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On Job Openings the Minimum Wage and Being Middle Class

Bruce Krasting's picture




 

 

I had lunch with a friend, he was bitching and moaning about business. He’s having a very hard time closing deals – and he only gets paid when there are deals.

 

This fellow is a headhunter. He specializes in supplying people for the medical industry. One of his clients has given him a sweet assignment – they have a dozen job openings that need to be filled - yesterday. The job description is OT – PT (Occupational or Physical Therapist). Some additional details:

 

Compensation: $100 per hour.

 

Location: Metro NY.

 

Terms: This is Per Diem work. There are no benefits.

 

Job Requirements: The applicant must have a graduate degree and at least two year of work experience.

 

Hours per week: Minimum of 40. There will be the opportunity to work more hours, but the $100/hr rate stays the same.

 

Long Term Prospects: Most of the jobs will be converted into full time positions with an excellent benefit package in less than one-year. The per diem option will remain open. (Full time work with benefits is less than $100/hr)

 

Micro Economics: There are no benefits and the taxes will be high. One should expect to pay 40% taxes (11% NY State/City and this income will be subject to the new, top Federal bracket). In NY, the out of pocket cost for medical insurance is $1,000 per month ($2k for a family plan). This brings the take home, after tax and after medical insurance to $55/hr. At 45 hrs a week, 50 weeks a year, it means a take home of $123k – call it 10 grand a month of spending money. Not bad at all.

 

Macro Economics: To get this job you must have six years of education - four years of college, two more for the graduate work. What does that cost? It could cost over $200,000. I’ll assume only $100k. The payback on that is $1,000 per month for ten years. In addition, there is the lost income for the six years that it takes to get an education; I’ll exclude that. When you factor in the debt, it brings the real disposable income down to $9k a month.

 

 

So what’s my friend groaning about? It’s been two weeks, and he hasn’t filled one of the jobs. There is a big shortage of people with these skills.

 

I checked a few online sites. There are plenty of ads for the jobs I describe. It’s not just in NY; it’s all over (pay varies significantly by location). None of this is either startling or new, but taken together, I thought it was interesting. Some observations:

 

 

- This part of the economy is red hot. It’s not just OT – PT, the shortage of qualified workers is across the hospital industry.

 

- In 2014 (10 months) Obamacare will kick in, and millions of people will have medical insurance. What will they do when they finally have benefits? They will go see a doctor. The demand for medical services is going to grow substantially as a result.

 

- Supply and demand says that today’s personnel shortage will get worse very soon. My conclusion is that this will translate into an overwhelmed system where patients do not fair well.

 

- A substantial portion of the rising demand for medical services is Medicare and the aging population. More Federal debt is the driving force for the high paying jobs.

 

- With personnel costs rising this fast, you have to believe that all of those estimates for what Obamacare was going to cost, were just noise. If you thought Medicare was in financial trouble today, wait three years. The costs will be double what what sold to the public in 2010.

 

- Want a good job? Get six years of education. I see this as a very big barrier to entry. The “good life” will remain elusive.

 

- If six years and $100k are required to get a good job, doesn’t that mean that the problems with unemployment today are structural? Can ZIRP or QE fix this?

 

- Healthcare is a big chunk of the economy. Clearly there is wage inflation in this sector. There are potential monetary policy implications to this. I would not “short” 2014 CPI at 2.5%....I suspect the new boss at the Fed will have to grapple with this.

 

- All of the jobs offered are per diem only. This is not new, but the trend is increasing. Hospitals don’t want the burdens of full time employees. It’s easier for them to write a big check, and let the employees deal with paying taxes and obtaining insurance. We will see more and more of this. You’re on your own…

 

- These jobs are very much full time. But because they are per diem, they statistically fall in the category of part time or temp workers. I'm not sure there is spin to this as far as the employment numbers we look at. If there were, it would suggest that the economy is a tad hotter then thought.

 

 

Now assume that have the skills and you're willing to move to the Big Apple. Assume you also have two young kids. You need that $100 an hour to pay all those bills. Including:

 

- An extra $1,000 a month for insurance for the kids.

 

- $3,000 for rent. (The Apple is expensive - You will live in Brooklyn, not Manhattan)

 

- Pre-School/baby sitters will cost another $2,000 a month. (Forget about private schools, that starts at $20k per child)

 

Now the monthly take home has fallen from 9k to $3,000. Then there is the cell, cable, Internet and electric. You’re making $225,000 a year and have no 401K. You have kids – and they need an education too. So savings is a question in this. Put a $1,000 a month into the market (minimal for this person) and what’s left falls to $1,500.

 

Can you put food on the table and buy clothes and all the other stuff kids need on $1,500 a month? Yes, but not by much. It comes to $50 day of spending money. That goes very fast these days. You’re not living the high life, forget about a vacation, there's no chance for a car. And you're making a quarter mil a year.

 

 

Bottom line? $100 an hour is the minimum wage for a person with a family in NY. The Prez is offering $9.

