In this issue, worries over the rollback to Medicaid, why inequality hurts empathy, more minimum wage debate, and why investing in new entrepreneurs means jobs.
Let's start with a cartoon:
This week the Republican-controlled House voted to change provisions of the American Affordable Care Act that potentially weaken healthcare access for the poor and people with pre-existing conditions including long-term disabilities, reports Vox's Dylan Matthews:
The Congressional Budget Office estimated in March that 24 million people would lose health insurance if the [American Health Care Act] were to pass, and the changes made to the bill in the ensuing two months have only made it less generous and more likely to jeopardize coverage. And because the bill substantially weakens regulations for both individual and employer plans, millions of people who still get insurance will see the extent of their coverage shrink, and see themselves forced to pay out of pocket for expensive procedures that would otherwise be covered.
In Mother Jones, Sabrina Toppa looks how the high cost of health care is stealing the life of the poor:
According to a new series of studies in The Lancet, the United States risks a "21st century health-poverty trap" if it does not address low-income Americans' growing inability to access or afford quality health care. The five papers published today in the British medical journal describe how the high cost of health care is intensifying the widening gap between the rich and poor and issue a call for a single-payer health care system.
The studies highlight several alarming trends: America's richest 1 percent live more than a decade longer on average than the poorest Americans; 40 percent of poor Americans skip going to the doctor because they can't afford to; the neediest 20 percent of Americans spend almost twice what the richest 20 percent Americans spend on private health insurance; and 1 out of every 10 households facing high medical costs declares bankruptcy, even after the implementation of Obamacare.
"We are witnessing a slow-moving disaster unfolding for the health of lower-income Americans who have spent their working lives in a period of rising income inequalities," says Dr. Jacob Bor, an assistant professor at the Boston University School of Public Health.
In the New York Times, Alice Wong, a disabled Indiana native, explains why Medicaid is so vital for her:
When I turned 18, my dad told me that I needed to make an appointment at the county office and apply for Medicaid. Living in an affluent suburb of Indianapolis, I was indignant. Medicaid was for “those people,” the “indigent.” I learned that my parents paid exorbitant monthly premiums for my health care. Only one company in our state would cover me because of my pre-existing condition (spinal muscular atrophy, a congenital motor neuron disease). I had no idea of the financial pressure placed on our family for basic health insurance because of my disability...
When you are disabled and rely on public services and programs, you face vulnerability every day. This vulnerability is felt in my bones and my relationship with the state. Fluctuations in the economy and politics determine whether my attendants will receive a living wage and whether I’ll have enough services to subsist rather than thrive. The fragility and weakness of my body, I can handle. The fragility of the safety net is something I fear and worry about constantly.
In a terse column, Chauncey Devega claims some of the conservatism being expressed by House Republicans reflect an underlying distain for the poor and research shows that this has to do with false beliefs:
A belief in the “just world hypothesis” is a unifying theme in Pew’s findings: Republicans and conservatives are more likely to hold the erroneous belief that good things happen to good people and that individuals who suffer disadvantages in life that are out of their control are somehow responsible for their circumstances. The just world hypothesis is a fallacy...
Pew’s findings echo in the debate about health care policy, which reflects the belief among Republicans and conservatives that those who seek assistance from society have no right to receive it. If people do not have the resources to provide adequate health for themselves and their families, that’s their own fault. Most important, the sick deserve their illnesses; the healthy and strong have earned their advantages.
Also in Salon, the Lodon School of Economics' Jonathan J.B. Mijs says inequality is rising and the world doesn't seem to notice:
[I]ncreasing levels of income inequality and segregation mean that modern-day Americans are growing up in less economically diverse environments than in the 1970s. Consequently, people on either side of the income divide cannot see the breadth of the gap that separates their lives from those of others. As the gap grows wider, other people’s lives are harder to view. Rising inequality prevents people from seeing its full extent...My research suggests that how we see and explain inequality drives our empathy and solidarity with others. We feel for people who we understand are facing hardship by no fault of their own. We have less sympathy for those whose situation, we think, is caused by poor choices or a lack of effort.
If we want our young citizens to develop a better understanding of the world they live in, we need to create conditions for more interaction across socioeconomic and racial lines, at school, in college and in the neighborhoods where they grow up. We can do this by ensuring access to preschool for all income groups; stepping up the effort to desegregate public schools; and considering roommate assignment and other cost-free measures to increase diversity in college life.
Check out this cartoon from Gary Varvel:
Is a $15 minimum wage good economics? In the American Prospect, Jared Bernstein and Ben Spielberg look at why the contention that jobs would be lost is too simplistic:
In this as in many other economic policy debates, proponents of progressive policies have allowed ourselves to be painted into analytical corners by focusing on the wrong questions. The criterion for an acceptable minimum-wage increase cannot be that if even one person loses a job, it’s not worth doing. Suppose we applied that standard to trade policy, or to technological progress. We’d have to dock every cargo ship and smash the machines!..
There’s another way in which minimum-wage opponents’ analysis is too simplistic. Their mantra tends to be that higher wages have dangerous macroeconomic effects, because, “if you raise the price of something, people will buy less of it.” But as economists Michael Reich and Jesse Rothstein of the University of California, Berkeley, noted in a recent brief, “Theory suggests that minimum wages have both positive and negative effects on employment.” While increased labor costs can lead to more automation and higher prices, which can reduce both sales and jobs, higher-paid workers can help offset their cost through greater productivity, lower quit rates, fewer turnovers, and fewer vacancies. Minimum-wage increases also generate “more purchasing power among households with higher propensities to spend their income. … Adding up these negative and positive effects yields ambiguous theoretical predictions. The net effect of a minimum wage increase on employment therefore is a matter of empirical evidence.”
Politico's Danny Vinik looks at why the economy is continuing to improve but wages are not and offers a few reasons such as this one:
Monopolies may not lead just to higher consumer prices; they also may lead to lower wage growth. This theory of economics—known as monopsony—holds that as industries have grown more concentrated, firms have gained greater control over their workers’ wages. In a world where workers can’t simply switch to a new industry—gaining new skills takes time, for instance—workers have little power to demand a pay raise.
“The concentration of economic power is a huge issue, not just for higher consumer prices but it is giving [companies] more bargaining powers over workers,” said Khanna.
This theory has been garnering greater influence over the past few months, with both Furman and Alan Krueger, another former chair of Obama’s CEA, arguingthat monopsony is holding back worker wages. Just this week, the Economist also suggested it could be contributing to reduced wage growth. The upside for this theory is that the government has a proven set of tools to combat this problem: antitrust authority.
You might be interested in NPR's Eric Westervelt interview with Northwestern's Teresa Eckrich Sommer and UT Austin's Chris King on two-gen services that target children and parents simultaneously to increase economic mobility. "There are many of these 'two-gen' programs across the U.S.," writes Westervlet. "And while they differ in emphasis and detail, at their core they intentionally focus on ways to help both the child and parent. Usually this happens through targeted education and career training and other vital support such as health services, mentoring, and transportation."
In the Boston Globe, Katie Johnson looks at the need for more daycare subsidies for the working poor:
For parents trying to hold down a job or take classes, child care is essential. And in Massachusetts, it’s often prohibitively expensive — $17,000 a year on average for an infant, the second-highest rate in the country. When families can’t secure a subsidy, some quit their jobs and stay home with their children, as Cirino did, sometimes turning to public assistance to get by. Others drop children off at a grandparent’s or neighbor’s or at a lower-priced unlicensed provider, which means greater risk. In the first week of April, there were two deaths at unlicensed centers: an 18-month old in Sturbridge and a 10-week old in Mendon.
In the Stanford Social Innovation Review Living Cities' Ben Hecht looks at why more investment in new entreprenaurs is needed to grow jobs, particularly in low income communities and communities of color:
For the past 40 years, the entities that create 90 percent of all new jobs—start-up companies less than five years old—have been on a steady downward trajectory. A recent Economic Innovation Group (EIG) report, “Dynamism in Retreat,” paints a frightening picture of this long-term decline. The data tells us that the number of start-ups fell by nearly half between 1978 and 2011, and start-up rates were lower between 2009 and 2011 than they were between 1978 and 1980 in every state and Metropolitan Statistical Area except one. If we aren’t producing new businesses, we aren’t producing jobs and opportunities for people of color and low-income Americans...
If we really want to re-invigorate the American economy and grow jobs today and in the future, we need to understand why America’s fastest-growing populations, people of color, aren’t starting and growing companies. A December 2016 report from The Kauffman Foundation, “Including People of Color in the Promise of Entrepreneurship,” casts a spotlight on the unique challenges faced by entrepreneurs of color when launching and growing businesses—including a lack of wealth and networks, and a history of being denied capital from traditional institutions...To succeed, we need philanthropists and other social change actors to expand our aperture from primarily focusing on mitigating the damage capitalism can cause—through efforts such as workforce re-training for jobs lost to globalization or advocating for environmental protections—to affirmatively building a new capitalism that creates shared prosperity.
Impact Alpha looks at new S&P-rated bonds being offered by the Reinvestment Fund and the Local Initiatives Support Corporation, which are both community development financial institutions that normally raise money via philanthropic sources or short-term bank loans:
The two bond sales last week represent a new source of capital for the CDFI sector, which specializes in lending to community-based organizations and households in low-to-moderate income urban, rural and reservation communities. As a sector, CDFIs have around $108 billion in assets...There are no geographic or programmatic constraints on the CDFI bond proceeds. The terms available from capital markets are also longer than the typical terms on CRA-motivated loans or PRIs that CDFIs get from banks or foundations. Reinvestment Fund’s offering comprised six-, seven- and eight-year bonds. (LISC’s bonds matured in 10- and 20 years.)
Over at Devex, Adva Salinger reported the Rockefeller Foundation's new President Rajiv Shah laid out some of the foundation's latest thinking at the Global Philanthropy Forum:
Shah called for foundations to explore “new ways to seek leverage and impact and results,” by taking on more risk and partnering with one another. He cited as examples a partnership between the IKEA Foundation and Open Society Foundations on forced displacement, Omidyar's work on impact investing and MacArthur Foundation's push to create a global marketplace of ideas.
Partnership will be a priority under his leadership, he said, acknowledging the challenges. Some past collaboration across philanthropic organizations has been superficial, he said, because of “our egos, our desire for control, our confidence in our own intelligence and our natural desire to launch programs and then find others to co-fund,” he said. “We don’t have all the answers but as we're looking around we are seeing signs of success from which we hope to learn.”