Posts Tagged ‘ Poverty ’

« Older Entries

Welfare Nostalgia Won’t Help Poor

Friday, August 26th, 2011
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

Some liberal commentators marked the 15th anniversary of welfare reform this week with a curious lament: Welfare rolls aren’t growing fast enough.

“If you think the point of the program is to help the poor, then no, welfare reform is not working,” asserts Ezra Klein of the Washington Post. He cites an article by Jake Blumgart in The American Prospect, who frets that welfare rolls have “merely inched upward” during the late recession and jobless recovery.

“At the heart of the worst recession in 80 years, TANF (Temporary Assistance for Needy Families) funds only reached 4.5 million families, or 28 percent of those living in poverty,” Blumgart writes. “By contrast, in 1995, the old welfare system covered 13.5 million families, or 75 percent of those living in poverty.”

Before we wax too nostalgic for the good old days of big welfare rolls, it’s worth remembering that progressives led the charge for welfare reform.

“Ending welfare as we know it” was arguably President Bill Clinton’s most radical challenge to the political status quo, and the biggest policy change to happen on his watch. By the time he took office in 1992, the welfare system was held in nearly universal contempt by Americans across the socio-economic spectrum. Not only had it failed to make a dent in poverty, but taxpayers believed it undermined work, personal responsibility and family. The system also had failed the poor, providing them neither effective preparation for work or links to jobs, nor public subsidies sufficient to lift them out of poverty.

Clinton had a better idea: Rather than subsidizing dependence on the state and isolation from the economic mainstream, public assistance ought to require and reward work. To “make work pay,” Clinton got Congress in 1993 to approve a massive expansion of the Earned Income Tax Credit, which is essentially a “work bonus” for low-wage earners. The credit has become a social policy rarity—an anti-poverty program that actually works.

On Aug. 21, 1996, after having vetoed two draconian bills sent to him by the Republican Congress, Clinton signed a law which put a time limit on benefits, and replaced the old, open-ended welfare entitlement with a block grant to the states. In combination with the work bonus and other reforms (e.g., cracking down on deadbeat dads and expanding child care support) and a robustly growing economy, the results were galvanic.

More than 7 million people left the rolls between 1996 and 2001. From its peak of 14.4 million in March 1994, the number of people on welfare dropped by 63 percent to 5.3 million in 2001. Millions of welfare recipients left the dole for jobs. Teen pregnancy and out-of-wedlock birth rates dropped dramatically. And the number of Americans living in poverty declined dramatically, by nearly 8 million people.

While some liberals predicted that ending the entitlement would produce scenes of Calcutta-style misery in America—and a few quit the Clinton administration in protest—the public heartily approved. By realigning U.S. social assistance with a strong work ethic and personal responsibility, Clinton’s reforms helped mitigate public hostility toward public assistance and unlock Americans inherent generosity—overall federal and state spending (including EITC costs) to support low-income families actually rose after 1996. They also deprived culture warriors of a favorite, racially tinged theme: When was the last time you heard a Republican candidate mock “welfare queens?”

In the late 1990s, of course, jobs were plentiful. Now the economy isn’t creating enough jobs to bring unemployment back down to earth. Obviously this undercuts policies aimed at speeding transitions from welfare to work, and liberals are right to draw attention to the hardships the jobless recovery imposes on our most vulnerable families.

But they are wrong to assume that welfare’s cash payments are somehow still central to America’s efforts to fight poverty, relieve social distress or shorten recessions. Clinton’s emphasis on “work first” made the unemployment system, rather than welfare, the safety net of first resort for low-income families in downturns. And indeed that is what has happened.

According to a recent Urban Institute fact sheet:

“Unemployment benefits substitute for welfare: three in ten low-income (below 200 percent of the federal poverty level) single parents received unemployment benefits in 2009, double the share receiving in 2005. This suggests that as more single mothers went to work during the late 1990s and early 2000s, more could qualify for unemployment benefits in the event of job loss. Also, many states have recently expanded eligibility for unemployment benefits.”

The other big, countercyclical response to the recession and sluggish job growth has come from the food stamp program (now called SNAP). Last month, the Urban Institute reported that nearly 45 million people receive help from SNAP, an increase of about 69 percent since the recession began in 2007. Many states have seen dramatic growth in their food assistance caseloads as well.

In other words, poor families increasingly rely on other social supports to tide them over hard times. Liberals have a point, however, in arguing against enforcing strict time limits on welfare benefits during a prolonged job drought. Although the Clinton reforms held up well during the 2000-2001 recession, this one is far worse. The “work-first” architecture isn’t perfect, and progressives should be open to sensible modifications based on new and unforeseen economic challenges.

Rather than resurrect the old dependency-fostering entitlement, however, progressives should try more creative approaches. We should be prepared to spend more money to help more families from sinking into poverty through no fault of their own. But, in keeping with the spirit of Clinton’s reforms, new funding should go to support work. This could take the form of a new public works initiative or—perhaps more likely, given GOP control of the House—direct subsidies to employers to hire low-income workers.

The states already have the ability to waive work requirements for a portion of their caseloads; Washington could broaden such authority temporarily, until job growth starts to pick up. Here again, the challenge will be getting GOP austerity freaks to get in touch with their inner “compassionate conservative.”

