In the short run, state unemployment and federal disability benefits have similar effects. Social stability is enhanced through buying off the poor. But long-term disability is not designed for the under-trained. Its means-testing paradigm discourages even the exploration of employment options which might jeopardise the applicant's disability status. Thus a one-way valve to dependency on the state's largesse.

[1] http://www.thisamericanlife.org/radio-archives/episode/490/t...

There's easily $60,000 of services, utilities, fees, and taxes that you pay when earning $100k, that you get for free or don't have to pay if you earn $0. As @fredophile says, then you still have to add in the direct/indirect costs of going out and earning that money (e.g. childcare for starters), and you can easily gain net-zero or negative benefit all the way up to $100k of household income.

I'm sure people must have researched this extensively, and can give a properly cited cost analysis, but it's something I've been calling the 'middle class crucible'. Until you break out on the other side of $150k household income, the vast majority of your earned income is effectively running on a treadmill. E.g. On the order of 80 cents of each dollar you earn.

Every progressive (means-tested) social support program or tax rate, by definition, is a penalty for working. These programs have grown so big, and phase-out so aggressively in the income curve, it's an incredible trap / attack against the middle class.

Is your list "Medicaid and health insurance credits, SSI, food stamps, EITC, FICA..." things that you have to pay, or benefits you get if your income is $0/yr.? For example, you wouldn't get EITC if you had no income, but you wouldn't get food stamps if you had $100k/yr.

I would argue that it's poor framing to compare a hypothetical family with $0/yr. income to one with $100k/yr. income. You bring up childcare as an example, but when you look at a family making, say, $35k/yr., they're largely unqualified for assistance but childcare is almost certainly out of reach for them. $100k/yr. families are paying for childcare, paying tons of taxes, and buying amazing Christmas gifts.

Because only 20% of Americans even make >= $100k/yr., I don't think you can rightly call them middle class. I'm not sure we should really be concerned for those at that income level, I think it's more imperative to start looking at people working full time but still making < $35k/yr. Is there an upper-middle class treadmill? Yeah sure, I'm not even sure what your argument is, that you're not getting rich? Regardless, a treadmill is much better than the alternatives. You imply that until you make $150k/yr., you may as well make $0/yr. This is really just untrue; probably (depending on number of children) it's untrue until you get down around $20k/yr., which is where you start getting into living wage argument territory.

Finally, I'm with you on progressive taxation. Tax tiers make no sense; we need a (simple) tax function. Problem solved.

> Is your list "Medicaid and health insurance credits, SSI, food stamps, EITC, FICA..." things that you have to pay, or benefits you get if your income is $0/yr.? For example, you wouldn't get EITC if you had no income, but you wouldn't get food stamps if you had $100k/yr.

I edited in; they don't all fully stack or else it would hit well over $100k. So it's a very complicated calculation (why we need a nice D3 app to show how everything interacts!). For EITC, I think it's fair to count the full $5k which you could get by working just a little, against the cost of working 'too much'.

I have not done the math necessary to find the global maxima of public support. Frankly, I'm not sure it's a great idea to make that calculation too easy for everyone to figure out, lest we all start optimizing for it!! Conversely, there are many points in the curve where you are below Net-$0. $63k household income for a family of 4 is probably the global-minima, where you're way below Net-$0.

The cost of working is much worse if, for example, you have a qualifying disability but are not vegetative and know how to code. You then have to choose, just stop working and get $30k, or don't go quietly into the night and forgo the entire $30k of SSDI.

The inverse is usually true. Good food doesn't cost much, it's the garbage food that's expensive. You can easily afford fresh fruits/vegies/meat with food stamps.

> they're likely living in better conditions in a better neighborhood

You can get public housing in Manhattan. Granted it's public housing, but hey, location location location.

> and their health insurance probably gives them more choices than they would have on medicaid.

This is state specific. For New Jersey, it is absolutely the best health insurance to have. You can't even buy the sort of stuff they will cover with almost zero out of pocket.

Medi-Cal is the name of California's Medicaid program, so "Medicaid + Medi-Cal" is just counting the same program twice. Which, if you could actually benefit that way, would probably be fairly generous, but the state actually makes a significant effort to prevent that.

Did you intend to say Medicare + Medi-Cal, perhaps?

But for example, you can pay ~$1000/mo for a family of 4 for "Silver" health insurance and earning > $63k you would have to pay the full amount. Credits pay for almost the entire cost (aka $12,000 of tax-free income from the Fed) if your household income is $33k. So under just one program (ACA), $30k of incremental work disqualifies you from $12k of assistance. And that's for the same exact plan/service.

Then you get below $33k household income and instead of paying thousands for a Silver plan with a $6,000 family deductible, you pay basically nothing and have no deductible for Medicaid / Medi-Cal. That's effectively a $24,000 / year value for a family of 4. [1]

In both cases, you can argue about access to top-specialists for chronic care, but certainly access to acute care coverage is equivalent (i.e. hospitals can't base their ER services based on ability to pay). In many ways Medicaid is better because deductibles are a hell of a lot lower than $13,500 Bronze / $6,000 Silver.

By the way, Whole Foods takes food stamps. So that's another example where you get straight up cash for not working. Up to $8,400 / year, cash on a debit card, which phases out as household income goes to ~$30k / year (plus allowed deductions) for a family of 4. [2]

If you have a qualifying disability and have to make the choice of giving up work and going on DI, assuming you have the work history credits, it's another up to $31,000 / year of income (not entirely tax-free though). [3]

That's over $60k right there, and there are many more programs to account. It would add up to well over $100k except you can't fully stack all of the programs, e.g. CA SDI payments count against SSDI payments.

I was thinking about making a "how much do you lose by working" micro-site as an excuse to play with D3 and interactive visualization, targeted to residents of California, but the whole thing was too infuriating I haven't mustered the motivation to do it.

[1] - http://www.coveredca.com/shopandcompare/#incomeGuidelines

[2] - http://www.stanworks.com/community-reports/other-services/co...

[3] - http://www.disabilitysecrets.com/how-much-in-ssd.html

Furthermore, your description of the way food stamps work is correct but elides how that "phase out" works. Under current CalFresh guidelines[1], a household of 4 grossing $30K a year would get $98 a month. If they grossed $24K a year that would go up to $218 a month -- an extra $1440 a year, when you work it out, which is to say much less than what they'd net by just making another $6000 a year.

[1]: http://foodstampguide.org/calculating-the-grant-how-much-do-...

In practice, I'd suggest that most of these calculations are going to work out in roughly the same way: yes, you're "losing out" on government assistance by making more money, but the benefits you accrue from actually making more money more than offset that.

