Jobless: 10 percent is tougher than it used to be
Americans get more money back than they pay in
| Has it gotten bad enough for people to demand real change, not just temporary handouts? We trim, blend, and append two 2009 articles from (1) the AP, Nov 7, on the harshness of unemployment by Jeannine Aversa and (2) Christian Science Monitor, Nov 9, on the dole by Mark Trumbull. |
by Jeannine Aversa and by Mark Trumbull
- Jobless: 10 percent is tougher than it used to be
It hurts more to be unemployed now than the last time the jobless rate hit 10%.
Americans have more than triple the debt they had in 1982, and less than half the savings. They spend 10 weeks longer off the job. And a bigger share of them have no health insurance, leaving them one medical emergency away from financial ruin.
For these reasons, the unemployed are more vulnerable today to foreclosure and bankruptcy than they were a generation ago.
The unemployment rate hit 10.2% in October. All told, 15.7 million Americans are out of work. Add in workers forced to settle for part-time work or those who have simply given up looking, and the rate is 17.5%.
Only twice since World War II has unemployment topped 10% -- now and from September 1982 to June 1983.
A much larger share of jobs these days -- more than four out of five -- are in the service sector, such as tax preparers, hair stylists, and retail clerks. Those jobs generally pay less and offer fewer benefits than blue-collar manufacturing work.
Manufacturing, which typically offers more generous benefits, accounts for less than 9% of payrolls today -- down from 19% in 1982.
People carry an average of about $46,000 in debt -- mortgages, credit cards, auto loans, and other consumer debt. That's a far bigger load than in 1982, when per capita debt totaled about $14,000 in today's dollars.
And savings, as a percentage of after-tax income, was only 2.7% last year, down from 10.9% in 1982. Americans stashed an average of just $940 last year, compared with $2,537 in 1982. That helps explain why the foreclosure rate runs about seven times higher today.
Not surprisingly, that means more Americans -- about three times as many -- are going bankrupt.
Another reason layoffs are more permanent: Manufacturers these days are more aggressive about using technology to boost productivity -- or they hire cheaper workers overseas as the economy improves.
Layoffs have forced some older workers into retirement, yet fewer of them can fall back on traditional pensions that pay a steady monthly sum. Only 11% of active workers have a traditional pension. That's down from 50% in 1982.
Instead, more workers today have 401(k)-type retirement plans. But those have suffered huge hits in this downturn. The Standard & Poor's 500 index fell as much as 57% earlier this year from its October 2007 peak and is still down about 32%.
JJS: Has the government stepped up to the plate?
- Post-Depression first: Americans get more money back than they pay in
For the first time since the 1930s, households are paying less in personal taxes than state and federal governments are paying out through transfer programs.
Personal taxes paid by Americans aren’t enough to cover the payments that the government sends out through programs like Social Security and food stamps.
A sagging economy has dragged down America’s total personal income, causing tax revenues to plunge. It also has added to the ranks of people who qualify for unemployment insurance and other safety-net programs. That’s not an unusual pattern during recessions, but the impact has been deeper this time.
In the second quarter of 2009, Americans were getting $79.8 billion more in transfers than they were paying to government, on an annualized basis. That’s about $260 per US resident. The amount was similar (a bit smaller) in the third quarter.
For years, tax revenues haven’t covered all government spending. But usually households pay enough in taxes (income taxes and payroll taxes dedicated to Social Security and Medicare) to at least cover what’s paid back to households in transfer programs.
Recently Social Security recipients got a one-time payment of $250, which showed up in the second quarter. And the stimulus included President Obama’s “make work pay” tax cut, which gave millions of workers an extra $400 in spending money.
In the much more severe economic conditions of the 1930s, the economy saw at least six straight years in which net government transfers exceeded tax receipts. This time, it may be just a few quarters.
In the second and third quarters, Americans were paying taxes at an annual rate of about $2 trillion a year. That includes state and federal income taxes, and it includes the payroll taxes paid by workers directly or indirectly (through employer contributions). The tax revenues were down significantly from a year before, when they were running at an annual pace above $2.3 trillion.
Meanwhile, transfer payments from the government to individuals have gone from less than $2 trillion in 2008 to more than $2 trillion this year. These include social insurance programs such as Medicare and also safety-net programs for the poor and unemployed -- such as jobless benefits and food stamps.
JJS: Citizens should get money from government, and not because government should help out citizens if they’re suffering during a recession. Indeed, recessions would be a thing of the past were government doing its job right. That is, if government actualized your right to a share of the commons, then you’d always get an extra income apart from wages, no matter what.
And since in such a geonomic system people would pay in land dues or land taxes for owning some part of nature, they’d no longer speculate in land or resources; hence the business cycle would not swing wildly, and bust would no longer follow boom. Rather, progress would steadily rise. In Australia during the recession of the 1970s, the towns that taxed land, not buildings, not only did better than their neighbors, and did not just break even, but they actually attracted new businesses-- to start up during a recession yet!
This geonomic policy is powerful stuff, having worked wherever tried. Give it a shot!
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Retail sales rise, or is it mostly higher prices?
Bank failures in 3 months = all of 2008
Rescue the economy or rescue ourselves? |
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