73 12.3 Problems in Work and the Economy

Unemployment

Unemployment is a fact of life. There will always be people laid off or fired, who voluntarily quit their jobs, or who just graduated school and are still looking for work. But most unemployed people are involuntarily unemployed, and for them the financial and psychological consequences can be devastating, as we saw in the news story that began this chapter.

Unemployment rates rise and fall with the economy, and the national unemployment rate was as high as 10.2 percent in October 2009 amid the Great Recession that began almost two years earlier. It was still 8.3 percent in February 2012, amounting to almost 13 million people. But whether unemployment is high or low, it always varies by race and ethnicity, with African American and Latino unemployment rates much higher than the white rate (see Figure 12.3 “Race, Ethnicity, and Unemployment Rate, February 2012”). Unemployment is also higher for younger people than for older people. In February 2012, 23.8 percent of all teenagers in the labor force (aged 16–19) were unemployed, a figure three times higher than that for adults. The unemployment rate for African Americans in this age group was a very high 34.7 percent, twice as high as the 21.3 percent figure for whites in this age group (Bureau of Labor Statistics, 2012).

Unemployment figures are misleading in an important respect, as they do not include people who are underemployed. Underemployment includes the unemployed and also two other types of people: (a) those who are working part-time but who want to work full-time—the so-called marginally attached, and (b) those who have stopped looking for work because they have not been able to find a job. Many economists think that underemployment provides a more accurate measure than unemployment of the number of people with employment problems.

For example, in December 2011, when the unemployment rate was 8.5 percent and 13 million people were officially unemployed, the underemployment rate was 15.2 percent, equal to 23.8 million people (Shierholz, 2012). These figures are almost twice as high as the official unemployment figures. Reflecting the racial/ethnic disparity in unemployment, 24.4 percent of African American workers and 22.3 percent of Latino workers were underemployed, compared to only 12.5 percent of white workers. Reflecting on the great amount of underemployment during the Great Recession, one economist commented, “When you combine the long-term unemployed with those who are dropping out and those who are working part time because they can’t find anything else, it is just far beyond anything we’ve seen in the job market since the 1930s” (Herbert, 2010, p. A25).

We have just seen that unemployment rises when the economy falters and that race and ethnicity affect the probability of being unemployed. These two facts provide evidence supporting the sociological imagination (see Chapter 1 “Understanding Social Problems”). As C. Wright Mills (1959) emphasized in his original discussion of this concept, unemployment is best viewed more as a public issue than as a personal trouble. When so many people are unemployed during an economic recession and when there is such striking evidence of higher unemployment rates among the persons of color who have the least opportunity for the education and training needed to obtain and keep a job, it is evident that high unemployment rates reflect a public issue rather than just a collection of public troubles.

Several kinds of problems make it difficult for people of color to be hired into jobs and thus contribute to the racial/ethnic disparity in unemployment. The Para 12.142 box discusses these problems.

The Impact of Unemployment

Although the news article that began this chapter gave us a moving account of unemployed people at food banks, survey data also provide harsh evidence of the social and psychological effects of being unemployed. In July 2010, the Pew Research Center issued a report based on a survey of 810 adults who were currently unemployed or had been unemployed since the Great Recession began in December 2007 and 1,093 people who had never been unemployed during the recession (Morin & Kochhar, 2010). The report’s title, Lost Income, Lost Friends—and Loss of Self-Respect, summarized its major findings.

Of those who had been unemployed for at least six months (long-term unemployment), 44 percent said that the recession had caused “major changes” in their lives, versus only 20 percent of those who had never been unemployed. More than half of the long-term unemployed said their family income had declined, and more than 40 percent said that their family relations had been strained and that they had lost contact with close friends. In another finding, 38 percent said they had “lost some self-respect” from being unemployed. One-third said they were finding it difficult to pay their rent or mortgage, compared to only 16 percent of those who had never been unemployed during the recession. Half had borrowed money from family or friends to pay bills, versus only 18 percent of the never unemployed. Of all the people who had been unemployed, almost half had experienced sleep difficulties, and 5 percent had experienced drug or alcohol problems. All these numbers paint a distressing picture of the social and psychological impact of unemployment during the Great Recession that began in late 2007.

Unemployment lines were all too common in recent years. Long-term unemployment often causes various social and psychological difficulties.

Rawle C. Jackman – The line of hope… – CC BY-NC-ND 2.0.

Unemployment also has a significant impact on children whose parent or parents are unemployed. The Note 12.21 “Children and Our Future” box discusses this impact.

The Role of Tax Policy

Economic inequality in the United States has increased during the last three decades. The loss of manufacturing jobs and unions accounts for some of this increase. However, a primary reason for the rising inequality has been tax policy. More specifically, the federal government has implemented steep cuts in the highest tax rates for income from salaries and wages and especially in tax rates for income from dividends and capital gains (Hacker & Pierson, 2011). This latter cut is especially important because dividends and capital gains account for a much larger share of the income of wealthy families than the income of ordinary families. To be more specific, dividends and capital gains account for only 0.7 percent of the income of the bottom four-fifths of the nation’s families, but for 18.8 percent of the income of the top fifth, 38.2 percent of the top 1 percent, and a striking 51.9 percent of the top 0.1 percent (Hungerford, 2011). In a related statistic, three-fourths of all capital gains are received by the top 1 percent (Krugman, 2012). Relative to its national wealth, the United States is the lowest-taxed industrial democracy in the world (Leonhardt, 2012).

Tax rates for the very wealthy have declined dramatically since the 1970s. This decline has helped fuel a rise in economic inequality.

Martin Haesemeyer – The Internal Revenue Service – CC BY-NC-ND 2.0.

Keep this context in mind as we note that tax cuts in 2003 lowered the tax rate for dividends and capital gains from 28 percent to 15 percent. Meanwhile, the top tax rate for income from salaries and wages is 35 percent. Thus many very wealthy families and individuals pay a lower percentage of their income in taxes than many middle- and upper-middle-class families do because so much of the wealthy families’ income is from dividends and capital gains. In fact, the four hundred wealthiest families and individuals in the country pay only about 18 percent of their income in federal tax (Krugman, 2012). As the director of Citizens for Tax Justice explained, “The low taxes on capital gains and dividends are why people who make a ton of money, which is largely from investment income, do awfully well. The Warren Buffetts, the hedge fund managers—they pay really low tax rates” (Confessore, Kocieniewski, & Parker, 2011, p. A1). This fact prompts a critical question from Paul Krugman, winner of the Nobel Prize in economics: “Is there a good reason why the rich should bear a startlingly light tax burden?” His answer: “Such low taxes on the very rich are indefensible” (Krugman, 2012, p. A27).

The lowering of tax rates has helped make the nation’s wealthiest families even wealthier. After adjusting for inflation, their after-tax income grew by a much greater amount than that for the poorest families from 1979 to 2007. Income grew by only 18 percent for the poorest fifth but by 65 percent for the wealthiest fifth (excluding the top 1 percent), and it also grew by a whopping 275 percent for families in the top 1 percent (Congressional Budget Office, 2011). As a result, economic inequality increased. Figure 12.6 “Growth of Economic Inequality in the United States (Percentage Share of Total National Income)” shows that wealthiest 1 percent now have a much larger share of the nation’s total posttax income than they did in 1979, while the poorest fifth have a lower share. As the saying goes, the rich get richer, and the poor get poorer.

The Impact of Economic Inequality

Why should we care if economic inequality has increased and if the United States has the highest degree of inequality of all industrial democracies? One answer is that it is a matter of fairness. The United States is not only the wealthiest nation in the world; it is also a nation that historically has stressed that everyone is created equal and that everyone has an equal opportunity to pursue the “American dream” by becoming economically successful. Against this backdrop, a high degree of economic inequality is simply “un-American” and unfair.

Beyond this rather philosophical critique are more practical considerations. First, a high degree of economic inequality is strongly associated with a high degree of poverty and near poverty: If the rich are getting richer, there is normally less wealth to “go around,” and the poor get poorer. For the same reason, high economic inequality is also associated with a shrinking of the middle class. In the United States, as both poverty (and near poverty) and wealth have increased, the size of the middle class has reduced, as the chair of the Council of Economic Advisers has emphasized (Krueger, 2012).

Second, a high degree of economic inequality is also associated with low economic mobility (the movement of people up or down the socioeconomic ladder) (Krueger, 2012). As noted earlier, the United States is the most economically unequal of all industrial democracies. It also has lower economic mobility: Americans born into poverty or near poverty are less likely than their counterparts in other democracies to be able to move up the socioeconomic ladder (DeParle, 2012).

