Posts Tagged ‘Work’


This morning I had coffee with a friend who’s a CPA, and we talked for over an hour about the economy, and especially about how those of us who work for a living are getting screwed. There are almost innumerable ways — pick an area, any area — but for now we’ll stick to the purely economic. Here are few of the things we talked about:

  • Dividends and capital gains (basically profits from selling stocks and bonds) are only taxed at about half the rate of money earned through work. If you work for a living in the USA, you’re probably paying about twice the amount of income tax (as a percentage of income) as a trust fund kid who’s never worked a day in his life.
  • If you work for a living and have to spend all, or nearly all, of the money you earn, you’ll pay a much higher effective tax rate on the necessities of life than wealthy people. Here’s why (to keep things simple, we’ll only talk about sales taxes here): If you live in an area with an 8% sales tax rate, make $2,000 a month, and spend $1,000 of it on such things as clothing, food, car parts, and beer (mustn’t forget the beer), you’ll end up paying 4% of your income in sales taxes. If you’re a trust funder with an income of $20,000 a month from dividends and capital gains (i.e., income not derived from useful work), and similarly spend $1,000 on clothing etc., your effective tax rate on those necessities will only be .4% of your income — one-tenth the rate of a $2,000-a-month wage earner.
  • If unemployment is low, and wage growth starts to outstrip the rate of inflation, the Federal Reserve Board will raise the prime rate to create more unemployment and keep wages down (as it’s doing at present). How does an increase in the prime rate do this? It “cools the economy” by making it more expensive for businesses to borrow and then spend the borrowed money on new facilities, machinery, or wages for new workers. It also raises the cost of consumer borrowing, especially as regards home mortgages. And the higher the mortgage interest rate, the fewer mortgages are taken out; this puts a damper on new construction and so decreases the number of construction jobs and also jobs in the industries that supply construction firms. Hence “economy cooled” and wages held down.
  • If you work for a living, have little or no savings (as is typical), and have to borrow money for a medical or other emergency, you’ll likely do so on a credit card, on which you’ll be paying sky high interest, probably in the 15% to 20% range, if not higher. If you’re wealthy and decide to borrow money, you’ll likely pay an interest rate in the low to mid single digits.
  • Under Trump’s much vaunted tax cut, 83% of the benefits go to the wealthiest 1% of Americans.  The rest of us get crumbs and will have to pick up the tab in fairly short order, in the form of goods-and-services price inflation and higher interest rates on credit cards and mortgages. In essence, Trump’s tax cut is a massive wealth transfer from those who do useful work to the ultra-rich, who don’t. (Disgustingly, some working class people are happy to scarf up crumbs, lick their masters’ boots, and grovel like dogs.) And if you think giving the rich ever more money is somehow a good idea, that’s been de facto federal policy since the time of Reagan; and how has that worked out for you? It has?! Good boy! What a good boy! Lick up those crumbs! Good boy!

I could go on, but won’t.

To put it simply, the economic deck is stacked against those who work do useful work, especially those who do useful work and won’t exploit others.

 


Emma Goldman

“[L]aziness results either from special privileges or physical and mental abnormalities. Our present insane system of production fosters both, and the most astounding phenomenon is that people should want to work at all now.”

–Emma Goldman, Anarchism


Preliminary Comments

Every time a politician or pundit tells you that there’s simply “not enough money” to pay for some obvious public good, they’re lying. The problem is not lack of money. It’s the incredible waste and inefficiency in both the economy and government spending. That waste and inefficiency also means that we produce far more than we need; add in the gross maldistribution of wealth and income in this country, and it’s very obvious that we’re slaving our lives away for no good reason.

Recap of Previous Posts in the Series

In Part I (distribution of wealth and income), we saw that the distribution of income and, especially, wealth in the U.S. is extremely inequitable, with the top 1% owning 42% of financial (nonhome) wealth, with the top .1% owning as much as the bottom 90% combined, and that the bottom 50% of the population owns essentially nothing. As well, since total wealth in the U.S. is currently $81.5 trillion, average (not median–which is half above, half below) per capita wealth comes to over $250,000 Yet distribution of wealth is so lopsided that most people have almost no net worth.

We also saw that American workers–who have one of the longest average work weeks in the world, 47 hours–have seen their real wages decline nearly 10% since 1973, while productivity per hour worked increased by, on average, over 1.75% per year during the same period; compounded, that works out to an over 80% increase in productivity. So, American working people are producing far more than we did four decades ago, and are being paid less. To maintain the same average standard of living as in 1973, we should (assuming a 40-hour work week then) only be working 22 hours per week, had wage increases merely kept pace with productivity.

In Part II (taxation), we saw that working and “middle class” people (an increasingly quaint concept) pay higher taxes than the top 1%. There are two primary reasons for this: 1) Capital gains income is taxed at a far lower rate (15%)  than a good majority of earned (through work) income (with a rate of 28% starting at $37,000); and 2) Other taxes (sales, property, social security, gas, “sin”) hit average people, who spend almost all of their income, far harder than those in the top income brackets, who don’t. It works out that a single worker earning $10 an hour pays taxes amounting to roughly 40% of his or her income, while a nonworker in the top .1% only pays about 30%.

Eliminate that difference in tax rates, reduce the average tax rate to what the top .1% pay, and the average worker would take home 17% more income–or could work 17% fewer hours to maintain his or her standard of living. (The 10% tax reduction on before-taxes pay would equal a 17% increase in take-home pay.) Adding that to the 18 hours of work per week that should have been eliminated over the last four decades, and it means that the average work week should now only be about 15 hours.

In Part III (wasteful government spending), we saw that a huge amount of tax money is wasted. The U.S. spends as much on its military as the next eight to ten countries combined (depending on which recent year you look at; as well, estimates of China’s military spending vary considerably), and the U.S. spends at least three (maybe four or even five) times the amount of the next highest-spending country, China. Taking the highest estimate of China’s military spending, that means that if the U.S. simply matched China’s expenditures, it’s now wasting approximately $400 billion annually (out of an annual military budget of approximately $600 billion). That $400 billion in excess military spending comes to $1200 for every man, woman and child in the country. And that doesn’t even include “black budget” spending or interest on military spending-incurred debt.

We also saw that the U.S. through its sky-high–by far the highest in the world–incarceration rate and the “war on drugs,” is wasting at least $50 billion per year (probably considerably more), and that this is not keeping us safe, with the U.S. having the highest murder rate and the fourth highest rape rate in the industrial world.

As well, we saw that the government gives tax breaks amounting to over $1.2 trillion annually, with almost all of the breaks going to corporations and the wealthy, and it also gives direct subsidies to them coming to tens of billions of dollars annually. This works out to total taxpayer subsidies to corporations and the wealthy of approximately $4,000 for every man, woman, and child in the country.

In Part IV (the inefficiency of capitalism), we saw that  under capitalism a huge amount of work is useless or harmful. We dealt with ten of capitalism’s inefficiencies in Part IV. Here, we’ll only mention what we consider the most important of them:

Cost-shifting, the shifting of costs from businesses to the public, is rampant.  An immediate, blatant example of cost-shifting is the cost of cleaning up mining and toxic industrial sites. Private companies in many cases made massive amounts of money while those sites operated; when they quit being profitable, the private owners walked away leaving the public to pay the oftentimes massive cleanup costs.

Unsold wasted goods. Huge amounts of unsold goods are wasted, simply thrown away in the U.S. and other developed countries. The most flagrant, and maddening, example of this is waste of edible food. A 2012 estimate in the Washington Post placed the amount of edible food wasted in the U.S. at 40% of the total, or $165 billion worth annually. The USDA reports that 30% to 40% of edible food is wasted in this country.

Planned obsolescence is difficult to quantify, but very real. Going beyond such things as Apple cultists standing in line overnight to buy the newest must-have versions of their gadgets, you have such things as auto manufacturers deliberately making their vehicles very difficult for shade-tree mechanics to work on, and thus uneconomical to keep running over the long haul.

