Lost in the Middle
Let's start with a cartoon from Mike Keefe:
Last week, we had a piece by Neal Gabler on "the secret shame of the middle class", which was likened to a financial impotence on making ends meet and staving off emergencies. Also in the Atlantic, Gillian B. White discusses why even though financial insecurity is wide spread, it is felt more acutely by Blacks and Hispanics:
In Gabler’s piece for instance, he notes that his financial predicament left him unable to pay for his children’s college education. So he turned to his own parents, who were able to provide the money for elite educations (at the cost of his own inheritance). It’s pretty unlikely [that] blacks or Hispanics would have access to these financial resources at all, from parents or grandparents. What’s more, windfalls like an inheritance come with tax advantages that a bonus from work or sudden jump in income don’t. It’s not just that white Americans tend to earn more, it’s that they hold more wealth: Less debt, more home equity, more stocks and bonds, more flush retirement accounts. These economic advantages accrue over time and then get passed down to the next generation, who in turn, are able to start their adult lives with a financial cushion, which can help them weather schools debt, unemployment, high rental prices, down payments, and emergencies of all varieties without doing the financially ruinous things that their peers without that backing may have to do.
In the New York Times Magazine, we have a pair of pieces dealing with work and middle class woes. First, a look at why declining government jobs hurt middle class fortunes, particularly those of minorities:
The public sector has long been home to the sorts of jobs that lift people into the middle class and keep them there. These are jobs that have predictable hours, stable pay and protection from arbitrary layoffs, particularly for those without college or graduate degrees. They’re also more likely to be unionized; less than 7 percent of private-sector workers are represented by a union, while more than a third of those in the public sector are. In other words, they look like the blue-collar jobs our middle class was built on during the postwar years...Declining tax revenue led to tightened state budgets, which led to tens of thousands of layoffs for public-sector employees. And during the recovery, public workers became easy political targets precisely because of their labor protections. Collective-bargaining rights, pension funds and mandatory raises look like unnecessary drains on state coffers to a work force increasingly unfamiliar with such benefits. And when the layoffs came, black Americans experienced a disproportionate share of the ill effects.
Next we have a story about how the middle class debate is playing out in this year's presidential election:
America’s self-image as a middle-class nation is so deeply ingrained in the country’s politics that we don’t often stop to think what, precisely, that means: whether it defines a concrete socioeconomic identity — a country where most people are neither very rich nor very poor — or an aspiration, the notion that if you “work hard and play by the rules,” as Clinton put it the first time she ran for president, you’re entitled to at least a modest prosperity. “Everyday Americans” was an attempt to acknowledge that the gap between these two ideas has widened to the point that ignoring it seems out of touch. Yet in its reversal, the campaign inadvertently revealed just how ill equipped American politics is for a post-middle-class nation — how deeply the way the country speaks of itself is tied up with these aspirations, even as more and more of its citizens come to see them as out of reach...
Richard V. Reeves, a scholar at the Brookings Institution, argues that the most significant dividing line in recent American experience isn’t between the 99 percent and the 1 percent, but between the 80 percent and the 20 percent — a group that includes not just the very rich but also people most Americans would identify as upper middle class. This is where you draw the line if you’re interested not in absolute wealth but in the trajectory of wealth — not whether you have a yacht docked in St. Bart’s, but whether you’re doing better than you were five years ago.
And just how does this upper 20 percent live? The NYT's Thomas Edsall takes a look at research on economic segregation and what it means for U.S. politics:
In hard numbers, the percentage of families with children living in very affluent neighborhoods more than doubled between 1970 and 2012, from 6.6 percent to 15.7 percent. At the same time, the percentage of families with children living in traditional middle class neighborhoods with median incomes between 80 and 125 percent of the surrounding metropolitan area fell from 64.7 percent in 1970 to 40.5 percent...
Democrats are now competitive among the top 20 percent. This has changed the economic makeup of the Democratic Party and is certain to intensify tensions between the traditional downscale wing and the emergent upscale wing.
The Republican Party in 2016 is an example of what can happen when the dominant wing fails to address the concerns of the majority.
The economic uncertainty surrounding basic income is huge, and the politics of bringing such a program about on a large scale are daunting. But something makes this radical proposal so exciting that people and governments are increasingly willing to try it. Basic income challenges our notions of the social safety net, the relationship between work and income, and how to adapt to technological change. That makes it one of the most audacious social policy experiments in modern history. It could fail disastrously, or it could change everything for the better...
Both lovers and haters of basic income often miss an important point: We don’t have great data on how it would work or what would happen if it did. Similar policies were tested in both Canada and the U.S. in the 1960s and ’70s, but studies of their effects were either flawed or abandoned. “To be honest, a full long-term universal basic income has never been tried, let alone rigorously evaluated,” said Michael Faye, the co-founder and executive chairman of Give Directly, a nonprofit that has pioneered direct cash transfers to the extreme poor, primarily in Kenya and Uganda.
In Tech Insider, Rutger Bregman looks at how proceeds of a massive casino in Cherokee territory is modeling a sort of universal basic income practice, and what the research found:
From $500 a year at the outset, their earnings from the casino quickly mounted to $6,000 in 2001, constituting a quarter to a third of the average family income...Ten years after the casino’s arrival, Costello’s findings showed that the younger the age at which children escaped poverty, the better their teenage mental health. Among her youngest age cohort, Costello observed a “dramatic decrease” in criminal conduct. In fact, the Cherokee children in her study were now better behaved than the control group.
You might be interested to read this Huffington Post piece on the Democratic governor of Minnesota who taxed the rich and raised the minimum wage, and may have gotten away with greater state prosperity for his trouble:
During his first four years in office, Gov. Dayton raised the state income tax from 7.85 to 9.85 percent on individuals earning over $150,000, and on couples earning over $250,000 when filing jointly — a tax increase of $2.1 billion. He’s also agreed to raise Minnesota’s minimum wage to $9.50 an hour by 2018, and passed a state law guaranteeing equal pay for women...By late 2013, Minnesota’s private sector job growth exceeded pre-recession levels, and the state’s economy was the fifth fastest-growing in the United States. Forbes even ranked Minnesota the ninth best state for business (Scott Walker’s “Open For Business” Wisconsin came in at a distant #32 on the same list). Despite the fearmongering over businesses fleeing from Dayton’s tax cuts, 6,230 more Minnesotans filed in the top income tax bracket in 2013, just one year after Dayton’s tax increases went through. As of January 2015, Minnesota has a $1 billion budget surplus, and Gov. Dayton has pledged to reinvest more than one third of that money into public schools.
You might also be interested in this announcement by Chobani yogurt CEO, who plans to give 10 percent of the company to employees if the company goes public or is sold. The Economist, meanwhile, looks the trend of blending private, government and charitable dollars to get projects done:
Private investors do not typically fund the construction of rural roads in Africa, say, or vaccination drives in villages, even though the returns on such investments are often enormous. That is because the returns are either hard to monetise, or the risks are too great for the private sector to tolerate. The point of blended finance is to use public or charitable funds to remedy those problems, allowing private money to flow to places and projects it would usually shun. According to a WEF survey of 74 blended-finance vehicles, this “honey trap” is working: every dollar of public money invested typically attracts a further $1-20 in private investment.
Let's have a cartoon:
From coach seats with slightly more leg room to a cruise within a cruise, the New York Times looks at the explosion of tier pricing amenities and why it might be creating "a velvet rope economy":
In many ways, the rise of the velvet rope reverses the great democratization of travel and leisure, and other elements of American life, in the post-World War II era. As the Jet Set gave way to budget airlines, in places like airports and theme parks even the wealthiest often rubbed shoulders with hoi polloi. These days, whether the provider is a private company or a public agency, special treatment for the very rich isn’t personal, it’s business. Late last year, public officials in Los Angeles agreed to lease a separate facility at LAX to a private firm that would serve celebrities or anyone else willing to pay $1,800 to skip the traffic jams and lines at the main terminals.
In the Boston Review, we have this fascinating piece by Ronald Aronson who says that neoliberal capitalism have led to "a privatization of hope" that does not benefit us greatly:
A striking aspect of the privatization of hope is the growing tendency for individuals to see themselves entrepreneurially, as agglomerations of social capital. In Undoing the Demos(2015), political theorist Wendy Brown describes this as an aspect of neoliberalism’s wholesale reshaping of life in economic terms. Related to this is the encouragement and pressure for individuals to construct their lives consciously and deliberately in the form of a biography. I have suggested that the process of self-invention and reinvention is drawn in the first place from conditions prevailing in the workplace and its demand for constant self-marketing. Another source is psychotherapy and its injunction to take command of our lives and become the active subjects of our own stories.
Privatization of the social is an essential part of this process...Taking control of one’s life contributes to the process of de-socialization and de-solidarization. It also points toward the displacement of hope. Something strange and remarkable happens as energies that once belonged to the social sphere are transferred from there to one’s personal life. Not only are collective capacities to solve collective problems weakened, but also the very sense that these problems are collective disappears. When individuals become personally responsible for these problems, social pain and its causes are conjured away. The energy to resolve them remains, though, and a peculiar and misplaced sense of empowerment results, one that is bound to be frustrated without our understanding why. Displaced onto individuals, hope takes on the aspect of an addiction that can never be satisfied.
In the Nonprofit Quarterly, we have this critique from Tom Wolff on whether the sector's idea of "collective impact" as defined in a 2011 article is troubled:
The downside of this is that Collective Impact is based on only a few case studies that the authors themselves were not involved in creating and implementing but rather observed after their development. The articles included neither research nor reference to learning from all the previous research, studies, and community experiences in the field. Observing successful coalitions provides the observer one basis for learning about community coalitions, but being involved in successfully and unsuccessfully developing coalitions provides a deeper and more nuanced understanding of coalitions that apparently was not available for Kania and Kramer. Thus, not surprisingly, Collective Impact gets much about collaboration wrong, regarding both the goals and processes of community change collaboration. In light of the uncritical, widespread adoption and funding of Collective Impact by government agencies and foundations, it is necessary to examine and assess Collective Impact much more critically and thoughtfully.
Guess what? According to the Atlantic's Alana Semuels, the founding fathers were not worried about inequality because the United States was one of the more egalitarian places of its time —but the country has trouble adapting to changing economic forces:
This equality left the founders focused on one thing: freedom from aristocratic England and its laws, which allowed for rampant inequality. Hobble the aristocrats and the people keeping others down, the thinking went, and anyone, no matter how humble their birth, could succeed...These egalitarian principles didn’t last long. Between 1800 and 1860, inequality grew in America about as much as it has in the period since 1970, according to the authors of Unequal Gains. The Gini coefficient grew to 0.441 in 1774. By 1860, it was 0.529...
There’s one more reason inequality grew after the Revolutionary War, and it’s surprisingly reminiscent of some of the reasons inequality is growing today. To prosper, the new nation needed a financial sector; it needed to issue bonds and get investors to buy its debt. Thanks in part to the advocacy of Alexander Hamilton, the U.S. financial system soon became popular with foreign investors, who were eager to get into the new market. But the financial sector favored only those people who were able to get into the market early, and those who were already financially sound enough to invest.