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

True, but it's not a choice made in a vacuum. Often the context is: I'm the only one making enough money to support the kids, so I have to work for this to work out at all, and I can't afford day care. So for the sake of the kids the mother gets custody. "Choice," true---but not free and uninfluenced, as you imply.

> I count benefits as part of income.

While there's a case to be made for that, it's not what most people do -- and it's not what you do for computing benefit eligibility for food stamps, ACA, and other government programs, AFAIK. So I'm not sure you should count benefits as income for this purpose. In principle you're right re: getting cash income instead, but in practice, I'm not sure it's that clearcut.

Re: taxes vs. credits, it would be really interesting to actually work that out. I'm not convinced your take is right, but I'm not convinced my take is right, either. :) I didn't intentionally pick the perfect example; the $24K a year came from typing "2000" into the spreadsheet I downloaded from the CalFresh web site because "3000" was too high to qualify. I didn't actually try any numbers other than 2000 and 2500. But my suspicion remains that most people would be better off actually working than taking assistance programs, both in purely pragmatic terms and in less quantifiable terms -- I've known a fair number of people who make assistance-qualifying incomes but I haven't known a single one who wants to be in that position. (Which is of course anecdotal, but it's still interesting to me.)

(Also, I don't think you can really count every possible credit -- most people can't qualify for disability income, for instance. And the observation I made about not wanting to be in that position is extremely relevant here; I've known a couple people who get permanent disability income and they absolutely do not consider it a good thing. They're making less than they were when they could actually get employment, and that's not getting into unquantifiable but real things like damage to their self-esteem.)

It's just wrong to mention DI here, since that won't apply to most people (downthread, I pointed out that it has serious incentive problems if you're on it, so I partially agree with you there).

I'm certainly not eligible for it, not even with the most cooperative doctors I could find. So it's not lost income for me.

Also: I hope your Econ 101 class that you tout mentioned the lifetime earnings hypothesis. Based on that, you can't count payroll taxes as lost income, because they contribute to your future social security benefit. So you'd have to adjust your figures to account for that. (And if you say that it won't be there for your generation, you have to put that in expected value terms, not absolutes...)

How the CBO defines "income": Labor income includes cash wages and salaries, including amounts allocated by employees to 401(k) plans; employer-paid health insurance premiums; the employer’s share of payroll taxes for Social Security, Medicare, and federal unemployment insurance; and the share of corporate income taxes borne by workers (see Box 1)." [1]

I see how bad the problem is, when we can't even agree what 'income' means. I've been mainly self-employed the last 5 years, and had years of near-$0 income, and other years, better, where I was also paying other employee W-2s and 1099s. Before that, I was W-2 from $50k up to one particularly good year where I max'd out FICA. I've also seen the process of applying for SSDI, SSI, Medi-Cal, food stamps, the whole gambit.

Call me wrong, but please do me the favor of doing the math for yourself and let us follow along with your examples. I thought the $24k - $30k example was a great one. It's the reality for many Americans. I though the $100k example was also fairly straight-forward, minus the FICA confusion.

I don't quite get why companies tend to hide all the payroll costs associated with a W-2 plus full benefits. If cost of an employee is $140k line item on the income statement, I tend to want them to know that, even if it's not all showing up in the direct deposit or on the paystub.

I know exactly how much $0 deductible group health insurance costs in my zip code by age, and I know you can get that all for free by not working. Economically that is income you have to earn (value you have to create for the company) to make up for that loss of benefits. It doesn't come from the magical W-2 benefits fairy. All that money would be actual real income if you didn't lose your guaranteed free Medi-Cal (the best insurance money can't buy) by simply deciding to work full time.

A rigorous financial analysis must count the totality of lost and forfeit benefits. I understand the inclination to bury one's head in the sand to avoid the realization that it's almost literally all-for-nothing but the enjoyment of doing good work. Once you actually get your head above water at around $100k+ of GROSS household income, and you actually see a little bit of real free cash flow, things improve rapidly. Up to that point, it's economically, almost entirely treadmill.