  Gross Increase in Income: $6,000
  - FICA:                  ($  918)
  - Fed Income Tax:        ($  900)
  - State Income Tax:      ($  500)
  - Reduced Food Stamps:   ($1,440)
  - Reduced EITC:          ($1,260)  [21% phase out after $23,260]
  - Reduced ACA:           ($ ???)   [Just about to lose Medi-Cal]

Think about how broken this is. At the point in the curve where adding $6,000 in family income could actually be life-changing, the government claws back at least 83% of it?! Fucking A... (sorry, this really makes me mad).

> "$30K of incremental work" is statistically very likely to involve a job with a company that provides health care

I count benefits as part of income. So if part of the increased payroll expense is actually spent by the employer paying for a private health plan (with a high deductible and cost sharing with the employee) that's a huge net-loss for the family versus getting cash income from the employer and keeping their free health care from Medi-Cal. (It makes zero difference to the employer, ACA penalties aside, either way it's a fully deductible business expense)

Edit: I see you gave two examples, $24k vs $30k, and lets say $30k vs $60k. If we do a detailed realistic budget accounting for all costs, credits, programs, etc. you will find "earning $60k" you actually have less money to spend than "earning $30k". You will be net-negative if you have any significant health care expenses at all. It's completely counter-intuitive, and in fact, borderline insane.

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.)

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...)

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)

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...

And you can't make the point without disability income. As shown lower down in the thread, your claims are hyperbolic even including DI of $31k!

It's funny..I agree there is a problem here. I just think we need someone intellectually honest to do the numbers properly. And that person is obviously not you.

The 'retained future income' portion of FICO payments, lets say with a 4% discount rate (ARR), is pennies on the dollar even in the best parts of the income curve where your earnings count the most toward achieving benefits.

Using 'danans' numbers he came up with $35k of marginal utility from $115k of household income. Those numbers were obviously overly conservative, but did include an average SSDI of $24k. There are many, many benefits that danans did not include, which I enumerated in my reply downthread, but I'm willing to settle on $35k of utility from $115k of work as a starting point.

Now showing it without SSI/SSDI and just relying on food stamps, Medicaid, EITC, and other means-tested programs you still get horrible outcomes like the $24k - $30k example from 'chipotle_coyote' but I agree it won't be a straight-out loss up to $100k.

But I hear you -- if I believe enough in making an irrefutable point, I should just code up the site and accept pull requests on Github.

I have always shown my math and quoted my sources, so you might not agree with the methodology, but I've tried to be accurate with the numbers, and cite sources of inaccuracy where-ever possible. I'm sorry you found it dishonest.

> it's an incredible trap / attack against the middle class.

If your household is not making $150k you're not middle class though. You're working class. Middle class people don't have to run on a treadmill like that (unless they want to).

For about 25 years after World War II, an anomaly occurred where a young blue collar veteran could go on the GI bill, or alternatively get a unionized job at the factory, and buy a car and a house in the suburbs with a stay-at-home wife who took care of the kids whose college tuition was affordable, along with long-distance one week vacations every year, a solid pension etc. Some people even extended the term middle class to these people, which had previously meant professionals. Because they were living the lifestyle of middle class people.

If anything is clear, it's the eradication over the past 40 years of the idea of extending the term middle class downward from professional households to those making less than $150k a year. This was the working class before World War II and it is the working class now. Even if nowadays it's banging out PHP code or putting Visual Basic widgets together or wiring Cisco switches together instead of going into the mines or soldering parts on an assembly line.

You are simply wrong. There are places below $50k where you might suffer from close to 100% marginal rates, which I view as an enormous problem, but it's not true at higher incomes. Even the 80% figure you quote sounds wrong (and of course I know I shouldn't believe you because you don't even pick a set of numbers and stick to it).

Edit: I see elsewhere in the thread, it's clear that you're not really talking about income.

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."

   Payroll taxes*       = $ 15,300
   Federal income taxes = $  6,500
   CA income taxes      = $  4,000
   ACA Subsidy          = $ 12,000
   Food Stamps          = $  8,000
   EITC                 = $  5,000
   Disability           = up to $30,000 if applicable
   Energy credits       = ???
   Housing credits      = ???
   Waived fees          = ???

Every progressive subsidy is mathematically equivalent to a progressive tax. The $12,000 ACA "tax credit" is actually a $12,000 progressive tax. It's the single largest tax hike against the middle class... possibly ever?

This doesn't even get into the property tax side of the equation, since we're talking direct cost of working, not cost of owning things like houses, and cars. But that's part of the overall conversation of the war on the middle class. [Edit] There are even property tax circuit breakers where you get credits on property tax for earning less, so that should be in the above table. That's separate from housing credits such as means-tested rent control.

Then you can start to pay for the personal costs of actually going out and earning that income.... everything from child care, to transportation, to business clothes, etc.

And then that's still not even counting opportunity costs, e.g. I'm too busy at work, now I have to pay for a plumber, contractor, mechanic, landscaper, take-out dinner, etc. versus doing it on my own time. Think, all the things you could do for yourself in 2,080 hours per year...

* Don't be fooled by the employer hiding half the cost from you.

You can't count it as a cost on you without adding the value of the employer share to your base income.

> Every progressive subsidy is mathematically equivalent to a progressive tax.

Wrong. You've basically made the same error as you did with employer share of payroll tax -- a progressive subsidy is arguably analogous to (but "mathematically equivalent" is still too strong of a term):

1. An addition to your income (whether or not you receive the benefit, maximum or otherwise) equal to the maximum benefit provided, and

2. An additional tax equal to the difference between the maximum benefit and the amount you actually receive.

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

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.

> I agree with you, but I think I did that.

You did not. Or you calculated the tax wrong, but it looks more like the former than the latter.

> I said $100,000 of payroll causes $15,300 of payroll taxes.

You said when "earning" $100k, you pay $15,300 of payroll tax, you did not say $100k of payroll causes $15,300 of payroll tax -- and interpreting earning in the usual way for such a discussion (i.e., the income shown on your pay stub subject to payroll tax) -- this is exactly correct; at $100k of such income, the total payroll tax (employer + employee share, Social Security + Medicare) is exactly $15,300.

If you are looking at the employer's payroll expense, however, though, that's not $100k, its at least $107,650 (the employee's income subject to payroll tax -- which includes the employee share of the tax -- plus the employer share of the tax.)

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.

No.

> It's obvious when it's 1099 or self-employment.

Ah, I see what you did -- you made the mistake of thinking that self-employment tax and W-2 payroll taxes are functionally identical, but just the way W-2 reports it is different and misleading. This is decidedly not the case, while the self-employment tax has the same rate as the combined employer + employee share of W-2 payroll taxes, the base value isn't comparable (since the latter is based on W-2 income, while the former is on the total, which is effectively equivalent to W-2 income plus the employer share of payroll tax.)