Next, high economic inequality may slow economic growth. This possible effect occurs for at least three reasons (Krueger, 2012). First, the wealthy tend to save their money rather than spend it. Second, a shrinking middle class means there is less spending by the middle class to stimulate the economy. Third, workers’ morale is likely to be lower in a society with higher economic inequality, and their lower morale decreases their productivity. As the chair of the Council of Economic Advisers has stated, “The evidence suggests that a growing middle class is good for the economy, and that a more fair distribution of income would hasten economic growth. Businesses would benefit from restoring more fairness to the economy by having more middle class customers, more stable markets, and improved employee morale and productivity” (Krueger, 2012).

Finally, many social scientists consider nations with high degrees of economic inequality to be “unhealthy societies,” to quote the title of a book on this issue (Wilkinson, 1996). Economic inequality is thought to undermine social cohesion and increase polarization, and also to cause other problems (Barash, 2012; Wilkinson & Pickett, 2011). Among the world’s industrial nations, higher degrees of economic inequality are associated with worse physical and mental health, lower life expectancy, and higher rates of violent crime. High economic inequality, then, is a matter not only of fairness but also of life and death.

Employee Theft

Employee theft takes two forms: pilferage and embezzlement. Pilferage involves the stealing of goods, while embezzlement involves the stealing of money in its various dimensions (cash, electronic transactions, etc.). Whichever form it takes, employee theft is so common that is has been called a “widespread, pervasive, and costly form of crime” (Langton, Piquero, & Hollinger, 2006, p. 539). It is estimated that about 75 percent of employees steal at least once from their employers and that the annual amount of employee theft is $19.5 billion (National Retail Federation, 2007).

Employee theft occurs for many reasons, but a common reason is worker dissatisfaction with various aspects of their job. They may think their wages or salaries are too low, they may feel they have been treated unfairly by their employer, and so forth. As the estimates of the amount of employee theft suggest, this form of theft is not condemned by many people, and, indeed, many workplaces have informal norms that approve of certain forms of theft—for example, it is OK to steal inexpensive objects such as (depending on the workplace) utensils, food, pencils and pens, or toilet paper. Not surprisingly, embezzlement is often more costly to an employer than pilferage; although it can involve just a few dollars from a cash register, it can also involve hundreds of thousands or millions of dollars acquired through more sophisticated means.

When we think of employee theft, we probably usually think of theft by blue-collar or lower white-collar employees. However, physicians, attorneys, and other professionals also steal from their patients/clients or from the government, even if their form of theft is often much more complex and sophisticated than what the term “employee theft” may usually imply. Attorneys may bill their clients for work that was never done, and physicians may bill Medicare or private insurance for patients they never saw or for procedures that were never performed. We call this form of “employee” theft professional fraud. Fraud by physicians and other health-care professionals (including nursing homes and medical testing laboratories) is thought to amount to $100 billion every year (Rosoff et al., 2010), a figure that far exceeds the $19.5 billion in “conventional” employee theft and the similar figure lost to property crime (robbery, burglary, larceny, and motor vehicle theft).

Workplace Violence

In January 2012, a lumber company employee in North Carolina entered the company’s warehouse armed with a twelve-gauge shotgun. He shot and killed three coworkers and critically wounded another coworker. He then returned home, shot himself in the head, and later died at a hospital. A news report described the gunman as a “disgruntled” employee (Muskal, 2012).

About five hundred homicides occur at workplaces every year. The majority of these homicides result from robberies, not from the actions of disgruntled workers.

Pixabay – CC0 Public Domain.

Many people die or are injured by acts of violence at their workplaces every year in the United States. In 2008, 517 people were slain at their workplaces, according to the US Bureau of Labor Statistics. As disturbing as this number was, it represented a sharp drop from the numbers that prevailed a decade earlier, when 1,080 workplace homicides occurred in 1994. From 2003 through 2008, an average of 497 workplace homicides occurred every year (Needleman, 2010).

In terms of who is involved and the reasons for their involvement, three kinds of workplace homicides are the most common. The first and by far the most common type is homicide as the result of robbery. This category includes the many store clerks, gas station attendants, taxi drivers, and other employees who are slain during a robbery, as well as police who are killed as they try to stop a robbery or apprehend the offender. The second category is homicide committed as an act of domestic violence; in this type, the offender, almost always a man, seeks out his wife or girlfriend (or ex-wife or ex-girlfriend) at her workplace and kills her. The third category involves disgruntled workers, such as the North Carolina lumber employee just discussed, who kill one or more people at their workplace whom they blame for problems the killers have been having. Although this type of homicide is the type that the phrase “workplace violence” or “workplace killings” usually brings to mind, it is actually the least common of the three types listed here (Fox, 2010).