Must Reads: Cato's Will Wilkinson in the Economist and Matt Miller in the Washington Post contend cheap goods have taken the sting out of yawning U.S. inequality. This National Review article by Kevin Williamson examines a small town in Kentucky he names a "big white ghetto," which Williamson says exhibits "a classic economic death spiral" for workers and job quality. At Forbes, Cedric Muhammed offers some thoughts about Martin Luther King's approach to poverty, arguing that "cultural finance," a.k.a. mass informal savings, was left unaddressed by the civil rights movement (in this context some you may want to check out the approach of the Family Independence Initiative). Former hedge fund trader Sam Polk in NYT's Sunday Review discusses his battle with wealth addiction and how the culture of Wall Street wealth is shaping the country.
NPR has a new report that the economy maybe slow but an increasing number of people seem to be quitting their jobs:
Some industries, like retail, always have a higher share of quitters than others, like government. But what matters is the change over time in each industry. In general, a rise in quitters is a promising sign: People usually quit because they have another job, or are confident that they can get one.
In U.S. News, Chad Stone from the Center for Budget Priorities discusses the unemployment benefit fight in Congress:
Federal jobless benefits have become a political football – and it's the workers losing them who are getting kicked. Congress has once again left town, as it did for Christmas, with more than one million unemployed workers prematurely cut off from Emergency Unemployment Compensation benefits and with the ultimate fate of these benefits still hanging in the balance... Holding up benefits that cost $25 billion or less on budgetary grounds misses the forest for the trees. Emergency Unemployment Compensation is a temporary program that will expire once the economy is stronger. It performs a valuable counter-cyclical role by injecting purchasing power into the struggling economy.
Barbara Ehrenreich over at the Atlantic discuss her discoveries working undercover as a minimum wage worker:
I was also dismayed to find that in some ways, it is actually more expensive to be poor than not poor. If you can’t afford the first month’s rent and security deposit you need in order to rent an apartment, you may get stuck in an overpriced residential motel. If you don’t have a kitchen or even a refrigerator and microwave, you will find yourself falling back on convenience store food, which—in addition to its nutritional deficits—is also alarmingly overpriced. If you need a loan, as most poor people eventually do, you will end up paying an interest rate many times more than what a more affluent borrower would be charged. To be poor—especially with children to support and care for—is a perpetual high-wire act. Most private-sector employers offer no sick days, and many will fire a person who misses a day of work, even to stay home with a sick child. A nonfunctioning car can also mean lost pay and sudden expenses. A broken headlight invites a ticket, plus a fine greater than the cost of a new headlight, and possible court costs. If a creditor decides to get nasty, a court summons may be issued, often leading to an arrest warrant. No amount of training in financial literacy can prepare someone for such exigencies—or make up for an income that is impossibly low to start with. Instead of treating low-wage mothers as the struggling heroines they are, our political culture still tends to view them as miscreants and contributors to the “cycle of poverty.”
Over at Demos, David Callahan says there are three things we don't really know about the labor market: how many contract workers there are; how many folks are working under the table; and how many truly cannot find work at all.
With this year's Davos gathering underway lots of folks seem to be weighing in on wealth and inequality, such as this new Oxfam report. Global Post has a new interactive project on global inequality that is worth a look. There is also this Wonkblog post from Ezra Klein looking at global and U.S. inequality, check out his chart:
Median wealth is [an] interesting measure. There, Australia leads with $220,000. They're followed by Luxembourg, Belgium, France, Italy, the UK, and Japan. The U.S. falls way back on this measure, with a median wealth of just $45,000. Think about that for a minute: Most Americans are worth less than most Italians, Belgians and Japanese. Some researchers think Credit Suisse overestimates median wealth in the U.S. Other estimates put us in 27th place. The tremendous difference between average wealth and median wealth is the country's level of wealth inequality at work. Global wealth inequality is even more startling, of course. After accounting for debts, assets of more than $4,000 put a person in the wealthiest half of world citizens. Assets of more than $75,000 put them in the top 10 percent. Assets of more than $753,000 put them in the top 1 percent.
You also might be interested in this oped from Council on Foreign Relations President Richard Haass who argues it isn't really inequality that is the problem but a lack of opportunity for upward mobility. At RealClearMarkets, the University of Georgia's Jeffrey Dorfman contends inequality is less important than free markets for the poor:
The countries with the least economic freedom had a poor with an average income of only $932. This compares to the quartile of countries with the most economic freedom whose poor earn an average of $10,556 per year. It sure looks better to be poor in a country with economic freedom. In case people think that the reason for the enormous difference in incomes of the poor described above is simply because rich countries have more economic freedom, the report also looks at the income share of the poor in countries based on their economic freedom. The share of income earned by the poorest 10 percent is a measure of income inequality and does not depend on the level of income in the country so it is easier to compare rich and poor countries fairly using this measure.
Meanwhile, Pew takes a look at how poverty has shifted since the beginning of the U.S. war on poverty, check out this chart showing affects on the elderly and kids:
Jared Bernstein in the NYT's Economix blog offers several new charts on U.S. inequality:
Not only are we now faced with slower growth, but that lesser growth rate is much more narrowly distributed (for broader historical reference: the real annualized G.D.P. growth rate over the full 1960s cycle was 4.5 percent versus 2.6 percent over the 2000s cycle). We’re baking a smaller economic pie and cutting less equal slices. As underscored by the simple Danziger exercise, at any level of G.D.P. growth there would be less poverty reduction because of the inequality wedge. But we’ve also got less growth to boot.
This report on on women in poverty from the National Council on Research for Women found that in "the period between 1993 and 2012, the poverty gap between men and women was at the lowest in 2010, not because the women’s rate decreased but because the men’s rate increased":
Politico has a new list of state rankings on issues ranging from wealth and income inequality to infant mortality and high school graduation rates. This Harvard study looks at mobility in the United States.
Over at Guidestar's blog, Bridgespan's Ann Goggins Gregory discusses "the overhead myth" plaguing nonprofits:
For several years, I’ve been interested in (many would say obsessed with) the need to break out of the nonprofit starvation cycle, where donors and nonprofits alike fixate on overhead rather than on what good outcomes cost. So I was thrilled to hear the joint announcement, www.overheadmyth.com, from GuideStar, BBB Wise Giving Alliance, and Charity Navigator denouncing the overhead ratio as a valid indicator of nonprofit performance. What do good outcomes cost? The for-profit world does not measure success by focusing on overhead, but if it did (by looking at sales, general and administrative costs as a percent of total sales), the average rate would be 25%. For service industries, perhaps the best analog to the social sector, it’d be 34%. Intuitively, we’d expect that a high-performing nonprofit would hire the best people, train them to be as effective as could be, and monitor results to improve as it went along. That involves HR, training, and performance measurement. Overhead, overhead, overhead!
Boston College's Ray Madoff discusses myths on payout rules for donor advised funds in the Chronicle of Philanthropy. And this report from the Gates Foundation looks at three myths on poverty. Meanwhile this report from Lucy Bernholz looks at philanthropy and the social economy and how the United States rates compared to Europe.
This other piece from Kevin Williamson in the National Review contends that "rich America is working America: Wealthy households contain on average more than four times as many full-time workers as do poor households, and, surprisingly, inherited wealth constitutes a smaller share of their assets than it does for middle-class and poor households." Over at Demos, Matt Bruenig offered these opposing thoughts: "[T]he reality is that the wealthy, whether they work hard or not, are generally inheritors of enormous sums of money. On average, the wealthiest 1 percent of households have inherited 447 times more money than households with wealth below $25,000."