The Rise of Men Who Don’t Work – And What They Do Instead

Actually, only half (the employer share) is.

I run a business, from my perspective the meaningful number is the total payroll cost for the employee. Taxes are taken before it even leaves my pocket and goes to the employee, and then more and more taxes by the time the employee finally sees it. You can't waive away the taxes just because the law says you can't show the true tax burden on the pay stub.

> Opportunity Cost

There are real, direct, added costs to choosing to work. It's reasonable to subtract those from salary when trying to calculate the net benefit of working. Just like there's an opportunity cost for waiting in line for bread. It's a real thing.

> $115300 -> $78,900 vs. $0 -> $44,011 (for a gap of $35k)

First, you can't take home quite $78,900 on $115,300 -- you've shifted up income but haven't adjusted taxes accordingly. From my perspective that employee is earning more like $140,000 (you can't just waive away the cost of paying for all those benefits that otherwise would be provided free by the government, just because they are taken out of your earnings before you see them).

Second, you can't just count $100 / pay period as the cost of insurance. It's the full cost of the plan (up to almost $24k / year for Platinum insurance for a family of 4) that has to be paid every two weeks at payday. Benefits are tax advantaged income, income paid out before you see it, but income all the same. If you are self-employed all this becomes obvious, but if you've never worked outside a W-2 the true cost is very much hidden out-of-sight.

Employer group insurance plans are more expensive than individual plans, which are obviously way more expensive than free means-tested plans. Going from $0 -> $30k you lose about $8k of value from losing Medi-Cal and going to the Cost-Shared Silver Plan. Going from $30k -> $60k you lose another $12k of subsidies. "Total actuary value" of having Medi-Cal is around $20k / yr for a family of 4. So if you are at $0 income, it's not just +$12k for ACA subsidies, it's more like +$20k for Medi-Cal since it's comparable coverage to a Platinum plan.

Third, yes the EITC phases-in and phases-out, it doesn't mean it's not a cost you pay for earning more. It's a curve and it's not a straight line, but it's still a real refundable tax credit that is clawed back as earnings increase over $24k. I agree it's impossible to maximize all benefits concurrently, it's a very complex equation with local and global minima/maxima. One day I really hope to be able to program it and put in on GitHub.

> Making financial progress on $100k income is challenging

So very true! Even per all your numbers, which are way more conservative than mine... the 'net benefit' to the family of earning "$115,300" of income (~$140k payroll) is only $35,000 !! (the gap)

And if you dig deep into all the assistance available, start counting things like income-based rent control, income-based property tax limits, income-based car registration fees, income-based electricity bills, etc.... you can easily erode that $35k down to more like $15k.

Isn't that just astounding?! Starting at $140k of employee payroll expense, by the end of the year you've only added $15k of net cash benefit to the family?!

As they say, "What the actual fuck!"

I agree with you, but I think I did that. I was trying to say $100,000 of payroll expense causes $15,300 of payroll taxes. Then the other taxes, and subsidy phase-outs, pile on from there.

> Its absolutely not even similar, much less "mathematically equivalent", to the latter alone, which is how you presented it.

You are right, they are not "mathematically equivalent", let me try again;

By "progressive subsidy" I mean a declining benefit as you earn more. That is, income from the government which decreases as you earn more. An example is Medi-Cal and ACA subsidies, food stamps, shit we didn't even mention SSI, etc.

By "progressive tax" I mean an increasing tax rate as you earn more. That is, an increasing number of cents out of each dollar in payroll expense is confiscated as you earn more. An example is Federal Income Tax.

The progressive subsidy offsets the benefit of early income, the progressive tax offsets the benefit of later income. The net effect is reducing the vast majority if not all of the the "Realized Family Benefit" from $0 - $150,000 of [household] payroll expense! I mean, it's disgusting to think about that way, but it's the economics of the system we've created.

The main reason why there is a lump of labor fallacy is that it rests on the fact that there is just a fixed quantity of jobs in the economy. A fixed amount of jobs means that thers is only a fixed amount of goods and services people desire. But this is wrong because human wants and desires are unlimited. This is the basic condition in economics. So in theory there is an infinite amount of jobs to be done to cater to our infinite wants.

Now, there are structural reasons for why there isn't universal employment. These can range from government policies, to technological reasons. If people want multistoried houses, and builders can build them, they will have jobs but if the government has policies which block those houses, the builders will not have those jobs. Another thing people want is to travel into space, say a visit to alpha centauri. There may be tourism operator jobs who can do that but technology does not exist which can take us there.

The main focus of government policies to promote and encourage job growth should be on building technology to promote new job creating industries, promoting skills growth to manage these industries, and removing or modifying policies which hinder job growth.

If trade or immigration caused a loss of jobs, the 90s would have been a time of high unemployment. It wasn't because a new industry came up to generate jobs and other jobs were created to service those workers. The same goes for policies to shorten hours or promote early retirement.

Earning $100k to me means providing services worth $100k. It's obvious when it's 1099 or self-employment. On a $100,000 '1099' or Schedule C income you owe $15,300 of payroll tax. I pulled the number straight from Schedule SE, Line 5. You will pay less income tax as a result, due to the 1/2 (e.g. $7650) deduction from income tax on Line 6. (I tried to account for that in my estimated $6500 of Federal Income Tax due, an effective 6.5% rate)

Somewhere along the line the Fed tricked us into subtracting 7.65% off our W-2 compensation before we even see it, and even got us to think we didn't even earn it. It's fully institutionalized now. It's like VAT being baked in and no one thinks they're paying the tax, but they are!

In my earning $100k example, the reported "Compensation" on the W-2 would be only 100,000 / 1.0765 = $92,893. My point is your W-2 is lying. The company is paying $100k for your services, and the IRS has their fingers in it before you even see it.

Anyway, we are arguing a very minor point to a very serious issue. I think I've provided enough numbers that are accurate enough to see the insanity of the whole system. It doesn't really matter when in the "pipeline" the $7,650 is confiscated. It's enough to know that FICA is 15.3% of every dollar up to $117,000 per person, $234,000 per household.