economics

You might have heard that the U.S. added 290,000 jobs in April.  At the same time, the unemployment rate rose!  Bwhat!?

The unemployment rate doesn’t measure how many people are unemployed.  It sounds like it should, being that it includes the words “unemployment” and “rate” and all, but it doesn’t.  Instead, the unemployment rate measures how many people are looking for jobs.  When things are really bad, some people get discouraged and give up, or go to school instead, or stay home to take care of their kids and save day care money.

So the number of jobs and the unemployment rate are not directly correlated.  Ezra Klein posted this visual:

It shows unemployment rising as job growth remains negative, leveling off as (perhaps) people drop out of active job seeking, and than actually going up again there at the end in response to two months of solid job growth.

So it turns out that, in this case, a rise in the unemployment rate is good news.  It means some people are hopeful again.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

How have adults and young people weathered the worldwide economic downturn? This two-minute 12-second video shows that young people have been harder hit by joblessness in almost all OECD countries:

From the OECD Factblog.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

One of the criticisms sociologists sometimes have of economics is related to the assumption of rational choice. Many economic models assume that individuals will always act to maximize their benefit.

Sociology, however, is premised on the idea that humans make meaning. To begin with, what is “rational” is socially constructed and, further, humans value many things beyond pure strategic economic gain.

The photo below illustrates this concept quite well:

If you had a found iPod touch, which number would you call? Certainly some of you might call for the $51 reward, but many of us would call for the $50 reward. We would sacrifice that extra dollar because we would know that the second person is scamming, while the first is (probably) honest.

The proportion of people that would call the scammer, of course, goes up as his reward gets increasingly large compared to the original reward. But this doesn’t mean that rational choice theory is correct, it just means that we’re rational. That is, many of us are more willing to do the less-right thing when there is more to gain from it (though our tipping points are going to vary tremendously). Pure rational choice theory, though, would have us calling the scammer every time, even if only for a buck, as if nothing else matters.

The High Definite, via MontClair SocioBlog (where Jay first spoke to rational choice theory in his post).

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

With tax season upon us, it is almost obligatory for Americans to complain about what they’re shelling out to Uncle Sam. According to Gallup polls, 46 percent of Americans think their taxes are too high.

The good news is that figure is near rock-bottom for the past 50 years; the bad news is that tax-related violence has been on the rise for the same period. The most recent example of this trend occurred last month, when software engineer Joe Stack, enraged by disputes with the Internal Revenue Service going back to the 1980s, flew a small plane into an IRS building in Texas.

In a lengthy essay/suicide note posted on his website, Stack styled himself after the early American patriots of “no taxation without representation” fame, reminding us all of the unique prestige of tax revolt in American history. As Stack points out, some of the first lessons American children receive about their nation’s history equates taxes to oppression, and revolt against those taxes to the struggle for liberty and justice for all. This probably contributes to Americans’ widespread distrust of taxation, and the acceptance of that distrust as normal and natural.

But that view of taxation is not shared worldwide. In fact, citizens of some countries are actually happy about paying taxes. If you’re an American reading these words, that statement probably sounds pretty far-fetched. But consider this: the citizens of Denmark pay the highest income taxes in the world (an average of 48.3 percent), and are also the happiest people in the world.

It’s not just that Danes pay those high income taxes: they also pay a Value Added Tax of 25 percent on every cup of coffee or pair of sneakers they buy, making the outcry in my hometown of Chicago over having the highest sales tax of any major city in the US (a whopping 10.25 percent) look picayune by comparison. And then there’s Denmark’s tax on new cars: a heart-stopping 180 percent. So if you buy a car with an MSRP of € 20,000 , you’ll pay an additional € 36,000 to get the car registered and licensed.

The Danish car tax, in and of itself, would probably be enough to provoke armed rebellion in the United States. So why do the citizens of Denmark not only tolerate the array of taxes they pay, but appear downright happy about them?

And just to be clear, Danes aren’t just generally happy, or happy despite the taxes they pay. Rather, they are specifically happy about paying taxes! Take this exchange, for example, from a recent series of “person in the street” interviews from Copenhagen by United States National Public Radio:

KESTENBAUM [Ed—NPR reporter]: You think paying taxes is terrific?

Ms. BAUOLASON [Ed—resident of Copenhagen]: I do actually think it is terrific.

From an American perspective, Denmark “seems to violate the laws of the economic universe.”

