Let's start with a cartoon from the Hartford Courant:
It's government budgeting time, and it looks like "deep cuts" to welfare and Medicaid are on the table in the House proposal, reports Arthur Delaney over at the Huffington Post. In the April issue of New York Review of Books, Christopher Jenks discusses the legacy of the "war on poverty" and argues that poverty measurements are flawed both in terms of assumptions about who is poor and what makes them so:
Fixing these flaws in the official poverty rate helps reconcile trends in poverty with trends in more direct measures of material well-being. Today’s poor live in less crowded housing, are more likely to have a complete bathroom and air conditioner in their residence, have bigger TV screens, are more likely to have a telephone, and more likely to have a cell phone. Nonetheless, most of the poor are still beset by constant financial anxiety. In part, that is because the poverty line was set so low in 1964. Linking the poverty line to the Consumer Price Index let it rise a little every year, but not much. Using a more realistic price index keeps the poverty line closer to its real 1964 level, ensuring that those we count as poor are more like those we counted as poor fifty years ago, but in both periods those just above the poverty line have suffered from many of the same problems...
Another reason the poor so often feel beleaguered, anxious, and depressed may be that what is often called “relative poverty” has not changed. Over time, any society’s definition of poverty adjusts up or down depending on how much income those in the middle of the distribution have. There is quite a bit of evidence that Americans need an income at least half that of families near the middle of the distribution in order to buy the things they need to hold up their heads in public. In such a world, the only way to reduce the number of people who feel and act poor will be to reduce the number with incomes less than half the 50th percentile (the median).
In a recent op-ed in the Huffington Post, your editor discusses what it is like growing up on welfare and why an effort to direct subsidies primarily to the working poor is wrong-headed:
In many ways, my family was the definition of the so-called "undeserving poor." My parents fell on hard times, both because of bad luck and because of bad choices. My dad was certainly guilty of drinking the last of our money away after he retired from the military, and my mother refused to work because she believed that staying at home was good for us kids. My parents fought over our welfare checks and it was violent and frightening. Without cash, food stamps were often our only means of purchasing food. I was obsessed with keeping those stamps securely fastened to the book because store owners wouldn't take loose bills, since it was considered a sign of fraud. I became afraid the bills would become worthless and we'd go hungry at the end of the month. Sometimes we did.
But for the most part, poverty subsidies delivered on their intention: they helped a family in crisis because my dad needed a job. Eventually he found one working in state government in Harrisburg, Pa. It took four years and numerous rejections claiming he was "overqualified" after spending 12 year in the Navy as an officer. By 1987, we were working class, not welfare class--and long before welfare-to-work was mandated.
With the Department of Justice report on Ferguson still in the headlines, showing that the city may have targeted its poor black residents to the drum of fine revenue (and the horrible shooting of polices officers just days later), the issue of race and poverty is again under a microscope:
In the Atlantic, Conor Friedersdorf has an excellent round up of the fractured conservative response to the DOJ report and says this is the moment to live up to their reputation for protecting civil rights against an out of control state:
The conservative movement has made tremendous progress on race...But the conservative reaction to the Ferguson report nevertheless suggests that, for ideological and political reasons, the movement remains unable to recognize instances in which local tyranny and frequent violations of Constitutional rights justify outside intervention...
If one accepts every premise advanced by the authors of National Review's coverage, including the most dubious—if we treat the Michael Brown investigation as a cynical pretext; presume Eric Holder hates every white cop in America; ignore statistics about racially disproportionate stops as inconclusive; and presume that people are being mistreated wholly due to their poverty rather than their race; even then, it remains the case that hundreds of Americans have had their Constitutional rights or basic liberties violated by governing elites with perverse incentives to cite, fine, and jail them as often and as expensively as possible.
Perhaps we should reflect on this quote from Frederick Douglas: "Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe." In the Pacific Standard, Kathleen Geier examines five studies on race and inequality that may be of interest. Meanwhile the Urban League published a report out on the "state of black America" in 2015. Meanwhile, Demos' Matt Bruenig looks at the links between poverty and disability. Check out this chart:
Now, even counting transfers, disability poverty is higher than overall poverty by 5 to 6 percentage points. When we exclude transfers (which primarily come from Social Security and Supplemental Security Income), however, the disability poverty rate is over 50%. So would we say disability "causes" poverty? Once again, it really seems to depend on what economic institutions you find yourself in. Under some sets of institutions (e.g. if we eliminated disability benefits), disability results in high and severe poverty. Under other institutions, it does not. Our institutions still make disabled people poorer than the overall population by a significant margin, but more generous and better designed disability benefits probably could close if not eliminate that gap.
You may also be interested in this video with Carol Glazer who heads the Nation Organization for Disabilities, a Heron grantee working to ensure that people have opportunities especially employment:
Building a Wealth of Nations
You might be interested in this bit of thought from Claude Fischer in the Boston Review on Adam Smith, economic ideology and poverty:
Many early Americans resisted such claims. Hamilton and the Federalists’ projects for national improvement—roads, canals, and such—entailed unnatural state intervention, albeit on behalf of industry. More profoundly, defenders of traditional, colonial-era prerogatives such as local price and wage controls, the priority of hunting and fishing rights over private property, and claims for charity by the dispossessed, fought this new worldview. For the most part, they lost. (See this earlier post.) Ironically, the free market ideology succeeded much better here than in its European home. In the antebellum era, the promise of the Smithian model that workers’ wages would rise and the dictum that free trade lifted all boats fell short. Instead, poverty and inequality rose. Americans’ heights actually shrunk even as their markets grew. The ideological response to this disappointment, Larson argues, was to increasingly explain poverty as a moral failure of the poor, not as a failure of the ideas.
