The unemployment rate remains at or close to 7%, several years into the nation's "recovery" after the Lehman Brothers' bankruptcy and subsequent financial events that commenced five years ago. Still, with all the unemployment, I see many lower-wage jobs (predominantly restaurant and retail) going unfulfilled. Why is this?
Some will say that there's little benefit to some because the federal subsidies for not working are greater than the monetary reward (paychecks) for working. So I did some research:
1) In Wisconsin, the average food stamp benefit for one person is $116.50/week (http://www.fns.usda.gov/pd/18SNAPavg$PP.htm). That's $16/day, which isn't too bad...
2) The maximum unemployment is $363/month (http://www.wisconsinunemployment.us/benefits). I don't know where to live on that amount.
Together that amount is about $800/month. At $8/hour, 40 hours a week, gross pay is $1280. Because this would maximize any tax incentives to work, actual amount paid would be more at some point (tax refunds, etc.), but there'd be an immediate tax deduction of approx 10% (FICA, etc.). Still, that's at least $1150, or $350 more each month by working. Anyone who can't see the difference in an extra $80/week hasn't seen how far that can go.
The "trap" comes in if there are any unexpected financial hardships, like needing new clothes, prescriptions, or having to pay for drug tests up front to maintain state benefits (Florida). Then only a careful financial planner could be prepared for the future.
More following. I wanted to open a series of columns of unintended consequences with opening thoughts. Comments are welcome.
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