The Long Gone Age of Innocence
Good golly your editor is overwhelmed by the number of stories on poverty in recent weeks. Over at TalkPoverty, Annelise Orleck summed up how this looks to many of us who have been following this story on a "new war on poverty":
It may feel to some as though all the current talk of economic inequality came over us rather suddenly. But, of course, the current focus on inequality did not come out of nowhere. And its popularity today—among the young (who suffer from wildly disproportionate unemployment rates) and the poor (whose share of American annual income continues to fall)—should not surprise anyone who has been paying attention. If Americans are talking about poverty again with greater urgency than they have since the 1970s, it is because they are rightly angered by the cruelties of the 21st-century economy.
Is downward mobility the new normal? Check this piece in Quartz by University of Texas' Mechele Dickerson on the state of the American Dream:
Many Americans no longer seem to believe that they will ever be financially secure or stable. The belief that you can succeed financially with hard work and determination has been a core tenet of the American Dream. Now more than three-quarters of all Americans believe that downward mobility is more likely than upward mobility.
Are the foundational elements of our collective dream and middle-class lifestyle—owning a home, having stable employment, and retiring debt-free and financially secure—now out of reach for most of us, especially the young? And has the problem of the vanishing middle class now reached a group that had seemed entrenched, suburban white Americans?
You also might be interested in this article in the American Prospect looking at the degree to which moving to slightly better neighborhoods has an impact on economic mobility.
Guess what? If you grew up poor and were lucky enough to go to college, you are less likely to do as well as those from wealthy households who earned the same degree as you... because social connections matter as much as education:
Since elite firms tend to recruit almost exclusively from elite schools, working-class students who avoided participating in structured extracurricular activities in high school significantly reduce their chances of landing a high-paying job upon graduation...One compared hiring to “picking a team on the playground growing up”; another described his firm as “a fraternity of smart people.” To put it more baldly, humans tend to be tribal and egocentric; we feel more comfortable with others who look like us, and the more time we are going to spend with others, the more we want them to look, dress and act like us.
Speaking of poor kids, the Atlantic's Alana Semuels looks at a recent book on why some kids managed to thrive while "Coming of Age in the Other America":
What they found was both hopeful and depressing. The hopeful part: The kids were doing much better than their parents had done. While just 25 percent of parents had a high school diploma and 6 percent had a GED, nearly 70 percent of their kids had a high school diploma. And kids who found what researchers call an “identity project,” essentially a passion or hobby that helped motivate them, went even further, onto college or decent jobs...Now, the depressing part: Many of the kids who, like Bob, had seemed destined for a four-year college and a well-paid job a few years ago had veered off track. They weren’t using drugs or on the streets, and they were employed, but they were often making minimum wage in jobs with little room for advancement. Some kids went to for-profit universities and didn’t get degrees. Others wanted to get out of their parents’ house so badly that they took whatever job they could, before they had the chance to get the education or training to excel further.
And the Century Foundation's Jeff Madick discusses why a universal child allowance should be used to address the U.S. child poverty issue:
When we talk about how the United States can be more competitive with the rest of the world, childhood poverty rarely comes up. Yet America has a higher rate of childhood poverty than all but a few developed nations...This is not to say that America has not tried to reduce poverty. Besides food stamps, the earned-income tax credit and the child tax credit also aid poor parents substantially. The problem is that these programs still leave the rate of childhood poverty unconscionably high.
Per-child cash allowances may have the greatest impact. They do not change if you find work; they are generally larger than standard welfare payments; and they don’t have eligibility requirements. Many other prosperous nations provide such allowances, as do some developing ones.
Trading on Nonsense and Sensibility
The impact of trade deals on U.S. workers continues to gain traction on the campaign trail. Voters are angry about trade, writes Ed Dolan in the Economonitor, and how we view "the costs and benefits of trade depends on whether we view people as consumers or as workers." Matt Phillips looks at the forces behind the ebbing push toward globalization:
In his excellent recent book Global Inequality, former World Bank economist Branko Milanovic points out that while globalization has provided huge benefits, the vast majority of those benefits have accrued to people at the bottom of global income distribution—effectively those who’ve been lifted out of poverty in Asia—and the world’s super rich. Meanwhile, those who would count among the middle-classes in the world’s affluent nations have seen remarkably little improvement in their standards of living in decades.
The Council on Foreign Relations' Ted Alden says the election's trade and minimum wage debates have something in common:
[T]he two issues are actually the mirror image of the same problem – weak wage growth that has left far too many Americans struggling, especially those with low levels of education, even as strong job growth has cut unemployment in half since the depth of the Great Recession.
Historically, manufacturing jobs provided lower-skilled Americans with a path to a middle-class paycheck. It also seems likely (though I have not found a good study on the subject) that higher manufacturing wages historically helped to pull up other wages as well. If an auto worker with a high school education could earn $25 or $30 an hour, local restaurants and retail shops would have to offer something more than rock bottom wages to attract and retain workers.
Meanwhile, Vox's Zach Beuchamp on whether Bernie Sander's stance on free trade harms the economic prospects of those in other countries:
Free trade is one of the best tools we have for fighting extreme poverty. If Sanders wins, and is serious about implementing his trade agenda as outlined in the NYDN interview and elsewhere, he will impoverish millions of already-poor people.
