U6 Watch: July 2013

U6 Watch is a monthly feature monitoring the success of the poverty-sustaining compromise of both political parties to use the U3 measure of unemployment.  Read the first U6 Watch for more background.  Other "recovery" news and labor market news is reported as well.

New data is in revising the basis of my frequent exasperation that corporate profits are at record highs, while wages and salaries are at record lows.  I wasn't wrong, it's just that things are more extreme than we thought:

Before the figures were revised, it appeared that wages and salary income in 2012 amounted to 44 percent of G.D.P., the lowest at any time since 1929, which is as far back as the data goes.

But the revisions cut that to 42.6 percent, which matched the revised 2010 figure as the lowest ever.

The flip side of that is that corporate profits after taxes amounted to a record 9.7 percent of G.D.P. Each of the last three years has been higher than the earlier record high, of 9.1 percent, which was set in 1929.

Last month's U6 Watch discussed the declining labor force participation rate.  An Urban Institute report (h/t) breaks down the components of the stagnating labor force participation rate, finding:

Obamacare's means testing is a phenomenal waste

Image: This is what Obamacare's means testing looks like, in flow chart form (source)

Much ink has been spilled about what an incredible corporate sell-out Obamacare is (my favorite piece).  But the law's centerpiece--the insurance exchanges--is based on the principle of means testing.  Means testing is always a waste of scarce resources.  As Obamacare's exchanges come online, it's worth pointing out (again) just how phenomenally wasteful Obamacare's means testing is.

Obamacare and why we have a two-tiered welfare state

Image: The illustration from Suzanne Mettler's article on the "submerged state," a key aspect of America's two-tiered welfare system.

A little background: In 2009, as Congress debated the corporate sell-out known as Obamacare, Iowa Republican Senator Chuck Grassley proposed an amendment that would force every member of Congress to use the Obamacare exchanges.  Grassley clearly thought that the Democrats secretly expected the exchanges to crash and burn, and would thus be unwilling to rely on them.  Fearing for their health, the Democrats would vote the amendment down, thus exposing their own hypocrisy.

Grassley miscalculated, however.  The Democrats, apparently confident in the principle of the health insurance exchanges, called Grassley's bluff and his amendment became law.  So, starting in 2014, all members of Congress are legally required to purchase health insurance from the exchanges.

This makes no sense, however, because the exchanges are meant for individuals who are not offered insurance through their employer, and the law does not permit employers to make a contribution to insurance their employees purchase over the exchanges.  Members of Congress do get health insurance through their  employer--the federal government--but are somehow expected to use the exchanges.

This creates an odd paradox wherein members of Congress are both expected to utilize their employer-sponsored health insurance, yet legally required not to.  This paradox was ironed out earlier this year, when it was determined that members of Congress would purchase their insurance on the exchanges with the help of the federal government; the federal government will pay the current employer contribution towards Congress' health insurance, and each member of Congress will have to pay the rest of the bill for whatever plan they purchase on the exchanges.

For those making up to 400% of the poverty line, subsidies are available on a sliding scale to help purchase insurance.  Obviously, members of Congress are making more than 400% of the poverty line, and thus would not be eligible for this subsidy.

Ok, done with the background.  This entire fiasco has led to one of the most amazing works of cognitive dissonance I have ever encountered: