This week's must reads includes this food for thought in the Weekly Standard from conservative George Gilder, who seems to be having a conversation with his younger self and the father of neoconservative thought—Irving Kristol—on free markets and the brutality of capitalism. (Because I needed more context, I found this reprinted piece from Kristol on the squishiness of defining economic well-being.) As a counterpoint to all this very academic musing on conservative economic theory, we have the testimony of Tianna Gaines-Turner submitted to the House Budget Committee this week as an expert witness on poverty and hunger in America (she was not allowed to speak in person). You also may be interested in this piece from the Nation on how childcare workers also make poverty wages. Lastly we have a New York Times piece on the health effects of poverty-related stress (Demos' Matt Bruenig looks at the policy implications here).
This week, President Obama gave another economic speech on the economic plight of Americans and how taxes might incentivize job growth. As the political war over jobs continues, Quartz offers this economic check in in "two simple charts":
New survey data from the Associated Press* finds "four out of 5 U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream." In the Wall Street Journal, the American Enterprise Institute's Arthur Brooks chided the president for not mentioning the poor enough and for not "fighting for people at the bottom, even if the best policies for doing so contradict conventional progressive policy dogma." Meanwhile, Bloomberg columnist Clive Crook looks at all the inequality talk and concludes it isn't helping anyone:
If you merge inequality and lack of opportunity for the poor into one story about systematic injustice, each problem becomes more difficult to confront. Greater economic opportunities for the poor should be a priority for liberals and conservatives alike. No doubt they’d differ on the means -- on the weight they’d give to improving schools that serve the poor, say, or paying bigger subsidies to low-wage workers, or discouraging births out of wedlock and other poverty-replicating behavior. In a functioning polity, that could be a fruitful discussion. Instead, the issue is subsumed into the larger perpetual conflict about liberty and social justice. And nothing happens.
It’s depressingly simple, really: The left would rather raise taxes on the rich, and the right would rather prattle on about freedom. So the poor stay poor.
The Economist takes a look at growing suburban poverty:
Suburban poverty began to rise before the recession. As American cities have grown safer and richer, homes there have become less affordable. During the subprime bubble, many people with bad credit scores got mortgages and moved to the suburbs. A shift towards housing vouchers and away from massive urban projects encouraged people in subsidized housing to make the same move. Immigrants, too, chased the American dream of neat lawns and picket fences. Now 51% of immigrants (who are more likely than the native-born to be poor) live in suburbs, compared with just 33% in cities. When the bubble burst, the suburbs suffered. Construction and manufacturing, two of the most suburban industries, lost more jobs between 2007 and 2010 than any other sector. Nowhere is it easy to be poor, but the suburbs present particular difficulties.
The New York Times' Paul Krugman looks the inequality challenge pose by sprawl, and finds there is a clear need for "policies that help families function without multiple cars." And this extensive interview in the New Republic takes on the location of the American Dream with Prof. Nathaniel Hendren, who worked on Equality of Opportunity project, which led to last week's New York Times' article on economic mobility.
The minimum wage debate is getting hotter as fast-workers continue to take to the streets over their low pay and the DC living wage statute remains a point of contention. Pew put out this analysis of the demographics for those getting minimum wage:
Last week, New York Times food guru Mark Bittman had this to say about the nascent food workers' movement:
Something is happening here, though exactly what isn’t quite clear. Fast food was never a priority of organized labor — it’s difficult to imagine a traditional union of four million fast-food workers in something like 200,000 locations — but dozens of organizations are now involved, including, to its credit, the Service Employees International Union, which is providing financing and counsel. The upshot: Workers with nothing to lose are demanding a living wage of $15 an hour, and gaining strength and confidence. They don’t have much else. Those making minimum wage ($7.25) and just above have less buying power than their peers did in the mid-50s. Even business leaders are beginning to recognize that forcing workers onto food stamps is no way to sustain an economy — or a society. The chief executive of Costco, Craig Jelinek, for example, has endorsed President Obama’s efforts to raise the minimum wage.
Over at Forbes, economist Art Carden offers this pretty standard conservative reaction:
It’s tempting to think that the higher wages for workers is worth it, but it isn’t. The minimum wage shifts the margins on which people compete with one another from wages to wasteful competitive endeavors like waiting or investing in too many quality signals. Competition in a price-controlled market can erode the entire value of the difference between the minimum workers are willing to accept and the minimum they are allowed to accept. The cruel irony is that a policy designed to pick the pockets of employers for the benefit of workers ultimately leaves everyone worse off.
At Quartz, Allison Shrager offers a similar but more measured response, arguing that it is inequality not minimum wage that should be the focus:
Paying higher starting wages may encourage more worker retention, which may or may not be what fast-food restaurants desire from most of their employees. In fact, the high turnover may be an efficient sorting mechanism. For example, some workers who change jobs may have only planned on working there temporarily. But this does not change the fact that it is harder lately for low-skill workers to move up through the economic ranks. Ideally, more should be done to encourage skill formation and advancement in low-pay jobs. That would ensure that workers will have a skill set that commands a higher market wage and more security. This might take policies that make providing benefits less burdensome for employers and others that increase incentives to retain and train full-time workers. It would be a mistake to make an arbitrary rule on what people of various skills and stages of their career should be paid.
