over night working the drive-thru.  So the labor fluctuates during the day to correspond to the amount of business.  Which is why there are a lot of part-time workers at McDonald’s.  Ideal for high school and college kids.  In addition the owner typically works during those busy periods to help with the rush.  And works on paperwork during the slower times.  Putting in about 12 hours a day.  If you assume an overhead rate of 18% and multiply that to the franchisee annual income of $691,389 we get an overhead expense of $124,450.  Subtracting that from the $230,463 (overhead & profit) leaves an annual owner income of $106,013.  Or, based on a work week of 84 hours (12 hours a day X 7 days a week), the owner earns about $24.27 an hour.  A rate a lot of people can earn working for someone else without the headaches of owning a business.

That late-night comedy show attacked McDonald’s for being greedy.  Saying they should increase their pay rate to a living rate.  Like picketers were asking for.  $15/hour.  A labor cost increase of 82.6%.  Or an additional $190,382 each year.  Which would bring the franchisee’s annual income from $106,013 to an annual loss of $84,369.  So are these McDonald’s franchisees greedy because they refuse to pay a living wage?  No.  They simply can’t afford to pay more than the minimum wage for these minimum wage jobs.  Unless they can get people to spend $6-$7 for a Big Mac.  They are delicious.  But are they $6-$7 delicious?  And can a low-income family afford to take the family to McDonald’s when they are charging $6-$7 per burger?  Probably not.  No.  McDonald’s is just fine.  What we need to do is to un-do the anti-business policies of this administration that is killing those higher-paying jobs.  And forcing the primary earner in some families to work a minimum wage job.  Because that’s all that is available in this jobless economy.



Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Why the Deficit and the Debt Matter

Posted by PITHOCRATES - March 25th, 2013

Economics 101

Keynesian Economists say there is Nothing Wrong with Running a Deficit or a Growing National Debt

We had the sequester.  Before that it was the fiscal cliff.  Before that it was the debt ceiling debate.  We hear these things.  But it’s like water off a duck’s back.  It doesn’t sink in.  We hear but we don’t understand it.  In one ear and out the other.  In fact people are tired of hearing of how we go from one financial crisis to another.  Enough already the people say.  Enough.  Pity, really.  As there are some serious consequences to the decisions our politicians are poorly making.

Part of the problem is that these economic issues are difficult to relate to for average Americans just trying to take care of their families.  A trillion dollar deficit?  A debt reaching $16 trillion?  A lot of people don’t know the difference between the deficit and the debt.  Including many of our television news talking heads.  And then the sheer magnitude of the word ‘trillion’ is just difficult to fathom.  We know it’s big.  But no one uses it in their personal lives.  We know a $200 utility bill is expensive.  An $8,000 property tax bill is expensive.  A $40,000 car is expensive.  But a trillion dollar deficit?  It is hard to make a connection to the size of a trillion dollars.

Compounding the problem are all these Keynesian economists who say there is nothing wrong with running a deficit.  Or the growing national debt.  Despite the financial debt crisis in the Eurozone.  Where running a deficit and growing national debt have caused great problems.  But the Keynesians say that can never happen here.  Because our economy is so much larger.  And the U.S. can still print money.  So people don’t know what to believe.  The government and their economists sound like they understand this stuff.  While a lot of people don’t.  So the people who don’t are more inclined to believe those who sound like they understand this stuff.  Which makes it easier for the politicians who are making all of these horrible decisions to make even more of them.

Over time Interest Charges run up the Outstanding Balance on our Credit Cards

So to understand deficits and debt it would be better to bring it down to our level.  And once we understand it at our level then we can understand better what’s happening at the national level.  So let’s do that.  Let’s imagine a person earning $30,000 a year.  Or $2,500 monthly.  Let’s further assume this person’s earnings are not enough to support their lifestyle.  So they turn to their credit card each month for an additional $100 in spending.  Which is this person’s deficit.  The amount they spend over what they earn.  Or money they spend that they don’t have.  So they charge it.  For this example we’ll assume a credit card with a 24% annual percentage rate.  In the following table we crunch these numbers for 120 months.  Or ten years.

Personal Deficit Spending and Cummulative Debt R2

The columns in the table are fairly self explanatory.  Each month we start with $2,500.  We start borrowing money in month 1 so there is no interest in the first month.  We subtract the interest from the monthly income to arrive at income less the interest charge on the credit card.  Our spending budget each month is $2,600.  Requiring $100 in credit card purchases in the first month.  Each month this increases by the amount of interest charged each month.  The last column is a running total of the credit card balance.

Over time the interest charges run up the outstanding balance on the credit card.  Because we are paying interest on both our purchases and our interest.  So as time goes by this increases our credit card balance at an increasing rate. Soon the interest charges take a larger percentage of our monthly income.  So much so that we need to borrow more and more to maintain our current level of spending.  The interest charge on the 120th month equals 38% of our monthly income.  Chances are that it would never get this bad as we would be unable to make our monthly payment long before the 120th month.  And with an outstanding debt approaching our annual income we probably would have filed for bankruptcy protection long ago.  For at these interest rates it wouldn’t take long before that debt grew beyond our ability ever to pay it back.

Deficit and the Debt Matter because Income is Limited

We can see this better if we graph these numbers.  We can see the cumulative debt growing at a greater rate over time.  Just as does the percentage of our personal income going solely to paying the interest on our debt.  Truly wasted money.  Spending money for things we purchased long ago.  And if we spent it on restaurants and vacations we have nothing tangible to show for this.  Nothing we can sell to get our money back.  Just interest payments that seem to go on forever and ever.  For something that gave us a few hours or days of pleasure.  Which is the worst kind of debt to have.  As there is no way to pay it down other than with current earnings.  Meaning we have to make sacrifices today and tomorrow for spending we did long, long ago.

Personal Income Debt and Interest as Percent of Income R1

On the chart we have a horizontal line for monthly income.  And one for annual income.  We can see that it only takes 21 months for our credit card balance to exceed our monthly income.  Not even two years.  But only 1.9% of our monthly income is going to pay for interest on the debt.  Which doesn’t sound that bad.  So we keep charging.  Just after three years of doing this we break $100 in interest expense.  Requiring 4.2% of our earnings to go to pay the interest on the debt.  It only takes another 2 years to break $200 in interest expense (8.4% of earnings).  It only takes another year to bring the interest charge to $300 (12.3% of earnings).  In 99 months the interest charge breaks $600 (24% of earnings).  And the total outstanding credit card debt is now greater than our annual earnings. Making it very unlikely that we’ll ever be able to pay this balance down.

Anyone who charged a little too much on their credit cards knows what this feels like.  And what those phone calls from collection agencies are like.  Not good.  Anyone who charged anywhere near this example no doubt brought great stress into their lives.  They might have lost their house.  Their retirement savings.  Their kids’ college funds.  Or had no choice but to file a personal bankruptcy.  But when we run our debt up this high there comes a point where we cut up the credit cards.  Making a serious cut in our spending.  Because that’s all we can do.  We can’t just earn a lot more money.  And we can’t print money.  If we could do either we would not have a debt problem in the first place.

This is where average Americans and the federal government differ.  Average people have no choice but to be responsible.  While the federal government can allow the problem to grow and grow.  For they can arbitrarily raise their income.  By raising taxes.  And they can print money.  Unfortunately for average Americans both of these options make life worse for them.  Raising taxes makes us cut our personal spending as if we ran up our credit cards.  Forcing us to get by on less.  And printing money causes inflation.  Raising prices.  Which, of course, forces us to get by on less.  This is why the deficit and the debt matter.  For income is limited.  Whether it’s ours.  Or the federal government’s.  And when you spend more than you have more money goes to paying interest on the debt.  Which is money pulled out of the economy and thrown away.  The ultimate cost of spending money you don’t have.  Money thrown away.  And, of course, potential bankruptcy.



Tags: , , , , , , , , , , , , , , , , ,

Disposable Income, Federal Taxes, Federal Debt and our Spending Problem 1940-2012

Posted by PITHOCRATES - February 27th, 2013

History 101

Excessive Federal Taxes reduce Disposable Income which reduces New Economic Activity

The key to economic growth is disposable income.  The more disposable income people have the more economic activity they will create.  So the key to a healthy economy is maximizing disposable income.  And we can do that in a few ways.  First of all we need jobs.  And we can create more jobs with fewer costly regulations.  And lower taxes.  If we make it less costly to hire people businesses will hire more people.  Which they aren’t doing right now.  Primarily because of Obamacare.  Which is so costly to businesses that they’ve frozen new hiring.  And are pushing some full time employees to part-time.  As well as investing in capital equipment wherever they can.  Replacing people with machines.  Because machines don’t incur Obamacare costs, taxes or penalties.

