Thou shalt not covet thy neighbor’s pay

Why do federal employees generally report less job satisfaction than those in the private sector, even though their pay, benefits, security, and working conditions are generally better?  I suspect lots of reasons.  Here is a theory:

There may be yet another explanation for why federal employees have long been less satisfied in their jobs than their private sector counterparts, a new study highlighted in Slate Tuesday reveals. Researchers from Berkeley and Princeton found that workers who know what their peers make, especially if they earn below-median pay, are more likely to be disgruntled than their blissfully ignorant peers.

Some HR thinkers have argued that more transparency would lead to better motivation and overall job happiness. If that’s true, federal employees, who have access to databases, public records and water cooler chatter over who makes what, should be much happier than their private-sector peers. But they’re not, according to data from the Partnership for Public Service, and FedBlog’s Tom Shoop wonders if a lack of pay secrets might be one reason.

One might argue, as HR gurus have, that knowing how you stand among your peers would make you motivated to perform better, in hopes of earning more. But the Berkeley and Princeton researchers argue the opposite. The study authors emailed University of California employees about a new Web site that listed the salaries of all of the university system’s employees, and then followed up to see how they felt about receiving the new information. Those who made less than median incomes reported more dissatisfaction and were more likely to say they’d be looking for a job sometime soon.

But those who made more than the median incomes did not report any kind of higher satisfaction from making more than their peers. Rather, they likely assume they’re worth it, and see the data as little more than confirmation of their superiority.

The study is a reminder, Slate’s Ray Fisman notes, of the increasing recognition by economists that humans are actually quite social when it comes to economics. Our salary doesn’t just make us happy or unhappy if we can (or can’t) cover our mortgage or buy an iPad for our spouse for Christmas. Rather, we are constantly comparing ourselves and what we earn to those around us.

via PostLeadership: My coworker makes what?! (When knowing more is not a good thing) – Jena McGregor.

That is to say, we value money not just for what we can buy with it but for the status it confers.  And what bothers us in the workplace is not just our need for a higher salary, but the prospect of other people making more than we do.  Is there anything wrong with this, or is it an example of the economic implications of coveting?

The Republican “Pledge to America”

The last big Republican midterm election gain featured a “Contract with America” that summed up the party’s agreed-upon policies.  Now Republicans, looking for a similar victory, have put together a “Pledge to America.”  The link below will give you access to the full 21-page document, but here are some highlights:

Jobs:

- Stop job-killing tax hikes

- Allow small businesses to take a tax deduction equal to 20 percent of their income

- Require congressional approval for any new federal regulation that would add to the deficit

- Repeal small business mandates in the new health care law.

Cutting Spending:

- Repeal and Replace health care

- Roll back non-discretionary spending to 2008 levels before TARP and stimulus (will save $100 billion in first year alone)

- Establish strict budget caps to limit federal spending going forward

- Cancel all future TARP payments and reform Fannie Mae and Freddie Mac

Reforming Congress:

- Will require that every bill have a citation of constitutional authority

- Give members at least 3 days to read bills before a vote

Defense:

- Provide resources to troops

- Fund missile defense

- Enforce sanctions in Iran

via “Pledge to America” Unveiled by Republicans (Full Text) – Political Hotsheet – CBS News.

What do you think?  Will a platform like this lead to a Republican win?  Will it solve our nation’s problems?

Cut payroll taxes?

One idea to help the economy–advocated by members of both parties–is  to cut payroll taxes, that money deducted from your paycheck.  Here is the case for that from liberal economist Nouriel Roubini:

A much better option is for the administration to reduce the payroll tax for two years. The reduced labor costs would lead employers to hire more; for employees, the increased take-home pay would boost much-needed economic consumption and advance the still-crucial process of deleveraging households (paying down credit card debt and other legacies of the easy-credit years).

Most policy approaches, including the Obama proposals, have tended to subsidize the demand for capital rather than the demand for labor. That has the problem backward. In the second quarter, capital spending reached an annual growth rate of 25 percent. The argument that increased demand for capital leads to greater demand for labor (i.e., if you buy more machines you need workers to run them) has not held up. Firms are investing in capital goods, equipment and offshore offices that allow them to produce the same amount of goods with less — and lower labor costs. To avoid a chronic increase in the unemployment rate, we need to subsidize the demand for labor — achieving job creation — rather than making it cheaper to buy capital, as investment and other tax credits would do.

