“Americans Want to Believe Jobs Are the Solution to Poverty. They’re Not.” (nytimes) describes a 33-year-old American who has three children: “Taliya, 17, Shamal, 14, and Tatiyana, 12” (i.e., the first one was born when mom was 16). The worker lives in public housing and presuambly qualifies for free health care, free food (SNAP), and a free smartphone (Obamaphone). She does not earn too much:
After juggling the kids and managing her diabetes, Vanessa is able to work 20 to 30 hours a week [in home health care], which earns her around $1,200 a month. And that’s when things go well.
The explanation for her low earnings is not a bountiful supply of low-skill immigrants (see this analysis by George Borjas of Harvard) and therefore a low value of low-skill labor.
American workers are being shut out of the profits they are helping to generate. The decline of unions is a big reason.
Due to weak labor unions, it has become crazy profitable to hire low-skill workers in the U.S. Yet the individual profiled is working only part time. If she were generating crazy high profits for her employer, wouldn’t the employer be trying hard to get her to work full-time so that they could make more of these profits?
Why haven’t this writer and his colleagues at the NYT started a home health care business to scoop up some of these supranormal profits for itself? They are too virtuous to want to get rich on the backs of low-wage workers?
[The Times didn’t bother with a Google search to find out how profitable an average employer in this industry might be. As of 2015, however, it seems that the average profit margin for a publicly traded home health care provider was 2.4 percent (source). So if her employer gave the profiled worker all of its profits she would have earned $1,229 per week instead of $1,200.]
The writer probably did not understand the difference between revenues and net income. My experience in dealing with journalists is that they have a very dim understanding of business and usually don’t have the ability to read a financial statement or SEC filing.
Actually, the profits of the company go down if the person is employed full time. Because then the employer also has to pay benefits. And the cost of benefits comes out of the profits. Now, if the worker makes generates more revenue than the cost of benefits, then the total profit would go up. But my experience is that the revenue is smaller than the cost of administering and paying the benefits.
Steve: That’s a good point. Buying health insurance at the world’s highest rates is painful for an employer. But on the other hand, the NYT is talking about employers getting insanely rich off the exploited proletariat! Presumably these riches should suffice for a $10,000/year individual or $20,000/year family policy!
Of course, a job is not a solution to poverty. News at 11. That worker was given three chances to get out of poverty, and she missed them all!
She failed to sue for child support, or perhaps the father(s) of her children was not properly screened (i.e., not independently wealthy). The Grey Lady always knows best what pays off and what does not!