There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.
-Excerpt from President Obama's speech on July 13, 2012
Many people on the right have already jumped all over this. But I thought I would put my two-sense in. Many conservatives are trying to paint this as an assault on business owners; an attack on the private sector. While without hearing the tone of the speech, or perhaps only reading a smaller chunk of this speech (many conservative outlets have used solely "If you’ve got a business -- you didn’t build that. Somebody else made that happen."), it may sound anti-business, but I believe it's more of an excuse for more government with pro-government sentiment. Other than that particular part of the speech being poorly worded, I believe Obama's overall message of the speech was that everyone uses the help of government at some point--whether it be through welfare, student loans, or merely using the roads paved by public employees, and that, in doing so, you did not build your business on your own. He uses this because of the brewing kettle of anti-government sentiment that is about to spill over out of the pot that is the Republican party.
But who will pave the roads?
Anybody who has libertarian-leanings or has read the work of Murray Rothbard can surely appreciate the irony of the above question. This post is not about making a case for the privatization of our roads or highways, although that has been done many times, but the point really is--we don't need the benevolence of government to get things done. Contrary to what many of Obama's zombies may believe, the United States would not be some third-world country crawling with pollution and poverty, and no new innovation, even things as simple as roadways, without the help of government. I'm not in favor of total anarchy, I do believe law enforcement, fire departments, and things of that nature are best suited for the public sector. However, Obama is using rhetoric to help the members of his party believe that because the successful people could not get where they are today without government, more government is necessary. Two aspirin may help my headache, so therefore 25 aspirin will help my headache even more!
The second part of this excerpt that really bothers me is what is said in the first paragraph. While I agree with him that there are a lot of hard working people out there--individuals who try to start a business (business owners often put in 65+ hours per week during start-up) and fail, single mothers with only a high school diploma who work three jobs to support their children, who don't succeed, to discredit the intelligence and drive of others who do is just wrong. It's almost as if, by his logic, if there is a group of 100 hard-working people, only a dozen or so will be successful, and that is because the success-fairy blessed them with successful dust and that's what creates success. As if it is total luck that smart or hard-working people become successful and it is government's job to bring down those who got lucky in order to help those who didn't. While "luck" is such a dangerous word to use, let me make it clear that I believe that to a certain extent, people create their own luck. They do so by surrounding themselves with the right people, making informed and well-timed decisions, and putting themselves in the right place. Yes, I agree with him that hard-work and intelligence does not guarantee success, but by making the right moves or doing the right things, or taking risks, success can be achieved. Yes, we've all had great teachers, great inspiration, and great role models to help us along the way. But is it fair that John Lennon give 10% of his profit to Dr. Hofmann for synthesizing LSD?
Monday, July 16, 2012
Monday, July 2, 2012
Free Market vs. Universal Health Care
It's easy for most people to say "oh yeah universal coverage is great!" And by and large, when polled about current health care systems, Canadians, Brits, and the French tend to respond very positively about their own universal coverage systems. However what many do not take into account about these polls if that people will more likely respond in favor because people are in good health most of the time. Pair this with a "free" system of health care and why wouldn't most respond in a positive manner? However, what most people don't consider is the strict limitations put in place on both the medical professionals and the patients with a universal system. Not to mention the shortages/surpluses that go into effect when price controls are enacted.
We have all heard about the waiting times that come with a universal system. Often times for screenings, these waits can range from a couple months all the way up to eight or nine months. Want to pay out-of-pocket for a screening to get one sooner? Not an option under many universal systems, including the ACA, looks like you're stuck waiting for a screening that could be life-saving. Dr. Lee Kurisko, a radiologist who lived his whole life in Canada made the move to the United States some years ago, for a number of reasons. He cites the free-market as the best alternative to health care, and cites the numerous problems that occur within the Canadian health care system. Dr. Kurisko explains that in Canada, the government sets the prices, in place of the market. This causes shortages that wouldn't occur in a free-market.
