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Sunday, May 06, 2012

Chicken or Egg?

Is the economy so bad - with no hope for millions of Americans to find work - that it makes them simply give up and go on government relief?

Or is government relief now so enticing that it makes people sit at home and collect welfare?

Whichever is the case, there is an unprecedented trend taking place in our country.  People by the millions are dropping out of the workforce.

The chart, courtesy of the Wall Street Journal:

A few things from "The Vanishing Workers" to ponder:

"The civilian labor participation rate, as it's known, fell again in April to 63.6%. That's the second decline in a row and the lowest rate since December 1981. That's right—more than 30 years ago, longer than Mark Zuckerberg has been alive."

"[T]he recent fall is so sharp and surprising that aging baby boomers can't be the entire reason. Another explanation is surely the slow pace of job growth, which means fewer opportunities to entice what economists call the "marginal" worker back into the labor force."

"Second earners in a household may also not find work at a high enough wage to justify the costs of commuting or child care. That's especially true when stagnant wage growth means less reward for the effort. Over the past 12 months, average weekly earnings are up 2.1% but inflation has climbed by 3%. Real pay is rising far too slowly, which makes work less attractive."

"Another culprit may be the rapid expansion of government transfer payments during this recession. Medicaid, disability payments and food stamps have all risen sharply in recent years, starting under President Bush and accelerating under President Obama.

"This is a particular disincentive to low-skilled workers to enter the job market because in some high-benefit states they need to earn $30,000 or more to compensate for the benefits they lose. This is an insidious high marginal tax rate that deters many from ever acquiring the basic skills and experience they need to move up the income ladder."

That last point is the most troubling.  Depending on the state in which they reside, there is no good reason for most people working at Wal-Mart to be working at Wal-Mart.  They can "earn" more by staying at home and waiting for the monthly check(s) to arrive in the mail box.  We're back to  the welfare state that Bill Clinton famously "ended as we know it."  Welfare as we knew it may have ended, but government transfer payments to non-productive citizens are flooding the countryside - by other names.  SCHIP, TANF, the EITC, SNAP (food stamps), housing assistance, SSI, never-ending unemployment compensation, school lunch assistance, child welfare services, child care subsidies, energy assistance programs, shelters for the homeless, even cell phone assistance.   Add to these the towering Medicare and Medicaid programs - and, soon, ObamaCare - and the problem becomes obvious.  And immense.

To make it worse, the mindset is ingrained in many areas of the country.  See "Welfare Queens," a story that is really about "Obama Bucks," as they are referred to in the video by those on the receiving end of your hard-earned income that was confiscated by one or more governments.  The cash is there and they're going to take it.  Work?  Employment?  The future?  They'll think about working in the future in the future.

So the economy is struggling.  And the government checks are flowing like never before.  Cause?  Effect?    Symptom?   Now till the end of time?


Something's gotta give.  We can't go on like this.