For those lucky few who haven’t been replaced by machines they can earn some disposable income.  Depending on their skill level.  A low-skilled person who never graduated from high school cannot earn as much disposable income as a thoracic surgeon.  So if you want stuff.  And you want to stimulate the economy.  Become a thoracic surgeon.  Or something else that takes years of college and years of on the job training.  And hundreds of thousands of dollars of student loan debt.

But earning a good income isn’t enough.  Because from that income we must pay an enormous amount of taxes.  Greatly reducing our disposable income.  Some of the taxes we can see.  Such as those itemized on our paycheck stubs.  Federal and state income taxes.  And Social Security and Medicare taxes.  But there are a lot of taxes we don’t see.  Such as excise taxes on the things we buy from gasoline to liquor to cigarettes.  And then there are property taxes.  Sales taxes.  And the list goes on.  All of which take a bite out of our disposable income.  Siphoning away real economic activity over the years as the federal government added new taxes.  And increased the tax rates of the old taxes.

The Federal Government came up with the Withholding Tax to Prevent an all out Tax Revolt

When the Founding Fathers ratified the Constitution there weren’t many taxes.  Mostly custom duties and tariffs.  Which was enough to fund the limited government they created.  But ever since the Founding some in the federal government have been trying to destroy what the Founding Fathers created.  And replace it with what they fought so long to get rid of.  A very large government that reaches into all parts of our life.  Like a monarchy.  Where those in the federal government belong to a new aristocracy.  Who are more equal than everyone else.  And live a far, far better life.  If you don’t believe this just check out property values around Washington DC.

With the American Civil War killing a generation of fathers a lot of boys grew up with over protective and doting mothers.  When these boys came of age and entered politics they weren’t as manly as their father’s generation was.  Because they grew up without fathers to teach them to hunt and fight.  Instead, they grew up with mothers who taught them to be more nurturing.  Giving us the progressive movement.  Woodrow Wilson gave us a permanent federal income tax.  And tried to expand the federal government to be more of a monarchy with a powerful executive that can govern against the will of Congress.  And the people.  After World War I we returned to normalcy.  And Warren Harding and Calvin Coolidge gave us the Roaring Twenties.  And the modern world.  Then Herbert Hoover and other progressives caused the Great Depression.  With a crisis too good to let go to waste FDR picked up where Woodrow Wilson left off.  Exploding the size and reach of the federal government.  And the great surge in federal taxes began.  Over the years they added more and more.  Such as these (see Table 2.1—RECEIPTS BY SOURCE: 1934–2017).

Income Payroll Excise and Other Taxes Key

Some of these you are no doubt familiar with.  The biggest bite is the individual income tax.  Something most of us have received our W-2s for and have just prepared our federal income tax returns.  Or are about to.  Dreading it.  Unless we’re getting a refund.  Those who owe money will probably take their sweet time.  As they hate writing a check to the federal government.  Which is why the federal government came up with the withholding tax.  For if people had to write a check for the full amount of their federal income taxes each year there would be an all out tax revolt.  And probably a lot more imprisonment for people not paying their federal taxes.  For no one has that kind of money sitting around.  Which is why the government takes it from you before you can spend it yourself.

Excessive Federal Spending requires ever Higher Taxation and ever more Borrowing to Feed

The big debate in Washington now is the sequester.  And the automatic cuts of the sequester.  Which were proposed by President Obama.  Which Congress wrote into a bill.  And the president signed into law.  In hopes that Republicans and Democrats would come together and find a way to reduce the record high deficit.  The Republicans want to do the obvious.  Cut the spending that caused the record deficit.  Democrats want to do what they always want to do.  Raise taxes.  Saying that we don’t have a spending problem.  That the four years of trillion dollar deficits isn’t because we’re spending too much.  It’s because we’re not taxing enough to pay for that spending.   That rich people aren’t paying their fair share.  But that’s not what you see when you look at the numbers.