The free-market approach is a consumer-driven approach. In any part of a free-market, a product or service provider must satisfy and meet the demands of the consumer in order to stay in business. These providers must compete against one another for service, and in doing so, drive down the fees they charge as well as improving the quality of their products, or else face bankruptcy. Health care should be no different, but it is treated differently due to government interference, malpractice insurance and doctors over-testing patients both due to the threat of litigation.
Another problem facing American health care is this use of insurance for every thing from a physical to a triple-bypass. While I believe the use of insurance for the latter is appropriate, the use of insurance for routine and expected services only drives up the cost of such procedures. As I mentioned in my former post "Why Free Market Medicine Works," using high-deductible health plans, in combination with health savings accounts for these run of the mill procedures allows the consumers to shop around for the best combination of low-cost/high quality doctor, which forces physicians to lower the cost of these procedures while simultaneously increasing quality in order to attract consumers.
HDHPs require that those covered pay higher deductibles (a minimum of $1,200/year or $2,300/year/family) but ultimately have lower premiums. These are required for a HSA and often times half of the covered's money goes into the HSA while the other half covers the insurance product. At the end of the year, the person likely had a few thousand dollars in the HSA and can use it on routine procedures, or choose to roll it over for the next year. By allowing individuals more control over their health-payments, it encourages them to take better care of themselves, and because HSA's are tax exempt and the money in them can be invested to collect interest, the money in one's HSA can grow.
As I've stated before, the problem is not that everyone must be covered by insurance, but that the cost of health care should be made more affordable. Many people do not realize that despite the name "Patient Protection and Affordable Care Act," the care is not made more affordable, nor are patients protected. Having a slip of paper that says you have insurance does not translate to actual health care. When doctors stop accepting medicaid and medicare patients, there will only be an increase in shortage of care. Not only that, but when government elects which procedures are appropriate in order to stay cost effective (such as the role of IPAB created under PPACA), not only are the patients options limited, but the option may not be appropriate for certain patients, and a physician doing what's best for that patient now becomes punishable by fine. Does that sounds like "patient protection" to you?
In Canada, when a doctor is paid, say, 20 dollars for a given service in downtown Toronto, and a doctor is getting the same thing in the remote community of Manitowage, the artificially set prices blunt the potential for movement of information. If there were a deficiency of doctors in Manitowage, and you allowed the marketplace to work, the prices would go up in Manitowage. The doctor in Manitowage might get to charge 50 dollars for a service that would be reimbursed in a free marketplace in Toronto for only 20 dollars. In such a scenario, doctors would start moving to Manitowage. Once there were more doctors in Manitowadge, the price would tend to correct back downward.This market method of resource allocation would allow for more doctors to practice in remote areas, without long-term price increases. This opens up options for patients, allowing them to have greater and higher quality access to care without sacrificing higher prices. He goes on to state:
With Medicare, you get cost shifting. If, as a health care provider, you’re artificially reimbursed too low for some of your clientele, that means to cover your costs you jack up the prices for other clients. As those costs go up, you’re actually contributing to the number of the uninsured because insurance costs are artificially inflated, and fewer people can afford coverage.However now, under the ACA, because everyone is insured, and physician reimbursement rates will no longer be set by the market, doctors will have to stop offering low-return services in order to continue to make money. This is just one more example of how government control leads to shortages, in this case, shortages of services.
The free-market approach is a consumer-driven approach. In any part of a free-market, a product or service provider must satisfy and meet the demands of the consumer in order to stay in business. These providers must compete against one another for service, and in doing so, drive down the fees they charge as well as improving the quality of their products, or else face bankruptcy. Health care should be no different, but it is treated differently due to government interference, malpractice insurance and doctors over-testing patients both due to the threat of litigation.
Another problem facing American health care is this use of insurance for every thing from a physical to a triple-bypass. While I believe the use of insurance for the latter is appropriate, the use of insurance for routine and expected services only drives up the cost of such procedures. As I mentioned in my former post "Why Free Market Medicine Works," using high-deductible health plans, in combination with health savings accounts for these run of the mill procedures allows the consumers to shop around for the best combination of low-cost/high quality doctor, which forces physicians to lower the cost of these procedures while simultaneously increasing quality in order to attract consumers.
