It's Not the Bad Economic News that Surprises Me

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Unlike economists, I can in no way ever claim to be surprised at all the continuing bad news on the economy (and yeah, I will continue to link to and milk that schtick). Just today, we have the Initial Unemployment Claims report (via CNN):

In the week ended May 28, 422,000 Americans filed for their first week of unemployment benefits, the Labor Department said Thursday.

While that marked a 6,000 decrease from the revised 428,000 initial claims filed the week before, it was worse than economists' expectations for 413,000 claims.

...snip...

Next up is the government's monthly jobs report due Friday. Economists surveyed by CNNMoney say they're expecting to see that 170,000 jobs were created in May and that the unemployment rate eased to 8.9% from 9% in April.

In case you're wondering, that "revised" figure from last Thursday's Initial Unemployment Claims report was revised upward from 424K. Given how woefully inaccurate the economists' predictions have been, I will go out on a limb as I stated yesterday and predict that the BLS numbers for May will be much lower than 170K. I'm thinking more likely closer to a quarter of that (42.5K) but I do hope that I'm wrong. As far as the "unemployment rate" easing, this article from the AP (via Yahoo) this morning (Thursday June 2) goes a long way to explaining why the "official" unemployment rate may drop. Good way to make the figures look better by not counting those who get frustrated and give-up.

Now what does surprise me, still, even after all the evidence that has been provided these last few years, is the apparent drive to push most folks' wages down to minimum wage (while trying to knock minimum wages down even lower). Back in December, I wrote a "what-if" post based on one person trying to survive living on minimum wage. Of course, the fallacy of my post is minimum wage jobs usually are not 40 hours per week, 52 weeks a year type jobs.

Yesterday, I saw a tweet from emptywheel on a study reported by the Detroit Free Press pointing out how it is virtually impossible (in Michigan at least) for someone to survive on minimum wage:

Working harder and longer may not be enough to support a family in Michigan, particularly for employees in low-paying jobs such as retail sales, clerical work and home health care, according to a new study released today.

The Basic Economic Security Tables for Michigan, a study that analyzes the cost of essential needs for singles and families across Michigan, found the cost of providing basic necessities -- such as shelter, food and transportation -- far exceeds minimum wage and the paychecks of people working full-time in low-paying job categories.

As I say, after having done my own "what-if" on this, I am not surprised. I was a little surprised though when I googled "living on minimum wage" and found someone who thinks it is possible. Of course, in this person's "what-if" there are roommates, the cost of food is only $150 per month and utilities are only $40 - $50 per month. I don't think this person has ever actually been fully responsible for all utilities to arrive at that figure.

What we are also dealing with, besides the apparent attempts to drive everyone's wages to minimum wage is the ongoing attempted destruction of the entire safety net. Fresh off his helicopter ride and 100 yard drive across a field to his son's baseball game, New Jersey Governor Chris Christie (via Think Progress) is proposing to gut the state Medicaid eligibility:

Christie has proposed cutting Medicaid eligibility to absurdly low levels: from the current maximum income of $24,645 to $5,317 a year for a family of three. Apparently, the governor believes a family of three making $6,000 a year is simply too rich to receive Medicaid.

While not actually making any proposals, the Washington Times (via the Washington Post), reported on a study requested by Senator Tom Coburn that there are 77K federal employees that make more than the governors of the states in which they live and work:

About 77,000 federal employees across the United States — including lawyers, air traffic controllers, medical personnel and information technology specialists — had higher salaries in 2009 than the governors of the states they worked in, a new report shows.

The data from the Congressional Research Service could add fuel to a debate on Capitol Hill about whether the salaries and benefits of federal workers are too high compared with their counterparts in the private sector. The study was first reported by the Washington Times.

Of course, the salaries of the various governors has fuckall to do with the salaries of the federal employees in question. Unlike governors, the people in federal employment have most likely been on the job for twenty or more years to reach these higher salaries, and unlike the governors, also have to continue to perform. I don't think I would want doctors or lawyers or air traffic controllers in federal service willing to work for the bargain basement wages Coburn would seem to prefer. And IT workers in federal service at this level are most likely Senior Executive Service. Compared to their peers in industry, they are working for a pittance.

Fortune Magazine has a report on one group of "low wage" workers that probably does fit the definition of overpaid - the $1 a year CEO:

A CEO who accepts an annual salary of $1 sends a powerful message -- namely, that he or she is a team player who wants to make a sacrifice for the good of the company. True, the executive is probably receiving generous stock options on the side, but those payments depend on the corporation's success. The buck-a-year salary is a grand gesture, intended to broadcast the CEO's confidence in the future of the business.

...snip...

It's no secret that these self-abnegating chieftains often make up what they lose in salary by loading up on stock options. Loureiro and his co-authors looked at the total compensation for the fifty CEOs of publicly listed companies who made $1 or less between 1992 and 2005 and found that, when equity-based pay was included, they made just as much as their peers did. The $1 CEOs gave up a median of $610,000 in annual wages, but they gained more than $2 million in incremental options awards.

...snip...

Confidence alone isn't cause for concern. But the study also found that $1 CEOs frequently had issues that made them vulnerable to public outrage, like pending government inquiries, corporate underperformance, and personal dilemmas. Of the 50 CEOs who accepted a $1 salary, 25 had explicit public relations risks. That could be a coincidence -- but the authors doubt it: "It is not surprising that this group has chosen to adopt $1 salaries as camouflage for their benefits."

If that seems cynical, consider this: In the first year after companies announced $1 CEO salaries, they achieved returns on assets that were comparable to their peers; after that, their returns deteriorated. One-dollar companies significantly underperformed their peers in the stock market after three years.

It's probably a good thing that politicians such as Coburn don't "volunteer" for a dollar-a-year salaries - we would never survive it given how questionable survival is for us now.

And because I can: