PeakTrader.com

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PeakTrader:

I think, people who need a job are more likely to be employed. A recent phenomenon is the collapse of the teen labor force participation rate, since the peak in the late 1970s. Chart:

http://research.stlouisfed.org/fred2/series/LNS11300012

Perhaps, some contributory factors are:

1. The decline in the real minimum wage.
2. living off parents longer.
3. The education boom.

Many teens may prefer to live off their parents, play video games, attend college, and go into debt, rather than work for minimum wage, or low wages, and compete with older immigrants.

Also, it has become more difficult for the economy to expand, because of excessive regulations, taxes, fees, fines, fares, tolls, etc.. Most regulations tend to be regressive and have a negative impact on employment, prices, and wages.

Regulation has a cost in time, effort, and money, which are not limitless, and tends to slow economic growth (ceteris paribus). Perhaps, the U.S. economy hasn’t been able to absorb more regulations on top of excessive regulations.

Some taxes (federal, state, and local) are regressive and some have become more progressive. For example, federal income taxes have become more progressive, which may make it more difficult for small business start-ups and expansions:

CBO: Top 40% Paid 106.2% of Income Taxes; Bottom 40% Paid -9.1%, Got Average of $18,950 in ‘Transfers’
December 9, 2013

“The top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010, according to a new study by the Congressional Budget Office.

At the same time, households in the bottom 40 percent took in an average of $18,950 in what the CBO called “government transfers” in 2010.

The households in the top 20 percent by income paid 92.9 percent of net income tax revenues taken in by the federal government in 2010, said CBO.”

It seems, the way the CBO measures taxes paid is if I pay $2 in taxes and someone else receives $1 in negative taxes, then the government collected $1 and I paid 200%.

Moreover, raising corporate taxes, or other taxes on production, may just raise prices, to offset the taxes, which would hurt low income Americans the most.

If taxes are too high, there may be undesirable effects, including disincentives to work and taking less risk to expand the economy (entrepreneurship, for example, is at 30 year low). And, I think, most Americans grossly underestimate the real costs of regulations and taxes.

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Also, I may add, raising the national minimum wage (which is not a tax), perhaps up to $15 an hour, is a pro-growth policy, because of an increase in productivity and a decrease in other production costs. So, it’ll have a significant effect on raising GDP, although little or no effect on employment. Income inequality will be reduced through inflation.

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Moreover, I may add, a higher minimum wage shifts idle capital (earning enough for capital preservation), in the saving glut, into capital equipment (because labor becomes relatively more expensive).

So, better jobs are created, because workers are needed to create, build, ship, install, improve, maintain, operate, and manage those machines.

Currently, in the U.S., there’s an overabundance of capital and an education boom.

There are too many overeducated Americans working at low-skilled jobs, and too much (idle) capital kept in unproductive assets.

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Joseph, the article was about “income taxes.” There’s a difference between “federal taxes” and income taxes. Here’s what the CBO says about federal taxes:

“Households in the top quintile (including the top percentile) paid 68.8 percent of all federal taxes, households in the middle quintile paid 9.1 percent, and those in the bottom quintile paid 0.4 percent of federal taxes.”

http://cbo.gov/publication/44604

Also, federal income taxes have become more progressive over time:

http://taxfoundation.org/article/cbo-report-shows-increasing-redistribution-tax-code-despite-no-long-term-trend-income-inequality

Tax Foundation link supports article: "CBO: Top 40% Paid 106.2% of Income Taxes; Bottom 40% Paid -9.1%, Got Average of $18,950 in ‘Transfers’"

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Rising riches: 1 in 5 in U.S. reaches affluence
December 6, 2013

“New research suggests that affluent Americans are more numerous than government data depict, encompassing 21% of working-age adults for at least a year by the time they turn 60. That proportion has more than doubled since 1979.

Sometimes referred to by marketers as the “mass affluent,” the new rich make up roughly 25 million U.S. households and account for nearly 40% of total U.S. consumer spending.

In 2012, the top 20% of U.S. households took home a record 51% of the nation’s income. The median income of this group is more than $150,000.”

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Growth in the
Residential Segregation
of Families by Income,
1970-2009

“The proportion of families living in affluent neighborhoods doubled from 7 percent in 1970 to 14 percent in 2007.

Likewise, the proportion of families in poor neighborhoods doubled from 8 percent to 17 percent over the same period.”

My comment:

In 1970, the proportion of Americans in the “affluent” and “upper income” classes, and also in the “low income” and “poor” classes were relatively small, while the proportion of Americans in the “high middle income” and “low middle income” classes were very large.

If you break down those six classes into three classes, the high and low classes grew and the middle class shrunk. Those three categories are almost equal in size today.

In 1970, both the high and low classes were about 18% each, while the middle class was over 60%. In 2007, both the high and low classes were about 30% each, while the middle class was over 40%.

Many middle class Americans moved into the higher classes, while many immigrants from dirt poor countries moved to the U.S. and into the lower classes.

Despite conventional wisdom, there has been tremendous upward income mobility in the U.S..

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