HDHPs require that those covered pay higher deductibles (a minimum of $1,200/year or $2,300/year/family) but ultimately have lower premiums. These are required for a HSA and often times half of the covered's money goes into the HSA while the other half covers the insurance product. At the end of the year, the person likely had a few thousand dollars in the HSA and can use it on routine procedures, or choose to roll it over for the next year. By allowing individuals more control over their health-payments, it encourages them to take better care of themselves, and because HSA's are tax exempt and the money in them can be invested to collect interest, the money in one's HSA can grow.
As I've stated before, the problem is not that everyone must be covered by insurance, but that the cost of health care should be made more affordable. Many people do not realize that despite the name "Patient Protection and Affordable Care Act," the care is not made more affordable, nor are patients protected. Having a slip of paper that says you have insurance does not translate to actual health care. When doctors stop accepting medicaid and medicare patients, there will only be an increase in shortage of care. Not only that, but when government elects which procedures are appropriate in order to stay cost effective (such as the role of IPAB created under PPACA), not only are the patients options limited, but the option may not be appropriate for certain patients, and a physician doing what's best for that patient now becomes punishable by fine. Does that sounds like "patient protection" to you?
Monday, June 25, 2012
It's Now or Never, Privatize Social Security
It's undoubtedly one of the most sensitive issues in politics, whether it be in the national spotlight or casual conversation at the dinner table, the topic of social security is a soft-spot, particularly for the elderly or those who are soon looking to retire. It is a federal program that the once-hopeful GOP nominee Rick Perry called a ponzi scheme, where he was greeted with much criticism. But I couldn't agree more.
We've all heard that social security will be broke in the near future, but let's take a look at some real numbers that will bring the issue a little closer to home. When social security was first created in 1935, there were 40 workers for every one retiree. In 1950, that ratio drops to 16 workers for every one retiree, whereas today, the ratio is a dismal 3 workers for every one retiree. You don't need to be a statistician to understand that the trend is a decreasing worker:retiree ratio. Estimates indicate that the social security trust fund will be broke by 2037, and retirees will not be able to receive full benefits. If a federally funded (taxpayer funded) system were to work, there would need to be a combination of increased payroll tax rate, increased retirement age, and possibly decreased benefits. In the words of economist Dan Mitchell, keeping this system would be like "paying for a steak and receiving a cheeseburger." Senators Rand Paul (who I am quite fond of), Lindsey Graham, and Mike Lee created a proposal titled "Social Security Solvency and Sustainability Act," which attempts to accomplish the salvation of social security. I disagree with this because of one of the provisions of the act is to gradually raise the social security retirement age to 70. I believe it is more important to phase out the taxpayer funded ponzi scheme, and allow citizens to privately invest their own money to pay for themselves in the future, rather than supporting an irresponsible pay-as-you-go model.
Think privatization of social security is crazy? Almost 30 countries have at least in part privatized social security and the ones I have looked into have all seen great success, including Chile, Australia, and even socialist-favored Sweden. Chile, for instance, had privatization accomplished in the early 1980's by a man named José Piñera, who created a system that includes: no social security tax, no government-funded pensions, and ten percent of the worker's paycheck is automatically transferred into a personal savings account (PSA) that the government is not allowed to touch because it is the worker's money protected by property rights. These accounts are unable to be accessed until the worker turns 65. Not to mention workers in Chile have had a rate of return of nine percent above inflation. José Piñera said himself that when Chile adopted this system the Dow Jones was at 900, whereas today it sits at roughly 10,300. But even if the individual worker decides against the stock market due to higher volatility, he/she is more than welcome to diversify his/her portfolio and include more stable (although less potential for return) options such as bonds or treasury bills.
