Monday, December 21, 2015

Candidates' Health Care Plans

This is not to endorse "planning" but for convenience I have made a list of links to Presidential candidate's health care plans.

Read about America's current plan here.

Tuesday, December 15, 2015

Robert Reich: Changing the Facts to Fight the Good Fight

Yesterday Robert Reich claimed that

"Most people who lose their jobs don't even qualify for unemployment insurance."

As you can see from my cut and paste of his quote (italics added), he cited a newsmax article.  But that article lists several reasons why the unemployed choose not to apply for benefits.  On this issue of eligibility, the article says that most UNEMPLOYED do not qualify.  The reason is typically that the non-qualifying unemployed DID NOT LOSE THEIR JOBS.  As the article says,

"Unemployment benefits are only available to those who lost a job through no fault of their own. ... Many of the unemployed are recent college or high school graduates who are now looking for work. Others may have quit their jobs, or they left work years ago to take care of children and are now job-hunting again. People in those categories make up 52 percent of the unemployed."

You would think that Mr. Reich knows the facts because he was IN CHARGE OF THE FEDERAL DEPARTMENT OF LABOR, which is intimately involved with unemployment insurance benefits.  But he also knows a good narrative, which is that job loss is typically endured with no government help.

Saturday, December 12, 2015

Timothy Jost poses an economics question

In reading the [CBO's analysis of ACA marginal tax rates and the labor market], questions that occurred to me, admittedly a non-economist, included why there is no accounting for the increased employment of health care workers which surely must accompany the coverage expansions?

The answer is:
  • when we redistribute income for the purposes of paying for some people's health care, that likely creates additional jobs in the process of supplying health care to the ACA beneficiaries.
  • But we cannot forget about the other end of the redistribution. Somebody is paying for this, either by paying taxes or loaning money to the government, and that's funds that the payers cannot spend on other things. So there's a reduction in the employment of people who would be supplying the payers (whatever it was that they would have spent money on: anything from food to forming new businesses).
  • The bottom line for labor demand hinges on a comparison of the labor-intensity of healthcare supply and the intensity of supplying those other things.

In effect, CBO and many others assume that they are equally labor intensive, so that there is no net aggregate-labor-demand effect. Only the composition of labor demand is changed.  (If I had to say how the "true" comparison works, I would say that just about anything for low-income people is less labor-intensive than the things bought by high-income people, but this gap is small in comparison to the marginal tax rate effects).

I also addressed a similar question in my earlier Redistribution Recession.

Mr. Jost has been so busy digesting and summarizing ACA regulations (that you for that, sir!) that he probably hasn't had time to look at my books on the economics of Obama-era social programs.

Wednesday, December 9, 2015

Fiscal Policies and the Prices of Labor: A Comparison of the U.S. and the U.K.

Many countries of the world experienced an unusually deep and long recession after 2007.  Over the same time frame, several facets of fiscal policy were changed, especially policies related to taxation and safety net programs.  The purpose of this paper is to compare changes in fiscal policy parameters as they affected the incentives of middle-class Americans and British to be employed.  The U.K. had a “stimulus programme” followed by an “austerity programme.”  The U.S. federal government also passed what it called a “stimulus package,” followed by a major health reform.
Policy labels acquired during legislative processes are not necessarily indicative of economic fundamentals.  This paper comparably quantifies fiscal policy in terms of one of the fundamentals: the wedge between the supply price of labor and the demand price of labor.  It finds that the two countries have been different in terms of the evolution of employment taxation, on average and across demographic groups.  The American stimulus reduced average incentives to be employed by increasing cash and health benefits for the unemployed and for families with low incomes, whereas the British stimulus did the opposite by temporarily reducing its value-added tax rate and permanently reducing its basic income tax rate.  The British austerity program pushed incentives in the opposite direction as its stimulus by permanently increasing its payroll and value-added tax rates.
            The evolution of employment has also been different in the two countries.  Figure 1 displays an index of each country’s employment rates for prime-aged people.[i]  Employment fell sharply in both countries during the crisis, although less so in the U.K.  The U.K. employment recovery began earlier, and by the end of 2014 the U.K. employment rate had exceeded pre-crisis levels.  Because taxes are one (among many) of the determinants of labor market performance, comparable tax measures are necessary for carefully investigating and comparing labor market outcomes.  This paper provides tax measures, and shows how changes in tax rates are linked to specific legislation.

Taxes potentially affect work decisions in a variety of dimensions, for example: the number of weeks worked per year, the number of hours worked per week, whether to work at all during a year, and the amount of effort to put into work.  Due to the prominence of the business cycle during this period and the sheer size of gross monthly employment flows, this paper focuses on the weeks-per-year margin holding constant weekly hours and the probability of not working at all during a calendar year.  In the 21st-century U.K., for example, the single largest quarterly employment decline for the non-elderly population has so far been 0.3 million, as compared to at least 2.6 million non-elderly people who join or separate from an employer during the average quarter.[ii]  Adding just one week out of work before joining, or after separating, would therefore create a remarkable net reduction in the number employed at a point in time.  Also, the large majority of unemployment spells last less than 12 months, and some of those lasting 12 months do not blanket an entire tax year.[iii]
I follow the usual steps of public finance analysis and first look at the tax wedge – the gap between supply and demand prices created by a tax or subsidy.  The next step, left for future research, is to draw conclusions about the wedge’s behavioral effects and ultimate incidence.  Thus, with one exception noted below, the estimates in this paper do not require any assumption about the relative incidence of labor taxes on employers and employees.
Section I discusses the United Kingdom, demonstrating how many of the tax changes were ultimately offsetting in terms of the employment incentives they created.  The primary exception relates to the subpopulation receiving child tax credits, because the phaseout (sometimes referred to as “taper”) rate of those credits increased with little change in the range of incomes over which the phaseout applies.  Section II shows results for the United States, where employment disincentives have increased over time, especially (but not exclusively) among unmarried workers.  Section III shows the evolution of the employer cost and employee benefit from work – the gap between the two is the employment tax wedge – by country for workers in the middle of the wage distribution.  Section IV concludes.

[i] Both series are from the Organization for Economic Co-operation and Development (hereafter, OECD), via the St. Louis Federal Reserve’s FRED database.  In 2007-Q4, the U.K. and U.S. employment rates were 81.5 and 79.8, respectively.
[ii] Average quarterly gross flows are from Gomes (2012, Figure 1), for 1996 through 2010.  Quarterly net employment changes are from the OECD, via the St. Louis Federal Reserve’s FRED database, and, for comparability with Gomes, for the age 16-64 age group. 
[iii] The St. Louis Federal Reserve FRED data series UEMPMED shows that the U.S. median duration of unemployment peaked at 25 weeks in June 2010.  Also note that, for example, an 18-month nonemployment spell lasting from March 2009 to September 2010 nonetheless involves positive weeks worked in both calendar years (tax years in the U.S. coincide with calendar years).

Tuesday, December 8, 2015

Employer penalty amounts for 2016 and 2017

The ACA's employer penalty increases every year. It began in 2014 (although not enforced in that year) at $2,000 per full-time employee-year (over 30 employees). Its amounts in subsequent years:

2015 $2,084
2016 $2,166
2017 $2,265

These are set according to the HHS Secretary's "Premium Adjustment Percentage."

As explained in my book, the employer penalty has a special business tax treatment that makes it more expensive than employee salaries. The salary equivalent of the employer penalties are:

2014 $3,046
2015 $3,174
2016 $3,299
2017 $3,449

After increasing 4 percent in each of the first two years, the lasted annual increase is 5 percent.

Another interesting way to look at it is the number of hours that a $7.25/hour worker has to work to create enough value for his employer to pay the penalty on his behalf (let alone pay the employee's wages):

2014 8.1 hours per week, 52 weeks per year
2015 8.4 hours per week, 52 weeks per year
2016 8.8 hours per week, 52 weeks per year
2017 9.1 hours per week, 52 weeks per year

In other words, only after the ninth hour of work in 2017 will the penalty be paid and there will be value creation that can go toward employee wages, employer profits, or other taxes.