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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.

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