Must Reads: The New York Times' Annie Lowrey looks at long-term unemployment and whether it's "too late to prevent long-term joblessness from permanently scarring the American work force and broader economy." (You also may want to check out this Economix blog post aggregating the numerous anecdotes from readers comments on the Lowery story. ) The Economic Policy Institute provides the latest entrant in the technology vs worker debate with this new report concluding technology is "unlikely to be a major driver of the overall wage distribution." The Forbes December issue has a series of articles on the philanthro-capitalist approach to solving the world's problems.
Check out this editorial cartoon on CEO pay from the Boston Globe's Dan Wasserman:
What happens when work doesn't really pay? The debate this week had another data point after an Ohio Walmart got attention for holding a food drive for its own workers, according to the Cleveland Plain Dealer. Bloomberg's Mark Gimien had this to say about employers with employees needing to rely on social subsidies, noting the sentiment has very Victorian roots:
Workers’ real wages have fallen for decades, with cruel and socially destructive effects. Someone who puts in 40 hours a week of work in a McDonald’s kitchen should not have to rely on charitable hospital care or food pantries. However, the idea that heartless and flinty employers are subsidized by welfare isn’t new. For many decades in the 19th and early 20th centuries is was more or less the conventional wisdom — and long seen as an argument for cutting welfare. Not for corporations but for the working poor. We’re still living with the ugly consequence: a system of government aid that aggressively cuts benefits for those who take on work, and forces many of the poor into desperate choices, like whether to take a job when it will mean losing their Medicaid benefits.
In counter argument, over at Bloomberg Megan McCardle weighs in:
What happens to those low-skilled workers if we try to force Wal-Mart to knock off the food drives and pay their workers much more? Some of them would be better off. But the higher wages might cause Wal-Mart to cut staffing levels -- and might draw in higher-skilled workers from other sectors. Many of the desperate folks who flooded Wal-Mart with applications might end up unemployed. The fundamental problem with Wal-Mart wages is not Wal-Mart wages. The economy has always had lower-wage jobs, often filled by housewives and teenagers who weren’t yet responsible for supporting themselves. For most of the 20th century, retail jobs were designed for people who didn’t intend to be permanently supported thereby -- often young women on the way to marriage.The problem is that there are too few of the better-paying permanent jobs held by the future husbands of those latter-day shopgirls -- the decent-paying, higher-productivity jobs that used to support the bottom tiers of America’s middle class.
We find that if Walmart redirected the $7.6 billion it spends annually on repurchases of its own company stock, these funds could be used to give Walmart’s low-paid workers a raise of $5.83 an hour, more than enough to ensure that all Walmart workers are paid a wage equivalent to at least $25,000 a year for full-time work. Curtailing share buybacks would not harm the company’s retail competitiveness or raise prices for consumers. In fact, some retail analysts have argued that by providing a substantial investment in the company’s front-line workforce, higher pay could be expected to improve employee productivity and morale while reducing Walmart’s expenses related to employee turnover. With more money in their wallets, Walmart employees would likely spend a portion of the cash at Walmart itself, boosting the company’s sales.
You might be interested in this Yahoo article by Ron Haskins looking at the upcoming 50th anniversary for the "war on poverty" and what went wrong. In U.S. New and World Report, the conservative American Enterprise Institute's Sita Nataraj Slavov argues if you want to save entitlements, tax consumption, not investment:
The bottom line is that sustaining a large welfare state will be feasible only with a pro-growth tax system that taxes consumption rather than investment and spreads more of the tax burden over the middle class. It will also require carefully designing transfer payments so that they do not severely punish work. In short, we face a choice. If we want to keep our current tax and benefit structure, which features a relatively high tax burden at the top and a low burden on the middle class, as well as welfare benefits that phase out rapidly with income, then we will need to sharply curb entitlement spending. If we're willing to move towards less progressive taxation, with a higher tax burden on the middle class and broader welfare benefits, then we can get by with more modest entitlement cuts.