As a result, the self-employment tax has a greater effective rate than the payroll tax, even though they have the same nominal 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!

Perhaps, but the problem with your analysis isn't disagreement over who is paying the tax, but it is how you calculated the amount of the tax and what the income is that goes with it. Payroll tax and self-employment tax server similar purposes and have identical nominal rates, but do not have equivalent bases. So, if you make a statement about payroll tax and how it relates to the income it is based on, but your logic is driven by self-employment tax and the income it is based on, the conclusion will be incorrect.

To be clear, yes there is a different convention for quoting the "salary" based on W-2 vs 1099. I agree that saying "$100k of W-2 Salary" is like saying "$109,031 of 1099". In both cases you net $92,350 after payroll taxes.

To your point, the difference in total payroll expense is $1,381. I'm sure my overall point does not sway on $1,381. Yet this difference will be almost exactly offset by the $7650 deduction allowed against Federal income tax!

Bringing me back to, we are saying the same thing, in two different ways.

Sorry everyone for the rat hole, I wish I stated it more clearly at the on-set. I think there's a more important discussion to be had here.

(Note: I edited this about 15 times over 20 minutes since the first 'Submit'. Dragon's response came against an early draft! Sorry D.)

No, its a mathematical fact.

> I agree that if all you consider is the verbal, "I'll pay you $100k W-2" is actually agreeing to a payroll expense of (at least) 7.65% more than saying, "I'll pay you $100k 1099". But companies don't set salaries that way!

Its not a matter of how companies set salaries, its a matter of the mechanics of the calculation of the tax.

Granting for now your argument that total payroll expense for a W-2 employee is comparable to total payment to a contract employee that must pay their own self-employment income, and considering (for simplification) only W-2 income and payroll taxes in payroll expense for the W-2 worker:

For a W-2 employee with a $107,650 total payroll expense, they will have a $100,000 W-2 income, and $15,300 in payroll taxes (employee + employer share), and (excluding any issues which make W-2 payroll tax income different from W-2 income tax income) $100K in income-taxable income

For a 1099 contractor paid $107,650, they will have $16,470.45 in self-employment taxes and (excluding any other issues which make self-employment tax income different from income tax income) $99,414.77 in income-taxable income (due to the income tax deduction for half of the self-employment tax.)

> We pay employees based on the total cost of payroll. That was my point way up there about Macro Econ 101.

Self-employment taxes and payroll taxes bear a different mathematical relationship to total expenses to the party paying the employee. This is completely orthogonal to any argument about whether, in the case of the W-2 employee, they effectively bear the cost of the employer share of the payroll tax in the form of depressed nominal wages, as well as bearing the cost of the employee share.

> I can easily make up the difference by the higher Fed Income Tax rate (due to missing the $7650 deduction),

The W-2 employee doesn't really miss the deduction for half of the self-employment tax that the self-employed worker gets, since the income which pays half of their payroll tax isn't part of their taxable income to start with.

> local taxes, property taxes,

Local taxes and property taxes tend not to be directly income-contingent (and tend to be regressive in net effect), so they probably hurt your point rather than helping it.

> To your point, the difference in total payroll expense is $1,381. I'm sure my overall point does not sway on $1,381. Yet this difference will be almost exactly offset by the $7650 deduction allowed against Federal income tax!

Why would you compare the difference in payroll expense to the deduction against Federal income tax? What are you trying to get at with that? It doesn't make sense to talk about that.

Also, on your current numbers, the deduction the 1099 worker gets (half of the self-employment tax) is more than that ($8,340.87 vs. $7,650), but it still leaves the 1099 worker with a higher income subject to income tax than the W-2 worker, so it doesn't "make up" for anything -- the actual total tax difference between the two is greater than the additional payroll tax paid by the 1099 worker, since the 1099 worker will also pay greater income tax, all other things being equal.

- You can't subtract the opportunity cost of not working from your income when you make $115k, because you've made the decision to work and earn that salary. - The EITC is for people who work (hence the "earned" part). If you chose to go exclusively on govt assistance, your max EITC is $11 for a family of 4: http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-...

- I don't doubt that there is a measurable amount of disability insurance abuse, but the fact remains that you probably have a disability that prevents you from doing child care. The poor still often have to pay for childcare. In any case, the average annual benefit for a family of 4 comes to about $24k, not $30k: http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/

Subtracting the opportunity cost of not working from vs working at 115300k muddies the comparison. It's more sensible to compare the two scenarios separately:

115300-15300(payroll tax)-6500(fed tax)-4000(CA tax)-8000(foodstamp equivalent food cost)-2600(typical employee cost for PPO-health program)= 78900

vs.

12000(ACA)+8000(food stamps)+11(per EITC comment above)+24000(per disability citation above) = 44011

Even this comparison isn't apples to apples. In the $100k figure, are you accounting for the employer paid portion of health-insurance (and the lower rates that those in a employer-negotiated plan pay?), any tax-free employer retirement plan contributions, and other pre-tax benefits (DCAP, flex-spending account, employee health insurance contributions?). If you own a home, are you accounting for the mortgage interest and property tax deduction?

I do agree with one sliver of your argument: making financial progress on $100k income is challenging for a family of 4 in VERY high cost-of-living places such as the Bay Area, where that remaining 79k easily gets eaten up by childcare, housing, food, transportation, etc.

Is the standard of living on the $115k salary equivalent to that of a family of 4 on govt assistance? I don't know, but I doubt it, and I would bet on the latter's standard of living being significantly worse. Neither situation is easy street.

EDIT: wording. EDIT2: formatting

Actually, only half (the employer share) is.

Whether or not that's true, that's already reflected in you showing the full cost of payroll taxes (employee + employer share) as an expense to the employee. What you failed to do is show all of the income that pays that expense (including the money from the employer that goes directly to paying the employer share) as part of the income from which that cost was being paid.

> The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash.

Perhaps its worse for your company, OTOH, it mitigates the risk to you should the company -- as many do -- fail, since in that case you will have forgone labor income for equity in the failed firm.

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!"

While grandparent made an error of including both halves of the payroll tax, when only the employer share should have been added, the point is that employer share (while it can be considered "income" of a sort that goes directly into paying payroll taxes), isn't taxable income subject to any other taxes, so properly counting it as part of the "income" number if you are counting the whole payroll tax (including employer share) as part of the tax expense doesn't shift up the taxes, it just correctly accounts for the income that goes with the taxes originally presented.

