More News on the Unemployment Compensation Problem

January 4, 2010

Another new worry for the new year: increased unemployment compensation taxes for Florida employers. As I’ve blogged about previously, employers could see their taxes for this fund increase to as much as 11 times what they have been paying.

A more recent article notes the likely outcome for small businesses under this increase, predicted by an executive at a staffing firm:

The first things likely to go will be vacation time and sick leave, McLeod said. After those savings are exhausted, more layoffs may be the only option for some companies. “This increased tax is going to cost jobs, running unemployment up even higher,” McLeod said. “And 2011 will be worse on employers if something doesn’t change dramatically.”

Moral of the story: Watch out for those pesky unintended consequences of government intervention. Since unemployment is high, more funds are needed to pay for unemployment benefits. Those increased funds take money away from businesses that may have used the money to hire new employees. The result: increased unemployment and/or decreased benefits.

These unintended consequences can lead to a vicious cycle, all thanks in part to those in government who believe it is their job to fix all of our problems. In reality, their “solutions” to our problems often create new ones or at least make the current problems worse.

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Government v. Private-Sector Compensation

November 3, 2009

Earlier this year I wrote about government employee benefits in Florida outpacing private-sector benefits — particularly noteworthy in a time of recession. Now comes an interesting analysis comparing average federal government wages and total compensation to those in the private sector.

 In an update from a previous post, the Cato Institute‘s Chris Edwards notes the following:

The new data show that average federal compensation is now more than double the average in the private sector.

Here is his graph displaying the average difference since 2000:

He also created a graph comparing just the average wages. He used data from the U.S. Department of Commerce’s Bureau of Economic Analysis.

In a time of economic downturn, the stark contrast between the government and the private sector is a bit worrisome — especially to those recently experiencing pay cuts or a layoff. But government doesn’t often face the same pressures as the private sector. It isn’t required to be competitive in order to stay in business; it can simply raise taxes or print or borrow money.

Ironically, all of that taxing, printing and borrowing in one way or another reduces private investment in things like jobs and higher compensation packages. Taxing takes that money directly. Printing reduces the value of that money. Borrowing diverts that money and eventually leads to higher taxation or more printing.


Government Benefits Up?

July 19, 2009

A recent article comparing government employee benefits in Florida to the private sector notes the widening disparity. The Sun Sentinel report points out that although the pay is often lower in state government, the benefits are often better. One notable summary of the article is this:

Florida’s 127,000 state workers still enjoy free or inexpensive health care, rich retirement benefits and such perks as free college tuition and ready access to financial planners.

It also points out the following:

In all, taxpayers paid $1.19 billion for employees’ health care last year, including a 15 percent increase from two years prior. Employees’ contributions declined slightly during that time, to $154 million.

Another mushrooming expense: retirement benefits.

The state’s contribution to workers in the Florida Retirement System is virtually unmatched in the private sector, at 9 to 19 percent of each worker’s salary. The bill for taxpayers has almost doubled in five years, to $1.1 billion. Employees don’t contribute anything.

This comes around the same time as reports on the newly appointed Hillsborough County (Florida) Supervisor of Elections collecting a $167,948 pension from his previous work in the county schools while being paid a $132,000 salary in the elections post. You read that right: $167,948 per year is his pension.

All of this occurs while, as the Sun Sentinel report notes, government has taken steps to increase taxes and fees on residents to make up budget shortfalls resulting from the down-turned economy. Meanwhile, the private sector has “been laying off workers in droves, cutting salaries, forcing furloughs and dropping health care contributions and matches to 401(k) accounts.”

These are just two examples of how not having to make a profit allows government to be tone-deaf to economic realities. To survive, private companies need to make a profit (the exception being those who dubiously receive government bailouts). To succeed, government need only force an increase in taxes and fees on its citizens.


Click-It or Ticket?

July 1, 2009

Hillsborough County, Florida, under the implementation of a new state law, just started actively looking for drivers not wearing their seat belts today. In their first day, they ticketed more than 200 people. Each ticket amounts to $101 in the county. One officer was quoted as saying:

“People think we’re like Big Brother, that they should be able to do whatever they want,” sheriff’s Cpl. Ed Raburn said before writing his sixth seat belt violation of the afternoon. “I’m not going to reach in there and force you to put it on, but if you choose not to, you choose to accept the consequences.”

Gee, I wonder why people would think the police stopping and ticketing people who are doing nothing to harm others is “like Big Brother”? The word paternalism comes to mind. Government, despite its legitimate function of protecting individuals from other individuals who seek to violate their rights, tends to always overreach to the point to where it treats its citizens as children in need of protecting from not just others but from themselves.