My suggestion? Allow younger workers to opt-out of social security and start paying into a PSA. I'll even go one step further than Chile and allow the workers to decide for him/herself what percentage of income he/she would like to donate to the PSA every year. This allows the workers to take their expenses into their own hands. After all, I am positive that the individuals know more about their financial future than do the bureaucrats in Washington, and a one-size fits all model is bound to face opposition from freedom-loving Americans. Eliminate the social security tax and public pensions (as Chile did), granting more liberty to Americans to do with their own money as they please. With an average higher rate of return, total solvency, and more financial freedom, why wouldn't you support privatization of social security?
We've all heard that social security will be broke in the near future, but let's take a look at some real numbers that will bring the issue a little closer to home. When social security was first created in 1935, there were 40 workers for every one retiree. In 1950, that ratio drops to 16 workers for every one retiree, whereas today, the ratio is a dismal 3 workers for every one retiree. You don't need to be a statistician to understand that the trend is a decreasing worker:retiree ratio. Estimates indicate that the social security trust fund will be broke by 2037, and retirees will not be able to receive full benefits. If a federally funded (taxpayer funded) system were to work, there would need to be a combination of increased payroll tax rate, increased retirement age, and possibly decreased benefits. In the words of economist Dan Mitchell, keeping this system would be like "paying for a steak and receiving a cheeseburger." Senators Rand Paul (who I am quite fond of), Lindsey Graham, and Mike Lee created a proposal titled "Social Security Solvency and Sustainability Act," which attempts to accomplish the salvation of social security. I disagree with this because of one of the provisions of the act is to gradually raise the social security retirement age to 70. I believe it is more important to phase out the taxpayer funded ponzi scheme, and allow citizens to privately invest their own money to pay for themselves in the future, rather than supporting an irresponsible pay-as-you-go model.
Think privatization of social security is crazy? Almost 30 countries have at least in part privatized social security and the ones I have looked into have all seen great success, including Chile, Australia, and even socialist-favored Sweden. Chile, for instance, had privatization accomplished in the early 1980's by a man named José Piñera, who created a system that includes: no social security tax, no government-funded pensions, and ten percent of the worker's paycheck is automatically transferred into a personal savings account (PSA) that the government is not allowed to touch because it is the worker's money protected by property rights. These accounts are unable to be accessed until the worker turns 65. Not to mention workers in Chile have had a rate of return of nine percent above inflation. José Piñera said himself that when Chile adopted this system the Dow Jones was at 900, whereas today it sits at roughly 10,300. But even if the individual worker decides against the stock market due to higher volatility, he/she is more than welcome to diversify his/her portfolio and include more stable (although less potential for return) options such as bonds or treasury bills.
My suggestion? Allow younger workers to opt-out of social security and start paying into a PSA. I'll even go one step further than Chile and allow the workers to decide for him/herself what percentage of income he/she would like to donate to the PSA every year. This allows the workers to take their expenses into their own hands. After all, I am positive that the individuals know more about their financial future than do the bureaucrats in Washington, and a one-size fits all model is bound to face opposition from freedom-loving Americans. Eliminate the social security tax and public pensions (as Chile did), granting more liberty to Americans to do with their own money as they please. With an average higher rate of return, total solvency, and more financial freedom, why wouldn't you support privatization of social security?
Sunday, June 17, 2012
More Taxes=More Revenue, Right?
Wrong. However those on the left, particularly President Obama often use rhetoric such as, "the rich need to pay their fair share," and continually cites the example of Warren Buffett as an individual who actually wants to be taxed more and believes the wealthy are not taxed enough. Mr. Obama even went as far to claim that Ronald Reagan himself was the originator of the "Buffett-Rule" and should so aptly be named the "Reagan-Rule." This is just an attempt to trick Americans into thinking that current conservatives are right-wing radicals, as if to say that not even Ronald Reagan, arguably the most cherished conservative of the 20th century, is too moderate for current-day republicans. Contrary to any left-wing hooplah, this is simply not true. Mr. Reagan wanted to make the tax code more fair by lowering taxes across the board, not by making the rich pay more. It started in 1981, when he cut the capital gains tax rate from 25 percent to 20 percent, and wanted to further reduce it to 17.5 percent in his 1985 proposal, but conservatives in congress agreed that the only way to lower the income tax rate, they would have to negotiate to raise the capital gains tax rate.
