Let's start with a cartoon:
Did you know the U.S. middle class had a secret shame? In the Atlantic, Neal Graber discusses his experience of being unable to scrape up money in even a small life emergency without having to borrow and says this is the plight of many Americans:
I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5—literally—while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil...
Two reports published last year by the Pew Charitable Trusts found, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses. A similar study conducted by Annamaria Lusardi of George Washington University, Peter Tufano of Oxford, and Daniel Schneider, then of Princeton, asked individuals whether they could “come up with” $2,000 within 30 days for an unanticipated expense. They found that slightly more than one-quarter could not, and another 19 percent could do so only if they pawned possessions or took out payday loans. The conclusion: Nearly half of American adults are “financially fragile” and “living very close to the financial edge.”
In Esquire Magazine, we have this collection of four mini-profiles of men in different income brackets describing their wealth or lack of and what they would need to feel secure. In the New Yorker, Jelani Cobb says this election cycle finds both voters and candidates really out of practice in discussing class issues:
For decades, both American culture and American politics have elided the differences between salaried workers and those who are paid hourly, between college-educated professionals and those whose purchasing power is connected to membership in a labor union. Some ninety per cent of Americans, including most millionaires, routinely identify as middle class. For many years, this glossing over of the distinctions between the classes served a broad set of interests, particularly during the Cold War, when any reference to class carried a whiff of socialist sympathies. Americans considered themselves part of a larger whole, and social animosities were mostly siphoned off in the direction of racial resentment. But, this year, Americans are once again debating class.
Meanwhile Foreign Affairs has two recent issues dealing with the global economic plight of regular people. In the February issue, Ronald Inglehart argues that despite the current focus on high inequality, equality is likely to make a comeback:
Today the conflict is no longer between the working class and the middle class; it is between a tiny elite and the great majority of citizens. This means that the crucial questions for future politics in the developed world will be how and when that majority develops a sense of common interest. The more current trends continue, the more pressure will build up to tackle inequality once again. The signs of such a stirring are already visible, and in time, the practical consequences will be as well...Social forces and ideas can drive political actions that reshape the economic landscape. Will that happen once again, with popular majorities mobilizing to reverse the trend toward economic inequality? In the long run, probably: publics around the world increasingly favor reducing inequality, and the societies that survive are the ones that successfully adapt to changing conditions and pressures.
We must find a pathway out of poverty for low-income Americans and restore economic security to the working class. That begins by investing in infrastructure, investing in education, and investing in wage growth to increase opportunity for all.
You may also be interested in how the government is using drug-trafficking laws to seize the legally-obtained, hard earned cash of the poor without much due-process. And in the New York Times, White House adviser Jason Furman and former Congressional Budget Office Director Douglas Holtz-Eakin look at why mass incarceration has considerable economic costs:
Time in prison not only means a loss of freedom, but it also means a loss of earnings, risks to the health and safety of the incarcerated, and prolonged absences from family that can strain marriages and increase behavioral problems in children. The probability that a family is in poverty increases by nearly 40 percent while a father is incarcerated.
Economic hardship often continues after release: A criminal record creates substantial obstacles to employment that could increase with the amount of time served, and incarceration decreases earnings by 10 to 40 percent, compared with similar workers.
Now for a few goodies from the New York Times: Billionaire advocate Nick Hanauer teamed up with former Labor Secretary Robert Reich to call for expanded overtime rules for salaried employees:
Today, if you’re salaried and earn more than $23,600 dollars a year, you don’t automatically qualify for overtime: That means every extra hour you work, you work free. Under the new proposed rules, everyone earning a salary of $50,440 a year or less would be eligible to collect time-and-a-half pay for every hour worked over 40 hours a week...
In a cruel twist, the longer and harder we work for the same wage, the fewer jobs there are for others, the higher unemployment goes and the more we weaken our own bargaining power. That helps explain why over the last 30 years, corporate profits have doubled from about 6 percent of gross domestic product to about 12 percent, while wages have fallen by almost exactly the same amount. The erosion of overtime and other labor protections is one of the main factors leading to worsening inequality. But a higher threshold would help reverse this trend.
Let's have a cartoon from Ben Sargent from the Austin Statesman American:
In assessing the reason why Verizon workers have gone on strike, Paul Krugman says we are not just living in a "new gilded age" but also a new age of robber barons with significant and growing monopolies:
In recent years many economists, including people like Larry Summers and yours truly, have come to the conclusion that growing monopoly power is a big problem for the U.S. economy — and not just because it raises profits at the expense of wages. Verizon-type stories, in which lack of competition reduces the incentive to invest, may contribute to persistent economic weakness.
