Poverty, the Middle and the Data Cloud
In the Financial Times, Shawn Donnan and Sam Fleming look at what they call the middle class meltdown:
One in five US adults now lives in households either in poverty or on the cusp of poverty, with almost 5.7m having joined the country’s lowest income ranks since the global financial crisis.
Many of the new poor, or near-poor, have become so even amid an economic recovery that is widely expected to lead the US Federal Reserve to raise interest rates next week for the first time in almost a decade. More than 45 per cent of them — almost 2.5m adults — have joined the lowest income ranks since 2011, long after the post-crisis recession was ostensibly over...
[New findings from Pew] illustrate how many Americans are being left behind even amid the strong jobs growth that, should the Fed move as expected, will be at the core of the argument its policymakers present for raising rates. They also help explain why any notion of a recovery still seems a long way off to many in the US and why the message of populist politicians such as Donald Trump that America is not working resonate on the eve of an election year.
“There’s a new American dream,” says Torrey Easler, a Baptist preacher who helps feed a growing population of poor in the town of Eden, North Carolina. “The old American dream was to own a home and two cars. The new American dream is to have a job.”
But over at the Week, the American Enterprise Institute's James Pethokoukis argues things aren't as bad as they seem for the middle class:
A recent survey of top economists found 70 percent agreed that Census data "substantially understate" middle-class progress. Indeed, Brookings scholar Gary Burtless doubts the median household is worse off since 2000, another claim Pew makes, although gains have slowed.
That's a key point. Inequality between 1 percent and 99 percent is actually lower today than it was was in 2000, with ups and downs in between. More dramatic is the downshift in economic growth. The U.S. economy has expanded only half as fast in the 15 years since 2000 as in the 15 years before that. Wage growth during this recovery is only half as fast as during the 1990s. And more than six years into the expansion, nearly two-thirds of Americans think the nation is on the wrong track. Those are recession numbers; by comparison, the average household doesn't seem so badly off.
Now, none of this is to downplay the particular economic strain on lower-income Americans, especially those without a college degree. There is evidence that real wages for male workers without college degrees have been stagnant or falling for decades.
Imagine you had the skills to garner free trips for job interviews and six-figure salary offers. Now imagine a system so punitive in its design, you could not take advantage of that and had to live in a homeless shelter. The Seattle Times profiles, James Simmons exonerated of a crime he had been convicted by testimony of what seems to be a dishonest cop--his name is clear legally but not in cyberspace:
He is listed on the National Registry of Exonerations as being wrongly convicted. But he says that hasn’t stopped multiple companies from backing away from hiring him once he gets to the background check stage.
“I’ve got a DOC (Department of Corrections) number that follows me around, because I did spend a year in prison,” Simmons says. “Officially I’ve been cleared. But effectively it’s like they gave me a life sentence.”
We also have this story from Al Jazeera of 69-year-old Otis Johnson, recently released from prison after 44 years for attempted murder of a cop but was forced at the end to serve an additional 8 months for a shoplifting charge at 17 (can we say statute of limitation anyone):
Johnson represents a very small set of people in the United States. In 2013, approximately 3,900 inmates were released from US prisons after serving at least 20 years, according to the Bureau of Justice Statistics. That is less than 0.7% of all state prisoners released that year...
[F]ormer prisoners like Johnson, who was released after decades of isolation, encounter obstacles that transcend those the current, younger, wave of ex-convicts face. Their needs are drastically different. Mental health issues, coping strategies and other side effects of long-term imprisonment come into play.
Whether the endowment’s move to divest from "companies that derive significant annual revenue" from private prison services will spur other foundations to follow its lead is hard to say. Activists have sought to draw attention to the disconnect between the causes some foundations support through their grantmaking and the investments they hold — with mixed results.
Here is interesting food for thought on inequality and computer algorithms highlighted in a recent Ford Foundation post:
It seems like everyone is talking about the power of big data and how it is helping companies, governments, and organizations make better and more efficient decisions. But rarely do they mention that big data can actually perpetuate and exacerbate existing systems of racism, discrimination, and inequality...
The problem with big data is that its application and use is not impartial or unbiased. Harvard professor Latanya Sweeney, who also directs the university’s Data Privacy Lab, conducted a cross-country study of 120,000 Internet search ads and found repeated incidence of racial bias. Specifically, her study looked at Google adword buys made by companies that provide criminal background checks. At the time, the results of the study showed that when a search was performed on a name that was “racially associated” with the black community, the results were much more likely to be accompanied by an ad suggesting that the person had a criminal record—regardless of whether or not they did (see video below). This is just one of many research studies showing similar bias.
If an employer searched the name of a prospective hire, only to be confronted with ads suggesting that the person had a prior arrest, you can imagine how that could affect the applicant’s career prospects.
In the Guardian, Steven Thrasher argues inequality is by design, rather than by accident:
The economic hoarding by those at the top has been termed “income inequality”, but that’s neither a strong nor accurate enough phrasing. I have never heard poor people complain about “income inequality”; poor people complain about being screwed out of housing , or about working more hours for less pay or about having to choose between medicine and food.
“Inequality” sounds like something that happens by accident and can be remedied by fiddling around the edges. It is not as if the rich are a little more equal and the poor a little less equal, and if we shift a bit we’ll all come out in the middle. What we’ve been calling “income inequality” might be better understood as a war waged by US political and economic policy on the poor...
Too often, the answer by those who have hoarded everything is they will choose to “give back” in a manner of their choosing – just look at Mark Zuckerberg and his much-derided plan to “give away” 99% of his Facebook stock. He is unlikely to help change inequality or poverty any more than “giving away” of $100mhelped children in Newark schools.
Allowing any of the 100 richest Americans to choose how they fix “income inequality” will not make the country more equal or even guarantee more access to life. You can’t take down the master’s house with the master’s tools, even when you’re the master; but more to the point, who would tear down his own house to distribute the bricks among so very many others?
Also in the Guardian, Joane Barkan discusses further on the Mark Zuckerberg giveaway of $45 billion in Facebook stock and what is means in terms of democracy:
Chan and Zuckerberg seem to prefer dissolving the already porous barrier between charitable activities and the market. The model fits not only Zuckerberg’s business experience, but also his growing up in an age that celebrates the free market in all domains. The model fits not only Zuckerberg’s business experience, but also his growing up in an age that celebrates the free market in all domains.
For anyone worried about growing plutocracy in the US, the Chan Zuckerberg Initiative has one positive feature: it will pay taxes – unless accountants discover new loopholes for this hybrid entity...
There’s a strong argument to be made that the private tax-exempt foundation doesn’t fit well in a functioning democracy. As the eminent US jurist Richard Posner wrote: “A perpetual charitable foundation, however, is a completely irresponsible institution, answerable to nobody. It competes neither in capital markets nor in product markets … and, unlike a hereditary monarch whom such a foundation otherwise resembles, it is subject to no political controls either.”
Although the Chan Zuckerberg Initiative isn’t a foundation and will pay taxes, nothing about their project changes the fundamental contradiction of mega philanthropy: the wealthy have the power to impose their personal visions of the common good on everyone else while calling it charity.
And now for a cartoon featuring the Simpson's Mr. Burns:
Does inequality kill? Nobel Prize winning economist Joseph Stiglitz has a new op-ed discussing the work of Angus Deaton, a soon to be prize winner for analysis of poverty, consumption and welfare with Anne Case:
Analyzing a vast amount of data about health and deaths among Americans, Case and Deaton showed declining life expectancy and health for middle-aged white Americans, especially those with a high school education or less. Among the causes were suicide, drugs, and alcoholism.
America prides itself on being one of the world’s most prosperous countries, and can boast that in every recent year except one (2009) per capita GDP has increased. And a sign of prosperity is supposed to be good health and longevity. But, while the US spends more money per capita on medical care than almost any other country (and more as a percentage of GDP), it is far from topping the world in life expectancy. France, for example, spends less than 12% of its GDP on medical care, compared to 17% in the US. Yet Americans can expect to live three full years less than the French.
For years, many Americans explained away this gap. The US is a more heterogeneous society, they argued, and the gap supposedly reflected the huge difference in average life expectancy between African Americans and white Americans.
The Case-Deaton results show that such theories will no longer do. America is becoming a more divided society – divided not only between whites and African Americans, but also between the 1% and the rest, and between the highly educated and the less educated, regardless of race. And the gap can now be measured not just in wages, but also in early deaths. White Americans, too, are dying earlier as their incomes decline.
Is Fidelity's nondisclosure of CEO pay for its donor advising arm an issue? Check out this piece from Alan Cantor in the Chronicle of Philanthropy that argues it is a huge IRS flaw:
When I recently approached Fidelity Charitable’s spokesman about the salary information, she said that the organization was disclosing all that was required by law.
My interpretation of this tortured, legalistic, and arrogant approach to public disclosure is that it reflects the underlying Fidelity corporate culture.
Because Fidelity Investments (unlike most other corporations affiliated with major commercial donor-advised fund sponsors) is privately held, its leaders perhaps are not accustomed to — nor tolerant of — the kinds of questions about its operations that a publicly-traded company would routinely receive. And yes, clearly, the corporate culture of Fidelity Investments extends to Fidelity Charitable, because for all intents and purposes, they are the same organization. (For further evidence, I’ve seen job searches for Fidelity Charitable have been conducted by Fidelity Investments.)
If Fidelity Charitable so stubbornly refuses to release information that virtually all other charitable organizations routinely make available, why should we trust anything Fidelity does choose to say?
In the New York Times, Neil Irwin discusses Shake Shack's wages and what it has to do with coming interest rate hikes by the Fed:
[T]he latest forecasts from Shake Shack and several other restaurant chains suggest that a mainstay of economic thought — that higher wages for workers will quickly translate into higher prices for consumers — may not apply as strongly as traditional economic theory suggests.
Chain restaurants present a particularly useful window into the ways that an improving economy is, or isn’t, transforming into broad-based price inflation. And inflation is the core issue facing the Fed as it considers a rate increase to prevent the economy from overheating.Why restaurants? Labor costs represent a larger portion of their total costs than in many other types of companies, and so any wage increases are more likely to flow through to higher prices for consumers. That sensitivity — combined with the ubiquity of the sector — makes it an interesting bellwether for the economy. And conveniently, because worker compensation and pricing are such crucial components of the companies’ financial performance, restaurant chain executives often talk about what they are seeing in conference calls with investors.