Bacon's Rebellion

Democracy Thrives in Sunlight

Shoot-Yourself-in-the-Foot Economics

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James A. Bacon
in

Virginia unemployment rate over past three years. Source: Ycharts.com

A sure sign of dysfunctional government policy: Thousands of Virginians remain unemployed, but small businesses are struggling to find employees. We’re not talking about highly specialized jobs like aerospace engineers or data analysts that require years of education. We’re talking about ordinary jobs.

“Virginia’s small businesses are working hard on their recovery but are struggling to find the right workers to fill open positions,” NFIB Virginia State Director Nicole Riley said in a Wednesday press release, as reported by The Virginia Star. “It is important that Virginia lawmakers keep small businesses a priority and focus on policies that will strengthen job growth and not hinder the small business recovery.”

“Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force,” said NFIB Chief Economist Bill Dunkelberg. “However, owners remain determined to hire workers and grow their business.”

Here in Virginia the unemployment rate is 5.2%, one or two percent higher than what economists consider “full” employment.

The economy is reviving on its own as the COVID epidemic recedes. On top of that the Biden administration has injected $2 trillion in stimulus spending. Businesses want to hire millions of employees nationally, but federal policy is encouraging workers to stay put in order to collect super-generous unemployment benefits.

In my lifetime, I’ve seen supply-side economics, trickle-down economics, and Trumponomics. I call this shoot-yourself-in-the-foot economics.

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25 responses to “Shoot-Yourself-in-the-Foot Economics”

  1. Kathleen Smith Avatar
    Kathleen Smith

    This, $15 per hour minimum wage. Small business is pretty muffed up. They can’t hire until wages go up and they can’t afford to go up until business improves. Shoot your self in the foot is a good metaphor.

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      The minimum wage is not $15 per hour. In Virginia, as of May 1, it will be $9.50. It will then increase each year until it reaches $15 in 2026.

      1. Nancy Naive Avatar
        Nancy Naive

        Details, details.

      2. PassTheBuckBureaucrat Avatar
        PassTheBuckBureaucrat

        Disqus must be destroyed

        That $600 ($600/40=$15) unemployment supplement wasn’t an accident.

        Employers are essentially in competition with unemployment benefits for labor. While the Statists cry crocodile tears about high unemployment, employers can’t find enough people to work.

        Disqus must be destroyed

  2. LarrytheG Avatar
    LarrytheG

    Small business wants cheap labor. I can’t blame the owners but then again, a job with low pay and few benefits and unsure longevity is not exactly going to be in big demand unless the worker has no other options.

    I’m appalled at how badly independent contractors are treated by both the Federal and Virginia tax code and more and more employers are going that way for workers.

    People who barely make 30K are first dinged by the Feds for the FICA tax (called self employment tax) to the tune of $156 dollars per thousand earned.

    Then the state gives almost no breaks like EIC or credits for kids. Virginia starts it’s tax at the Federal Adjusted Gross while the Feds then give lower income credits below that line. Virginia does some but not much so that a person earning 30K ends up owing $1500 – most independent contractor jobs do not deducted Fed, State or FICA tax so they get nailed at tax time – self employment.

    1. DJRippert Avatar
      DJRippert

      Been self-employed for several years now. It’s a big tax bite plus no 401(k) matches, no health insurance subsidy, no paid holidays or sick days.

      1. tmtfairfax Avatar
        tmtfairfax

        There’s a provision in the IRC that, under certain conditions, allows a self-employed person to deduct his/her special type of 401K and have the business match it. I recall the cap is around $50K plus change.

    2. Don Crawford Avatar
      Don Crawford

      Small business doesn’t want cheap labor. They want employees with good work ethic and the necessary skill set or a willingness to learn on the job. The small businesses I have been associated with over the years are generous as they can be to their employees while still maintaining financial viability.

    3. WayneS Avatar
      WayneS

      “People who barely make 30K are first dinged by the Feds for the FICA tax…”

      So are people who are not self-employed. Everyone is “dinged” for the FICA tax. The only difference is, self-employed people must pay both the employee and employer contribution. Do you think that is unfair?

    4. PassTheBuckBureaucrat Avatar
      PassTheBuckBureaucrat

      Disqus must be destroyed

      Businesses (big or small) want customers. Customers want lower prices. Labor, direct and indirect, is a significant business expense. Unless you’re a Crony, you have to keep your expenses down to keep and attract customers.

      Governments and their Cronies have the same problem, except they can hold a gun to your head to force you to pay.

      Individuals pay taxes, either directly or indirectly through higher prices. Those FICA taxes are just collected by employers.

      Disqus must be destroyed

      1. LarrytheG Avatar
        LarrytheG

        There is a big difference between how the FICA tax is collected between workers who get paid as W2 wage employees and workers who are independent contractors.

