Reports from the Economic Front

a blog by Marty Hart-Landsberg

Monthly Archives: April 2016

Disappearing Corporate Taxes

The following chart from an Economic Policy Institute economic snapshot makes clear that we have every reason to raise corporate taxes in order to adequately fund needed public investments and social programs.

Corporations have enjoyed a series of tax cuts and loopholes which have enabled them to lower their income tax payments.  In 1952 their income tax payments totaled 5.9 percent of GDP.  In 2015 they were equal to only 1.9 percent of GDP.

 

corporate taxes

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Global Wealth Inequality

This short video does an excellent job illustrating the extent and growth of global wealth inequality.

References for the facts presented in the video can be found here: http://therules.org/inequality-video-fact-sheet/

 

US Households Experience Growing Insecurity

People are angry about economic trends and are searching, as voting trends reveal, for ways to communicate their strong desire for change. A recent Pew Charitable Trusts issue brief on Household Expenditure and Income provides powerful insight into those trends.

The issue brief focuses on households in which survey respondents or their spouses are between the ages of 20 and 60.  The households are then divided into thirds based on income.  The key takeaway is the growing economic insecurity of US households.

Figure 1 shows that it took until 2014 for inflation-adjusted median and mean household expenditures to return to their pre-recession levels.

Fig_1_Expen

However, as Figure 2 shows, the median rise in household expenditure was not matched by a corresponding increase in median pre-tax household income.

Fig_2_Expen

As the authors of the issue brief explain:

By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.

Figure 4 highlights the recent upswing in costs of housing, food and transportation.

Fig_4_Expen

The housing squeeze has become especially severe for low income renters.  As Figure 6 shows, in 2014, low income renter households spent almost half of their pre-tax income on housing.

Fig_6_Expen

More generally, as Figure 10 reveals, households in all three income groups are experiencing budget tightening; they have significantly less money left over after meeting their regular annual expenditures than they did in 2004.

Fig_10_ExpenIn the words of the study:

The amount of slack that families had in their budgets declined for all income groups between 2004 and 2014. . . . In 2004, the typical household in the lower third had a little less than $1,500 left over after accounting for annual outlays. Just 10 years later, this amount had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures. The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014. Of note, because income is measured before taxes, some families will have had even less slack in their budgets than this figure implies.

Sadly, there is no reason to believe that majority economic prospects will take a turn for the better.

The Growing Precariousness of US Work

The nature of work is fast changing in the US and not for the better.  There has been lots of talk lately about the so-called Gig economy and the precarious work conditions of those forced to work as so called independent contractors for companies like Uber, Lyft, DoorDash, Postmates, Amazon’s Mechanical Turk, and the like.  These workers have no job security, little or no control over their wages and work conditions, and no social benefits.

But Gig economy employment is just a small percentage of what is being called alternative work arrangement jobs.  This broader category includes those working for temporary help agencies, as independent contractors, for contract firms or on-call.  And, as a Wall Street Journal discussion of recent work by economists Alan Krueger of Princeton University and Lawrence Katz of Harvard University makes clear, the number of these alternative work arrangement jobs is rapidly growing.

As the figure below shows, the percentage of workers with alternative work arrangement jobs—what might better be labeled as precarious work—grew from 10.1 percent of all jobs in 2005 to 15.8 percent of the total in 2015.  By comparison, alternative employment barely increased over the previous decade, from 9.3 percent in 1995 to 10.1 percent in 2005.  The data is based on a person’s main job, so someone with a full time position who also works a second more alternative job is still classified as a conventional employee.

Alternative Work Arrangements 1

Strikingly, as the following chart illustrates, these precarious work arrangements are exploding in almost all sectors of the economy and at all educational levels.

Alternative Work Arrangements 2

As the Wall Street Journal explains:

The steep jump in workers in alternative employment complicates the rosy picture of the labor market highlighted by officials at the Federal Reserve and in the Obama administration. While the economy has added nearly 14 million jobs since 2010, more than recovering the number of jobs lost during the recession, the new data suggests a growing slice of the workforce has only tentative ties to a main employer.

This development has begun to spur new kinds of organizing.    However, at this point in time, the aggressive corporate restructuring of work has left growing numbers of workers, regardless of whether employed in conventional or alternative work arrangements, in a weakened position.