I don't want to argue the mechanics of taxation on W-2 vs 1099! I was totally happy to accept 'danans' much more conservative numbers because we still end up with a maximum of $35,000 net benefit from $115,300 of compensation!

This is, with danans math, which is adjusted from mine by not even counting;

  Employer portion of health care cost
  Employer share of FICA
  Excluding direct employment costs
  Excluding indirect opportunity cost
  Use average disability payment, instead of max
  Exclude SSI payments
  Exclude rent control
  Exclude property tax circuit breakers (21 states, not CA)
  Exclude EITC

Like I said, the only way to properly calculate all this is to code it all up and chart it. But the laws are insanely complex (we've proven that just now, right?) I don't think anyone has ever tried.

http://marginalrevolution.com/marginalrevolution/2013/07/aid...

This is a point that's not fundamentally liberal or conservative. Both sides should be interested in improving programs that have gratuitous barriers to work.

The problem is that it's going the be impossible to get an agreement on the solution. Conservatives would take this as an opportunity to slash disability benefits and walk away. Liberals would look toward new government programs.

EDIT: Here's a conservative think tank advocating the EITC as an alternative to a minimum wage hike: http://www.aei.org/publication/earned-income-tax-credit-does...

Everyone is eligible for SSI but pays the least (maximum $733 / month federal, some states add a small amount). Someone on SSI whose parent has enough qualifying working quarters can switch to SSDI at 1/2 of the benefit the retiree would be eligible for at full retirement age. This currently tops out at around $1400 / month. Finally, if you yourself have worked enough qualifying quarters (6-20 depending on age) and become disabled you may be eligible for primary SSDI. These top out at around $2600 / month, but average much less. An additional benefit of SSDI, is that after two years a recipient becomes eligible for Medicare.

[0] https://en.wikipedia.org/wiki/Flexicurity

Simplified analysis, goal is situation C. Let's say my monthly welfare income is $1000.

A. I start earning $200. My welfare decreases by $200. Why don't I just stay on welfare?

B. I start earning $200. My welfare decreases by $300. I've lost $100, a penalty for working.

C. I start earning $200. My welfare decreases by $100. I now have an incentive to work. Over time, this leads to a future situation where I gradually earn much more than I could ever with welfare.

Also consider: What if I find $1000 sufficient to live on? What about $1100?

[1] http://en.wikipedia.org/wiki/Earned_income_tax_credit

I start earning $200. My welfare decreases by $200. My expenses increase by $100 (transportation to/from work, childcare while at work, clothes specifically for work, etc).

Once you realize that work usually has more costs than just time A and B become the same.

These things don't happen overnight--there will be many years as the class of jobs that you're talking about becomes slowly less well-regarded, until when they disappear no one will care.

Example #1: A couple of weeks ago, my brother, an orthopedist, had a 26-year-old man come in for an ankle sprain. In the course of working up the ankle -- mildly sprained, no problem -- he found that the patient doesn't work and is on 100% disability. Why? Because of acne. Yes, acne. Apparently when he was 19 or 20 he had such severe acne that someone deemed him unable to work and he was approved for 100% disability. Even though his skin now is perfectly clear, with some minor acne scarring the only remaining blemish, this man will likely never work a day in his life -- he will be drawing a disability check from the government for the next 60 years.

Example #2: Another brother is a police officer. Or was. He recently retired, at age 52, and now will draw a $70,000/year pension for the next few decades, which is a separate but related issue. But he tells me that -- even though he didn't personally take advantage of this ploy -- it is routine for retiring police officers and firefighters to go to "friendly" doctors and have those doctors certify them as disabled so they can get disability checks in addition to their pensions. It's called "taking the disability topper" or "getting DA'd."

Worse, there is no solution is site. Who is going to arrest these crooked cops? Other cops? They're on the take as well.

>He recently retired, at age 52, and now will draw a $70,000/year pension for the next few decades

Illinois has a pension crisis we can't get out of because of this. These union handouts and insane pensions that are 100% unaffordable. Right now every man, woman, and child in Illinois owes $26,000 in taxes to pay these pensions out. Who is going to pay this stuff?

The fraud burden typically lies with the agency that's cutting the checks. Other agencies (IRS, SEC) deal with fraud in their specific areas and do not rely on police except the very specific step of arresting the individual, which in these cases may never happen.

<< About 600 Long Island Rail Road retirees will lose their disability benefits after a federal agency voted last week to halt the payments, amid a sweeping investigation into what prosecutors have called a major disability fraud scheme, according to agency documents and officials.

The agency, the United States Railroad Retirement Board, which over more than a decade granted disability benefits to hundreds of railroad retirees based on fraudulent medical evidence with little scrutiny, took the action on Thursday during a five-minute meeting at its headquarters in Chicago. The vote approved procedures under which the board will cut off the benefits, which, officials said, are costing the agency $2 million a month. >>

A bunch of the people involved have gone to prison over this fraud:

<< The first terminations came several weeks after the doctor who submitted what prosecutors have said was the bogus medical evidence underlying the applications of the roughly 600 retired railroad workers pleaded guilty in federal court in Manhattan to fraud and conspiracy. The doctor, Peter J. Ajemian, told the judge in January that the retirees were not in fact disabled. …

Dr. Ajemian, who was sentenced to eight years in prison, is among 24 people — including retirees, another doctor and two facilitators — who since 2011 have pleaded guilty to federal charges resulting from of the investigation. Charges against eight other people indicted in the case are pending, and the investigation by the F.B.I. and federal prosecutors in Manhattan, officials have said, is continuing. >>

http://www.nytimes.com/2013/07/02/nyregion/600-long-island-r...

The solution of course is transparency. Stop treating police as holier than thou. They're just government workers. "Trust but verify" works wonders for keeping people honest. Good people as well as bad, because it removes temptation.

Would disabled veterans be reflected in these numbers?

http://www.ibtimes.com/va-stops-releasing-data-injured-vets-...

Which I think uses these numbers:

http://www.publichealth.va.gov/epidemiology/reports/oefoifon...

Which are the numbers of veterans that accessed VA facilities for health care, not the numbers of veterans that were injured (disabling injuries are one of the major eligibility factors for the VA, but there are other veterans that would also be eligible for VA services).

I think there are a lot of people out there like me. I have some money coming from side projects, several opportunities to grow that, and several opportunities for new side projects.

And quite a long personal runway before I have to "get a job" again.

If I can get to personal ramen profitability, that would be great.

And if my cofounders and I get a real startup off the ground that can pay us salaries.... well, then I can start showing up in statistics as employed again.

But either way, it's not as big a deal to me as it would be to men of my age 20 years ago.

And that's a huge shift-- in opportunity towards the individual.

