Louis Proyect: The Unrepentant Marxist

March 6, 2013

Caught in the sequestration web

Filed under: financial crisis,unemployment — louisproyect @ 5:57 pm

Two days ago I got a letter from NY State Unemployment telling me to show up for an appointment next week to certify for extended benefits after my current benefits expire on August 14th. I got a chuckle out of the work search record I was supposed to bring with me. There were 10 rows, one for each prospective employer you contact each week.

Aren’t these people aware that once you reach the age of fifty or so, the chance of getting a job in your field is about the same as winning the American Idol contest? The NY Times reported on February 2nd:

In the current listless economy, every generation has a claim to having been most injured. But the Labor Department’s latest jobs snapshot and other recent data reports present a strong case for crowning baby boomers as the greatest victims of the recession and its grim aftermath.

These Americans in their 50s and early 60s — those near retirement age who do not yet have access to Medicare and Social Security — have lost the most earnings power of any age group, with their household incomes 10 percent below what they made when the recovery began three years ago, according to Sentier Research, a data analysis company.

Their retirement savings and home values fell sharply at the worst possible time: just before they needed to cash out. They are supporting both aged parents and unemployed young-adult children, earning them the inauspicious nickname “Generation Squeeze.”

New research suggests that they may die sooner, because their health, income security and mental well-being were battered by recession at a crucial time in their lives. A recent study by economists at Wellesley College found that people who lost their jobs in the few years before becoming eligible for Social Security lost up to three years from their life expectancy, largely because they no longer had access to affordable health care.

“If I break my wrist, I lose my house,” said Susan Zimmerman, 62, a freelance writer in Cleveland, of the distress that a medical emergency would wreak upon her finances and her quality of life. None of the three part-time jobs she has cobbled together pay benefits, and she says she is counting the days until she becomes eligible for Medicare.

In the meantime, Ms. Zimmerman has fashioned her own regimen of home remedies — including eating blue cheese instead of taking penicillin and consuming plenty of orange juice, red wine, coffee and whatever else the latest longevity studies recommend — to maintain her health, which she must do if she wants to continue paying the bills.

“I will probably be working until I’m 100,” she said.

This morning I went to the Unemployment website to file a weekly claim and found this bit of news there:

ALERT: Federal cuts to extended unemployment benefits (beyond 26 weeks)

Updated March 1, 2013

Beginning with the week ending April 7th, federal government budget cuts known as sequestration could affect your unemployment insurance benefits.  If you are receiving regular UI benefits you will NOT see any change.  However, if you are receiving federal extended unemployment benefits that start after 26 weeks, the federal government has directed us to reduce your payments by 10.7% beginning that first week in April.  New York State has no control over these cuts in benefits and no ability to waive or reduce the level of cuts.  If you are going to be affected, you will receive a letter during the month of March telling you your exact benefit amount.  Please check this website for the most up to date information concerning the sequestration cuts.  And please be aware that our telephone call center agents do not have any more up to date information, so it is best to use our webpage, Facebook page or contact the United States Department of Labor at 1-866-487-2365, the White House at 202-456-1414 or your member of Congress at 202-224-3121.

What this means is that the 14 weeks of extended benefits I am eligible for after August 14th will be cut from $404 to $360. Now as it turns out my situation is not as dire as most facing such cuts. My wife is a full-time professor who makes a decent income, while I am collecting Social Security payments of $2400 per month. But what if I was 58 instead of 68, single, and living in a typical Manhattan apartment that rents $2000 per month for a studio? That easily could have been me.

Gawker has been running a series on the unemployed, including this tale of woe from someone who had been working in information technology for 9 years:

One evening, four months later, in January, 2010, I got a call at home from work, which was unusual. I was told that my position would be eliminated in favor of contractors, who would develop an e-commerce platform in house. The department head thanked me for my five years of work (it was actually 9, but she didn’t know that; she had only started six months before) and that was that. I kept updating the blogs in the normal way, but someone seemed to notice the snarky tone that the blogs suddenly seemed to take, and complained to the company. I got a phone call asking if I knew what the blogs were, and who updated them. I told them that I no longer worked there and did not normally give out advice for free, but that if there were domains out there that they owned and had control of, it might be considered a liability.

I have not held a full-time job since. I am either “overqualified” (too old), “lack proper qualification” (I have no degree) or I “don’t fit the company culture” (am not pretty enough to be a marketing director).

I have been staving off the sheriff by making crappy landing-page type websites for fly-by-nights that want to increase their Google rankings on their real websites, or by working phone banks, or by playing standup bass in bluegrass bands. There has not been a single month in the last two years where I have made more than $1200. My modest mortgage payment is $1198. My three children and I are living on a $420 SNAP benefit. My wife, who does actually have a degree, got a part time, temp job at the local library after they laid off all the regular employees and hired temps. She left about six months after the paychecks stopped.

Meanwhile the stock market keeps breaking records.

Maybe that’s a function of the New New Economy:

NY Times March 3, 2013
Recovery in U.S. Is Lifting Profits, but Not Adding Jobs
By NELSON D. SCHWARTZ

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold.

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

Other recent positive economic developments, like a healthier housing sector and growth in orders for machinery and some other durable goods, have also encouraged Wall Street but similarly failed to improve the employment picture. Unemployment, after steadily declining for three years, has been stuck at just below 8 percent since last September.

