Friday, August 21, 2015

"As QE Wanes, Real Costs of “Employment” Subsidies Surface" = City of Greensboro 'Incentives' for our wealthy oligarchs

"...a lot of corporate subsidies that are meant to induce businesses to Do Something wind up paying them for things they were going to do anyhow. the case of “employment” subsidies, the money too often did not lead to new hiring, but instead helped supplement the incomes of low-wage workers. That enables employers like WalMart and McDonalds (and increasingly colleges and universities) to pay well under a living wage because they know that the public purse will help shore up these sub-standard incomes.

...the Fed had amassed a total of $3 trillion worth of assets from the financial markets over a course of less than four years. This was equal to roughly 20% of U.S. GDP. In turn, interest rates fell all around the globe to virtually zero.

...seeing the expansion of the monetary base barely made a dent in stimulating real productive activity, the Fed declared in early Spring that “from now on it will be patiently waiting to start raising its policy interest rate and quitting QE operations.” This means bad news for global finance capital, which was drugged with the inflow of cheap liquidity, with zero credit costs.

...As a response to rising global unemployment during the Great Recession, many countries introduced direct and indirect incentive packages to cover labor costs. These often took the form of reducing and covering the employer share of social security taxes, tax breaks, publicly financed reduced-hours programs, and other public support programs. The costs of these employment subsidies were measured in multi billions dollars, and yet their beneficiaries had been mostly big corporations such as McDonalds and Walmart, which already profited handsomely from low wages. In return, employment gains had been meager at best, while the subsidy costs were borne by the public sector.

...public support programs to compensate for the low wages of workers in the formal corporate sector cost as much as $153 billion a year to American taxpayers. Among the needy are those employed in home care and service sectors, where 48% of all workers rely on public assistance—food stamps, Medicaid, and other forms of support.  ...a quarter of part-time faculty at colleges and universities are in need of public support.

...while these programs sponged as much as 3% of total fiscal expenditures, with a meager return of only 0.1% of additional employment. The real gainers were large enterprises in the formal sector. Low wages were sustained by public support programs, as real costs were taken over by the public sector.

...from 2003-2013, inflation-adjusted wages fell for the entire bottom 70% of the U.S. workforce. As the global crisis lingers on and has given way to a period of stagnation, and the Fed is preparing for “victory” over its QE operations, it is becoming more and more clear for the working class that the gradual growth in employment does not necessarily mean growth in wages."