Tuesday's annual speech by the president to Congress and the nation offered a hopeful message about a mostly recovered economy along with a set of policy proposals aimed at strengthening low-income workers and the middle class:
Of course, nothing helps families make ends meet like higher wages. That's why this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work. Really. It's 2015. It's time. We still need to make sure employees get the overtime they've earned. And to everyone in this Congress who still refuses to raise the minimum wage, I say this: If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it. If not, vote to give millions of the hardest-working people in America a raise. These ideas won't make everybody rich, or relieve every hardship. That's not the job of government. To give working families a fair shot, we'll still need more employers to see beyond next quarter's earnings and recognize that investing in their workforce is in their company's long-term interest. We still need laws that strengthen rather than weaken unions, and give American workers a voice. But things like child care and sick leave and equal pay; things like lower mortgage premiums and a higher minimum wage -- these ideas will make a meaningful difference in the lives of millions of families.
You might also be interested in this very cool interactive looking at how certain words, such as labor, wages and wealthy, showed up in previous presidential addresses. The speech came amidst the kickoff to another annual event, the World Economic Forum, which is often lambasted for its champagne and caviar dreams quality that over shadows the weighty issues being discussed. Check out this cartoon from Patrick Chappette:
Once again the world's most wealthy and powerful listed growing inequality as one of the globe's biggest threats for 2015. The Guardian reports they also offered up 14 measures of inclusive growth intended to make work on lessening inequality more concrete:
The World Economic Forum has urged governments to measure minimum wages, trade union membership, investment in public services and corruption as part of an action plan for tackling rising inequality... “Since the onset of the financial crisis, the question of how to unlock new sources of productive employment and strengthen the contribution of economic growth to progress in broad living standards has become an increasingly important concern for political and business leaders in developed and developing countries alike. These challenges have been at the top of the World Economic Forum Global Risks Report survey in recent years”, the paper said. “But while there is widespread international consensus on the need to develop new and improved growth and development models in this respect, little in the way of concrete policy guidance has emerged. There is a growing need for analytical frameworks and evidence-based solutions suited to this purpose.”
Oxfam is calling on governments to adopt a seven-point plan to tackle inequality, including a clampdown on tax evasion by companies and the move towards a living wage for all workers... There are all sorts of reasons why such increases in inequality are troubling, and not just for those at the bottom of the income and wealth pyramid. One is that aspirational people on lower incomes have massive incentives to take on too-great debts to support their living standards - which exacerbates the propensity of the economy to swing from boom to financial-crisis bust. Another is that the poor in aggregate spend more than the rich (there are only so many motor cars and yachts a billionaire can own, so much of the super-rich's wealth sits idle. as it were), and therefore growth tends to be faster when income is more evenly distributed.
Meanwhile the New York Times' Thomas Edsall discusses the rise of the idea of "inclusive capitalism" among progressive Democratic policymakers:
The concept of inclusive capitalism has expanded over the past 13 years to apply to those at the bottom and middle of the ladder in developed nations, including the United States. The fundamental “inclusive capitalism” argument is that business enterprises lose profit-making opportunities when consumers have little money to spend. Inadequate purchasing power among the many threatens corporations and poses a direct danger to the top 1 percent, and, indeed, to capitalism itself... If policies grounded in “inclusive capitalism” become central to the party platform, it will mark the party’s strongest commitment to the economic interests of working- and middle-class Americans since Franklin Roosevelt’s New Deal. The new agenda stands apart from Lyndon Johnson’s War on Poverty, which was focused primarily on the “Other America” of the very poor.
Hey, sort of good news, economic mobility will likely be a topic for both parties in the 2016 presidential election, reports the Washington Post. This November article form the Economist looks at who is really getting ahead in the United States. You also might find this Morgan Stanley report on inequality and consumption interesting. The reports' authors offered up this interesting piece of analysis on why things went badly so quickly, saying, "What the financial crisis did was lay bare the ugliness of a growing income gap by removing the layer of debt accumulation that had been masking its presence." Check out these charts, showing some of report's analysis:
Bill Moyers and TalkPoverty have teamed up to deliver 12 posts on ways to tackle poverty, some ideas include the media telling more stories, free higher education, protecting and expanding the rights of workers to bargain, and increasing the minimum wage. In the Stanford Social Innovation review, Elisabeth Babcock of Crittenton Women's Union looks at what brain science says about poor people and what might be holding them back:
Brain science also shows that stress hijacks our good intentions and increases the likelihood that we will be swept away by our impulses. Even if we manage to develop a good plan, we will find it harder to stick to it if we are under stress or if we have experienced significant stress during childhood. In sum, getting out of poverty requires people in low-income families to manage very complicated lives, to optimize decision-making, and to persevere in the face of huge odds. Yet recent advances in brain science show that poverty also creates crippling stresses that significantly hamper people’s ability to develop and sustain EF skills. So how can organizations that work with low-income families resolve this vicious Catch-22?... Findings from brain science show us that the stresses of poverty can compromise people’s decision-making skills in ways that virtually assure that the odds will be stacked against their efforts to gain upward mobility. Yet those same findings suggest that even in adulthood people can benefit from coaching and other services that improve EF skills. It’s better living through science—and, in our experience, it works.