Not to squash your enthusiasm; just saying that 'control of my destiny' is mostly not true at all; you are being lived by actual constraints of life. If you get a mortgage, kids, spouse, investors etc these constraints can easily 'live' you instead of you controlling anything. I was lucky, but just saying to be careful in thinking this and keep tabs on the 'do I actually still like this' factor. A regular job, for most of my friends who started out with me, was a blessing.

Of course you don't have control over your destiny to the point of just wishing you had a million bucks... but I also now don't have a psychotic boss whose only experience has been in the military micromanaging software development and doing everything he can to "control" things without any understanding of software development.

A portion of the population does not get opportunities to develop these skills and were once allowed low-skilled jobs that paid "decently" but have now found themselves squeezed due to inflation and companies hoarding cash instead of spending it.

I've heard this sentiment many times but I've wondered if there's an economic fallacy there. Would the economy be better off if lots of companies stopped hoarding cash and hired lots of new employees? Or would there be side-effects like inflation, or some effect of pulling out cash from whatever it was invested in, etc.?

Serious question.

Economic fallacy there is, but it's in standard economic theory. Standard economics claims that only sensible things to do are investment and consumption, and considers savings to be a waste. But the savings are not waste for individual economic entities; savings are a way of gaining power in economics.

Let me give a couple examples, consider two companies, company A which saves (has large quantities of liquid capital), the other B which doesn't (and invests everything into machinery, better production, etc.).

First example: A stealthy startup appears with a completely new ("disruptive") technology. Company B cannot buy it, so the company A is at advantage.

Second example: Workers decide to strike for higher wages. Company A can survive the long strike by taking hit on it's monetary reserves, perhaps pay strikebreakers, etc. Company B cannot do anything and have to give in to the strikers demands.

In other words, savings are a way to break out of the market system, and so people do it and race who does it better, because they want power (which comes from ability to react). Economy as a whole suffers; but why should the winning actor care?

For instance, you could spend your money constantly hiring more employees to do more work and to grow.

Or you could save your money, until you have enough to build a new modern factory that produces the product much more efficiently. That efficiency lets you pay your fewer employees more, but overall lets the business grow more reliably.

In your example, Company A is better for the economy because it will last a lot longer than Company B.

Companies failing does more economic damage than a company saving its profits for several years.

There is, it's a confusion between money and capacity. That money is an option, the possibility of getting people to do things for you. Unused money is paper.

> Would the economy be better off if lots of companies stopped hoarding cash and hired lots of new employees?

The economy is an abstraction. It can't be better off. But if the companies that have the money had productive ways to spend it they would be doing so. The fact that there aren't that many productive ways to use the money is why the interest rate is so low. The interest rate is the cost of renting money.

If we need more people consuming more and more stuff (that mostly gets put in landfill within a couple of years) then we're completely screwed. We need to start restructuring our way of life to accommodate the need to conserve resources, for one, and the need to support a basic standard of living for all people (across the world) for another.

Instead of encouraging increased consumption we need to be levying massive taxes against disposable items, requiring all goods to be largely recyclable, requiring the ability to repair before production can be licensed.

Yeah, that's the inherent contradiction of capitalism. But unless someone comes along with a different system we're probably stuck with that for a while.

They're all production with minimal consumption agree; they hardly summarise current human activity though. They don't require [many] raw materials beyond energy and humans but nevertheless they do tend to still use some non-renewable resources.

Another way to look at that is that it incentivises short-term investment in anything that brings returns above inflation, instead of allowing for capital to be saved up for more important projects.

Rules can define themselves, rules used to regulate the flow of information become information.

Standard economics defends that idea; but it is only true in a fairy-tale world where you have a magic money printing machine - like the world we are currently living in.

In the real world you actually have to have savings first and foremost in order to produce the products that others will buy.

Hoarding is a good thing since it frees the person to work on what they like, which is likely to benefit others. Also, money hoarded is usually invested in some instrument that might be benefiting other businesses.

> In a two person economy, your expenditure is my income and my expenditure is your income.

This is wrong. Imagine two people in an island. We elect that fish is money since it's the thing we all want and have a use for and can easily trade with each other. Now I fish 5 fish and put that in my savings account (a bucket of salt). As I spend this money, it does not become your income.

You might be confusing the way governments characterize the economy with how a real world economy actually works in practice.

> Also moderate inflation is a good thing. It disincentivises hoarding of cash.

And moderate tax-evasion is a good think because it disincentivizes hoarding of cash by the government. This is wrong as well. Not to say morally wrong, as it's trying to steer people's financial decisions in a definite uniform direction (ie. spending).

That sort of thinking is what had the US government almost shut down yesterday and have to inflate the money supply with $1.1 trillion more. It used to take us decades as a country to spend that much, but now it's only expected to last until September 2015.

But we still have people saying moderate inflation is a good thing.

Slate Star Codex had a great post a while back that touched on this:

http://slatestarcodex.com/2014/08/16/burdens/

Key pull quote: "Society got where it is by systematically destroying everything that could have supported him and replacing it with things that required skills he didn’t have."

This means that I make decisions differently to somebody who has a buffer of parental emergency capital injection. For example, I would love passionately to quit my job right now. I would love to set up a consultancy specialising in data analysis for capital management for insurance companies, and have more than the required skill set, but if I take too much risk my family could be hungry. That would be decidedly uncool.

Another thing, you need skills. But it's very difficult to get a decent education (formal or otherwise) if your family isn't able to support you during your formative learning years. It's not easy to learn programming if your family can't afford a computer. It's not easy learning financial management when the largest amount of money you ever had is $500.

Basically, if you want to do a startup, you had better not be poor or uneducated.

Robert Herjavec would disagree with you, as would Sam Walton, Andrew Carnegie, Li Ka-shing, and dozens more who overcame poverty and a lack of education via hard work and common sense (and yes, a bit of luck in some cases) to become successful businessmen.

I'm not denying that it is possible that an illiterate girl from a low-income family in Mali could overcome every obstacle and build a successful start-up. But how much would you bet on that happening? Do you also think that her success will negate the hardships that other folks in her position face?

However, I think you are falling into the trap of identifying outliers and then trying to reason about the general case from it - it's pretty hard to use that to say anything more that "it's possible for X to happen, because it happened here, and here."

Our monthly tournament is always looking for new players...

It's a simplistic idea, but it is definitely possible. I lived out of my car for months until I was able to turn it around by using my computer for something besides surfing MySpace.

Rich or poor, there are numerous people sitting in front of extreme learning resources, and they'll never do anything with it unless there's this enormous infrastructure designed to remedy issues of motivation and planning. And that's where I think the difference is between rich and poor; yes, there are networking differences, yes, there are differences in local crime rate and other environmental stressors and so on, but the biggest factor is motivation.

