Welfare State: Handouts Make Up One-Third Of U.s. Wages

[aa3]

CNBC

By: John Melloy

http://www.cnbc.com/id/41969508

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”....

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

Edited March 9, 2011 by aa3

[aa3]

My comments: The old economy, the one where people drove into the office or factory, got a paycheque and used that to support a family, and having disposable income to drive the economy... That old economy died in about the year 2000. That was the post war economy. Sort of Henry Ford's dream that men could buy their own production.

And most of the think tanks, politicial leaders, journalists, bloggers and so on that I see are still talking about how we can get back to that age. Like the increasingly desperate and unrealistic goal of educating everyone more. It wont' do anything to slow down the trend.

Because of mass automation, human workers are losing their value in the marketplace. In manufacturing even if workers were paid nothing, it would still be better to choose the robotics for the consistency, quality and precision. It doesn't matter if that human got a stellar 12 years of grade school, and the finest liberal arts degree money can buy. The robotics have above human level capabilities.

It was the luddite fallacy before, new and better jobs were created from the same technologies that made the old jobs obselete. But today its no longer a fallacy. Those men in Britain who lost their jobs in steel, coal mining, dockworkers, car manufacturing.. have not found new and better jobs. They are just long term unemployed or on 'disabilities'.

[interestrateripoff]

The economic system is fatally flawed, the tax base to support these payouts is shrinking question is have we passed the point of no return?

[tahoma]

Since when was welfare considered 'wages'. FFS.

It's the spirit of the age - If we don't call call a thing what it is, we can ignore it.

You can ignore reality. But you can't ignore the consequences of ignoring reality.

[fluffy666]

Since when was welfare considered 'wages'. FFS.

It's the spirit of the age - If we don't call call a thing what it is, we can ignore it.

You can ignore reality. But you can't ignore the consequences of ignoring reality.

Total household income - which, I suspect, means that pensions are included.

[fluffy666]

My comments: The old economy, the one where people drove into the office or factory, got a paycheque and used that to support a family, and having disposable income to drive the economy... That old economy died in about the year 2000. That was the post war economy. Sort of Henry Ford's dream that men could buy their own production.

And most of the think tanks, politicial leaders, journalists, bloggers and so on that I see are still talking about how we can get back to that age. Like the increasingly desperate and unrealistic goal of educating everyone more. It wont' do anything to slow down the trend.

Because of mass automation, human workers are losing their value in the marketplace. In manufacturing even if workers were paid nothing, it would still be better to choose the robotics for the consistency, quality and precision. It doesn't matter if that human got a stellar 12 years of grade school, and the finest liberal arts degree money can buy. The robotics have above human level capabilities.

It was the luddite fallacy before, new and better jobs were created from the same technologies that made the old jobs obselete. But today its no longer a fallacy. Those men in Britain who lost their jobs in steel, coal mining, dockworkers, car manufacturing.. have not found new and better jobs. They are just long term unemployed or on 'disabilities'.

This is the paradox of the 'leisure state' predicted in the 1970s. Although automation initially increases employment by increasing worker productivity, eventually it has to start replacing the whole model of mass employment.

In theory, this should be straightforward to manage; educate people for longer, get them to retire earlier and shorten working hours. Unfortunately, we've spent the last 30 or so years with the economy run by people ideologically opposed to all of these; the result being that the leisure time (i.e. unemployment/long term sick) is forced on the very people least able to make constructive use of it.

[matroskin]

This is the paradox of the 'leisure state' predicted in the 1970s. Although automation initially increases employment by increasing worker productivity, eventually it has to start replacing the whole model of mass employment.

In theory, this should be straightforward to manage; educate people for longer, get them to retire earlier and shorten working hours. Unfortunately, we've spent the last 30 or so years with the economy run by people ideologically opposed to all of these; the result being that the leisure time (i.e. unemployment/long term sick) is forced on the very people least able to make constructive use of it.

I think it has to start replacing the whole model of working for fiat currency.

This was blindingly obvious in the last days of USSR.

Official wages in Soviet Rubles were minuscule, handouts were in the form of food+staples vouchers called "talons".

Black market was thriving.

[57percent]

This is the paradox of the 'leisure state' predicted in the 1970s. Although automation initially increases employment by increasing worker productivity, eventually it has to start replacing the whole model of mass employment.

In theory, this should be straightforward to manage; educate people for longer, get them to retire earlier and shorten working hours. Unfortunately, we've spent the last 30 or so years with the economy run by people ideologically opposed to all of these; the result being that the leisure time (i.e. unemployment/long term sick) is forced on the very people least able to make constructive use of it.

Great post.

Effectively, what we're seeing is the ideological 3-day week. We're so efficient at creating food and essentials, that we could simply all work a bit less. This seems to oppose human nature, so the west has created a whole made up industry of 'finance' and all the insurance and law that surrounds it and spent all the extra money bidding up land prices.