This post in NextCity discusses free tax prep services and small dollar lending by nonprofits intended to help low-income workers navigate through the complex process including getting an earned income tax credit. You may also be interested in this interactive from Brookings, looking at ETIC claims by county. Over at Think Progress, Bryce Covert looks at new research showing how the fast food industry, still beleaguered by protests, could raise wages without cutting jobs:
Economists Robert Pollin and Jeannette Wicks-Lim of the University of Massachusetts-Amherst looked at a scenario in which the federal minimum wage gets increased to $10.50 in one year and to $15 three years after that, which in the end would mean a 107 percent increase over the current minimum wage of $7.25 an hour. They found that instead of having to cut jobs, fast food restaurants could cover the cost of the increase with savings from reducing turnover, higher prices, and greater economic growth. To come to that conclusion, they estimate what it would cost these companies to increase not just wages for those at the bottom of their scales to $15 an hour, but also to slightly boost the workers above them to maintain current hierarchies.
Meanwhile, the Economic Policy Institute's Josh Bivens argues that despite what the president may have said in his speech, we cannot boost wages and take on new trade agreements:
The steady integration of the United States and generally much-poorer global economy over the past generation is a non-trivial reason why wages for the vast majority of American workers have become de-linked from overall economic growth. This is not a novel economic theory—the most staid textbook models argue precisely that for a country like the United States, expanded trade should be expected to (yes) lift overall national incomes, but should redistribute so much from labor to capital owners, so that wages actually fall. So, it can boost national income even while leaving the incomes of most people in the nation lower than otherwise... To be clear, there are plenty of things keeping wages down for most American workers (though the most commonly cited suspect—technological change—is actually pretty innocent), and expanded trade does not explain the majority of the wage/productivity schism. But it pushes in the wrong direction, and its weight is non-trivial.
The Center for Economic and Policy Research's Dean Baker argues in Fortune that expanding paid sick leave would open up the way for more worker participation:
There is another aspect to paid sick days or any paid time off that is generally overlooked. With unemployment still holding back the economy (or “secular stagnation” to use the now fashionable term), reducing the average hours of those with jobs can increase the number of jobs. To take some simple arithmetic, if paid sick days or other forms of leave reduced average hours by 2%, this should open the door for 2%, or 2.8 million, more workers to be hired. In reality, the relationship will never be this simple, but the basic point holds. Germany has full employment not because its economy grew more than America’s, but partly because its workers put in 20% fewer hours.
In the NYT, Charles Blow looks at why it is expensive to be poor.
In this New York Times video documentary, a Kenyan activist talks with U.S. college students about why they should volunteer at home rather than going abroad. He argues "Africa doesn't need a savior, America needs a savior,":
As Americans, we’re inundated with images of hungry African children, but what about the plight of children in this country? Our child poverty rate is at its highest level in 20 years, with nearly one in four children living in homes without enough food. Among our homeless population, there are nearly 2.5 million children. Mr. Mwangi points particularly to the racial inequality in this country, highlighting the staggering rate of incarceration for African-American men, which is nearly six times the rate for white men.
Do impact investors expect too much? In the Stanford Social Innovation Review, Mal Warwick, Paul DiLeo, and Paul Polak had this to say:
In reality, we tend to sell investors short in terms of their requirements and motivations. There are plenty of upper- and middle-class consumers globally who will drive the extra miles and pay the higher price to buy premium, organic ice cream made with locally sourced milk free of growth hormones, or accessorize and decorate with handicrafts made by Indian dalits or African women’s cooperatives. But we assume that this impulse is entirely absent when it comes to the investment portfolios of these same consumers. While many of the same people are prepared to sacrifice some basis points of return on their savings or retirement accounts, if the sacrifice translates into impact on poor people, investment professionals take for granted that only competitive or superior returns will do for their investments. The common good becomes risk reduction; concern for the planet becomes brand equity. Unlike consumers’ motivation, the motivation for investors reduces to a single value: maximizing financial returns... Can investors extract extraordinary returns from the poor? Of course...Still, far too many impact investors are confused about the meaning of profit in a social enterprise. In addition to the financial return on investment, an impact investor must consider above all the mission that drives the enterprise—and the company’s success in fulfilling it.
In the Guardian Liza Ramrayka looks at future philanthropists:
A CAF report published earlier this month found that four out of five wealthy donors under 40 hold socially-conscious investments, including some that will not necessarily offer a financial return. The findings in Philanthropy: a gift or investment? mirror the growing trend for big donors to move away from the usual beneficiaries and traditional methods of giving, to identifying and nurturing “disruptive” interventions to complex problems... This process of identifying creative projects and solutions is often seen in giving circles, formed by individual donors with common interests. Members pool monetary contributions and decide as a group how to distribute funds. Usually they have close contact with the charity or organisation and often will find, or back, a project that a traditional funder would not.