Let’s start with a cartoon from Steve Nease:
It may be no surprise to our readers to learn that many families are just one setback away from financial disaster, reports Neil Shah in the Wall Street Journal:
About 70% of U.S. households are struggling with at least one of three problems with their balance sheets—low incomes, insufficient savings or debt, according to an analysis of government data by the Pew Charitable Trusts on Thursday.
More than one-third of households face two or even three of the problems simultaneously, compounding their insecurity.
That most U.S. families aren’t secure enough to weather a financial storm matters because when a storm comes, it could wipe away their chances to accumulate wealth, prepare for retirement and generally improve their living standards.
In more follow-up to last week’s State of the Union speech, Michael Gerson looks at the growing political fight over the middle class:
Obama’s “middle-class economics” is not the ideological love child of Elizabeth Warren and Thomas Piketty. Rather than occupying Wall Street, Obama claimed credit for Wall Street’s success. Instead of focusing on economic inequality, he emphasized economic mobility.
Republicans have no choice but to contest this ground. Some have already begun. Read Sen. Marco Rubio’s book “American Dreams,” or listen to Mitt Romney’s recent speech at the Republican National Committee’s winter meeting, or look at the Web site for Jeb Bush’s Right to Rise PAC. All of these prospective nominees argue that economic growth, while necessary, is not sufficient; that the cultivation of human capital is essential to individual and national success in a globalized economy; and that government has an important role in promoting equal opportunity. They are also (accurately) pointing out that the condition of middle-class families during the Obama years — measured by net worth, real wages, business ownership, homeownership — has grown worse.
Over at Harvard Business Review, Paul Krugman has put MBA’s on notice arguing that running a business is not the same thing as running a country:
Businesses—even very large corporations—are generally open systems. They can, for example, increase employment in all their divisions simultaneously; they can increase investment across the board; they can seek a higher share of all their markets. Admittedly, the borders of the organization are not wide open. A company may find it difficult to expand rapidly because it cannot attract suitable workers fast enough or because it is unable to raise enough capital. An organization may find it even more difficult to contract, because it is reluctant to fire good employees. But we find nothing remarkable in a corporation whose market share doubles or halves in just a few years.
By contrast, a national economy—especially that of a very large country like the United States—is a closed system. Could all U.S. companies double their market shares over the next ten years?2 Certainly not, no matter how much their managements improved. For one thing, in spite of growing world trade, more than 70% of U.S. employment and value-added is in industries, such as retail trade, that neither export nor face import competition. In those industries, one U.S. company can increase its market share only at the expense of another.
Over at Slate, Reihan Salam looks at whether “the upper middle class is ruining America” by driving up the prices of everyday items from housing to taxis and healthcare:
What can we do to break the stranglehold of the upper middle class? I have no idea. Having spent so much time around upper-middle-class Americans, and having entered their ranks in my own ambivalent way, I’ve come to understand their power. The upper middle class controls the media we consume. They run our big bureaucracies, our universities, and our hospitals. Their voices drown out those of other people at almost every turn. I fear that the only way we can check the tendency of upper-middle-class people to look out for their own interests at the expense of others is to make them feel at least a little guilty about it.
Do Millenials value home ownership? Over at ShelterForce, the Center for Housing Policy’s Lisa Sturtvesant says yes, but they are delaying owning because of economic conditions:
Rather than radically different preferences, it is economic conditions that have shaped the household formation and housing choice of the Millennial population. Relatively poor labor market conditions, slow wage growth, and high student debt have led to delays in coupling up, marriage, and ultimately household formation and homeownership among this population.
The number of kids surviving on food stamps has doubled since 2007 to 16 million, reports the Guardian:
In the New York Times, Charles Blow discusses “the disgusting” child poverty problem in the United States:
“America’s poor children did not ask to be born; did not choose their parents, country, state, neighborhood, race, color, or faith. In fact if they had been born in 33 other Organization for Economic Cooperation and Development (OECD) countries they would be less likely to be poor. Among these 35 countries, America ranks 34th in relative child poverty — ahead only of Romania, whose economy is 99 percent smaller than ours.”
It points out many of the corrosive cruelties of childhood poverty: worse health and educational outcomes, impaired cognitive development and the effects of “toxic stress” on brain functions. It also points out the “intergenerational transmission” properties of poverty.
To achieve rising and shared prosperity requires not a silver bullet but an arsenal of policies deployed in systematic fashion. Most important, it requires a new level of understanding of how those policies interact and how they play out in the actual workings of an economy: among workers, in factories and offices, and between nations. This is a challenge, but policy makers can compare strategies and learn best practices to increase the likelihood for success. Moreover, in a globalized world, policy makers will need to consider each other’s approaches even as they focus on their own goals.
Meanwhile in Slate, David Sirota looks at why regressive tax policies are harmful to those with less means:
American politics are dominated by those with money. As such, America’s tax debate is dominated by voices that insist the rich are unduly persecuted by high taxes and that low-income folks are living the high life. Indeed, a new survey by the Pew Research Center recently found that the most financially secure Americans believe “poor people today have it easy.”
