You might have heard that “U.S. companies slashed payrolls last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II. Employers cut 533,000 jobs, bringing losses so far this year to 1.91 million,” as reported by Bloomberg News. (I can’t believe I keep promoting that man’s business after term limits repeal). You may have also heard that the number of people collecting unemployment insurance is at a 26-year high, because those laid off can’t find new jobs. But what you may not have realized is that these figures only include wage and salary employees who are eligible for unemployment benefits, given that unemployment tax revenues is what the Current Employment Survey, the source of the payroll employment number, is benchmarked to. Increasingly, especially in New York City and a few other places, immigrants and younger people, even college graduates, are not allowed to be employees. They are hired as “independent contractors,” “freelancers,” and “permalancers” even if their work arrangements are not different than those of older generations classified as employees. But they don’t get health insurance, and don’t get whatever retirement benefits that still exist. And when they are laid off and have their hours cut, it doesn’t show up in the statistics, they don’t get unemployment insurance, and if they don’t have savings or family nearby and able to help, they face immediate economic disaster. When they had money the City of New York taxed them twice, through the local income tax and the unincorporated business tax. What will happen to them now?
How many people are we talking about? According to the attached table Bureau of Economic Analysis data I created for someone writing a (hopefully soon to be released) article on the self-employed, in 2006 a total 28.5% of those working in Brooklyn, 25.8% of those working in Queens, and 296,000 people working in Manhattan, were self employed rather than wage and salary employees — all way up from 1989. Brooklyn and Queens have among the highest proportion self-employed in the country. The place most like New York City is Los Angeles County, where from 1989 the number of wage and salary employees went down but the number of self-employed people went up by a greater amount, something that also happened in Manhattan. These aren’t illegal immigrants working “off the books.” That is a whole additional group of people facing destitution with limited social support as a result of the economic crisis. These are people who fill out IRS Schedule C, which is how the Bureau of Economic Analysis knows about them. The “on the books” self-employed alone.
Some of these people made a choice to be self employed, to own their own business or independently practice their profession. Others did not. At some point the number of people working in NYC’s taxi industry plunged. Why? Because instead of being employees of taxi companies, with whatever benefits that provided, taxi drivers were told they were independent contractors. The taxi executives get their money up front. The taxi drivers take the financial risk. I doubt that is what they wanted.
The way I’ve been tracking changes in self employment is the difference between the establishment survey, which measures payroll employment, and the household survey, which asks people if they are employed. In some parts of the country, such as New York and Los Angeles, the number of people who said they were employed used to be going up much faster than the number of employees, due to the shift to self-employment. Now it is doing down faster. Those who never counted as workers to begin with are being laid off, or having their pay and hours cut.
Again, New York City, where some people matter much more than others, taxed these people twice. They don’t get unemployment benefits. What will happen to them? Who will help them? New York State is full of politicians always looking out for senior citizens “on fixed incomes,” whose Social Security payments are going up 5.8% next year as a result of an automatic upward adjustment for the cost of living. All tax free for the NYC and NY State income tax. What about those who have been sat on for years to benefit those sitting at the top of this political hierarchy we have? Does anybody even care?
Not up in Albany. The talk up there is about increasing pension benefits by allowing public employees to retire even earlier, and get paid without having to work. That pension income is also tax free. Not at City Hall, where what mattered was repealing term limits.
I’ve said it before but I’ll say it again — I try to make sure my charitable contributions benefit those worse off than I am. Because my taxes go to those better off than I am. You can shift some charitable dollars to the local food pantry this year to try to ensure those who don’t matter won’t starve, but that doesn’t mean they won’t be out on the street a few months from now.