        1. PassTheBuckBureaucrat Avatar
          PassTheBuckBureaucrat

          Disqus must be destroyed
          The big difference is the point of collection, and maybe the perception that some useful idiots have about whose paying.

          If you were able to somehow directly associate taxes collected and passed on through costs increases, the actual tax burden on the lower and middle class would be horrendous. The fact the progressives don’t admit this, is more indication that they’re either useful idiots or looters.

          Disqus must be destroyed

  3. DJRippert Avatar
    DJRippert

    Ahhh … the magic of socialism along with the “sure to be coming” modern version of bread and circuses – subsidized marijuana and non-stop professional sports on TV. What could go wrong?

    One obvious answer would be to assign some of the unemployment money to employers. If they hire an unemployed person they can pay half the going wage but the unemployment benefits continue for some period of time. The formerly unemployed person has a job and more money, the employer has an employee and the government is paying out no more than when the unemployed person was unemployed.

  4. tmtfairfax Avatar
    tmtfairfax

    Whatever the minimum wage, a worker must produce more benefits to the business than what he/she is paid, at least over the long-term. The alternative is no job.

    And anyone who doesn’t think that robotics and other technology will not replace workers is smoking and inhaling. How many self-checkout lanes do you see at your neighborhood grocery? When is the last time you went to a teller to deposit a check or get cash? Last year, I helped a major retailer with FCC regulations to begin using radio-controlled robots in warehouses.

    1. LarrytheG Avatar
      LarrytheG

      re: robotics, automation. Yes. But robots and automation will replace workers anyhow as competitors cut costs to gain markets. It really has nothing to do with wages if all employers have to pay the same wage.

      You can see this especially at places where the customer is captive, like interstate food/gas stops, amusement parks, tourist areas, etc… higher prices don’t stop sales even when burgers cost much more than in other lower cost places.

  5. Nancy Naive Avatar
    Nancy Naive

    It is a very difficult endeavor for a Conservative to shoot himself in the foot without causing grave injury to his face.

  6. Stephen Haner Avatar
    Stephen Haner

    All is well. In the Permanent COVID Socialist Utopia ahead, all get a guaranteed minimum income, health care and freedom from inconvenient things like monthly rent or electric bills. All part of the long term plan, Jim Boy. Work becomes a matter of personal choice.

    1. WayneS Avatar
      WayneS

      Ah, yes. “Freedom from want” – one of FDR’s “Four Freedoms”.

  7. James Kiser Avatar
    James Kiser

    As Thomas Sowell a noted economist has said the minimum wage is 0! Govt has no business telling any private employer what to pay. Or what benefits to offer.

    1. LarrytheG Avatar
      LarrytheG

      Well that idea went out the window long ago with child labor laws, and then worker safety laws, etc. The FICA tax changed everything and more important – this is what the vast majority of citizens support. It’s not what Mr. Sowell’s philosophy is – it’s what those who decide governance want.

      According to Mr. Sowell, every single developed country on earth is “violating” what the unfettered “economy” wants to be. We had that economy since the industrial age began and we rejected it. The only argument is to what degree and we still have those who insist a “pure” economy is the best economy. It all depends on what one thinks is “best”.

      A truly unfettered economy would not have public education, public roads, water,sewer, fire, ambulance – all of it would be private sector, fee-based for those who wanted and could afford it and not for those who could not afford it.

      1. James Kiser Avatar
        James Kiser

        So if the democracy voted to take all your property in the name of equity you would be ok with that. Nice to know. Your losing your individual liberties, what is left of them and you apparently are cool with that. Enjoy your rights as a serf which are known to be none.

  8. Nancy Naive Avatar
    Nancy Naive

    Immigrants. Use separated children. That way, they can hire private detectives to learn the fate of their parents at the hands of the Trump architect of our very own “Petit Solution”, Steven Miller.

  9. PassTheBuckBureaucrat Avatar
    PassTheBuckBureaucrat

    Disqus must be destroyed

    Your “social contract” is to add value to society. You do that through labor, preferably thoughtful labor.

    Disqus must be destroyed

  10. PassTheBuckBureaucrat Avatar
    PassTheBuckBureaucrat

    Disqus must be destroyed!
    McDonald’s Apologizes for Understaffing: ‘Nobody Wants to Work Anymore’

    https://www.entrepreneur.com/article/369315

    Disqus must be destroyed!

  11. PassTheBuckBureaucrat Avatar
    PassTheBuckBureaucrat

    Disqus must be destroyed!
    McDonald’s Apologizes for Understaffing: ‘Nobody Wants to Work Anymore’

    https://www.entrepreneur.com/article/369315
    Disqus must be destroyed!

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