The key to this attitude seems to lie in Danes’ trust in government and each other—something I noted in an earlier post. As this video interview with a pair of Danish sociologists suggests, this trust stems from several factors. Among the most important is the widely-shared belief that their society is just, and that socio-economic goods are equitably distributed. As a result, many Danes seem satisfied that they are getting their money’s worth–that is, they enjoy tangible benefits of the taxes they pay in terms of universal health care, tuition-free education through the university level, and employment benefits and security far beyond anything available in the United States.

Meanwhile, things could not be more different in the United States, which ranks 23rd in the world happiness rankings, and where distrust of government has been virtually axiomatic since the Reagan era—if not before. This helps account for a paradox: while the United States has among the lowest income tax rates in the world, and we have nothing like the VAT and auto registration taxes that Danes pay, Americans rarely challenge each others’ complaints about “high taxes.”

In fact, one of the remarkable things about Joe Stack’s anti-tax rant/suicide note is how much it resembles what now constitutes “mainstream” rhetoric on taxation in America—particularly in the aftermath of the government bailout of financial firms following the 2008 economic crisis.

Stack wrote:

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours?

Compare this to CNBC newsman Rick Santelli’s now legendary on-air rant of February 2009, in which he sounds many of the same notes as Stack, using virtually identical arguments and references to American history:

So while Stack’s violent actions took this rhetoric to the extreme, the evidence suggests that he was no outlier in his  perspective on taxation in America: his basic views are apparently shared by a wide swath of his fellow citizens, from television news reporters to the Tea Party movement to think tanks like the conservative Cato Institute.

What accounts for this extreme disparity between American and Danish attitudes toward taxes? And what does this have to do with the differences between the two countries in terms of happiness?

The evidence suggests that both phenomena stem from perceptions of fairness. While—as the two video interviews from Denmark suggest—many Danes believe that they benefit personally from their tax contributions, the rhetoric of people like Stack, Santelli and others suggest that many Americans believe they get little to nothing in return for their tax contributions. Instead, they believe their taxes benefit the “free riders” in US society—whether conceived as “welfare queens” at the bottom of the socio-economic ladder, or as corporations and executives at the top.

Thus, Stack signed off with this bitter epigram: “The capitalist creed: From each according to his gullibility, to each according to his greed.” For him, it was a bitterness unto death; for like-minded Americans, these beliefs contribute to a sense of pervasive injustice that frustrates their “pursuit of happiness” and makes April 15 a day of national resentment rather than a simple administrative deadline.

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Brooke Harrington is Associate Professor of Economic Sociology at the Copenhagen Business School. She is the author of two books: “Pop Finance: Investment Clubs and the New Investor Populism” (Princeton University Press, 2008) and “Deception: From Ancient Empires to Internet Dating” (Stanford University Press, 2009). She is currently doing research on offshore banking.  Harrington blogs at our fellow Contexts blog, Economic Sociology.

If you would like to write a post for Sociological Images, please see our Guidelines for Guest Bloggers.

O.S. sent in this neat video found at Flowing Data that illustrates the spread of Wal-Mart and Sam’s Club stores across the U.S. since the early 1960s:

Tom Schaller at FiveThirtyEight posted this graph showing different types of federal taxes as a percent of total U.S. GDP (estimated through 2014 based on the current tax code):

Despite widespread beliefs that we’re all taxed to death, and that taxes are strangling the business sector, we can see that the only taxed that have clearly trended upward since 1935 are payroll taxes (SSI/Retirement). And corporate and excise taxes have actually decreased over time.

Total federal taxes make up less than 20% of our total GDP. Interestingly, a (non-random convenience) sample of Tea Partiers at a recent protest found that half of the attendees thought that federal taxes make up over 40% of GDP, and the mean answer was 42% (the highest answer being 99%).

This reminds me of watching The Price Is Right with some of my relatives as a kid. We’d watch, and inevitably someone would win a car or at the end get the Showcase Showdown package, and being kids my sisters and I would be agog over their riches. But one of the adults in the room would then give us a lecture about taxes, saying you’d have to pay a tax of 50% of the value of the winnings, so you’d really just end up owing money. The implication was that this was really unfair and robbed people like us of our birthright to go on TV and try to win stuff because we wouldn’t be able to come up with the money to pay the taxes on our winnings (though they did wonder if you could convince Bob Barker to just give you the cash value of the items rather than the things themselves so you’d have the cash to pay the taxes).

