March 28, 2019
How China Trade Affects Social Security
If you don’t know this fact about Social Security, join the club. The percentage of earnings for all
U.S. workers combined that is subject to the Social Security payroll tax is falling. Growing income inequality is the reason.
Thirty-five years ago, Social Security taxes were levied on 90 percent of all workers’ earnings. By 2016, this taxable share of earnings had declined to 82.7 percent, according to federal data, and it will continue to drop over the next decade.
The payroll tax is 12.4 percent of an individual worker’s earnings, with half deducted from his paycheck and half paid by the employer. But the tax has a cap: once earnings reach $132,900 – the cap for 2019 – they do not have to pay the tax for the rest of the year.
This is where inequality comes in. Since incomes above the cap are growing much faster than regular workers’ incomes, a bigger share of earnings is escaping the cap every year.
The decline in the taxable share aggravates the existing problem that benefits being paid out by Social Security now exceed the tax revenues coming in.
A recent study identified growing U.S. trade with China as one important factor that is shrinking the share of earnings subject to the payroll tax.
China is now the largest source of U.S. imports. The increase in trade volume over several decades has contributed to U.S. income inequality by sharply eroding earnings for workers in the low-wage, low-skill industries that have lost factory jobs to China. But trade with China has actually been good for workers in the top 1 percent – their earnings have increased slightly. Think of the high-tech entrepreneur selling software to a Chinese manufacturer. These are the types of people who stop paying the payroll tax partway through the year, when their earnings exceed the cap. …Learn More
November 13, 2018
Millennial Cities and Those Left Behind
Sumat Lam, a recent college graduate, was skeptical when his Silicon Valley employer transferred him to Austin, Texas. What he found was a high-tech mecca that defies the stereotypes of 10-gallon hats and Southern drawls.
Google, Apple and Amazon have established outposts in the “Silicon Hills” of Texas’ Hill Country. The young workers moving there are “bringing in their culture and influences from Boston and New York,” Lam told VOA News.
Taylor Hardy lives in Dayton, Ohio, but she might as well be living on a different planet.
This young nursing assistant can barely eke out a living. Her plight is shared by too many others in this former industrial hub that has been in a downward spiral that accelerated after plant closings by National Cash Register and General Motors during the last recession. The loss of high-quality blue-collar jobs contributes to Dayton’s 35 percent poverty rate – nearly three times the national rate.
Hardy, a single mother, and the boyfriend who lives with her, earn a total of $27,000 a year – she has $5 in her bank account. “I work all these hours, and I miss all the time with my kids to make … nothing,” she said in the PBS Frontline documentary “Left Behind America.”
The contrasting fortunes in these two cities – Austin versus Dayton – are playing out around the country. Young professionals are streaming into Millennial boomtowns from San Francisco to Boston, where growth seems almost unstoppable. But outside these hot spots are struggling Midwestern and Northeastern cities that have become deserts, devoid of opportunity for their young adult residents.
“Historically, many young American adults have left their hometowns to chase better opportunities,” said Kali McFadden, senior analyst at Magnify Money. “But not all millennials have the same work opportunities,” she said about her firm’s new city ranking of the employment available to young workers. …Learn More