Over at the Guardian, the University of Austin's A Mechele Dickerson says the United States needs affordable housing but the government is stuck on a flawed ownership model:
Since the Great Depression, US housing policies have aimed almost exclusively at encouraging Americans to become homeowners. Housing policies favor and heavily subsidize homeownership because it is said to help create strong communities and build family wealth. But it would be a mistake to continue with this approach now...[T]his isn’t a debate about owning vs renting. While homeownership is risky and increasingly unaffordable, renting is no panacea. Many young adults can’t even afford to rent. Instead, cash-strapped young adults are going back to live with their parents, which has caused parental co-residence rates to soar. Between 2003 and 2013, parental co-residence rates increased by as much as 20 percentage points in some states and rates were as high as 50 percent in twelve states. Faced with such a dire situation, the immediate priority must be to make housing – both rented and owned – affordable. It makes no sense to focus on homeownership when there are so many people out there who cannot pay the rent, let alone put down a large deposit for a house.
Companies are still hoarding record amounts of cash, reports CNN money, which is not necessarily the best news for workers. McKinsey's Marc Goedhart, Tim Koller, and David Wessels argue that shareholder value should not be conflated with short-term profit maximization:
What’s needed at this time of reflection on the virtues and vices of capitalism is a clearer definition of shareholder value creation that can guide managers and board directors, rather than blurring their focus with a vague stakeholder agenda. We do believe that companies are better able to deliver long-term value to shareholders when they consider stakeholder concerns; the key is for managers to examine those concerns systematically for opportunities to do both... Most advocates of managing for stakeholders appear to argue that companies can maximize value for all stakeholders and shareholders simultaneously—without making trade-offs among them. This includes, for example,Cornell Law School professor Lynn Stout’s book, The Shareholder Value Myth, 6 in which Stout argues persuasively that nothing in US corporate law requires companies to focus on shareholder value creation. But her argument that putting shareholders first harms nearly everyone is really an argument against short-termism, not a prescription for how to make trade-offs. Similarly, R. Edward Freeman, a professor at the University of Virginia’s Darden School of Business, has written at length proposing a stakeholder value orientation. In his recent book, Managing for Stakeholders, he and his coauthors assert that “there is really no inherent conflict between the interests of financiers and other stakeholders.”7 John Mackey, founder and co-CEO of Whole Foods, recently wrote Conscious Capitalism,8 in which he, too, asserts that there are no trade-offs to be made.
Such criticism is naive. Strategic decisions often require myriad trade-offs among the interests of different groups that are often at odds with one another. And in the absence of other principled guidelines for such decisions, when there are trade-offs to be made, prioritizing long-term value creation is best for the allocation of resources and the health of the economy.
Also at the Guardian, a look at the Gates Foundation's fossil fuel investments. You might also be interested in this piece in Capital New York about the bankruptcy of Federation and Employment Guidance Services, once a "blue-chip New York nonprofit."
Lastly you might be interested in this video from Institutional Investor that highlights Heron President Clara Miller, B-Lab Cofounder Andrew Kassoy and The Social Entrepreneurs’ Fund President Liz Lucket who are involved in helping improve capitalism's ability to share prosperity.
Working for Work
Last month, the Economic Policy Institute's Lawrence Mishel penned an op-ed on why raising wages is better than lowering taxes for low income workers:
And there are several things we can do to bolster the labor standards and institutions that support wage growth. Raising the minimum wage to $12.50 an hour by 2020 would ensure that the minimum wage equals more than half the average wage, as it did in the late 1960s. And it has been too long since we have raised the salary threshold for overtime pay; raising it to $50,000, so that anyone making below that would get overtime, would move us closer to what prevailed in the 1970s, when about two-thirds of salaried workers received overtime pay.
Protecting and expanding workers’ right to unionize and bargain collectively is also essential; the erosion of collective bargaining is the single largest factor suppressing wage growth for middle-wage workers over the last few decades. And we need to modernize our New Deal-era labor standards to include earned sick leave and paid family leave so workers can balance work and family.
You also may want to check out the EPI's pay agenda outline here. And in the Wall Street Journal, White House adviser Jason Furman outlines the president's plan for the middle class. Over at the Fiscal Times, Rob Garver reports on a new Pew study finding that the middle class is shrinking in all 50 states. Check out this chart:
Over at the American Enterprise Institute, James Pethougkis says perhaps instead of focusing "income distribution," we should look at "whether living standards are rising broadly." Also in the Atlantic, Kim Phillips Fein discusses why workers aren't forming unions and the economic drivers behind it:
Today, both professional and low-wage jobs are dominated by an ideology of “flexibility”—and by a reality of transient relationships between employers and employees. Those ties are getting only more tenuous as the “on-demand economy” takes off, with the spread of Uber-style instant consumer services. A media beat that had all but disappeared seems to be making a tentative comeback. Politico has started a section devoted entirely to labor issues in response to reader interest. The Huffington Post now employs a full-time labor reporter...
With the on-demand economy thriving, the ranks of freelancers are growing—one can now hire a lawyer, doctor, computer programmer, or run-of-the-mill office worker for short-term service via the Internet. They, too, generally lack the basic perks of stability, such as a retirement plan and health insurance. Describing one boss who compelled his workers to set themselves up as legal corporations so the company could avoid the cost of employee benefits, Geoghegan writes, “Sometimes I think: one day, every American worker will be a John Smith, Incorporated, every cleaning lady, every janitor, every one of us—it will be a nation of CEOs in chains.” His bleak vision captures the culminating challenge facing a labor revival. That hurdle is rooted in the contemporary ethos of work itself, never mind global and technological factors: how to liberate wage slaves who are, however perversely defined, their own masters.