Check out this editorial cartoon from earlier this year from Clay Bennett of the Times Free Press:
The New Yorker's Jon Cassidy published six charts on the issue of inequality, here's the most striking:
This story from the Nation Magazine looking at inequality's effect on life expectancy, and concludes inequality kills. Over at Mother Jones, Kevin Drum asks whether we can blame all of the inequality the United States is facing on financialization:
I'm all for reining in the size of the financial sector, but I confess to thinking that there must be something deeper than this that underlies our problem. Wall Street would happily allocate more money to real-world investment opportunities if the demand were there. But it's not, even with essentially free money. For some reason, the investment community doesn't believe that expanding production of real-world goods and services to maximum levels will pay off. If [Larry] Summers is right, this is not a temporary condition that can be solved with monetary policy, it's a permanent change in the economy. But why? One way or another, the answer has to get back to the real world. That's where everything starts.
This week the NYT's Paul Krugman looked at whether the United States is in a permanent slump and argues the country should say no to austerity:
[I]f our economy has a persistent tendency toward depression, we’re going to be living under the looking-glass rules of depression economics — in which virtue is vice and prudence is folly, in which attempts to save more (including attempts to reduce budget deficits) make everyone worse off — for a long time. I know that many people just hate this kind of talk. It offends their sense of rightness, indeed their sense of morality. Economics is supposed to be about making hard choices (at other people’s expense, naturally). It’s not supposed to be about persuading people to spend more.
Meanwhile Germany has been saving more and spending less with decent results, sparking debate here and here. Two years ago, Alhambra Investment's Joseph Calhoun connects deepening inequality with the Fed policy:
It is relatively simple and intuitive to make the connection between Fed policy and wealth inequality. Whether through open market operations or direct lending through the discount window the first recipients of newly created money are the banks in the Fed system. These banks can then lend out those funds while keeping only fractional reserves. Given that the banks, particularly today, want to limit their risk exposure, this newly created money is first lent to their most creditworthy customers. In addition, the amount one can borrow is obviously a direct function of one’s already existing net worth so it is the “wealthy” who are able to borrow these newly created funds first and at the lowest rate of interest. There are other means by which inflation tends to benefit the wealthy as well but this is the most direct route.
The Economix blog's Jared Bernstein, meanwhile, analyzes the Fed and Janet Yellen's ability to improve employment and economic conditions:
The question then becomes whether the Fed can really tighten up the job market, especially with Congress pushing in the opposite direction. The answer, given what we’ve seen in recent years, would appear to be: the Fed can help, and Ms. Yellen has been a smart, forceful advocate of that position, but it can’t do so alone. It needs complementary fiscal policy to stimulate the missing demand that would be taking advantage of the low-interest-rate environment that the Fed has created and fostered.
The Washington Post looks at how the recovery is creating inequality state by state--be sure to check out the interactive chart at the bottom.
Inspired by all this talk of JFK this week? You might want to read one of his most famous speeches, which includes the above quote. Here's a bit more:
If a free society cannot help the many who are poor, it cannot save the few who are rich.
You have to understand that we know that we will never not feel tired. We will never feel hopeful. We will never get a vacation. Ever. We know that the very act of being poor guarantees that we will never not be poor. It doesn't give us much reason to improve ourselves. We don't apply for jobs because we know we can't afford to look nice enough to hold them.
Viral interest in the post led to this outcome for the author: "After enough people tried to send me paypal money, I set up a gofundme. Find it here. It promptly went insane. I have raised my typical yearly income as of this update." Meanwhile this article in Salon discussing a new for-profit, "crowd-funding platform dedicated to collecting donations for homeless or otherwise needy people in San Francisco." The World Bank's Marcelo Giugale looks at the potential to move from simple poverty alleviation to true prosperity, arguing "the game is no longer to sell cheap but to sell new, not just to be efficient but to be innovative." The NYT's Annie Lowrey also recently wrote about the funding prospects of nonprofits:
Even as the economy recovers, the charitable sector as a whole is facing a tough and deeply uncertain economic environment. The economic scars from the recession continue to haunt many charitable groups. Need remains acute. And the tough fiscal environment for federal, state and local governments further threatens them.
This post from Phil Buchanan at the Center of Effective Philanthropy discusses why funders need to support nonprofits in "data collection and analysis that fuels improvement." You also may want to check out these infographics on fundraising.
Is Mitt Romney's former running mate hoping to be a new type of class warrior? Be sure to read this Washington Post piece on Rep. Paul Ryan's search for a new GOP policy narrative for poverty.
The Center for American Progress offers a primer on social finance tools explaining what they are, how they are being used, and where policy changes can help them reach their full potential. And finally you may want to read Heron's first set of interviews with influencers in the field on how nonprofits can make use of capital to be more sustainable.