Onto the original question. Now, I think it's obvious (at least to those of us who can do simple math), that raising the taxes of millionaires does not justify for more government spending, nor can raising the taxes of the millionaires keep our runaway spending even close to afloat. That point aside, we can at least all agree that increasing taxes will increase revenue for our benevolent government, right? Wrong, wrong, wrong. The wealthy have worked hard for their money and know how to divert capital to other areas, including taking advantage of subsidies or using tax havens. General Electric for example took advantage of green-energy subsidies to hold on to shareholders and escape excessive taxation. Economist Dan Mitchell, a man I frequently cite states:
Yet some believe that we should punish businesses for taking capital and jobs overseas, and that leaving is un-American, but moving assets in a way that makes sense for the owner is a basic freedom that shall not be infringed. If the government wants to keep jobs and wealth here, a flat-tax rate with a simple tax-code, free of subsidies and deductions is the most effective way to do so.
Onto the original question. Now, I think it's obvious (at least to those of us who can do simple math), that raising the taxes of millionaires does not justify for more government spending, nor can raising the taxes of the millionaires keep our runaway spending even close to afloat. That point aside, we can at least all agree that increasing taxes will increase revenue for our benevolent government, right? Wrong, wrong, wrong. The wealthy have worked hard for their money and know how to divert capital to other areas, including taking advantage of subsidies or using tax havens. General Electric for example took advantage of green-energy subsidies to hold on to shareholders and escape excessive taxation. Economist Dan Mitchell, a man I frequently cite states:
In 1980, when the top tax rate was 70 percent, rich people (those with incomes of more than $200,000) reported about $36 billion of income; the IRS collected about $19 billion of that amount. So what happened when President Ronald Reagan lowered the top tax rate to 28 percent by 1988? Did revenue fall proportionately, to about $8 billion?
Folks on the left thought that would happen, complaining that Reagan’s “tax cuts for the rich” would starve the government of revenue and give upper-income taxpayers a free ride. But if we look at the 1988 IRS data, rich people paid more than $99 billion to Uncle Sam. That is, because rich taxpayers were willing to earn and report much more income, the government collected five times as much revenue with a lower rate.
Yet some believe that we should punish businesses for taking capital and jobs overseas, and that leaving is un-American, but moving assets in a way that makes sense for the owner is a basic freedom that shall not be infringed. If the government wants to keep jobs and wealth here, a flat-tax rate with a simple tax-code, free of subsidies and deductions is the most effective way to do so.
Friday, June 15, 2012
Why America Should Be More Like Sweden
America is like the kid who got straight As in elementary school, a brilliant mind who dedicated time to studies and academic excellence; then middle school hit. America started hanging out with the wrong crowd and started to change its views on life and by high school it went from top of its class to the middle. Sweden, on the other hand, who also did well in elementary school, had a middle school slump, but came back strong by the start of high school and is now headed in the right direction.
Unnecessarily drawn-out analogy aside, I do believe Sweden and the United States are heading in opposite directions. Before everyone jumps this gun on this one, we must recognize that sweden has enormous government spending (almost 50% of economic output according to Dan Mitchell), and a large tax-rate of 56.6 percent for the wealthiest Swedes. However, prior to their status as all-star of the welfare-world, Sweden had low tax-rates, limited government, deregulated industries, and free-market policies in other areas for much of the 20th century allowing them to grow to become a very prosperous nation (Sweden also avoided costly wars, such as World War II, allowing them to retain some spending). Then the downfall (middle school) occurred during the 1970s through 1980s when Sweden started to regulate and raise taxes to feed a public sector and welfare state that grew dramatically. In 1991 through 1993 Sweden suffered both a banking and real estate crash. However, sometime after this, Sweden grew wise, cutting the top marginal tax rate from almost 90 percent to just under 57 percent today, eliminating both the inheritance and death taxes, and a corporate tax rate reduced to 26.3 percent (compared to United States which boasts a 38 percent federal corporate tax rate, not to mention additional state taxes as well). Sweden enjoys pro-market policies, such as a partially privatized social security system, and a nationwide school voucher program with for-profit schools.