Income Payroll Excise and Other Taxes

These taxes are identified in the above table.  As government spending grew so did taxes.  In particular personal income taxes which provide the majority of federal tax revenues.  Which exploded after LBJ’s Great Society added a lot of new federal spending.  And after President Nixon decoupled the dollar from gold in 1971.  Unleashing inflation.  Note that personal income taxes are greater than corporate income taxes.  That’s because there are more people than corporations.  For example, Siemens AG is an international corporation that employs about 360,000 people.  Who all pay personal income taxes.  After personal income taxes comes old-age and survivors insurance.  Otherwise known as Social Security.  And all of these taxes have continued to grow.  Taking a bigger and bigger bite out of disposable incomes.  Putting a drag on new economic activity.  Note that the only falls in federal tax revenue were due to two Democrat-caused recessions.  Bill Clinton’s dot-com bubble burst causing a bad recession in 2000.  And his subprime mortgage lending bubble he started with his Policy Statement on Discrimination in Lending burst causing a bad recession in 2007.  Apart from these, though, the pattern has been more spending.  Not less.  Which would suggest that we do have a spending problem.

Also included on this chart is the federal debt.  Note how it spiked up during World War II.  Then settled down at a constant rate for about 30 years.  Until LBJ’s Great Society spending increased federal spending.  But these massive new taxes weren’t enough.  For that’s when the big deficits started.  Adding on to a growing federal debt.  With the only decline in this growth coming during President Clinton’s presidency.  President Clinton’s dot-com boom (before the bubble burst), the peace dividend from President Reagan winning the Cold War, the Asian financial crisis and Japan’s Lost Decade all helped the American economy shower the treasury with cash.  Putting the nation into a surplus for a year or so.  But that didn’t last.  As federal spending continued to outpace tax revenue.  Culminating with President Obama’s trillion dollar deficits.  With federal tax revenue at the highest since President Bush’s record high just before Clinton’s subprime mortgage bubble burst into the subprime mortgage crisis.  And the Great Recession.

So yes, Virginia, we have a spending problem.  A spending that requires ever higher taxation and ever more borrowing to feed.  Taking an ever bigger chunk out of disposable incomes.  Leaving less and less for new economic growth.  Explaining why the economy has never recovered from the Great Recession.  For President Obama’s policies only increase taxes and the cost of doing business.  And do nothing to create disposable income.



Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FT150: “The Left wants to extend tax hikes down to those earning $250,000 because there are just too few rich people to tax.” —Old Pithy

Posted by PITHOCRATES - December 29th, 2012

Fundamental Truth

If you Confiscated ALL Income from those Earning a Million+ it would be Less than HALF of the Average Obama Deficit

The fiscal cliff yadda yadda yadda the Democrats want to raise taxes and the Republicans’ mothers are whores.  That about summarizes the fiscal cliff negotiations.  The Democrats want to raise taxes.  The Republicans don’t because there is nothing that will kill off an economic recovery quicker than raising taxes.  And the Democrats are mean.  Calling the Republicans a lot of names.  And saying things about them that aren’t very nice.  So once again let’s look at the numbers to see what they say about federal income taxes.  The following numbers come from the IRS (see Table 3.  Number of Individual Income Tax Returns, Income, Exemptions and Deductions, Tax, and Average Tax, by Size of Adjusted Gross Income, Tax Years 2001-2010).

The Democrats keep saying that the Republicans want tax cuts for the rich paid for by the poor.  But according to these numbers that’s just not happening.  People who earned $15,000 or less paid 0.0% of all federal income taxes.  People who earned $30,000 or less paid less than 1% of all federal income taxes.  It’s the meaty center that paid the taxes.  Those who earned from $75,000 to $1 million submitted approximately 20.5% of all federal tax returns while they paid approximately 62.9% of all federal income taxes.

Now how about those rich people?  Those earning $1 million or more submitted approximately 0.19% of all tax returns.  Less than a quarter of one percent.  And yet they paid approximately 21.9% of all income taxes.  Is that fair?  At these high levels of income people pay basically the top marginal tax rate as only a very small fraction of their earnings falls outside this top rate.  So if we divide the total taxes paid by this 0.18% ($207 billion) by 0.35 (the 2010 top marginal tax rate) you get a total income of $590 billion.  So if you confiscated ALL of their earnings it would be less than HALF of the average Obama deficit ($1.324 trillion).  Meaning that it is IMPOSSIBLE to reduce the deficit with any tax rate on those earning $1 million or more.