Meanwhile the Washington Post's Harold Meyerson says a recent study shows the conservative main argument favoring reductions in taxes and low wages "is sheer hooey":
Profits and investment began to decouple at the end of the 1980s — several years after the doctrine took hold that share price was the sole determinant of a corporation’s value and that corporate management had to heed only the concerns of shareholders, rather than balancing the interests of shareholders, employees and consumers. The terrible toll this doctrine has taken on U.S. workers is clear. But with this study, it’s apparent that the damage came not only in the form of lowered wages and offshored jobs but also in an overall reduction of investment in productive enterprise. What are the public-policy takeaways of the Harvard-NYU study? First, that the president’s emphasis on public investment is a screamingly necessary corrective to a national economy that has a structural bias against investment. So long as CEOs are more concerned with short-term share value than long-term research, development and production, either the public sector will have to pick up the investment slack or nobody will.
This Business Insider article looks at Henry Ford's philosophy on worker pay and how it applies today.
Last week you may have read Peter Buffet's piece titled, The Charitable-Industrial Complex, which by headline alone seemed to be destined for major controversy. To recap:
Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left. There are plenty of statistics that tell us that inequality is continually rising. At the same time, according to the Urban Institute, the nonprofit sector has been steadily growing. Between 2001 and 2011, the number of nonprofits increased 25 percent. Their growth rate now exceeds that of both the business and government sectors. It’s a massive business, with approximately $316 billion given away in 2012 in the United States alone and more than 9.4 million employed. Philanthropy has become the “it” vehicle to level the playing field and has generated a growing number of gatherings, workshops and affinity groups.
Over at Quartz, Oxford's William MacAskill had this reaction:
Peter Buffett admirably decries the have-a-go do-gooders: philanthropists with no relevant experience or understanding of the issues thinking that they know it all already and can offer pronouncements about what to do. He begins on this point, and I was excited, thinking he might segue into a discussion of the importance of effective altruism. He might have noted that there is a dearth of understanding of what works and what doesn’t when it comes to helping others, and that charity, unlike business, doesn’t have the feedback mechanism of profit and loss by which to correct itself and learn. He might have argued that it’s crucial for philanthropists to find and rely on the best research available, and to honestly and humbly try to do as much good as possible.
And the Economist's Matthew Bishop had this to say:
Mr Buffett also dislikes how “business principles are trumpeted as an important element to add to the philanthropic sector” through phrases such as “return on investment” (ROI). Yet two paragraphs later he argues (in my view, rightly) that “foundation dollars should be the best ‘risk capital’ out there”. Mr Buffett seems unaware that the phrase “risk capital” is drawn from business, and that perhaps the best way to assess if philanthropic capital is being used as risk capital is to measure and analyse its return on investment (in the sense of social/environmental return – which is how I think Mr Buffett is using the phrase – rather than narrow financial return alone).
In more positive yet still critical response, progressive advocate Zack Exley says there is an obvious solution to poverty that is not getting enough credit from Buffet and other philanthropists, simple economic development:
There are at least a few dozen countries where virtually no citizen has been sold for sex (to stick with your benchmark) for many decades -- or sold for anything else, or gone hungry, without health care, housing or education. Most eliminated poverty in a rapid push lasting sometimes just a single generation. They are countries as diverse as Spain, Germany, Finland, Greece, Japan, Korea, Taiwan and Singapore. Not long ago -- 150, 100, 50 years -- all of those countries were even poorer than, say, Kenya is today. In the city (if there were cities), people lived in unimaginable slums. In the country, people frequently starved. Most families lost many of their children to illness, most were subject to extreme exploitation and violence from landlords, soldiers, criminals or all three. How did they pull billions out of poverty so quickly? Unfortunately, the answer is totally unfashionable and will never, ever be discussed at hipster social venture forums. They all had one thing in common: the people in charge -- whether they were social democrats, conservative nationalists, communists or military dictators -- carried out programs of rapid economic development designed to give most people access to means of making a living. But how did that do that? They built factories, railroads, universities and everything else required to make the things and do the things that go into a decent living (or were valuable enough to trade for them). Communists and dictatorships used various forms of force -- often brutal. Democrats and republicans (small d and small r) used the market and public-private partnerships. By hook or by crook, wherever eliminating poverty was one of the top few national priorities, it was eliminated.
Data Bits This Harvard research paper issued in March looks at whether corporate managers have a "responsibility to structure market institutions so as to preserve the legitimacy of market capitalism, even if doing so is at the expense of corporate profits." The Chronicle of Philanthropy discusses a two-year study of the charitable contributions and political advocacy of the Koch Brothers. Economic experts Jared Bernstein and Dean Baker discuss the arbitrariness in measuring GDP. David Henderson, who attended Heron's data meeting last week, discusses what he learned—including how it "challenged and expanded" his thinking on the social sector. Join the discussion here.
* The Associated Press article has been removed from their website. It was previously located at: