Why Don't People Work ?

While the current economic situation will certainly cause the "unable to find a job" category to increase (maybe even double), I found the statistics about why people do not work interesting. The second graph shows the percentage of people over 65 who still work, and I would imagine that the reason for that has a much different demographic. I find it encouraging that in general, people who want to work, for the most part can - in normal times, and tragic that so many senior citizens must work for day to day sustenance.

Why are so many people older than 15 not in the work force today? According to a 2004 study (current unemployment will change these numbers temporarily) the main reasons are:

37.9% are retired
19.1% are going to school
14.7% suffer from chronic illness or disability
13.2% are taking care of children/others at home
4.3% are unable to find work
3.6% are uninterested in working

What the Stimulus Means for You :o)

So, what are we going to get for $800 Billion, and is there a chance that us average citizens will see anything? Below are the details that we can expect:

A bigger paycheck: Starting in April, you can expect to see a little bit more in your paycheck, and income tax reduction of $400 for individuals and $800 for couples. Assuming this is for the whole year, it should be $50 to $60 per month.

A bonus for retirees: If you collect social security, look for a $250 check this summer.

Relief from the AMT: A $500 increase in the alternative minimum tax (AMT) exemption for individuals, to $46,700, and a $1000 increase for couples, up to $70,950.

A tax break on new wheels: If you buy a new car, light truck, motorcycle or motor home this year and spend up to $49,500, you can deduct state and local sales taxes (average is 6%). Individuals who make less than $125,000 and families making less than $250,000 qualify.

An incentive for home buyers: A tax credit of up to $8,000 for first-time buyers has been extended through November. If you buy in 2009, you will not have to pay the credit back. For all homeowners, the cap on credits for energy-efficiency improvements, such as new windows or insulation, has been raised from $500 to $1,500.

A break on college tuition: A beefed-up Hope (now American Opportunity) credit will max out at $2,500, up from $1,800. Qualifying income limits rise to $80,000 for singles and $160,000 for couples. Does your college student need a PC? You can use money in your 529 account to buy one - or Internet access - this year or next.

Lifeboats for the laid-off: Those who remain on their former employer's health-insurance plan will get a 65% subsidy for up to nine months. The first $2,400 in unemployment -insurance benefits this year will be tax-exempt.

Big Three Bailout - Yes or No ???

There have been some discussion threads and entries about the pros and cons of assistance to the Big Three (This one for you Mark).

This got me thinking, at first blush, I am against a "bailout" (it is bad business planning and poor decision making, the company(s) do not deserve to be bailed out), and that is the fiscal conservative republican side of me. After all, if we bail out the auto industry, what is next, every struggling company will line up with the palms extended upwards (sometimes holding a bucket). Where do we draw the line?

Then there is the socially liberal side that looks at the impact to the people, the workers and families that were simply doing their jobs, and they may have to pay the ultimate price. How do we address that issue, do we bailout the companies, do we provide increased welfare and job training, do we do a packaged bankruptcy with government backing???

I can see, understand, and empathize with both perspectives. So, I decided to look at the business case perspective; what is better for the average taxpayer. Some facts/assumptions:

• One Million workers potentially impacted.
• Average weekly unemployment benefit is $359/week (assume 20 weeks)
• Assume average salary is $60K/year, and that workers will be out of work for a year.

What is the burden to the taxpayer if do not provide some assistance? The unemployment benefits will cost $7.18 Billion. The lost tax revenue, assuming a 25% rate, will cost $15 Billion in lost taxes. So, without even considering downstream costs to other local businesses that lose sales, and without considering job training and placement assistance, we are at a greater than $22 Billion impact if we do nothing.

So, I say that some assistance package is necessary, for the good of the impacted workers and their families, as well as for all tax payers. I think that some guarantees of repayment (so the assistance is more like a loan) and harsh realities for the executives (no bonuses, reduced pay) are definitely in order. Longer term, we need to consider reduction in manufacturing in other countries, retooling for renewable technology, and some union concessions are in order to ensure the viability of this industry in our country.

I think that whenever we are faced with such a dilemma, we need to run the numbers, figure out what the business case is, and make our decisions based on facts, not emotion. When the number of impacted employees is around a million, the numbers do not lie; when the numbers are in the thousands, it is much harder to make the case.