The Rich may be paying Lower Tax Rates but they’re paying Far More Tax Dollars than most of Us

All right, so it won’t reduce the deficit.  But the Democrats say we must do this to be fair.  Meaning those earning more should pay more even if it’s only symbolic.  To punish success.  As if they’re not being punished already for their success.  We’ve all heard about Warren Buffet’s secretary paying a larger tax rate than he pays.  But talking percentages isn’t the same as talking dollars.  Because a small percentage on a much larger earnings amount will produce more tax revenue than a higher tax rate on a smaller earnings amount.  So let’s look at dollar amounts to see if the rich are paying their fair share.  Or whether we’re punishing them enough for their success.

The rich paid a smaller percentage of their earnings in taxes but paid far more in actual dollar amounts.  Which is the only thing that allows government to pay for things.  Dollars.  Let’s assume Warren Buffet’s secretary falls into the income range $50,000 to $75,000.  Who paid on average $4,310.92 in federal income taxes.  Now compare this to what rich people paid in income taxes.  Those earning from $1 million to $1.5 million paid on average $306,779 in federal income taxes.  Or more than 71 times what someone earning $50,000 to $75,000 paid.  Those earning $1,500,000 to $2,000,000 paid 102 times more than that lower income earner.  Those earning $2,000,000 to $5,000,000 paid 179 times more than that lower income earner.  Those earning $5,000,000 to $10,000,000 paid 407 times more than that lower income earner.  Those earning $10 million or more paid 1,389 times more than that lower income earner.

The rich may be paying lower tax rates but they’re paying far more tax dollars than most of us.  An inordinate amount.  If you look at it in terms of government services people consume (which is what taxes pay for) are those earning $10 million or more consuming 1,389 times the government services those earning $50,000 to $75,000 consume?  No.  If anything, they consume far less government services than most people.  Because they live the good life.  The good life their high earnings provide.  Being that the rich are paying far more than their fair share you can only conclude then that these excessive taxes are punitive.  To punish their success.

The only way to Achieve Real Deficit Reduction is to Increase Taxes on the Middle Class or Cut Spending

So what can we conclude?  The rich are paying more than their fair share of taxes.  The amount of tax dollars they’re paying could even qualify as being punitive.  As they are so great any further increase in rates on the rich is not likely to increase tax revenue.  First of all as they are already paying so much they will take every tax shelter advantage they can to minimize the further confiscation of their earnings.  But more important than that is that there are just so few rich people.  Even though the rich pay on average hundreds of times more in federal income taxes than that meaty center it’s the meaty center where most of the tax revenue comes from.  Because there are so many more people in the meaty center.  And by graphing the number of tax returns from each income bracket and the amount of tax revenue they pay we can understand why the Democrats are so adamant to raise taxes on those earning as little as $250,000.

The blue line (Series 1) is the number of tax returns filed in thousands of people for each income bracket (the left vertical axis).  The red line (Series 2) is the total tax revenue in millions of dollars each income bracket produces (the right vertical axis).  You can see the meaty center of tax revenue (from those earning $75,000 to $1 million).  And you can see the meaty center of those filing tax returns (form those earning $30,000 to $200,000).  As you can see the meaty center of tax filers and tax payers are not the same.  As the tax code shifts the tax burden onto the higher income earners.  And in this chart we can see why the Democrats want to increase tax rates on those earning $250,000 and more.

The drawback to progressive tax rates is that it shifts the tax burden onto fewer people.  Who must pay more in taxes than is their fair share.  And that worked for awhile until government grew so large.  But as our aging population has increased the costs of Medicare and Social Security (and soon Obamacare) there just aren’t enough rich people to tax to pay these soaring costs.  And they will have no choice but to shift the tax revenue graph to lower income people.  So they can capture more people (and incomes) under this graph.  Yes, they want to tax the rich more.  But only for the symbolism.  For once they’ve punished them by forcing them to pay their ‘fair’ share then they can raise tax rates on everyone else.  Which is the only way they have a snowball’s chance in hell of achieving real deficit reduction.  Increasing taxes on the middle class.  Well, that, or cutting spending.  Which could provide serious deficit reduction.  By shrinking the size of government. The very cause of those massive deficits.  And accumulated debt.  But shrinking government is, of course, crazy talk for those on the Left.  Who would rather let the country sink into insolvency before agreeing to that.



