The Wall Street Journal editorial page is like the proverbial fish in a barrel. If I ever lack material to criticize, I can just hop over to A16 or whatever and pick from several semi-clever, mostly misleading columns extolling the unlimited virtues of Mr. Market and Corporate America and the bottomless evils of The Gubmint and Big Labor.
Today (yesterday, actually), we have Michael P. Fleischer, president of a small business called Bogen Communications International, who blames the government for snatching a third of his median employee’s income. Or, as he puts it, he’s not hiring because it costs $74,000 to put $44,000 in “Sally’s” pocket.
An outrage! But where is that $30,000 going? When you look at it, it’s not really so outrageous.
About $11,400 of it goes to private health care costs, which Fleischer tries to blame on the heavy hand of government and “ObamaCare” through a bit of jujitsu that is the WSJ columnist’s stock in trade:
Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance.
I don’t want to give away my secrets here, but all I’ve got to say is: the passive voice is often a huge tell.
It actually contains a good size kernel of truth (another WSJ trick). Corporate-provided health insurance goes back to World War II when companies finagled their way around government-imposed wage controls to pay their workers more. Catch that? “Pay.” Health insurance costs are part of “Sally’s” actual pay. If she and her employer didn’t withhold them, she would have to pay them out of her check from Fleischer. Mr. Market would say that her pay would be somewhere right around $11,400 more. (Funny enough, we don’t get Fleischer complaining about being “pressed into serving” as provider of retirement compensation, which he is if he contributes to his workers’ tax-favored 401k accounts. That surely distorts markets, too, by funneling workers’ cash into a few corporate hands. Hi, Fidelity!).
So just right there, that supposed $44,000 jumps to $55,400. Maybe individual-controlled insurance would push down health-care costs—who knows (though we do know that, say, single-payer and state-run systems cost half as much as ours and get similar or better outcomes). But even that wouldn’t necessarily push down what Fleischer, as the employer, would pay to Sally. And how would Fleischer propose to get to such a utopia? I reckon it would take government interference of some kind.
There’s more, naturally.
Sally gets $3,661 withheld for Social Security taxes. Fleischer would have you think that this is money paid into the government maw that Sally will never get back.
That’s not the case, of course. Contributions to retirement plans or pensions are compensation under anybody’s standard. She’ll get that $3,661 back, plus her employer’s $3,661 contribution, when she retires—and more. You can be far more certain of that than you can about your 401k.
So add another $7,322, and now we’re up to $62,722. And:
She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare.
And Fleischer adds “$56 for federal unemployment coverage, $149 for disability insurance, $300 for workers’ comp and $505 for state unemployment insurance.”
Should we mandate that people buy insurance for the likelier than not possibility that they’ll lose their jobs at some point in their career? Or that they’ll have a not-unlikely debilitating injury? Or that they’ll need to pay now for old-age health coverage since now is when they’re earning money? These seem like classic tragedy of the commons problems. You don’t mandate coverage, and most people won’t buy it. Then everybody pays (unequally), anyway. These things have clear benefits to the payer and to the community.
Add the $2,997 a year in insurance payments and we’re up to $65,719. Out of $74,000. So, Sally pays taxes—real taxes—of $6,250 to the federales and $1,893 to the Jerz (one of the highest-tax states).
Does that strike you as crazy? And let’s point out that those taxes aren’t paid by Fleischer, so they have little to do with why he’d hire someone or not.
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'Gubmint'? What's 'gubmint' mean? Does the WSJ use the term 'gubmint'? I can't find it in my dictionary.
#1 Posted by Mark Richard, CJR on Tue 10 Aug 2010 at 05:44 PM
Mark, lets try this juxtaposition on for size.
The New York Times editorial page is like the proverbial fish in a barrel. If I ever lack material to criticize, I can just hop over to A16 or whatever and pick from several semi-clever, mostly misleading columns extolling the unlimited virtues of The Gubmint and Big Labor and the bottomless evils of Mr. Market and Corporate America.
#2 Posted by Mike H, CJR on Tue 10 Aug 2010 at 05:48 PM
Mike H.,
Not sure of your point, but if it is meant to juxtapose the NY Times with the WSJ I'd suggest that you're cutting the wrong angle. Certainly you won't find the Times extolling the virtues of "big Labor", whatever that may be in this day and age in America. And in regards to government, big or little, the Times is only slightly more to the political center of the spectrum than is the WSJ, a reactionary rag if ever there was one.
#3 Posted by Jack, CJR on Tue 10 Aug 2010 at 06:09 PM
I think it's a cue to the reader that the tripe they're about to read is a caricature of "gubmint" and not an objective description of "government".
Which is kind of what to expect from the editorial page of the WSJ both pre and post Murodoch.
Back to Fleisher:
Ballon juice highlighted a commenter's take on that:
http://www.balloon-juice.com/2010/08/09/aris-brother/
"The reason Mr. Fleischer’s company isn’t hiring has nothing to do with taxes or the policies of any administration. It’s because his business has been in decline for a decade. As the CEO, that decline is his fault. All his complaining about taxes and benefits is just a smokescreen for his own incompetence.
The world changed around them a decade ago and they failed to adapt. In 2000, their annual sales were 66 million dollars with cash on hand of 12 million. By 2003, sales were down to 55 million and cash was down to 6 million. That was before the financial crisis and under the allegedly pro business policies of the previous administration. In 2009, sales were down to 44 million and cash was down to 2 million. They managed to lose 17 million dollars that year and got a carry back refund of some 5 million dollars. Mr. Fleischer should spend less time complaining about taxes and more time thinking about how he can correct 10 years of mismanagement.
Don’t take my word for it, read the balance sheets yourself.
http://www.bogen.com/aboutus/financials/#historical"
Owned!
#4 Posted by Thimbles, CJR on Tue 10 Aug 2010 at 06:39 PM
Company health insurance payments are the equivalent of tax-free income for the employee..
#5 Posted by barney kirchhoff, CJR on Wed 11 Aug 2010 at 08:07 AM
Ummm! How many jobs has Ryan Chittum created? How many payrolls has he met?
#6 Posted by MarioG, CJR on Wed 11 Aug 2010 at 12:30 PM
None, as far as I can remember, MarioG!
But I've never claimed I couldn't create jobs for some BS reason instead of the real reason.
#7 Posted by Ryan Chittum, CJR on Wed 11 Aug 2010 at 04:58 PM
OK, Ryan, where's your or Kevin Drum's piece on how much it does cost to hire an employee, thanks to government mandates?
I remember a few years ago when Congress raised the minimum wage how we got a lot of left-wing sophistry peddled uncritically by their ideological co-religionists in the press about how the mandatory increases wouldn't cost any younger workers anything in terms of employment prospects. Two years on, and we are talking about a 'generation' of young people without much work experiences - as is the case in the never-never land of western Europe. Artifically-set wage-rates are, apparently, especially tough on those with few work skills who mainly have their attractiveness as low-wage earners as a strong suit for employers, in these recessionary times. More ideology over practical outcomes from the party of compassion.
I'm tired of uncritical journalism that says the government can do more of it, do it better, and it ain't gonna cost ordinary citizens nothin'. A good journalist's real BS detector would be clicking every time that was implied - by Krugman or anyone else. An ideologue's BS detector, on the other hand, wouldn't notice a thing.
#8 Posted by Mark Richard, CJR on Fri 13 Aug 2010 at 05:01 PM
Mark,
Teenage unemployment rates are always high. And this recession/depression is what's caused the super-high rate now.
Teen unemployment was near 12 percent in July 2007 before the minimum wage started its climb from $5.15 to $7.25. It's at 26.1 percent now.
In July 2007, overall unemployment was at 4.7 percent. It's now at 9.5 percent.
So, both have doubled. The teen rate has risen about 15-20 percentage points more but you can hardly blame that on the minimum wage increase. With more people in the labor force desperate for work and lowering their sights, teenagers are going to be last picked.
#9 Posted by Ryan Chittum, CJR on Fri 13 Aug 2010 at 05:58 PM
What is this nonsense about "creating" jobs? Businesses don't "create" jobs. Businesses hire employees to perform work that is profitable for the company. Trained employees are assets to a company, not charity cases sucking away the profits of a business.
Every dime of what it costs to hire and maintain an employee is a cost of doing business. It isn't charity, something to "give" to someone. Each employee represents a value-added service to the company. In order to make a profit in a contract business like Mr Flesicher's, the employee must return about twice cost of his or her labor. Since Mr. Fleischer contracts with the government, to the extent that he might underbid the cost of labor to do the agreed-upon work, to the extent that he makes no profit is an indication that he is an incompetent businessman. His incompetence is not the fault of his employees.
Perhaps he is a lousy businessman with no understanding of good business practices, or, like most Republicans, a self-pitying whiner. Other companies that contract with government are able to be very successful and make a handsome profit while providing valuable services to government entities or other businesses. To the extent that Mr. Fleischer whines that he cannot do that, but others CAN do that, one wonders how he actually stays in business.
If he feels like his employees are paid too much, there are adjustments downward that he could make. He could pay them less, for example, or negotiate for less expensive benefits, he could manage them better, or opt for temporary labor during busy times. There are many options available to a smart businessman, and whining doesn't help.
Other than the minimum wage, what "government mandates" conspire to prevent this whiner from making a profit? Clearly his competitors are subject to the same imaginary "government mandates." If they can make a profit and Mr. Fleischer can't, whose fault is that?
#10 Posted by James, CJR on Fri 13 Aug 2010 at 07:50 PM
Ryan, that would be a good answer if it weren't for the possibility that teens would seem to be attractive hires in a recession, given the search for cheaper labor. People switch from eating at a higher-end restaurant to eating at Applebee's, or from Applebee's to Wendy's. Europe suffered from high youth unemployment (regular unemployment, too) even before the slump, too, and very few people excuse rigid labor laws from being at fault. Second-generation North African kids have been conducting low-level rioting over this. Same story in Germany, where the integration of Easterners into the Republic has run up against wage-fixing and other job entitlements - the kinds of entitlements being peddled by leftist politicians and pundits here.
There is never any one factor causing unemployment, but to pretend the hike in the minimum wage did not price out of a lot of unskilled labor is really carrying ideology a long way into the real world. And my question asking whether anyone you approve of has actually computed how much it costs to hire someone that is attributable to taxes and regulation still stands. It's fun to criticize Fleischer. Not so much fun to consider the question yourself.
#11 Posted by Mark Richard, CJR on Sat 14 Aug 2010 at 06:48 PM