The rich are certainly entitled to their own opinions — but, as the old saying goes, nobody is entitled to their own facts. With that in mind, here’s a set of tax facts that’s worth considering: Middle- and low-income Americans are facing far higher state and local tax rates than the wealthy. In all, a comprehensive analysis by the nonpartisan Institute on Taxation and Economic Policy finds that the poorest 20 percent of households pay on average more than twice the effective state and local tax rate (10.9 percent) as the richest 1 percent of taxpayers (5.4 percent).
Michigan Radio has a very interesting story about the sometimes cognitive dissonance of being poor and attending an elite school, something your editor has experienced first hand. Over at the Pacific Standard, Kate Wheeling has a piece about the drivers of unethical behavior by class:
Those who saw themselves as higher up the social ladder tended to cheat when the prize was their own entrance; lower class individuals were more likely to cheat when it meant another person of their choosing could enter the lottery.
The driving force behind unethical behavior, the study found, was not social status per se, but power. Research has shown that the powerful tend to feel independent and focused on their own goals. Powerlessness, on the other hand, increases dependence on and generosity toward others.
A new Center for American Progress report looks at jobs programs for the 21st Century:
Furthermore, eligibility for government safety net programs is increasingly tied to work, meaning that those who are excluded from the labor market often have limited access to resources and supports that would help them and their families make ends meet and advance in the labor market. While some resources are available to specific groups through programs such as unemployment insurance, or UI, and Temporary Assistance for Needy Families, or TANF, no dedicated funding is available to states that wish to create employment opportunities for all who seek work…
For struggling workers and their families, subsidized jobs would alleviate hardship in the short term by generating immediate work-based income, while also providing valuable work experience to improve workers’ employment credentials and help them escape poverty. A national subsidized jobs program would also serve as a buffer for our nation’s economy—softening the impact of future downturns by counteracting increases in unemployment, enabling businesses to preserve and expand their workforces, and boosting demand in local communities.
In the New York Times, Anna North looks at why women and minorities have trouble getting a raise. Meanwhile, NYT’s Josh Katz look at the break down of activity for unemployed men and women. Check out this chart:
In Al Jazeera’s Tammy Kim has a story about why low-wage workers have more trouble weathering a blizzard:
A massive disruption like a blizzard hits low-wage employees hardest, said Amy Traub, senior policy analyst at liberal think tank Demos. “There is no working from home if you’re a sales associate or if you’re a cashier. If they can’t get to work because of weather, you miss a paycheck. If the store closes early or works with a skeleton staff, you miss a paycheck.”
Another Center for American Progress report looks at policies needed to aid disabled workers:
Disability can be both a cause and consequence of economic insecurity. It is a cause because disability or illness can lead to job loss and reduced earnings, barriers to education and skills development, significant additional expenses, and many other challenges that can lead to economic hardship. It can also be a consequence because poverty and economic insecurity can limit access to health care and preventive services and increase the likelihood that a person lives and works in an environment that may adversely affect health. As a result, poverty and disability go hand in hand.
Yet the intersection of disability and poverty is too rarely discussed. In fact, despite the fact that 1 in 5 Americans live with disabilities, the U.S. Census Bureau’s annual report detailing income, poverty, and health insurance coverage did not even include poverty rates for people with disabilities until recently. It does now, and the most recent available data put the poverty rate for working-age people with disabilities at 34.5 percent in 2013, compared with 12.2 percent for those without disabilities.
David Brooks wrote very astutely of impact investing in the New York Times:
So over the past generation many of the most talented people on earth have tried to transform capitalism itself, to use the market to solve social problems. These are people with opposable minds: part profit-oriented and part purpose-oriented. They’ve created organizations that look a little like a business, a little like a social-service provider, and a little like a charity — or some mixture of the three…[I]mpact investing is now entering the mainstream. An older generation used their (rigorous) business mind in one setting and then their (often sloppy) charity mind in another. Today more people want to blend these minds. Typically a big client, or a young heir, will go to his or her investments adviser and say, “I want some socially useful investments in my portfolio.” If the adviser has nothing on offer, the client leaves the firm.
In the Stanford Social Innovation Review, the Aspen Institute’s Anne Mosle discusses a new report that looks at how impact investing can improve economic mobility:
Wealth has never been so concentrated in the United States as it is today. Meanwhile, families find it increasingly difficult to climb the ladder of prosperity—32 million children live in low-income families, and one in four live in poverty. This disparity points to an urgent need to enlist all sectors in breaking the cycle of poverty.
With that in mind, Ascend at the Aspen Institute took an in-depth look at the field of impact investing as one tool that could help advance economic mobility for families…Impact investing is not a silver bullet, but it does hold the promise of helping more people realize the American dream. We invite you to review our findings in “The Bottom Line: Investing for Impact on Economic Mobility in the United States,” and let us know what you think.
Giving Evidence’s Caroline Fiennes argues that more information about nonprofits does nothing or hurts donations:
The overall effect of presenting the information was to reduce donations. Showing the ratings brought no more benefit to the high-rated charities than not showing them. For charities with a rating of less than four stars, showing the rating reduced donations; and the lower the rating, the more it reduced donations.
Donors appeared to use evidence of effectiveness as they would a hygiene factor: they seemed to expect all charities to have four-star ratings, and reduced donations when they were disappointed – but never increased them because they were never positively surprised.