Is Mitt Romney right about a 'good jobs' dearth in US? (+video)
Under fire for writing off 47 percent of Americans as government dependents who will never vote for him, Mitt Romney clarifies that what he wants is for more people to have jobs good enough that they do pay taxes. Many agree about slippage in 'good jobs.'
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The US economy has become much more productive since 1979, measured by what a worker can produce in a typical hour of work. Yet the share of jobs earning $37,000, or about $18.50 per hour, has risen only modestly since then, from about 41 percent in 1979 to 47 percent today. Declines in health insurance and retirement benefits over that time, meanwhile, account for the overall slippage in "good jobs."Skip to next paragraph
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For his part, Romney has set a target of seeing the US create 12 million new jobs in four years.
Some forecasters don't believe 3 million new jobs a year will be a big stretch, whether the president is Obama or Romney. But achieving that goal would require a significant pickup from the recent pace. US employers have added 1.8 million new jobs in the past year.
Say that goal is achieved during the next presidential term. What would it do to the number of Americans owing income taxes – and to the poverty rate?
A solid economic recovery would make a difference on these fronts. Exhibit A is a number that Romney himself cited: When he said that 47 percent pay no federal income taxes, that appeared to be a reference to a study by the Tax Policy Center, finding that 46 percent of Americans paid no income tax in 2011. But before the recession, when the job market was stronger, that share was more like 40 percent.
According to data gathered by the nonpartisan Tax Policy Center for the 2009 tax year, some 25 percent of single people with income between $10,000 and $20,000 owed some federal income tax. The share of people owing the tax rose steadily with income. Nearly two-thirds of singles with income of $20,000 to $30,000 owed some tax.
So even the creation of relatively low-paying jobs can result in many more people paying federal income taxes.
Ditto for reducing poverty. Even a low-wage job could lift a single person above the poverty threshold ($11,484 as of 2011). Only about 4.2 percent of people who were usually employed full time in 2010 were classified as "working poor," the Labor Department says. But for people who had only part-time work, 15 percent were classified as working poor.
If 12 million jobs were created, it's hard to know how many of them would go to people now in poverty. But history suggests that the poverty rate can decline significantly during recoveries from deep economic slumps. One example: After peaking at 15.2 percent in 1983, the poverty rate declined to 13.4 percent four years later. A similar decline today might reduce the number of Americans in poverty by 3 million people.
One final thought: Lots of people who don't pay taxes now still wouldn't owe taxes even if the job market fully heals.
An April report by the Brookings Institution's Hamilton Project notes that "many households with no tax liability are young or old, meaning that they are likely to be led by students who subsequently will pay taxes or retirees who paid taxes over their lifetimes."
The study found that for working-age Americans, the share who pays no federal income tax ranges from about 20 percent (for the early-50s age group) to about 35 percent (for people in their early 30s). This tally used numbers from a 2008 government survey.
Moreover, millions of Americans pay other taxes (payroll taxes or state taxes, for instance) even if they owe no federal income tax.