Bottom line: The United States has lost its way in the world, and, although Sweden is by no means the poster-child for limited government and low tax rates, they are at least heading in the right direction, something that I cannot say about us.
Unnecessarily drawn-out analogy aside, I do believe Sweden and the United States are heading in opposite directions. Before everyone jumps this gun on this one, we must recognize that sweden has enormous government spending (almost 50% of economic output according to Dan Mitchell), and a large tax-rate of 56.6 percent for the wealthiest Swedes. However, prior to their status as all-star of the welfare-world, Sweden had low tax-rates, limited government, deregulated industries, and free-market policies in other areas for much of the 20th century allowing them to grow to become a very prosperous nation (Sweden also avoided costly wars, such as World War II, allowing them to retain some spending). Then the downfall (middle school) occurred during the 1970s through 1980s when Sweden started to regulate and raise taxes to feed a public sector and welfare state that grew dramatically. In 1991 through 1993 Sweden suffered both a banking and real estate crash. However, sometime after this, Sweden grew wise, cutting the top marginal tax rate from almost 90 percent to just under 57 percent today, eliminating both the inheritance and death taxes, and a corporate tax rate reduced to 26.3 percent (compared to United States which boasts a 38 percent federal corporate tax rate, not to mention additional state taxes as well). Sweden enjoys pro-market policies, such as a partially privatized social security system, and a nationwide school voucher program with for-profit schools.
Bottom line: The United States has lost its way in the world, and, although Sweden is by no means the poster-child for limited government and low tax rates, they are at least heading in the right direction, something that I cannot say about us.
Saturday, June 9, 2012
The Myth of Underpaid Women Part II
Shortly after writing "The Myth of Underpaid Women," I was messaged by a friend who provided me with a link to "The Mommy Tax" by Ann Crittenden, which discusses the financial toll women take when deciding to have kids--losing out on hundreds of thousands (and in some cases millions) of dollars throughout their lifetime due to maternity leave. The immediate suggestion which came up was a government-sponsored maternity leave to help reduce the income disparity between genders.
I have a big problem with this. Anytime anything is "government sponsored," it actually means "taxpayer sponsored." Every time the taxpayer must step in to foot a bill it means less disposable income for the people. That being said, let's play a numbers game. In 2009, 72,019,000 women were in the civilian labor force, 66,208,000 of whom were employed (U.S. Department of Labor). So let's pretend that the number of employed women hasn't changed, and that it will stay constant forever. In that case, 66,208,000 women are employed and roughly 80% of women have children at some point in their lifetime. 80% of 66,208,000 comes out to 52,966,400 women who would have to be subsidized for having children at one point or another. Now, this can get messy because we then would have to analyze the average number of children that women would decide to have, but for sake of brevity, let's solely analyze the cost for having one child. If we assume paid maternity leave is 16 weeks (as it is in France), and there are 52 weeks in a year, where the average woman with a bachelor's degree age 25 and up is making roughly $40,000 per year, each woman is entitled roughy 12,300 dollars. Throughout a lifetime, the rough total cost for the taxpayers comes out to $6,518,941,538,000. While this is a very, very rough estimate, nonetheless I think it makes a point that it is not a cheap entitlement to run.
The other suggestion would be a mandate that forces business owners in the private sector to pay for their female employees' maternity leave. This is another terrible idea, that would force businesses to cover more compliance costs, hindering ability to expand and hire more employees, generating more wealth. Since I like numbers so much, here's a little more food for thought. Let's say a small business owner employs 30 people, where 15 are female. Let's say that of these 15 women, 10 were hired straight out of college, and, sticking with the idea that ~80% of women have children, 8 of these women decide to have kids while employed for said business owner. If each is getting paid ~$30,000, using the same 16 week paid leave example as before, it will cost the business $73,845 for eight separate maternity leaves. What does this mean for the other 22 employees and employer? It means each having a shortened pay of $3,210 for these eight leaves. However, if the workers are unionized, I doubt that the union will stand around and take that, meaning the business owner would have to bare all of the costs him/herself. This may mean not taking home a paycheck for a few months, or this may mean limited expansion and investment for a few months, pushing back potential hirings. Not to mention, the women are not obligated to tell their employer that they are or plan to get pregnant. This makes the environment more unpredictable, especially when the owner doesn't know the costs that he/she will have to cover in the near future, and with the tens of thousands of pages of regulatory burden, not to mention compliance costs, taxes, and the constant threat of litigation, this would only add to an already hostile environment for business owners.
This is not being sexist or chauvinist, I feel the same way about paid paternal leave (which is covered in France, no surprise there). Unfortunately those who are anti-business treat employees like helpless puppies and the business owner like the master of the pound, but in reality, a good employee is equally or more valuable than the pay they receive. Any time a woman needs to leave for maternity leave, especially a talented and skilled one, it already hurts the business enough.
I have a big problem with this. Anytime anything is "government sponsored," it actually means "taxpayer sponsored." Every time the taxpayer must step in to foot a bill it means less disposable income for the people. That being said, let's play a numbers game. In 2009, 72,019,000 women were in the civilian labor force, 66,208,000 of whom were employed (U.S. Department of Labor). So let's pretend that the number of employed women hasn't changed, and that it will stay constant forever. In that case, 66,208,000 women are employed and roughly 80% of women have children at some point in their lifetime. 80% of 66,208,000 comes out to 52,966,400 women who would have to be subsidized for having children at one point or another. Now, this can get messy because we then would have to analyze the average number of children that women would decide to have, but for sake of brevity, let's solely analyze the cost for having one child. If we assume paid maternity leave is 16 weeks (as it is in France), and there are 52 weeks in a year, where the average woman with a bachelor's degree age 25 and up is making roughly $40,000 per year, each woman is entitled roughy 12,300 dollars. Throughout a lifetime, the rough total cost for the taxpayers comes out to $6,518,941,538,000. While this is a very, very rough estimate, nonetheless I think it makes a point that it is not a cheap entitlement to run.
The other suggestion would be a mandate that forces business owners in the private sector to pay for their female employees' maternity leave. This is another terrible idea, that would force businesses to cover more compliance costs, hindering ability to expand and hire more employees, generating more wealth. Since I like numbers so much, here's a little more food for thought. Let's say a small business owner employs 30 people, where 15 are female. Let's say that of these 15 women, 10 were hired straight out of college, and, sticking with the idea that ~80% of women have children, 8 of these women decide to have kids while employed for said business owner. If each is getting paid ~$30,000, using the same 16 week paid leave example as before, it will cost the business $73,845 for eight separate maternity leaves. What does this mean for the other 22 employees and employer? It means each having a shortened pay of $3,210 for these eight leaves. However, if the workers are unionized, I doubt that the union will stand around and take that, meaning the business owner would have to bare all of the costs him/herself. This may mean not taking home a paycheck for a few months, or this may mean limited expansion and investment for a few months, pushing back potential hirings. Not to mention, the women are not obligated to tell their employer that they are or plan to get pregnant. This makes the environment more unpredictable, especially when the owner doesn't know the costs that he/she will have to cover in the near future, and with the tens of thousands of pages of regulatory burden, not to mention compliance costs, taxes, and the constant threat of litigation, this would only add to an already hostile environment for business owners.
This is not being sexist or chauvinist, I feel the same way about paid paternal leave (which is covered in France, no surprise there). Unfortunately those who are anti-business treat employees like helpless puppies and the business owner like the master of the pound, but in reality, a good employee is equally or more valuable than the pay they receive. Any time a woman needs to leave for maternity leave, especially a talented and skilled one, it already hurts the business enough.