Tags: , , , , , , , , , , , , , , , , , , , , ,

Paying French Workers more for less Work is putting France on the Path towards Greece

Posted by PITHOCRATES - December 9th, 2012

Week in Review

France is where President Obama is trying to take the United States.  While the French are trying to figure out a way to save the French from the French (see Insight: Making France work again by Mark John posted 12/9/12012 on Reuters).

Yet the overtime episode is a telling insight into a France struggling with itself: the France whose appetite for work sits uneasily with the France whose priority is to sustain one of highest standards of living in the world…

Its welfare system is among the most generous in the world. A road and rail transport network means its companies are within hours of tens of millions of potential customers. It is a leader in luxury goods and is the world’s top tourist destination.

But somehow that Gallic vigour is being lost.

Unemployment is at 14-year highs as plant closures mount, France’s share of export markets is declining, and the fact that no government in three decades has managed a budget surplus has created a public debt pile almost as big as national output…

And it was the cost of that generous welfare state that has raised the cost of doing business in France so much that less business is done in France.  Less business means fewer jobs, less private income to tax and less corporate income to tax.  Forcing the French to turn to borrowing to sustain that generous welfare state.

By 1980, French economic growth had shrunk to two percent compared to its pre-oil crisis rate of above six percent – a rate which France and most rich states have not seen since.

In the years that followed, governments around the world reacted in their fashion: Britain’s Margaret Thatcher faced down Britain’s unions in a drive to free up labor markets, while Scandinavian leaders sought to free their economies of debt.

In France, governments of left and right chose entrenchment: strong rises in public spending which helped ease the social and employment shocks but which sent national debt soaring from 20 percent of output in 1980 to its current record of 91 percent…

The high productivity of its workers might have compensated for their rising cost. But decisions such as the 1997 cut in the working week from 39 to 35 hours meant many French were also starting to work less.

A 2008 paper on “the Liberation of French growth” by Jacques Attali, ex-adviser to Socialist President Francois Mitterand, calculated that while the French lived 20 years longer than they did in 1936, they worked 15 years less over their lifespan – a shortfall he labeled “35 years of extra inactivity”.

“Even given that each French worker produces five percent more per hour than an American, he produces 35 percent less over his working life,” he found in the 245-page report.

You need two things to generate tax revenue.  A tax rate.  And income to tax.  In other words, you need businesses to grow and hire more people.  But when they reduced the work week down to 35 hours that’s fewer hours worked.  And less income to tax.

One of the ideas behind the reduced work week was to force employers to hire more workers.  For example, if a company had 15 employees working 39 hours per week that’s a total of 585 hours a week to complete the necessary work each week.  When they reduced the work week to 35 hours it now took 16.7 workers (585/35) to complete the 585 hours of required work per week.  As you can’t hire 0.7 of a worker that rounds up to two new workers the state believed owners would hire.  The government believed they’ve reduced the unemployment rate.  But they’ve actually increased the unemployment rate.

The existing workers may be working 4 hours less a week but their employers are still paying them the same.  Which makes workers more costly to employers.  For they’re getting paid the same but are working fewer hours.  Forcing the owner to raise his or her selling price to cover these higher costs.  Or laying off a worker or two so their current revenue can pay for their higher labor costs.

So all of the government’s policies intended to increase the number of high-paying jobs actually decreases the number of high paying jobs.  Encouraging employers to hire part-time workers or temporary workers in lieu of full time workers to escape these higher labor costs.  Reducing the gross amount of income in the economy to tax.  Forcing the government to borrow more to support that generous welfare state.  And it gets worse.

France has an aging population.  So not only are French employees working fewer hours there are fewer workers entering the workforce than leaving it.  And those who are leaving the workforce are collecting pensions.  And consuming health care resources.  With these growing expenditures being paid by fewer workers entering the workforce who are working fewer hours each week.  Forcing the government to borrow even more to support that generous welfare state.  Which is why their total debt now is 91% of GDP.

And it will only get worse if France doesn’t make the country more business friendly.  While at the same time cutting their spending.  As French students took to the streets to protest a proposed increase in the retirement age a year or so ago don’t expect either to happen anytime soon.



Tags: , , , , , , , , , , ,

« Previous Entries