With $85 billion in automatic cuts taking effect between now and Sept. 30 as part of the so-called federal budget sequestration, some experts warn that economic growth will be reduced by at least half a percentage point. But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits — or seriously threaten the recent rally in the stock markets.

“It’s minimal,” said Savita Subramanian, head of United States equity and quantitative strategy at Bank of America Merrill Lynch. Over all, the sequester could reduce earnings at the biggest companies by just over 1 percent, she said, adding, “the market wants more austerity.”

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

At the individual corporate level, though, the budget sequestration could result in large job cuts as companies move to protect their bottom lines, said Louis R. Chenevert, the chief executive of United Technologies. Depending on how long the budget tightening lasts, the job cuts at his company could total anywhere from several hundred to several thousand, he said.

“If I don’t have the business, at some point you’ve got to adjust the work force,” he said. “You always try to find solutions, but you get to a point where it’s inevitable.”

The path charted by United Technologies, an industrial giant based in Hartford that is one of 30 companies in the Dow, underscores why corporate profits and share prices continue to rise in a lackluster economy and a stagnant job market. Simply put, United Technologies does not need as many workers as it once did to churn out higher sales and profits.

“Right now, C.E.O.’s are saying, ‘I don’t really need to hire because of the productivity gains of the last few years,’ ” said Robert E. Moritz, chairman of the accounting giant PricewaterhouseCoopers.

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5 Comments »

  1. Meanwhile we get the NYTimes and Eduardo Porter telling us about “The Payoff in Delaying Retirement”. The reality is that you, as an older worker, can want to work forever but employers have an entirely different want for you. You can tell that Mr. Porter doesn’t get out much.

    Comment by brunssd — March 6, 2013 @ 6:12 pm

  2. I have been spared the worst of the fifty-to-sixty effects so far by getting good enough at what I do–and by shameless self-promotion where it counted–that I have been able for the past twelve years to make a decent income on short-term contracts diversified by briefish spells of unemployment. Sequestration stands a good chance of reversing this, but at present, I remain surprisingly employable (that said, tune in in a week or two–or in couple of months–and listen for the sobbing).

    This is, however, the exception rather than the rule. I am 64, and have substantial (if in the long run inadequate) retirement savings. Had I not wasted twelve years of my youth and early maturity on a Ph.D. in the humanities and its aftermath, I might be among the exempt elect. But the closer you get to fifty, counting down, the worse things are for a broad array of mostly blameless and potentially productive citizens who have no real jobs, no medical care, and, essentially, nothing in the kitty for retirement. I am speaking of at least two of my close relatives, amid a countless horde of the soonest doomed.

    The current plan by the Democrats and Republicans is to turn a blind eye to the problem and let these people (us people) die. Yes, die. Younger people are expected to cheer–and certainly the youthful parasites who infest the urban “gentrified” areas–mostly Obama voters–will cheer.

    Expect a lot of high fives and eye-rolling amid the cries of “bitch!” as these “vibrant young urban pioneers” and their admirers get busy calling the police on old farts who have had the bad taste to collapse in agony on their well-tended stoops and gardens.

    Neither the government nor the so-called private sector is going to do anything about any of this. Not one solitary thing. It will all be invisible.

    Comment by Sam Death — March 6, 2013 @ 7:35 pm

  3. I guess we’re headed back to the elderly and poor literally eating tuna out of cat food cans (See a The Onion submission to that effect). As a retired community college adjunct, with low pay and thus low retirement funds, not to mention in adequate and sometimes absent benefits, I live on less than $10,000/year. But then I don’t live in NYC. Still, things may b getting rougher here for many.

    Comment by Jenell Scherbel — March 6, 2013 @ 10:50 pm

  4. The sequester was Obama’s idea, he drafted the legislation and now he’s playing the same tired blame game as he’s done throughout his dictatorship. I’m convinced that his administration has manipulated the job numbers to look better than it actually is as part of the perpetual propaganda machine regime we currently live under.

    Comment by Deborah Jeffries — March 7, 2013 @ 2:40 am

  5. I’m 61, have two degrees, and am married with four children still at home. I am not a man who has retired after thirty-five years at a successful career and am now looking forward to a life of casual retirement. I have worked as a substitute teacher with a local public school district for the last thirteen years. ( I refer to myself as “seasonal labor” because I only work for the district August through May of each year.) I have worked as many 59 hours a week at three part-time positions with the district. I have worked nights as kitchen help at a local university cafeteria to supplement my sub pay and mow yards, do construction, and have picked up cans and metal during the summer months – whatever work I can find – to help us get through the summers. My wife works part-time with a major “box store” but has recently been having her hours cut back. Our kids have been on Medicaid all of their lives and my wife and I have no insurance. We have taken advantage of SNAP benefits in the past (usually summers). I have sought better employment with a family supporting salary and benefits but have not been able to find one (age?, too educated? living in an area that is retail-driven and employs part-time workers?). I know that I have made some poor career choices in the past and am perhaps “lying in the bed which I have made”. I am just saying that it is frustrating to be in this situation and wanting to do better, to know there are many men and women out there like me (for whatever reason there may be), and that the Sequester is not going to help our situation, or those of our children, in any way, but that it is only going to benefit corporations, the corporate-elite, and the plutocratic class of our nation.

    Comment by scottspeak — March 8, 2013 @ 6:26 pm


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