Wednesday, June 6, 2012
The Myth of Underpaid Women
There has been much talk lately of the Census Bureau date from 2008 that showed that a woman makes only about 77 cents to every male's dollar. So with this statistic in mind, of course bureaucrats in Washington are going to try to make new legislation to ensure equal pay under the law for both men and women (market be damned!). But, let us all not forget what happens when politicians see a statistic without really deciphering the meaning--they misconstrue the data.
Now, it is true that if you were to add up all of the incomes of all of the women in the U.S., then divide by the number of women in the labor force, then did the same for men, you would see that women makes only about 77% as much as men do. But is it because we still live in a sexist country, saturated with discrimination?
I don't think so. I encourage any of my readers to walk onto the campus of Rensselaer Polytechnic Institute (RPI), located in scenic Troy, NY, or any other engineering-focused school and count the number of women. Chances are, it won't be long until you realize that men outnumber the women roughly three to one (at RPI). Men are more likely to go into more lucrative fields such as engineering, computer science, business, or investment, whereas women are more likely to go into fields such as humanities or social work. Although there has been an increase in the number of women graduating with math or science degrees, the women that make up much of the labor force graduated in the 70s, 80s, and 90s--when math/science degrees weren't so popular among the ladies.
Another point that economist Steven Horowitz makes is that many women who graduated from college during the above mentioned decades were less likely to see themselves working a full-time job, and more likely saw themselves working for a period of time before taking time off to raise children, or perhaps taking a job that required only part-time work so that the family could also be looked after, which of course means a lower income.
This isn't to say that absolutely no gender discrimination takes place anywhere in this country anymore, but I believe that it occurs much less than those who like to legislate every little imbalance in our society would like to believe. The income disparity between men and women occurs more through the choices men and women make, including educational choices, the choice to have kids, and the choice to assume responsibility for work in the house. This is not something that can be legislated or mandated, but like I've always said, social changes occur through time or shifting attitudes of the population, not by some government enforced policy. As more and more women start to engage in science and math, perhaps more women will take up fields in engineering, investment, or medicine, which will naturally lower the income disparity. No law will be able to do that, ever.
Now, it is true that if you were to add up all of the incomes of all of the women in the U.S., then divide by the number of women in the labor force, then did the same for men, you would see that women makes only about 77% as much as men do. But is it because we still live in a sexist country, saturated with discrimination?
I don't think so. I encourage any of my readers to walk onto the campus of Rensselaer Polytechnic Institute (RPI), located in scenic Troy, NY, or any other engineering-focused school and count the number of women. Chances are, it won't be long until you realize that men outnumber the women roughly three to one (at RPI). Men are more likely to go into more lucrative fields such as engineering, computer science, business, or investment, whereas women are more likely to go into fields such as humanities or social work. Although there has been an increase in the number of women graduating with math or science degrees, the women that make up much of the labor force graduated in the 70s, 80s, and 90s--when math/science degrees weren't so popular among the ladies.
Another point that economist Steven Horowitz makes is that many women who graduated from college during the above mentioned decades were less likely to see themselves working a full-time job, and more likely saw themselves working for a period of time before taking time off to raise children, or perhaps taking a job that required only part-time work so that the family could also be looked after, which of course means a lower income.
This isn't to say that absolutely no gender discrimination takes place anywhere in this country anymore, but I believe that it occurs much less than those who like to legislate every little imbalance in our society would like to believe. The income disparity between men and women occurs more through the choices men and women make, including educational choices, the choice to have kids, and the choice to assume responsibility for work in the house. This is not something that can be legislated or mandated, but like I've always said, social changes occur through time or shifting attitudes of the population, not by some government enforced policy. As more and more women start to engage in science and math, perhaps more women will take up fields in engineering, investment, or medicine, which will naturally lower the income disparity. No law will be able to do that, ever.
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