South By North Strategies, Ltd.

The Benefits Of Public Transit

A recent BTC Brief from the NC Budget and Tax Center explains why policymakers should not lose sight of equity concerns when investing in public transit. 

Last year, North Carolinians traveling to work by means of public transit were disproportionately people with lower incomes: 60.4 percent of riders had incomes below $25,000 while only 13 percent had incomes above $50,000. Transit-oriented development is a planning approach that can benefit lower-income people by increasing access to employment networks and services, reducing transportation expenditures, and renewing private investment in economically depressed areas. However, transit investments can lead to higher rent prices, gentrification, and displacement of lower-income residents around new transit stations.
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To ensure that transit investments generate a return for all North Carolinians, evidence suggests that transit plans need equity components—primarily, affordable housing measures.

Flat Tax Fantasies

Writing in The New York Times, economist Robert Frank of Cornell University explains “the problem with flat tax fever.”

The much more serious concern is that a flat tax would reinforce the trends toward greater income inequality that have been seen over the last several decades. As documented by a recent Congressional Budget Office study, the top 1 percent of income recipients in the United States earned 275 percent more in 2007 than they did in 1979, adjusted for inflation, a period when the earnings of middle-income households grew by less than 40 percent. A flat tax would increase inequality by substantially reducing rates on the most prosperous households, while increasing them on low- and middle-income households.
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According to an analysis by the nonpartisan Tax Policy Center, Mr. Cain’s proposal would increase the annual tax bill of a typical family of four earning $50,000 a year by more than $4,000, but would reduce the taxes owed by a similar family earning between $500,000 and $1 million by almost $60,000. The center also estimated that families in the top one-tenth of 1 percent of households would enjoy an average annual tax reduction of nearly $1.4 million under the Cain plan. Similar distributional effects are common under all flat-tax plans, not just Mr. Cain’s.

Around The Dial – November 4, 2011

Economic policy reports, blog postings, and media stories of interest:

• Working Economics explains Social Security and the federal deficit.
• Off The Charts is not impressed by Erskine Bowles’ long-term budget proposal.
• Slate imagines a world without credit cards.
• The Huffington Post reports on the problems of electronic benefit transfer.
• Simon Johnson lays out the issues facing the G-20 summit in France.

Another Month With Almost No Job Growth

CHAPEL HILL (November 4, 2011) – In October, the American economy gained just 80,000 more payroll jobs than it lost. While the private sector netted 104,000 positions, the public sector shed 24,000 jobs, due overwhelmingly to payroll cuts on the part of state governments. Also, some 9 percent of the labor force was unemployed in October, while the underemployment rate equaled 16.2 percent. These findings come from today’s national employment report.

“The October employment report shows that the national labor market has stagnated,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Job growth once again was virtually nonexistent, and joblessness remained widespread. Signs of future improvements were missing as well.”

In October, the nation’s employers added 80,000 more payroll jobs than they cut. A net loss of 24,000 public-sector jobs erased 23.1 percent of the meager private-sector gain of 104,000 jobs. State government reductions (-20,000, due primarily to a loss of 15,600 non-education jobs) drove the public-sector decline. In recent months, public-sector cuts have weighed down job growth. Since October 2010, government payrolls have shed 323,000 positions. This drop offset 17.8 percent of the private-sector job growth that occurred during the same period.

Additionally, the payroll employment estimates for August and September underwent upward revisions. With the changes, the economy netted 262,000 jobs over those two months, not 160,000 positions as first reported.

Several private industries recorded net job growth in October. Trade, transportation, and utilities netted 35,000 positions with half of that growth occurring in the retail trade sub-sector. Professional and business services added 32,000 jobs, of which 79.4 percent were in the administrative and waste services sub-sector, which includes temporary help services. Education and health care services netted 28,000 positions, while leisure and hospitality services gained 22,000 positions, mainly in the accommodation and food services sub-sector. The construction industry lost 20,000 positions, and the information industry shed 5,000 jobs.

“The October employment report is another in a long series of unimpressive ones,” noted Quinterno. “Over the past year, net job growth has averaged 125,100 positions per month. This is barely above the level of growth needed to keep pace with population growth, and it is grossly insufficient for replacing the jobs lost during the Great Recession.”

The inability of the current pace of job growth to alter employment conditions was evident in the October household survey. Last month, 13.8 million Americans (9 percent of the labor force) were jobless and seeking work. While the unemployment rate and number of unemployed individuals dropped over the past year, the share of the population with a job remained depressed. In October, the share of the adult population that was employed (58.4 percent) remained at a level last seen in the early 1980s.

Another cause for concern is the fact that long-term unemployment remains elevated. Last month, 42.4 percent of all unemployed workers had been out of work for at least 27 weeks. A year ago, the comparable figure was 42.1 percent.

In October, proportionally more adult male workers were unemployed than female ones (8.8 percent vs. 8 percent). Similarly, unemployment rates were higher among Black (15.1 percent) and Hispanic workers (11.4 percent) than among White ones (8 percent). The unemployment rate among teenagers was 24.1 percent. Between September and October, the unemployment rate among Black workers fell, but the rates for most every other major demographic group held steady.

Additionally, 7.7 percent of all veterans were unemployed in October. The unemployment rate among recent veterans (served after September 2001) was 12.1 percent.

“Jobs remained scarce in October,” added Quinterno. “This led many individuals simply to abandon their job searches. Compared to a year ago, America has a labor force that is essentially no different in size despite population growth, while the number of working-age individuals who are effectively jobless remains at a disturbingly elevated level.”

A more extensive measure of labor underutilization is the underemployment rate, which equaled 16.2 percent in October. Further evidence of the difficulty in finding a job is that, among unemployed workers, the average time out of work in October equaled 39.4 weeks, compared to 33.9 weeks a year ago.

“The American economy did not create jobs in any meaningful way in October, nor has it managed to create many jobs over the past year. Labor market conditions clearly have not improved. While the scope and contours of the problems are plainly evident in the data, policymakers are actively refusing to pursue solutions that would help millions of Americans. Maintaining the status quo only will lead to more terrible job reports like the October one.”

Unemployment As far As The Eye Can See

Via Calculated Risk … the Federal Reserve has again lowered its economic projections. The Fed is now projecting an unemployment rate of between 6.8 and 7.7 percent in the fourth quarter of 2014.