[efdemin]

My comments: The old economy, the one where people drove into the office or factory, got a paycheque and used that to support a family, and having disposable income to drive the economy... That old economy died in about the year 2000. That was the post war economy. Sort of Henry Ford's dream that men could buy their own production.

And most of the think tanks, politicial leaders, journalists, bloggers and so on that I see are still talking about how we can get back to that age. Like the increasingly desperate and unrealistic goal of educating everyone more. It wont' do anything to slow down the trend.

Because of mass automation, human workers are losing their value in the marketplace. In manufacturing even if workers were paid nothing, it would still be better to choose the robotics for the consistency, quality and precision. It doesn't matter if that human got a stellar 12 years of grade school, and the finest liberal arts degree money can buy. The robotics have above human level capabilities.

It was the luddite fallacy before, new and better jobs were created from the same technologies that made the old jobs obselete. But today its no longer a fallacy. Those men in Britain who lost their jobs in steel, coal mining, dockworkers, car manufacturing.. have not found new and better jobs. They are just long term unemployed or on 'disabilities'.

I'm sorry, those particular jobs, except maybe car manufacturing, were lost due to cheaper workers overseas. Automation has had an effect, sure, but that doesn't cause the closure of whole plants and then the machinery being shipped to China.

You could equally blame the high cost of housing in the UK brought on by the bankers / government / various VIs making UK workers too expensive.

But if automation had destroyed all these jobs, how come Germany is doing so well at the moment?

Edit:

Also, I have no figures to back this up but I suspect that new jobs are more likely to be in the SE. So new jobs have been created, just not in the areas where those jobs were lost. I guess Labour tried to fudge it by moving lots of government jobs out of the SE but that's not a very good long-term solution.

Edited March 9, 2011 by efdemin

[fluffy666]

I'm sorry, those particular jobs, except maybe car manufacturing, were lost due to cheaper workers overseas. Automation has had an effect, sure, but that doesn't cause the closure of whole plants and then the machinery being shipped to China.

You could equally blame the high cost of housing in the UK brought on by the bankers / government / various VIs making UK workers too expensive.

But if automation had destroyed all these jobs, how come Germany is doing so well at the moment?

There are two ways to compete in manifacturing...

One way, ship your factory out to somewhere with cheap labour (China, India, etc..); ideally a place where the workers don't have any inconvenient rights or protection under the law. This reduces costs, although since worker productivity generally goes down, and wage income drops sharply, it becomes harder to sell your products. Especially if everyone does it. You can't expect to pay poverty level wages yet have affluent consumers to buy your stuff..

The other way is to invest in sufficient advanced capital plant and automation to lower your labour costs via improved productivity. Which means you can still pay high wages - as can everyone else doing the same thing.

[fluffy666]

Great post.

Effectively, what we're seeing is the ideological 3-day week. We're so efficient at creating food and essentials, that we could simply all work a bit less. This seems to oppose human nature, so the west has created a whole made up industry of 'finance' and all the insurance and law that surrounds it and spent all the extra money bidding up land prices.

Don't forget childcare, convenience food, 24-hour opening, 2 or 3 car families and the rest of the extra consumption generated by the 2-full-time-worker household. You have to wonder just how much GDP has been conjured up by the monetization of domestic chores..

[Olebrum]

What is good enough for the banks and business is surely good enough for the people.

[Britney's Piers]

What were some people saying the other day "don't short the US"? All QE smoke and mirrors.

Edited March 9, 2011 by Britney's Piers

[South Lorne]

What is good enough for the banks and business is surely good enough for the people.

...who will pay when the tax take dries up ....?

[PopGun]

This is the paradox of the 'leisure state' predicted in the 1970s. Although automation initially increases employment by increasing worker productivity, eventually it has to start replacing the whole model of mass employment.

In theory, this should be straightforward to manage; educate people for longer, get them to retire earlier and shorten working hours. Unfortunately, we've spent the last 30 or so years with the economy run by people ideologically opposed to all of these; the result being that the leisure time (i.e. unemployment/long term sick) is forced on the very people least able to make constructive use of it.

Good post.

I remember reading a book called Kiln People. Set in the near future where people could produce an assortment of clay clones of themselves (or golems) to carry out various jobs and tasks on the originator's behalf. This meant individuals could effectively be doing three/four jobs at once.

Downside to this maximisation of productivity from talented individuals unfortunately meant unemployment was around 80%. However the tax from the rich elite (the beneficiaries of all this macro labouring) more then covered the costs of decent basic living standards for those who were unable to compete in this new economy.

Maybe unemployment is a symptom of successful capitalism, rather than a consequence of capitalism failing?

[R K]

There are two ways to compete in manifacturing...

One way, ship your factory out to somewhere with cheap labour (China, India, etc..); ideally a place where the workers don't have any inconvenient rights or protection under the law. This reduces costs, although since worker productivity generally goes down, and wage income drops sharply, it becomes harder to sell your products. Especially if everyone does it. You can't expect to pay poverty level wages yet have affluent consumers to buy your stuff..