Parasitic jobs comprise a higher percentage of the total than most people realize. We can define them as “jobs” that do nothing to produce goods or services that meet human needs. Lawyers provide one example. There are 1.3 million lawyers in this country, and the average pay for lawyers is over $114 thousand a year. Then there are stock traders, stock brokers, and hedge fund managers who produce nothing, yet receive vast amounts of money, in some cases over a billion dollars a year. In contrast, those doing the dirtiest, most necessary work–farm workers, sanitation, healthcare workers–are among the lowest paid. Under capitalism, parasites make the most money, and those doing the most necessary work make the least.

Systemic unemployment. The current unemployment rate is 5.3%, but that 5.3% refers only to those currently working or actively seeking work, and doesn’t include those working part time who want full-time work but can’t find it, nor “discouraged workers” who want to work but have given up on finding it. Estimates place the real unemployment rate between 10.7% and 14.2%, and the percentage of the working-age population without a job (voluntarily or involuntarily)  is far higher than that. Participation in the labor force is currently only 62.6% of working age adults.

This represents a huge waste of potentially useful labor. It means the nation is producing far less than it could; it means those of us doing useful work are carrying a disproportionate share of the work load; and it means that the huge “reserve army of the unemployed” holds down wages, which benefits only corporations and the wealthy–not those of us doing useful work.

Conclusion

Taking everything into account, how much work would be required to maintain the average standard of living if all of the above problems were addressed? If wages per hour worked had merely kept pace with productivity increases over the last four decades, workers would make as much in 22 hours today as they did for working 40 hours in 1972/1973 (the high point of real wages). Instead, real wages have not only not kept up with productivity, they’ve dropped by approximately 10% since 1972/1973.

Low and middle income workers pay considerably higher taxes as a percentage of income than upper income individuals. Unearned income (basically capital gains) is taxed at about half the rate of earned (through work) income.  Taxation is a very complex subject with many variables, but it’s fair to say that if tax rates for the rich and poor were merely equal–not even tilted against the rich–low and middle income people would save roughly 10% more of their gross income. That translates to nearly seven hours per week of work. (This is a somewhat fuzzy part of the equation, so we’ll ignore it in the estimate below.)

Then eliminate grossly wasteful military spending (above that of the next-highest military spender), the utter waste of the war on drugs and mass incarceration, and government tax subsidies and direct subsidies to corporations, and you end up with per capita savings of well over $5,000 annually. Since the average worker’s income is roughly $32,000, this equates to about six hours per week. (This is the fuzziest part of the equation, so even though it’s very real, we’ll ignore it in the following estimate.)

Then consider that only five out of eight working age adults actually work. Even taking out the under 10% of the working age population who are disabled, that still leaves 27% of the working age population who could work, but don’t. If they all worked, and were as productive as the average worker, that would create a 40% productivity increase overnight, which in turn equates to another twelve hours that could be lopped off the average work week.

So, how long should the average work week be to maintain the same average standard of living? Even without redistribution of wealth and income, even without taking into account tax inequities and wasteful spending, even without taking into account the difficult to quantify but very real inherent inefficiencies of capitalism,  the average work week should be no more than about ten hours a week.


WAGE LABOR, n. 1) Death on the installment plan; 2) The process by which those who work enrich those who don’t.

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–from the revised and expanded edition of The American Heretic’s Dictionary, the best modern successor to Ambrose Bierce’s Devil’s Dictionary


“[T]here must be human work before any article of wealth can be produced, and, in a natural state of things, the man who toiled honestly and well would be the rich man, and he who did not work would be poor. We have so reversed the order of nature that we are accustomed to think of a working man as a poor man.”

–Henry George, The Crime of Poverty

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Quoted in The Heretic’s Handbook of Quotations

Front cover of "The Heretic's Handbook of Quotations


“Work is the curse of the drinking classes.”

–Oscar Wilde

quoted in The Heretic’s Handbook of Quotations

Front cover of "The Heretic's Handbook of Quotations


INVERSE RELATIONSHIP, n. The normal relationship between the usefulness of work and pay for it.

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–from the revised and expanded edition of The American Heretic’s Dictionary, the best modern successor to Ambrose Bierce’s Devil’s Dictionary