Too little work this Labor Day
Terry Savage email@example.com September 4, 2011 3:50PM
Sterling Green, 23, (right to left) DeAndre Wislon, 25, and Jermaine Cain, 25, all of Chicago, patiently wait in line for a job fair hosted by Bobby Rush at the Jones Convocation Center at Chicago State University 9501 S. King Drive in Chicago, Illinois, Tuesday, August, 9, 2011. | Joseph P. Meier~Sun-Times Media
Updated: May 3, 2013 12:15PM
It’s Labor Day — and not enough people are laboring. Instead of celebrating a day off from work, we’re worrying about where all the jobs have gone. So here are some thoughts about labor — for those who are currently receiving a paycheck, for those who have been working all their lives and are in or nearing retirement, and for those who are wondering whether they’ll ever again find meaningful work.
National Payroll Week
It seemed more than ironic to receive a press release extolling the fact that National Payroll Week is Sept. 5-9 this year. But the report was chock-full of facts you might find interesting to discuss — instead of the fact that the economy is creating zero jobs these days. Here’s what those who do have jobs are doing with their money:
◆ 75 percent of employees use direct deposit for their paychecks.
◆ Only 17 percent of those who use direct deposit split their payment into two accounts. That’s easily done — and can be a terrific way to save. (Savage Truth: If you don’t see it, you won’t spend it!)
◆ While 71 percent use direct deposit because of the convenience, 21 percent say they do it because it makes a positive environmental impact.
The survey was taken by NACHA — the electronic payments association, representing more than 10,000 financial institutions that accept direct deposits.
Here’s a quick quiz. You recognize the initials FICA because they appear on a little box on your paycheck. That box has a substantial sum in it — a deduction from your paycheck that goes to Social Security. But what do those initials stand for? The answer is at the bottom of this column.
While you’re thinking about that, here are some statistics — roughly checked by my actuary — that come from an e-mail circulating on the Internet. The originator of the commentary remains untraceable but is obviously upset that the budget discussions have included Social Security as an “entitlement” program deserving of cuts.
The math is pretty rough — but acceptable to make the point. The writer reminds us that your FICA deduction is only half of the story, since the employer sets aside a like amount. Thus, the combined “contribution” is roughly 15 percent, including the Medicare Hospital tax and despite the reduction in FICA for 2011 from 6.2 percent to 4.2 percent for employees — though it remains 6.4 percent for employers. Still the writer’s complaint rings true:
“If you earned only $30,000 per year over your working life, and paid in 15 percent each year, that’s close to $220,500. If you calculate the future value of $4,500 per year (total contribution from you and your employer) earning a simple 5 percent — after 49 years of working, you’d have $892,919.98. “If you took out only 3 percent per year, you’d receive $26,787.60 per year and it would last better than 30 years — until you’re 95 if you retire at age 65. If you bought an annuity and it paid 4 percent per year, you’d have a lifetime income of $2,976.40 per month. The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madoff ever had! “Entitlement my ---! I paid cash for my Social Security insurance!!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!!”
“If you took out only 3 percent per year, you’d receive $26,787.60 per year and it would last better than 30 years — until you’re 95 if you retire at age 65. If you bought an annuity and it paid 4 percent per year, you’d have a lifetime income of $2,976.40 per month. The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madoff ever had!
“Entitlement my ---! I paid cash for my Social Security insurance!!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!!”
(Special note for math experts: The actuary pointed out that he didn’t use a declining balance for withdrawals, nor any interest crediting on the balance during the withdrawal period, and there is some “rounding” in this calculation!)
Will there be jobs?
And now a final thought for this Labor Day season. The headlines are gloomy. No jobs are being created. There are cries for government to “do something.” But recent history should make us skeptical that government can create jobs.
Yes, the New Deal in the 1930s created roads and bridges and dams, many of which are still in use today. But today our government is buried in debt — some as a result of failed “shovel ready” programs that cost money but provided no results.
The current situation demands we try something more creative this time around. Maybe it’s time to give the real economy incentives to grow, such as tax cuts and more sensible regulations. Then Labor Day would once again be a reward for those who are working instead of a reminder of our failed policies. And that’s The Savage Truth.