 

nyt

 

banksy-streetart-london-lifestyle-624x416

 

 

 

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Wed, 02/13/2013 - 23:59 | 3242078 Pemaquid
Pemaquid's picture

I won't work in NY for $1000 an hour!

Thu, 02/14/2013 - 01:18 | 3242275 Freddie
Freddie's picture

The problem with NY and especially NYC and LI is NY'ers. You might actually have to touch them even with gloves. They are dusted daily with fecal dust. You also get exposed to bed bugs and other parasites the "residents" carry.

They voted for this.

Wed, 02/13/2013 - 23:58 | 3242075 duo
duo's picture

When the huge deductables and out-of-pockets of Obamcare Silver and Bronze kick in, the doctor's offices will be mostly empty.  If your kid is sick and it will cost you $80 out of pocket to have his temperature taken, you'll pay your iPhone bill instead.

Wed, 02/13/2013 - 23:55 | 3242071 john39
john39's picture

Screwed when 'healthcare' is considered a big part of the economy... This is not productive...

Thu, 02/14/2013 - 00:00 | 3242080 duo
duo's picture

When a week in the hospital ICU costs more than the average worker makes in a lifetime, either wages are too low, or hospital costs are too high.

 

Thu, 02/14/2013 - 03:07 | 3242381 Dealyer Turdin
Dealyer Turdin's picture

When it totally sucks and the filth is all over the place, the bag is ripped.  We'll buy another vacuum.   It's like the Entemann Donut box that supports cancer research... Eric Holder checkin' himself out... Bernanke keeping HP alive by buying toner...

Thu, 02/14/2013 - 00:20 | 3242139 infinity8
infinity8's picture

Or both. I would submit both.

Thu, 02/14/2013 - 00:44 | 3242070 which way weste...
which way western man's picture

the jew takes ALL

now they want the guns

they are going to get what is coming to them once and for all

this fucking nation wrecking race cult of amoral ticks and tapeworms

Wed, 02/13/2013 - 23:35 | 3242036 Eireann go Brach
Eireann go Brach's picture

Obama doesn't deserve $9 an hour for the job he is doing!

Thu, 02/14/2013 - 03:18 | 3242395 Boris Alatovkrap
Boris Alatovkrap's picture

America is pay President for large vacation entourage and golfing time, is also pay wage?!

Wed, 02/13/2013 - 23:35 | 3242031 amazon1966
amazon1966's picture

If you have kids, your wife either watches them, $2000 back or she brings some income in. I think you can live with two kids in NYC if your married. If not well.....

 

Wed, 02/13/2013 - 23:31 | 3242024 dark pools of soros
dark pools of soros's picture

$9 is upperclass compared to jail labor... Can't wait for jail labor nurses to fill all those jobs

Thu, 02/14/2013 - 03:16 | 3242392 Boris Alatovkrap
Boris Alatovkrap's picture

Maybe is American prison more accommodation than Soviet Gulag, but Boris is not fond for jail nurse, especial not for shave groin!

Wed, 02/13/2013 - 22:47 | 3241923 Almost Solvent
Almost Solvent's picture

$9 is too low by half for the 21st century

Thu, 02/14/2013 - 01:37 | 3242295 RafterManFMJ
RafterManFMJ's picture

I'm getting my degree in Pysical Therappies for only 80K while I attend classes from my computter; thanks you very much University of Phoenix!  Soon I will be making excellent wages, doing what pysical therapists do. Massage me if you need an intern.

Thu, 02/14/2013 - 03:14 | 3242391 Boris Alatovkrap
Boris Alatovkrap's picture

Maybe is can join business, Boris is dentistry while you are can foot massage!

Thu, 02/14/2013 - 00:37 | 3242188 Stuck on Zero
Stuck on Zero's picture

Obama didn't explain why the minimum wage needs to be raised and raised again.  It's inflation, of course.  Caused by none other than Obama!

 

Thu, 02/14/2013 - 03:12 | 3242388 Boris Alatovkrap
Boris Alatovkrap's picture

You are for too cynical! Obama is only look outward for middle class and poor. Inflation is faulting of Bush and Cheney, not Democrat, not Obama! No!

Thu, 02/14/2013 - 00:26 | 3242151 HoofHearted
HoofHearted's picture

And yet a ton of people don't even have the skillz to make seven fiddy an hour. Hmmmm.....

Either be able to do useful stuff or forget about it.

Thu, 02/14/2013 - 03:10 | 3242384 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is to learn from cousin, Yuri, is become home dentist. Gold is expensive, but high-density poly-urethane resin is for make good filing material against pulp or dentin. Can fix for family and friends and no is to pay taxes!

Thu, 02/14/2013 - 05:16 | 3242472 ebear
ebear's picture

Ah yes, but is it safe?

Thu, 02/14/2013 - 12:02 | 3243206 Boris Alatovkrap
Boris Alatovkrap's picture

Safe!? Who is say anything safe about this!? But remember this for one thing - have teeth, will eat!

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