Nov

2

RosieOne of my analytical speedbumps has been the subject of forecasting tax policy. Being a child of the incentives form of economic modeling, I cannot get away from the disincentivizing aspects of the probable 2010 and 2011 tax policy changes.

Based on my thinking, it would be natural to see a large exit of women from the workforce, as the after-tax income of working migrates closer and closer to childcare and tax-adjusted healthcare costs. This loss in demand for services would reflexively feed back in decreased demand for other services.

For fun, let's also note the popularity of Mad Men, a show of badly behaving men and their stay-at-home wives. Again, another show, Desperate Housewives, is wildly popular. Clearly this is in the forefront of women's thinking.

RBS also notes similar observations, in that the private sector gets it, while policy makers and the financial sector do not.

Considering the economics again, migration patterns between high-tax and low-tax states are increasing. That would support a change from a "two income" household  to a "one income" household. A lack of a certain activity would also "encourage" more risk taking behavior by men in the workplace.

Domestically speaking, the pie appears to be shrinking. I just can't tell if this is descriptive or predictive.

Art Cooper answers:

Tax incentives matter, but there is a more immediate cause of the shift from double to single income households: job loss. The U-6 unemployment, most recently reported at 17% nationwide, doesn't even include those who have given up looking for work. If a spouse loses his/her job, and can't find another, tax disincentives to working become irrelevant short term. Long term, such disincentives shift work to "off the books" employment, i.e., the underground economy. Because job losses have been worse for men than women (e.g., in the construction industry), the exit of workers from the workforce may result in more husbands than wives leaving formal employment. I wonder how many former construction workers turned "handymen" fully report their income?

J. Rollert replies:

I concur, but was not making the point [incentives] was a current causal factor, but a growing one. So, the ideas can run in parallel.

Point I forgot to add: am noticing conversations occurring where "older" mom commenting "one doesn't have energy for work and kids anymore" a lot. Yes, it may be a rationalization. But it's also accurate, as boomers had them later. I'm 50, and my kids just started middle school/junior high.

Was in San Diego over the weekend, and heard cash bids and mortgage bids are pretty close on residential auctions now.

Ken Drees writes:

John Williams of Shadow Government Statistics has current U-6 unemployment at 21% (including discouraged workers). I think job loss is the driver for these trends.

Construction and jobs surrounding building (residential and commercial) will be dead for years to come. Real estate jobs and banking jobs are tipped towards women. Car dealers have been decimated, which favors men losing jobs. So far this year over 1200 plus bank branches have been shuttered. So as real estate and construction have already liquidated many employees, banks will continue to close next year. Both genders are losing jobs in general. As states seize up, more government workers and education workers will be losing jobs in 2010. Education has more women, whereas government is mixed.

The movement from high tax to low tax states is affects wealthy individuals and business, rather than average families. For example, the exodus of the wealthy from New York, and the exodus of business from California. It is much more difficult to move from state to state now as a single family. If you cannot sell your home, you will not just abandon it and move, unless you are close to losing it already. Probably a lot of people who lost homes are the ones able to pull up stakes and go to lower tax states where the cost of living is more affordable and where jobs may be had. People moving to new states will probably rent first to test the waters, depending on how good the new job is — how confident they are in the job continuing. How about the person who wishes to take a higher paying job in a new state within their same corporation — you can't just sell your home in 45 days any more. The crisp housing market really made job hopping and movement within the country fast and efficient. That's over.

As the squeeze continues, tax avoidance strategies and migration trends will be more indicative of higher earners than 100k and below families. Tax avoidance and EPA/government restrictions will be the big business drivers out of states that hold these policies as important (blue states overwhelmingly).


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