Simple Jobs Economic Model that Explains Whats Happening

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Simple Jobs Economic Model that Explains Whats Happening

Post by Peeka on Sun Oct 23, 2011 1:13 am

Why jobs are so important. For a local community to be a happy vibrant place to live, a dollar spent locally has to pass thru 5 hands before leaving the community. This is from a government study. In china town, a dollar goes thru 10 hands. That is why the sidewalks are crowded, and the stores and restaurants are bustling. In a ghetto, a dollar passes thru 1 or 2 hands before leaving the community. That's partly why ghettos are so run down.

Nice info, but what to do with it? Numbers always helps and a spread sheet can provide a rough idea and can be a simple economic model.

The columns just show what is earned, saved, taxed, and spent. People should save 10% of what they earn. Average taxes are about 20%.
Worker Earns Saves 10% Taxes 20% Spends
Worker$100.00 $10.00 $20.00 $70.00
Person 1 $70.00 $7.00 $14.00 $49.00
Person 2 $49.00 $4.90 $9.80 $34.30
Person 3 $34.30 $3.43 $6.86 $24.01
Person 4 $24.01 $2.40 $4.80 $16.81
Person 5 $16.81 $1.68 $3.36 $11.77
Totals $29.41 $58.82

Start with $100.00 to make it easier to think in terms of percentages later on. The results showed that banks got about 30% of the initial $100 that can be used for making loans. Nearly 60% of the initial $100 is collected for taxes and can be used for roads, teachers, police, fire, government, etc. All of the teachers, police, firemen, etc will also save and pay taxes. This is not included so that the table does not get too complicated.

Note: You can change percentages, use Gain's 9-9-9 plan, use graduated percentages based on income, or come up with your own scheme. Just keep in mind that money should pass thru 5 hands for a vibrant community and total the Savings (Banks use for loans) and Taxes (Government employees, infrastructure).

When looking at the above table, realize that businesses are not taxed, its all personnel income tax on earnings. There is also no sales tax or property tax. The table is very basic but does really show why jobs are important. It is a simple straight forward economic model about jobs.

Persons 1 thru 5 are just workers in local small businesses, like plumbers, dentists, waiters, clerks, doctors, etc. Obama wants to get local businesses going .... but that is not going to do anything because the company worker is not there. The company worker produces goods and services that are used OUTSIDE of the local community. The problem that this country is in is because the company's worker's jobs were outsourced. From a business point of view, profits were greater for their stock holders if the same goods and services were produced by workers who worked for less. So if a business lays off 1000 workers, they are really laying off 5000 more people in the local community and affecting the taxes needed to maintain the community. The business profits do go up but not enough to justify the effect on those 5000 local workers and the taxes needed to maintain the local community.

The only way to really fix this problem is to get America producing the goods and services that will be used by Americans. But there is no way that China or India will allow this to happen. Their countries are booming because their workers are earning wages and spending it locally. The USA may and does come up with new ideas and products but China and India will produce it for less and their governments will provide subsidies and keep their money at a rate that favors their trade. China has done this with many products and lately wants to control the solar panel production and does this by subsidizing their solar panel manufacturing so that their panels are priced less than any other countries. They will put any foreign competitor out of business by under pricing them.

As long as things cost less for the middle class American if done overseas, then that will happen and the jobs will go overseas. Business is doing what it does best ... maximize profits. That is why those CEOs get those bonuses. And what is really bad is that the CEOs do not shop in the local communities or even buy local goods and services!!

How to fix this problem???
- a VAT tax on all goods coming into this country. May not work. Foreign countries just lower their prices. No incentive for American companies to work smarter. Remember what happened with Japanese cars.
- get foreign countries to raise their workers' wages. Ha Ha Foreign bosses are greedy.
- ship union organizers to foreign countries. They will end up in jail
- ??

America borrows money from China to try and get a stimulus package going and the local American governments give the job back to china. Arrgh!!
We end up paying interest on money we borrowed and use the money to stimulate business back in china. Arrgh!!
The politicians felt proud of what they did because they saved millions of dollars.

I would like to think that if more people really saw the attached table and what it indicates, then that may help them make the "right" decisions. Closing a plant, outsourcing production and services, and laying off employees has a larger affect that most people do not realize and that should and can be measured.


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