President Obama could fully fund the reduction in payroll tax by allowing the Bush tax cuts for people making more than $250,000 a year to expire. Meanwhile, the Bush-era cuts affecting middle- and low-income earners — the vast majority of Americans — would remain in place for the time being. . . .

To maximize the incentives for private-sector hiring, there should be sharper reductions to the payroll taxes paid by employers than for those paid by employees. This will counter the argument that the higher income taxes funding these payroll tax cuts will hurt the wealthy and small businesses (many of which are run by those same high-income individuals) and their willingness to hire. Moreover, any cut in the payroll tax reduces the costs of operation and labor for all businesses. Other targeted policies that induce smaller banks to lend to small and medium-size businesses may be needed.

Low-income workers have historically shown a much higher propensity to consume when given extra money, so the payroll tax cut should be designed to provide a larger-percentage break to those on the low end of the income scale compared with the upper middle class.

via Nouriel Roubini – What America needs is a payroll tax cut.

One out of seven is below the poverty line

The recession is officially over, with a quarter showing positive growth after 18 months. Hooray, hooray. Just like the war in Iraq is officially over. So why don’t we feel better? Meanwhile,
we get news like this:

In the second year of a brutal recession, the ranks of the American poor soared to their highest level in half a century and millions more are barely avoiding falling below the poverty line, the Census Bureau reported Thursday.

About 44 million Americans – one in seven – lived last year in homes in which the income was below the poverty level, which is about $22,000 for a family of four. That is the largest number of people since the census began tracking poverty 51 years ago.

The snapshot captured by the census for 2009, the first year of the Obama presidency, shows an America in the throes of economic upheaval.

Since 2007, the year before the recession kicked into gear, the country has almost 4 million fewer wage-earners. There are more children growing up poor. And for the first time since the government began tracking health insurance in 1987, the number of people who have health coverage declined, as people lost jobs with health benefits or employers stopped offering it.

With midterm elections less than two months away, the statistics bare the reality fueling much of the anger toward Washington.

via Poverty stats show the damage.

The price-cutting tailor vs. the New Deal

George Will gives an object lesson about what happened to an ordinary citizen when the government presumed to control the economy:

The crime scene at 138 Griffith St. has changed in 76 years. Today it is a barber shop. In 1934, it was a tailoring and cleaning establishment owned and run by Jacob Maged, 49.

With his responsibilities as a father of four, Maged should have shunned a life of crime. Instead, he advertised his criminal activity with a placard in his shop window, promising to press men’s suits for 35 cents. This he did, even though President Franklin Roosevelt’s New Dealers, who knew an amazing number of things — his economic aides were not called a “Brains Trust” for nothing — knew that the proper price for pressing a man’s suit was 40 cents.

The National Recovery Administration was an administrative mechanism for the National Industrial Recovery Act of 1933, which envisioned regulating the economy back to health by using, among other things, codes of fair competition. The theory was that by promoting the cartelization of labor by encouraging unions, and the cartelization of industries by codes that would inhibit competition, prices would be propped up and prosperity would return.

Soon there were more than 500 NRA codes covering the manufacture of products from lightning rods to dog leashes to women’s corsets. Amity Shlaes, in “The Forgotten Man,” her history of the New Deal, reports that the NRA “generated more paper than the entire legislative output of the federal government since 1789.” Businesses were asked to display the Blue Eagle, an emblem signifying participation in the NRA. Gen. Hugh “Iron Pants” Johnson, an admirer of Mussolini who headed the NRA, declared, “May God have mercy on the man or group of men who attempt to trifle with this bird.

Maged trifled by his 5-cent violation of New Jersey’s “tailors’ code,” written in conjunction with the NRA. On April 20, 1934, he was fined $100 — serious money when the average family income was about $1,500 — and sentenced to 30 days in jail. The New York Times reported that Maged “was only vaguely aware of the existence of a code.” Not that such ignorance was forgivable. It is every citizen’s duty to stay up late at night, if necessary, reading the fine print about the government’s multiplying mandates.

“In court yesterday,” the Times reported, “he stood as if in a trance when sentence was pronounced. He hoped that it was a joke.” Maged was an immigrant from Poland, which in the Cold War would become familiar with the concept of “economic crimes” and the use of criminal law for the “re-education” of deviationists.

Actually, his sentence was a judicial jest. After Maged spent three days in jail, the judge canceled the rest of his sentence, remitted the fine and, according to the Times, “gave him a little lecture on the importance of cooperation as opposed to individualism.” The judge emphasized that people “should uphold the president . . . and General Johnson” in their struggle against — among other miscreants — “price cutters.” Then, like a feudal lord granting a dispensation to a serf, the judge promised to have Maged “measure me for a new suit.”

Maged, suitably broken to the saddle of government, removed from his shop window the placard advertising 35-cent pressings and replaced it with a Blue Eagle. “Maged,” reported the Times, “if not quite so ruggedly individualistic as formerly, was a free man once more.” So that is freedom — embracing, under coercion, a government propaganda symbol.

via George F. Will – Trifle with the government? Just ask Jacob Maged.

Loving austerity

You’ve got to hand it to the Brits, as Anne Applebaum explains:

“Vicious cuts.” “Savage cuts.” “Swingeing cuts.” The language that the British use to describe their new government’s spending reduction policy is apocalyptic in the extreme. The ministers in charge of the country’s finances are known as “axe-wielders” who will be “hacking” away at the national budget. Articles about the nation’s finances are filled with talk of blood, knives and amputation.

And the British love it. Not only is “austerity” being touted as the solution to Britain’s economic woes, it is also being described as the answer to the country’s moral failings. On Oct. 20, the government will announce $128 billion worth of spending cuts, and many seem positively excited about it. . . For these voters, the very idea of instant gratification is anathema, in theory if not in practice. And they elected this government because they’ve convinced themselves that they’ve had enough of it.

Austerity, by contrast, has a deep appeal. Austerity is what made Britain great. Austerity is what won the war. It cannot be an accident that several British television channels are running programs this year with titles such as “Spirit of 1940,” all dedicated to the 70th anniversary of that “remarkable year” of rationing, air raid sirens and hardship. One series, “Ration Book Britain” is even devoted to that era’s parsimonious cooking. “With bacon, eggs and sugar rationed, wartime cooks had to be jolly resourceful,” explains an advertisement for the show. Its host promises to “re-create the recipes that kept the country fighting fit.”

Sometimes the depth of the Anglo-American cultural divide reveals itself in unexpected ways, and this is one of those moments: No cooking show featuring corned beef hash and powdered eggs would stand a chance in the United States. Perhaps for similar reasons, nobody is talking about “austerity” in the United States either. On the contrary, Republicans are still gunning for tax cuts, and Democrats are still advocating higher spending. Almost nobody — not Paul Krugman, not Newt Gingrich — talks enthusiastically about budget cuts. Instead, our politicians use euphemisms about “eliminating waste” or “making government more efficient,” as if no one had ever thought of doing that before.

Despite the deep shock the United States supposedly experienced during the banking crisis of 2008 and the resulting recession, we are, in other words, still far from Clegg’s “long-termism.” Hardly anyone in America is talking about cuts in Medicare, Medicaid or Social Security, for example, the biggest budgetary items (even though “private” pensions now look a lot safer, even when taking stock market fluctuations into account, than those who will depend entirely on a bankrupt federal budget 20 years hence). In Britain, by contrast, everything is on the table: pensions, housing benefits, disability payments, tax breaks.

Politics explain some of this difference, but I reckon history explains more of it. The last period of real national hardship Americans might remember is the 1930s, too long ago for almost everyone alive today. But rationing in Britain lasted well into the 1950s, long enough to color the childhoods of many politicians now in power. Nostalgic Brits, longing to re-create their country’s finest hour, remember postwar scrimping and saving. Nostalgic Americans in search of their own country’s finest hour remember postwar abundance, the long consumer boom — and, yes, a time when even instant gratification wasn’t fast enough.

via Anne Applebaum – For the U.S., Britain’s austerity is a foreign concept.

The conventional wisdom is that politicians dare not ask Americans to make sacrifices of any kind.  Do you think Americans could come to love austerity?


CLOSE | X

HIDE | X