I've seen a peer ditch school to go to the library to use public terminals, back at the time when computers still weren't that popular, and there was no Google or Wikipedia. But even then I could see that some people have a different heart -- starting from an early age, they had a yearning to learn that surpassed the praises of parents or the soothing structure of school.

The issue isn't access. The access is already intense for rich and poor alike. Most people don't possess the psychological traits to pursue their own intellectual growth. Almost everyone I've met, rich or poor, stop learning when society stops pressuring them. They may have high or low IQ, be rich or poor, but they are not interested in self-directed learning, at least not without strong external reasons like parents or social shame.

Almost everyone is not an intellectual.

Access clearly isn't an issue for you, and that's good. Perhaps your peer didn't have access issues either and that's good too, but if you believe that access isn't an issue for some people, then you are inexperienced in dealing with some forms of poverty.

Perhaps in some places the library is the solution, but in Chicago, public access is limited to two hours a day. I don't know how much access you required when learning to program, but I needed more than two hours a day.

That is assuming that you can get a library card. For one, you need a verifiable address, which is easy to produce if you live in a home, but very difficult if you do not. Also, if you have violated your card in the past, perhaps due to a youthful indiscretion, you are shut out of the system unless you can monetarily recompense, which is also difficult to do when you are poor.

Not to mention that street gangs can make it challenging to leave your block to get the library in some cases.

So while access has improved, to deny that it is an issue for some people because public libraries exist is glossing over the problem.

I'm doing an online python course, but works busy at the moment and I missed my last deadline; I just can't be bothered, motivation is really hard to me (perhaps it is for everyone though).

That's not to say that there can't be many people, perhaps a majority, who are poor and disadvantaged by their poverty to an extent that locks them out of opportunities. I just think you have to be careful you're not saying "well sure he's lazy but looks he's poor so he can't help himself".

I can't afford that book could you say why you recommend it; our libraries here will order any book requested for a small charge.

I also imply that most people, when placed in front of vast access to knowledge, will do nothing with it.

It's also why great online education resources have failed to achieve revolution. Giving kids access to Khan Academy isn't enough; because too many people would rather visit another website.

That's an interesting thought. What might infrastructure to remedy issues of motivation and planning look like?

Exactly!

However, it is a trend that there are a lot more people becoming independant and making their money online via various ways (not all of which are startups, most of which are probably what would be called "lifestyle businesses" here, though I hate that term) and thus not counted on the "employment rolls".

Less than 6% of workers are working computer or math jobs - of any kind - which suggests that the overwhelming majority of people still have a difficult time when they're listed as "unemployed."

What would ideally happen is people learn a skilled trade if they are stuck on the job market. This training should also happen in high school.

I am a programmer, but I can also weld and fix cars. This is because in high school I took some auto shop classes. Let's say for some odd reason programming doesn't work out anymore as a career(this is happening to lawyers and pharmacists), I have something to fall back on.

That's a pretty flippant dismissal of the knowledge required to either "fix cars" or "weld" for a living. My brother was an excellent welder and it's a very hard life.

As in "physically demanding", or "lots of technical knowledge needed"?

But it's part of the job of an iron-monger.

- Lawyer

- Town planner

- Royal Marine Officer

I'd love to know the "logic" that led from his interests/skills to that selection!

[NB Only one of these got the reaction "don't do that" from his mother and I].

How are people who don't have a meaningful source of income and who are dependent on their parents for shelter any more in control of their destinies than corporate worker bees?

There is a cultural bias for entrepreneur, especially in the US (that's not a bad thing BTW), so struggling directly against the market is seen as more glamorous then through a corporate structure/middleman.

In the end, you are as in control of your destiny as much as your wealth permit, no matter how you made that wealth in the first place.

Working for a corporation, in the most recent case, meant dealing with people who were so incompetent that they did everything I can think of to interfere with us reacting to the market.

You know the saying about how people with nothing to do create work for others? Well, when you're a software team and the boss has zero software skills, or understanding, or care, you end up in a lot of pointless meetings.

Seriously, I would get interrupted 200 times in a day. (I counted once).

So, more risk, less secure money, but avoiding harassment, verbal abuse, manipulation, gas lighting, and 200 interruptions a day is a huge positive trade off.

For me at least.

Plus I get to see my parents for a few months while I pick out the next place I'm going to live.

Let's run with your example - what would have been your boss opinion ? Or if your business is growing and you need more people, how will you treat them and how should they feel ?

You have a good job in a hot sector, enjoy it, don't try to generalise to everybody or other sectors. Actually, the article is all about people that don't share our luck.

Here's a good litmus test: If they have an open floor plan they clearly don't care about developers.

If they BRAG about having an open floor plan-- and so many of them do-- they are terrible. Run away.

Ugh I'm sorta feeling stuck professionally and tomorrow I start my 3rd incubator yet im unemployed.

You might want to reconsider startup pursuits after your early to mid 30s.

You could easily secure a well paid job for a few years, and save enough to support working on a start-up or starting a consulting business.

If things do not go as planned, I can see no problems in going back to being employed, since your skills won´t have withered in the meantime, and possibily learned new ones.

It seems to me that the startup culture is seen sometimes as a "get rich quick" scheme, where the goal is to retire at 25.

A normal career in most professions lasts 30/40 years...

I'd rather scrape by doing what I love than make bank and hating my life.

Of course, making bank and loving it would be the ideal. But its not like I think the odds are huge.

One thing I am doing is building up my side businesses. Get enough side income going to live on and you can work for a startup at low risk.

Not the case when you have a family, of course.

Loose lips sink ships.

There was also no global internet allowing for an instant global market to be serviced from the middle of nowhere. If you started a business in podunk, your market was the podunk area. (For the most part, there was mail order and stuff, but that still had a higher barrier to entry than the internet does now.)

So I think things have gotten easier and a lot more people are doing it.

I'm interested in hearing why you think the opposite-- I bet you're observing a different trend than I am focusing on. (eg both trends can be true)

The areas of high unemployment in Arizona and New Mexico overlap almost exactly with the Indian reservations. A problem deserving its own analysis.

There's also been a huge transfer of land from tribal to non-tribal/non-Indian ownership [1]: the US government held a lot of land in trust for the tribes, identified a lot of it as "surplus to their needs," and sold it to non-tribal members, and on other reservations they transferred ownership to individual tribal members and then economic pressures pushed them to sell, especially if they traditionally did agriculture and the land wasn't farmable. This land wasn't developed, in general, so there's really not that many places to work on a reservation...