So basically, they would get riled up and resentful over the amount of taxes they thought they would have to pay if they flew to L.A., got on The Price Is Right, and won something of value. They were complaining about something that didn’t exist, a theoretical tax in a situation they were not going to face, ever.

The point is, a lot of the opposition to and anger about taxes strikes me as completely theoretical: it’s not derived from specific knowledge of tax codes or tax rates or how many services you got in return for the taxes you paid. It’s a more diffuse anger based on assumptions that the government is always out to over-tax you and that your life would be a lot better off if you could just reduce the tax burden and take the ski boat and bedroom set you just won on CBS home in peace, unmolested by the IRS.

Some have argued that the vitriolic nature of the opposition to health care reform among the political right comes not from a concern about money per se, but a concern that the money of good, hard-working, white Americans will be transferred to the not-so-good, lazy, non-white Americans. That is, that this is isn’t about money, it’s about color.

The fact that conservative anti-health care reform activists hurled the n-word at Black lawmakers on Saturday adds heft to that argument, as does the justification of the use of that word by Representative Devin Dunes (Republican – California) as understandable given Leftist “totalitarianism”:

Via Matthew Yglesias.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Boy, you can’t open the paper these days without seeing something about how irrevocably fucked California’s finances are. With a budget deficit approaching a staggering $40 billion dollars, it’s worth noting that not only is their deficit the biggest in the country in absolute terms but also as a proportion of state GDP. That’s pretty impressive given that California’s economy is bigger than all but a handful of countries.

In my line of work, “Raiding the UCs” is a very real phenomenon. Faculty have seen salaries slashed by 20% (with talk of more cuts to come) while students have experienced dramatic tuition hikes – although it’s fair to note that in-state tuition before the hikes was far lower than in most states. The recent cuts come on the tail end of a 15 year trend that has seen the university system’s share of the state budget halved. With too many obligations and not enough money, it would make sense that cuts to a vital sector like education would be indicative of cuts across the board.

Oh.

Lost in the budget debate is the fact that California spends nearly 10% of its annual budget on the Department of Corrections. Eight billion dollars. Let’s see that with the zeroes: $8,000,000,000. This is, of course, in addition to other money spent on law enforcement and the criminal justice system. Such figures look reasonable only in comparison to a trainwreck like Michigan, where a mind-blowing 22% of the state budget is spent on warehousing the poor in prisons.

We can re-hash all the usual, obvious, and valid culprits – “guideline” sentencing, mandatory minimums, three strikes, a vast social underclass deriving minimal benefit from the state’s aggregate wealth – but we’d say nothing new. The more important questions is how prison systems, and California’s in particular, can absorb the coming increase in crime concomitant with an extended period of double digit unemployment. At a time when every agency needs to get cheaper, the CDC must continue to get bigger (and inevitably costlier) to provide a convenient dumping ground for society’s expendables.

This problem is fascinating because like the Federal budget there is no reasonable move that doesn’t make the situation worse. California can start paroling more people. With no jobs available even for Californians with clean criminal backgrounds, we can imagine how few ex-inmates will find an “honest” living and how high the rate of recidivism will be. It can adopt different sentencing guidelines, which is politically unlikely and will provide only gradual long-term relief. They can simply stop arresting and/or charging so many people, but that too is politically infeasible and may ultimately lead to increased crime levels. They can, as publications as mainstream as Time have noted, formally surrender in the War on Drugs and legalize weed. I will believe that when I see it (although I don’t entirely discount it as the budget situation gets progressively more desperate). They could simply slash the budget, which may not be realistic given the high fixed costs of the system and the current levels of overcrowding/understaffing.

Spending twice as much on prisons as higher education should prompt some soul searching. I won’t hold my breath; in all likelihood the status quo will be maintained and the share of the budget devoted to corrections will continue to increase. Devoting one of every ten tax dollars to locking up the poor is understood as the cost of doing business in a state and society that choose to solve the problem of a persistent underclass the same way it deals with trash; that is, by collecting it in cities and shipping it out to the middle of nowhere to be buried under a mountain of other garbage, never to be seen or thought of again.

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Ed is a Political Scientist who claims to finds “the spatial and geographic context of political behavior — partisanship, turnout, and public opinion” — particularly thrilling.  You can learn more, vaguely inappropriate, things about Ed here.  In the meantime, we’re thrilled to feature his post questioning California’s questionable budget priorities. He blogs at Gin and Tacos.

If you would like to write a post for Sociological Images, please see our Guidelines for Guest Bloggers.