The other way is to invest in sufficient advanced capital plant and automation to lower your labour costs via improved productivity. Which means you can still pay high wages - as can everyone else doing the same thing.

Except the surplus isn't redistributed to the 'workers' it's redistibuted to the owners of the capital, who might not be the same (as indeed it is when cheap labour is used).

I agree with you in principle but you'd have to shoot all the Adam Smith nutjobs first and let's face it they'd shoot you long before you got the chance.

But the last 15 years has been the WTO, China etc etc - The solution to that is capital controls and tariff barriers to negate the dumping of cheap labour on Western markets, but of course the big corporates and banksters have spent a great deal of time, money and effort ensuring they own the govts. to prevent that happening.

Since we don't have democracy any longer it'll probably have to go Egypt/Libya to remove these people. Dave/Osborne/Boris/Ed/Ed/Nick/Vince work for the capital owners not the workers. That much must be very obvious to everyone by now.

[PopGun]

I agree with you in principle but you'd have to shoot all the Adam Smith nutjobs first and let's face it they'd shoot you long before you got the chance.

[Olebrum]

...who will pay when the tax take dries up ....?

printy printy

[South Lorne]

Except the surplus isn't redistributed to the 'workers' it's redistibuted to the owners of the capital, who might not be the same (as indeed it is when cheap labour is used).

I agree with you in principle but you'd have to shoot all the Adam Smith nutjobs first and let's face it they'd shoot you long before you got the chance.

But the last 15 years has been the WTO, China etc etc - The solution to that is capital controls and tariff barriers to negate the dumping of cheap labour on Western markets, but of course the big corporates and banksters have spent a great deal of time, money and effort ensuring they own the govts. to prevent that happening.

Since we don't have democracy any longer it'll probably have to go Egypt/Libya to remove these people. Dave/Osborne/Boris/Ed/Ed/Nick/Vince work for the capital owners not the workers. That much must be very obvious to everyone by now.

...BMW , Mercedes and Audi prove that theory wrong ...and in fact they wish to prolong the working lives of their older experienced workers .....quality (total) is the answer ....where the workforce have the same pride in the product as management...and this moves on to the customers....

[fluffy666]

...BMW , Mercedes and Audi prove that theory wrong ...and in fact they wish to prolong the working lives of their older experienced workers .....quality (total) is the answer ....where the workforce have the same pride in the product as management...and this moves on to the customers....

Most workers do have pride in the product.. it's more the MBAs that don't, and see the workers as unteachable, expensive, and easily swappable drones.

I suspect that Adam Smith would have regarded this kind of treatment as a failure of management..

[South Lorne]

Most workers do have pride in the product.. it's more the MBAs that don't, and see the workers as unteachable, expensive, and easily swappable drones.

I suspect that Adam Smith would have regarded this kind of treatment as a failure of management..

.....some UK Management maybe...but try Nissan Sunderland where quality reigns as good as Japans....but it is Japanese management ...following quality philosophy like Deming they more than likely don't employ MBAs ....

[aa3]

This is the paradox of the 'leisure state' predicted in the 1970s. Although automation initially increases employment by increasing worker productivity, eventually it has to start replacing the whole model of mass employment.

In theory, this should be straightforward to manage; educate people for longer, get them to retire earlier and shorten working hours. Unfortunately, we've spent the last 30 or so years with the economy run by people ideologically opposed to all of these; the result being that the leisure time (i.e. unemployment/long term sick) is forced on the very people least able to make constructive use of it.

Thats a great point..wunderpup and shipbuilder have pointed out how much innovation came from 19th century rich guys who were doing science as a hobby. And the thought was if we gave people more leisure time they would have a chance to be more innovative. However what is happening is what you are saying, those left behind with the leisure time are those least able to use it constructively.

[aa3]

Good post.

I remember reading a book called Kiln People. Set in the near future where people could produce an assortment of clay clones of themselves (or golems) to carry out various jobs and tasks on the originator's behalf. This meant individuals could effectively be doing three/four jobs at once.

Downside to this maximisation of productivity from talented individuals unfortunately meant unemployment was around 80%. However the tax from the rich elite (the beneficiaries of all this macro labouring) more then covered the costs of decent basic living standards for those who were unable to compete in this new economy.

Maybe unemployment is a symptom of successful capitalism, rather than a consequence of capitalism failing?

I agree. People often think I am against capitalism because of the solutions I propose. But actually it is capitalisms success in innovation that has gotten us to this point, and will take us further.

I think an earlier stage was reached in the 1930's. And a whole host of reforms were put in during that era to deal with the mass unemployment then. The 40 hour work week, paid vacation, retirement, much more progressive taxation, public services, statuatory holidays, workers unions... to name some of them. By the 1950's western workers were making hugely more money and working less.

An assumption in the ideologies is as we get more productive, new and better jobs will open up. But if that doesn't happen, it is only logical that different policy solutions are needed.