[1] https://www.iltf.org/resources/land-tenure-history/allotment

Its a culture problem, but not from the Native American side. The current generation suffered all these things and is trying to dig out of a hole. The next generation is better poised to grow as the culture is returning.

Also, I would love for you to go to the Seminoles and read them your comment. I expect they would have a words. I would imagine these stats also don't cover pow-wow circuit youth very well, but that would take research.

As a side note, this is the most ignorant and racist comment I have read on HN.

https://news.ycombinator.com/item?id=2590535

Stating it that way seems reasonable enough. I haven't read "Don't Sleep, There are Snakes" fully but from summaries I'm guessing the tribes refused to accept Western ways and were comfortable living the way that let them survive for thousands of years. Which is a reasonable thing to do if you could isolate yourself from the rest of humanity and competition.

This article about Northern native tribes https://news.ycombinator.com/item?id=8449134 says that they were far enough along building a settled society of farmers and villages when apocalypse struck and the survivors became roving nomads. Just like all our post-apocalypse movies!

The tribes ran the gamut in what they had before Columbus. It is know that trade routes existed bring things only found in the arctic regions south to the deserts and beyond.

The world would look very different today if the European explorers had brought back a virulent disease (like smallpox) instead of merely chronic ones (like syphilis). They simply had no idea what the risks were. They lucked out with malaria and yellow fever as well; most of Europe is too far north for them to be as big a problem as they are in Africa, or as they were in the American south.

Smallpox is the least of the problems that the tribes faced. The government abuse of land and wealth, the beating out of culture, the killing of food sources, and parking the tribes in the middle of nowhere on land that wouldn't grow anything. Broken promises and laughing officials are the problems.

"what they do instead"

Trying to go back to school, I learned programming for 2 years in some technician school program, did not get the degree, after that I expanded my programming skills by myself, but it has been pretty bleak. I'm quite ashamed of myself. I have many ideas of projects, but they really seems to be out of my reach in terms of skill, experience, motivation and networking. I took anti depressants for 4 years but am not so unhealthy in term of mental health...

I'm back at school again, for some equivalent degree, but on 1 year, I have an internship starting wednesday, I really hope it will hook me to some job opportunities.

If I don't get the degree nor a job, well I could really try to start some crowdfunded game project or social network, but I don't feel the industry really needs that many programmers. Maybe I'm really incompetent.

Writing software isn't really about intelligence, although it probably helps. It isn't really about knowing the "one right way to develop software." It is more about being willing to admit you are wrong. Learn from your mistakes. Also a good dose of stubbornness is needed to deal with tools that don't work properly. Sometimes the documentation will lie to you. It helps to not take the little failures too personally.

Best of luck to you.

I'm more than a little frustrated that the tech sector hasn't taken this to heart more. There's a lot of day-to-day work that we expect developers to do that anyone with good grades in high school or a liberal arts associates degree could do.

I guess what I'm saying is that there's a low ratio of administrative assistants to developers considering how much developers are paid. Perhaps it would be better if developers were paid hourly or otherwise went home at 5 p.m. like normal professionals.

Take one of your ideas, scale it down to nothing more than its essence, and build the simplest form of it you can imagine to get it to work, so people can use it. Then add on to it if or when you care to.

Whatever you do, build within your means to complete; as otherwise, you'll never actually get anywhere. As you launch things successfully, your ability to build to a larger vision will likely expand.

That's definitely false, at least in the US.

I don't answer so many stackoverflow questions, but I use bitbucket regularly, several stackexchange accounts, several programming-oriented forums...

I guess it boils down to immigration policy...

For example in many parts of Europe, although it is relatively uncommon for a programmer to be unemployed, salaries are a far cry from the 100k+ of Silicon Valley, meaning that the (local) industry is not exacly "starving" for programmers.

I only do my shopping at aldi, so I save a good amount of money.

don't forget that in france, government benefits are pretty good compared to other countries.

  Part of what they say is now men have access to
  their basic needs with out needing to work as much.

In reality, one of the easiest ways to be poor is to have a single mom. In other words, one of the easiest ways to be poor is to have a dad who isn't (can't or won't) fulfilling his responsibilities. Men and women who are fertile and sexually active need to be able to care for a child for eighteen years. Yes, birth control, please. But there are millions of single moms out that came from somewhere.

Additionally, someone needs to pay for current social security retirees, poverty programs, etc. And if you aren't having kids, someone else's kids will be paying for both their social security checks and yours.

I say all that not to be judgmental, but to point out that the numbers don't add up for men to just live the minimalist lifestyle free of guilt. Like I said, that's possible, but you'd literally have to live (and die!) off the grid while somehow caring for orphans, veterans, and windows at the same time (lifestyle choices don't count).

Some experiments can be run in a spreadsheet. I assumed 40 years of work (optimistic) and google reports a median personal income of 32140/yr and average savings rate of 3.2%. Shadowstats reports an average inflation rate around 5%, thats sounds about right. The S+P 500 total return over the last half century has been 7% but it oscillates insanely from -5 to +17 percent per decade. I think it very unrealistic to assume the 50s or 90s will ever happen again, but whatever, I feel optimistic this morning. I modeled in a 1% annual decline in income, which is lower than actual but sounds vaguely realistic.

My spreadsheet model shows an inflation adjusted retirement nest egg of $51K for joe 6 pack median middle class dude assuming its never dipped into for medical, educational, or unemployment issues for J6P or his kids or parents (in other words almost everyone will not have the money). I'm also assuming smooth economic growth (LOL) for best compounding results.

It still affects you as most investment advisors assume 0% inflation, 10% rates of economic growth, etc. In a world of poverty for almost everyone, that sounds rather optimistic.

Some other interesting experiments... 15% annual growth rate still only gets joe 6 pack to about 10% of your goal.

Joe6Pack at 1% annual wage increase (which is totally unrealistic in era of long term decline) and 15% annual economic growth rate (LOL) and triple the median savings rate at 10% of gross income being saved for 40 years and no unemployment, medical issues, or educational costs for J6P or his parents or kids (LOL) is still only about 1/3 of your goal.

Nobody I know experiences nominal wage declines, even of 1%. For reference, the average annual raise is a full 3%. [1]

As for 5% inflation, everyone knows Shadowstats is incredibly bogus and pushing a clear agenda without any grounding in realistic CPIs. [2] [3] For the past few years we've been experiencing almost 0% inflation, though I use 3% for my models (to be conservative).

I'm not implying that someone with average income will retire with millions, I just took issue with the idea that somehow "everyone" is going to end up penniless. 50% of people fall above median income and a substantial portion of us can reasonably expect to have retirement savings readily available.