But the Huffington Post's Zach Carter has an eye roll for this line of thinking:
Free trade is an economic policy that, as Beauchamp notes, damages the American working class to allow some people in the developing world to have slightly higher incomes. By gutting manufacturing jobs in the United States and shifting them to low-wage countries where workers are willing to accept far lower pay, free trade has raised wages for many people abroad. Opponents of this policy are therefore enemies of the global poor, according to free trade evangelists.
This is morality laundering, in which the otherwise obvious tenets of a belief system are channeled through econo-speak and the complexities of international law to hide their actual meaning. The primary beneficiaries of declining labor costs are, of course, not workers. They are corporate shareholders and executives. These people are also known as “rich people.”
You also might be interested in this Center for American Progress report on the state of U.S. labor in 2016. David Doylen in the New Republic says the 1099 job market doesn't make voters happy either:
The fact that this shift toward the 1099 economy occurred mostly during a terrible labor market suggests it was never a matter of worker choice, but an exercise of employer power. And it’s become a frustration for millions, a confirmation of the rigged economy that places more of a burden on ordinary people. It certainly informs this anti-establishment, anti-business-as-usual political moment.
And speaking of the wealthy... Let's have some commentary on the Panama Papers scandal involving the leaked documents on who's got what squirreled away in tax-haven accounts. The Atlantic's Brooke Harrington had this to say:
With just an Internet connection and a few thousand dollars, anybody can create shell corporations and other offshore vehicles in a matter of minutes. It’s child’s play to dodge taxes, debts, child support, and so on by putting assets in one of those structures—though there is a risk of getting caught, audited, and possibly prosecuted. But that’s not what many of the world’s richest people are doing: They can afford the privilege of defeating the spirit of the laws without violating them formally.
Meanwhile, in the Guardian, Colin Holtz argues for universal basic income and says the amount of money found shows the United States would have enough money to solve its problems if the global elite would stop "hoarding and hiding it":
[W]hile working and middle-class families pay their taxes or face consequences, the Panama Papers remind us that the worst of the 1% have, for years, essentially been stealing access to Americans’ common birthright, and to the benefits of our shared endeavors.
Worse, many of those same global elite have argued that we cannot afford to provide education, healthcare or a basic standard of living for all, much less eradicate poverty or dramatically enhance the social safety net by guaranteeing every American a subsistence-level income.
It isn't all bad news. Let's look at this piece in the New York Times on where the U.S. economy is kicking some serious butt:
When the aerospace company Sierra Nevada Corporation moved into the Colorado Technology Center about eight years ago, employees on their lunch break could stroll by the alpaca farm next door...[T]his thriving industrial park is just one sign of the many metropolises and smaller cities across the nation that have not only regained their footing since the recession, but are on the upswing. Here in the Mountain West — but also in places as varied as Seattle and Portland, Ore., in the Northwest, and Atlanta and Orlando, Fla., in the Southeast — employers are hiring at a steady clip, housing prices are up and consumers are spending more freely.
There are lots of different kinds of tools that people have in their tool belt to try to attack some of these problems, and impact investing is one of them. At Blue Haven, we engage in commercial rate, return-market rate impact investing. There are foundations that are happy to take concessionary returns, and that’s wonderful and needed. Then there’s straight grant money that is not seeking any kind of financial return but hoping to expand the environmental and social return of that capital. I think that all of these tools can play well together.
But what I think is exciting about people looking at business models and financial tools to try to advance some of these social and environmental goals is, it frees up some of that philanthropic capital to do actual grant work. If you look at some of the development aid models over the years, you’ve had philanthropic dollars or development dollars that are being used for something a business would be better to solve. It would be more scalable, it would be more sustainable, and also it would be something that people want. People aren’t going to buy something that they don’t want. You’ve seen a lot of different kinds of weird products and widgets out there in the market that have been developed in some lab in Cambridge, Mass., and shipped over to Uganda, and nobody really wants it or uses it after six months.
In Governing Magazine, Liz Farmer discusses a new twist on pay for success:
Under a pay for success or social impact bond program, private funders finance a preventive social or health program and only get paid back if the project meets its goals over the course of a predetermined set of years. The new model, announced by Third Sector Capital Partners on Thursday, offers a money back guarantee.
With a “social impact guarantee” or SIG project, governments front the money (instead of a private investor) and get paid back if the project doesn’t meet its goals. Specifics are sparse, but Third Sector co-founder George Overholser says he's currently working with two states on creating the country’s first SIG projects and hopes to announce them by the end of this year.
The main objective of the new tool, which is the brainchild of Overholser, is to give governments a simpler alternative to the existing structure. Third Sector helps governments develop social impact bond projects and Overholser says two main complications tend to arise under the current model.
Lastly we have this piece from Ruth McCambridge in the Nonprofit Quarterly on why the strategic philanthropy crowd's apologies to nonprofits should just stop:
[T]he proponents of the strategic philanthropy ideology are in the process of, one by one, walking their revelations back out of public view. But the way that they are doing it does not exactly convince us all that they wouldn’t once again declare a philanthropic plutocracy if given half a chance.