As the lazy, hazy Summer of Recovery melts into a sere and yellow Fall of Employment, you may be wondering: How is it that one of the costliest economic interventions in history failed to make any serious dent in unemployment?
While the dynamics of federal stimulus spending in job non-creation have been widely examined, some are still puzzled by the "failure" of the private sector to create jobs. Free marketers like to point to the punishing restrictions on hiring private employers face and to the uncertainty of businesses that are holding off expansions because they're worried about changes in government policy. I suspect the second claim is interesting but slightly inflated—the signals you respond to in business tend to be more immediate than speculative. But for a powerful demonstration of the first claim, check out the hiring woes of plutocrat Michael P. Fleischer, heartless controller of the means of production at Ramsey, N.J.'s Bogen Communications Inc.
Fleischer gives the case of the median-pay employee at his company. She makes $59,000 a year:
Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That's the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She's lucky she doesn't live in New York City, where the toll would be even higher.
Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.
Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security.
When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year.
Much more from Mr. Selfish Warbucks here.