The only reason to keep going is building experience and hopefully getting a raise till you finally crawl out of the hole. It's not too bad in the programming field, even a single breadwinner can get the family there, but statistically, most people will never emerge from the social welfare pit.

[1]... "In its analyses of the distribution of income and taxes, the Congressional Budget Office (CBO) strives to measure income as broadly as possible and thus includes in income some items that people may not usually consider to be part of income. For example, CBO counts taxes paid by businesses as part of household before-tax income; because those taxes are ultimately borne by households in the form of reduced income, CBO adds them to before-tax income in order to measure more accurately what a household’s ability to consume would have been in the absence of those taxes."

[2] CBO intentionally broke it's measure of government transfers after ACA, in their latest report, [because it just looked too bad otherwise] (emphasis added): "CBO recently undertook a more comprehensive analysis of the distribution of federal spending in 2006. Although that study used a similar methodology to the one used in this report, it differed in some important respects, most notably by adjusting the amount of transfer income reported in survey data to match the budgetary totals reported in the Treasury Department’s Monthly Treasury Statements. The data used in this report are not aligned to budgetary totals and, because of underreporting of transfer income in surveys, do not capture the full effects of government transfers on household income."

> It's just wrong to mention DI here

I agree with SSI and SSDI the pit is very, very deep. The incentive to just give up is extraordinary. You have to willingly forgo tens of thousands of dollars for the pleasure of working. Since trying even just a little bit disqualifies you. And yes, SSI/SSDI eats your soul.

But the argument stands even without SSI/SSDI though. Just adding ACA on top of the existing subsidies was enough to almost completely eliminate the incentive to work for practically half of Americans! (median household income: $53,891)

> you can't count payroll taxes as lost income, because they contribute to your future social security benefit.

If only that were literally true!! As usual, a tiny little bit of work each year contributes a lot to your benefits. Everything above that contributes ~1/8th as much. See: http://www.ssa.gov/pubs/EN-05-10070.pdf

I'll summarize: Take your annual earnings each year (up to the FICA max for that year), and adjust for inflation. Take the 35 highest earnings years, and sum them, then divide by 420 (35 * 12). The result is "Step 4". Now look at Step 5:

5a. Multiply the first $816 in Step 4 by 90%. 5b. Multiply the amount in Step 4 over $816 and less than or equal to $4,917 by 32%. 5c. Multiply the amount in Step 4 over $4,917 by 15%. Step 6. Sum the three to find your benefit!

Do you see what they did there?! This is nuts! What does this actually all mean? The net effect?

  15.6% * $10k *  35 = $ 54,600 of FICA taxes ==>  $  816/mo in benefits (5.5yrs till breakeven)
  15.6% * $120k * 35 = $655,200 of FICA taxes ==>  $2,642/mo in benefits (20 yrs till breakeven)

TL;DR - With Social Security, paying 12x the premium nets you at most 3.2x the benefits. The highest payers would need 20 years of benefits just to get their money back, and that's with no ROI / compound interest.

Plug $20,000 (it's a bit more than current-day maximum FICA) per year savings for the next 35 years at even 4% ARR into a calculator... the day you retire you should be looking at $1.35 million dollars in your savings account. At 8% ARR (S&P500) the balance would be $2.8 million.

But they'll pay you inflation-adjusted $2,600 / month. About 1% annually on your 2.8 million. It's. A. Scam. $18,000 / month would be a respectable ROI on that level of investment. In other words, the vast majority of that up to $655k is effectively lost.

I'm not tracking inflation, but since the Wage Base tracks inflation, and payout as well, I can make the point without adding that complexity.

It's like a disease ridden throughout the tax code. The progressive nature is literally everywhere, and it's all designed to apply more and more pressure the more money you make. The problem is, it's all additive, and there are so many layers...