1: http://www.usatoday.com/story/money/personalfinance/2013/09/... 2: http://voxrationalis.wordpress.com/2011/05/15/the-absurdity-... 3: http://www.forbes.com/sites/modeledbehavior/2013/10/14/niall...

This has already happened in europe's southern bankrupt economies

Basically, "everyone" is hyperbole. Obviously many people can retire fine, if you live within your means and consistently save.

How does this process work? Having been in this population, I know for certain nobody from the government has ever asked me for this information.

Global wealth tax on large personal fortunes (say, 0.2-1.0% per annum of fortunes greater than $2MM) and even redistribution to everyone will make the solution more transparent and fair.

And no, even if everyone were a genius, there are limited funds allocated by geniuses to pay geniuses to be geniuses. But if everyone were brilliant and have complete information and comprehensive educations about everything, either we are already in post-scarcity singularity utopia or we are imminently going to get there because you have hundreds of millions of geniuses capable to work on it, and geniuses running the system capable of realizing that potential and working to make it happen.

So either you are in a state where employment no longer matters, or your geniuses are smart enough to devote all their overflow resources to getting there, since they are all geniuses, they can all contribute to that end goal.

We simultaneously have people who just do not have the skills or mental capabilities to contribute, and leadership that is too ignorant or selfish to acknowledge the benefits of investing in research and science, and thus neither is possible.

It makes perfect sense that you don't know this since you seem completely misinformed about capitalism, judging by what you've said here in other replies:

> "The whole foundation of capitalism is growth"

The foundation of capitalism is savings, which is something current mainstream Economics thinks is evil (it only recognizes investment and consumption as good things to do with money, and saving is bad for Keynesians because they think if you know the price of food will be cheaper tomorrow, you won't eat today).

> "Yeah, [ever increasing consumption and resources being finite are] the inherent contradiction of capitalism"

Capitalism needs resources to be scarce in order to be a coherent system. Communists are the ones to whom resources being finite (and hence creating the need for a system of allocation of those resources, namely the price system in Capitalism) is a contradiction, which is why it never works (without price there's no way to know where to allocate resources).

Seriously, read up on Capitalism.

Smart people aren't immune to principal-agent problems. The 2008 crisis was created by exactly the smart people we're trying to be. We shouldn't stop trying, but neither should we be deluded that that is sufficient.

Of course there's nothing in the article to suggest many of these people are happy.

Classic lump of labor fallacy.

You did this in a previous discussion with me as well

https://news.ycombinator.com/item?id=8691296

Of course, you are absolutely free to do this if you wish. But I did take the time to explain why I felt you had misdiagnosed the situation, and explained how the position I held was not undermined by the lump of labor fallacy.

Just my own opinion, but if you're going to cite this fallacy, I do think you should be explain how you feel it relates to the current discussion and be prepared to engage in a debate about whether it is relevant.

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.

Here's the full quote from the nytimes article:

"Some countries have developed policies that encourage older people to leave the labor force, so they do not “crowd out” younger workers. But studies across countries and time suggest that crowding-out may not actually be a problem. Economies do not appear to have a fixed number of jobs. When more older people are working, they are earning money that they will then spend in ways that may create more jobs for young people, for example."

So in this case, I don't disagree with you, but it seems that the times article identifies the lump of labor fallacy immediately after the quote you provided.

I think it is important to point out because so few people still know about it. If few people know about it, they are likely to support harmful policies that they think will help the economy or job creation, but will not.

In the other case - our previous discussion, I explained how I though you had misapplied the lump of labor fallacy. You claimed that notion that H1B workers could displace local workers commits the lump of labor fallacy.

I made an argument that very specific, targeted immigration programs designed to increase workforce in a narrow sector of the economy can in fact cause market distortions that lead to displacement and deterrence. This is a pretty common objection to these sorts of visas. Many people who support free markets and free immigration see a real problem when the government starts creating programs where a worker is allowed to come to the US only under certain employment conditions (in this case, related to working as an employee to a high tech company).

Even Milton Friedman chimed in:

"There is no doubt," he says, "that the [H-1B] program is a benefit to their employers, enabling them to get workers at a lower wage, and to that extent, it is a subsidy."

I assure you that Milton Friedman was aware of the lump of labor fallacy. It's a bit more complicated than just citing a fallacy.

That fallacy is far from proven, see e.g. http://econpapers.repec.org/article/tafrsocec/v_3a65_3ay_3a2...

https://www.census.gov/newsroom/releases/archives/facts_for_...

Anyway, I attended a few conferences on aging, and all that fun. One thing that stuck out was that, in Germany at least, the ratio of workers to retirees of 4:1 will be more like 2:1 when I reach the current age of retirement.

Another is that you need to consider years of abled life.

A last is that I will never retire, and probably you won't either.

Note that, in Bismarck's time, life expectancy was about 55:

One persistent myth about the German program is that it adopted age 65 as the standard retirement age because that was Bismarck's age. This myth is important because Germany was one of the models America looked to in designing its own Social Security plan; and the myth is that America adopted age 65 as the age for retirement benefits because this was the age adopted by Germany when they created their program. In fact, Germany initially set age 70 as the retirement age (and Bismarck himself was 74 at the time) and it was not until 27 years later (in 1916) that the age was lowered to 65. By that time, Bismarck had been dead for 18 years.

If I try to create a startup I'll be doing it on my own.

EDIT: I disagreed with you, with a following comment, and didn't downvote you.

I'm not sure he's a great example. He has inertia and a lot of money made from when he was much younger. Take an average person at that age, middle class income, family, etc, and see if they can accomplish life changing goals that they just started chasing.

I'm not going to agree with the poster above that claimed that "At 40+ you realize you've pretty much accomplished everything you're going to with your life." but I think as a generalization it's probably closer to truth than feels comfortable (I'm 37).

I know a number of couples where the man just doesn't work and is supported by his wife. I don't think it's a conscious choice, it's unconscious and based on incentive.

One of these is not like the other…

Everyone in the military (at least, who's not also imprisoned) should count as fully-employed.

Your warm feelings about it notwithstanding.

Given that these are employment figures, it's odd to segregate one career from all the others.

Otherwise, anyone can steal $18 trillion from the masses under the pretense of using it for the public good - when really all (yes, 100%) it does is pay debt interest according to the government's own report on how tax money is spent - and "create" several jobs for you as well.

So no, those shouldn't count unless you want to keep on living on fantasy land, believe government's inflation numbers (and close your eyes when you go grocery shopping), and ignore the fact those government "jobs" do not make us more competitive to other countries. You don't win in the global economy by giving everyone jobs, but by allowing people to create real jobs that compete with other countries so that we as a population become wealthier.

(Walking away from a civilian employment contract wouldn't normally result in criminal charges)