The argument begins with a seeming paradox about overall corporate behavior. You see, profits are at near-record highs, thanks to a substantial decline in the percentage of G.D.P. going to workers. You might think that these high profits imply high rates of return to investment. But corporations themselves clearly don’t see it that way: their investment in plant, equipment, and technology (as opposed to mergers and acquisitions) hasn’t taken off, even though they can raise money, whether by issuing bonds or by selling stocks, more cheaply than ever before.
And finally Michael Riordan argues we should have "serious penalties for corporations that export well-paid jobs, particularly those that have been major beneficiaries of hundreds of billions of dollars in research and development spending by the federal government, which helped create many high-tech products and industries and the jobs that came with them."
In Quartz, Allison Schrager argues that a higher minimum wage has to come from somebody's pocket and asks who will pay:
This is the wrong way to solve the problem. It’s not just that a wage increase that large risks job losses, but if the goal is a fairer distribution of income between rich and poor, then the minimum wage is a lousy way to achieve it...
Sadly, the money to pay low-wage workers more has to come from somewhere. It can either come from the savings that result from cutting jobs or hours, from dipping into profits, or by raising prices. Even pro-minimum wage economists worry that $15-per-hour goes too far and risks job losses.
Over at Fact Company, Adele Peters discusses a new report finding that a year of a higher minimum wage in Seattle has not affected retail prices but it may be due to location:
"Seattle's a pretty affluent town," he says. "San Francisco's a pretty affluent town. New York City is an affluent town. In these sorts of places, you're dealing with a lot of consumers who are already used to the idea that they're going to pay a premium for their Fair Trade coffee, and they're going to shop at the farmers market so that their dollars go directly to the person who grows the food ... For that type of consumer, paying the workers fairly can actually be a selling point."
In other areas, such as California's Central Valley or upstate New York, he says the impacts of new minimum wage laws might be more strongly felt. New York and California both recently passed laws that will slowly ramp up minimum wages to $15 an hour.
The Skoll World Forum on Social Entrepreneurship took place last week, here is a video of highlights from the conference. In this Skoll discussion, Capricorn Investment Group's Ion Yadigaroglu and Alan Chang went head to head with One Acre Fund's Andrew Youn and Root Capital's Willy Foote on whether a for-profit or nonprofit provides better social return on investment (your editor thinks this is a silly argument):
Initial rounds of the debate saw the two teams trading blows about the scale of their impact. Foote gave the example of a cashew nut company in northern Togo that was struggling to honour a contract without investment. Root Capital stepped in and revenue has now increased four fold with employment rising from 100 to 900 people. “This is about a non profit working at the financial frontier where capital is scarce and impact is abundant,” said Foote.
Responding, Yadiagaroglu gave an example of one of Capricorn’s investments in the Kilombero Valley in Tanzania, which he described as “an extremely poor area that has never seen a penny of investment: 9 hours, 450km from Dar es Salaam, via mainly dirt roads”. Capricorn established a central farm that served as repository for equipment and expertise. “We are now addressing 10 villages in a 65km radius, we’ve trained 7400 smallholder farmers… we have seen a tripling of smallholder yield,” Yadiagaroglu concluded.
You might also be interested in this TED talk on becoming "global citizens" and why the world's future might depend on it:
So um in the latest complaint about the wealthy of Silicon Valley we have this entrant in the Guardian from Nellie Bowles who says our tech titans are wielding great power in DC:
The late 19th century was a period known as “the Gilded Age” in America. As the railroads, mining industries and factories boomed, millions of workers were inspired to migrate from Europe, yet the wealth became concentrated among a small set of industrialists such as Andrew Carnegie, a steel magnate, and the oil baron John D Rockefeller. These men wielded massive power through business, political efforts and philanthropy.
Yet even Carnegie, whose ruthlessness earned him a reputation as a “robber baron”, would have been amazed by the power the heads of technology firms wield today, according to the Carnegie biographer David Nasaw.
“Carnegie could never have imagined the kind of power Zuckerberg has,” said Nasaw, a history professor at City University of New York. “Politics today is less relevant than it has ever been in our entire history. These CEOs are more powerful than they’ve ever been. The driving force of social change today is no longer government at all.”
In Alliance Magazine, Timothy Ogden argues philanthropists should consider migration as a tool in the poverty fighting arsenal:
For some reason, the idea of allowing people to escape from poverty by moving, particularly if that means moving across national borders, seems to make us afraid.
It is true that migration has sometimes destroyed nations and cultures. But the cases where it has happened have something in common: they are migrations where relatively wealthy people invaded the territory of poorer ones (see colonialism). I can find no examples of migrants from poor countries harming the long-term wellbeing of richer countries since the fall of Rome...
Your editor is saddened by the death of pop icon Prince who according to Van Jones donated significant amounts anonymously.