In any event, it’s hard to see how relitigating the 1996 reform will help the poor. The entitlement ethos isn’t exactly making a comeback in America. And there’s no evidence it would work any better now than before.

 

Tags: , , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix, Fiscal Responsibility | 1 Comment »

Do You Know Anyone Who Has Served in the Military?

Thursday, September 30th, 2010
Jim Arkedis


Jim Arkedis is the director of PPI's National Security Project.

by Jim Arkedis

In late July, I was sitting in a Seattle restaurant with my uncle and his wife.  Our conversation ebbed and flowed among the many problems our country faces –recidivism, poverty, Afghanistan, economic uncertainty – you name it, and I assure you it came up.  Since I do the whole “progressive national security thing” for a living, we invariably circled back to those themes.

Though an oversimplification by any stretch, it’s probably safe to say my uncle and his wife classify themselves as “west coast liberals,” or a bit further left on than yours truly at least on military issues.  They had, however, spent time in Italy in 2008 teaching English to military officers, and enjoyed the experience.

“You know,” Uncle Bill said, “The only other experience I’ve had with the military was when I was 17. I marched in to see your grandfather and told him that he had to sign these papers so I could join up and go to Vietnam.  Of course, he didn’t even bother to drop his paper and said ‘no’.  But it’s probably one of the most patriotic things I’ve done in my life.”

The American public’s lack of familiarity with the military, something we subsequently brought up, continues to be a huge problem.  Because military recruiting is confined to a few areas of the country – notably poorer areas of the South and Midwest – most of the country has little “skin in the game” when it comes to major foreign policy decisions involving military deployments.

Secretary of Defense Robert Gates feels just about the same.  He spoke about the issue yesterday at Duke University:

“With each passing decade, fewer and fewer Americans know someone with military experience in their family or social circle…. There is a risk over time of developing a cadre of military leaders that politically, culturally and geographically have less and less in common with the people they have sworn to defend.”

For rational economic reasons, our forces are concentrated in several areas throughout the country – southern Virginia, San Diego, North Carolina, and Texas are amongst the largest – and DoD remains the bedrock of many of those communities.

While that may not change, the next Secretary of Defense should make it a priority to expand the recruiting base.  This is a big argument that needs much more fleshing out, but it’s worth beginning to discuss now: Our military should draw from a more even cross-section of American society to inject a more diverse set of ideas into military culture and policy, which will further benefit the country by engaging those diverse recruits’ families and friends in pressing foreign and military policy debates.  How many officers have Ivy League educations these days, anyway?

Photo credit: Ed Yourdon

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in A Progressive Security Strategy, Daily Fix | 2 Comments »

Prices, Wages, Food and Inequality

Friday, June 4th, 2010
Scott Winship


Scott Winship is research manager of the Pew Economic Mobility Project and a recent graduate of Harvard's doctoral program in social policy. The views he expresses do not represent those of Pew.

by Scott Winship

Mike Konczal’s inequality post as a guest blogger for Ezra is getting a bit of attention in the blogosphere. Konczal jumps off of an interesting post by Jamelle Bouie to argue that contrary to those who argue that “inequality isn’t so bad,” the unhealthy nature of the cheaper food that is purchased by the poor negates the fact that the poor face a lower inflation rate. Since he suggests I (and Will Wilkinson) think that “inequality isn’t so bad,” I wanted to correct a misconception that Konczal has about the argument of economist Christian Broda that he is responding to. Broda’s actual argument really doesn’t have anything to do with how healthy the things purchased by the poor are.

Here’s Konczal:

One argument that has become popular recently is that the increase in income inequality isn’t quite as bad because both the rich and the poor have different ‘inflation’ rates — the prices at which goods increase for the rich have been increasing much faster than the prices at which goods have been increasing for the poor. So even though the poor or median person hasn’t had any wage growth, he has much more purchasing power because of this effect.

This isn’t quite the argument that has become popular recently. What fans of the Broda research argue (i.e., what Broda and his colleagues argue) is that the apparent increase in income inequality may overstate the actual increase in inequality because the poor appear to have a lower inflation rate than the rich. If true, then it’s not that “the poor or median person hasn’t had any wage growth,” it’s that they have had wage growth because of their lower inflation rate — and the wage growth has been big enough that it has kept the ratio of rich-to-poor incomes roughly constant.

Think of it this way. Broda and his colleagues find that the prices of what the poor buy (that is, “price” when the satisfaction derived, or utility, is held constant) have risen less than the prices of what the rich buy. That’s because when prices of related goods change, the poor are more likely to switch to cheaper goods, all the while maintaining their overall level of satisfaction with their purchases. If it becomes cheaper to maintain a constant level of satisfaction, then one’s wages have effectively grown. So poor consumers may switch from Green Giant frozen veggies to generics when the latter go on sale, or they might buy their frozen veggies at the chain a couple of neighborhoods over rather than the local grocery store when the latter’s prices go up. Rich consumers, on the other hand, may be relatively unlikely to stop buying Whole Foods vegetables when the plebian chain’s prices are cut. They may not switch to generics as those products become cheaper relative to those on offer at the farmer’s market.

It’s not that we should be excited about how great the generic frozen veggies bought by the poor are compared with the Whole Foods produce. It’s that we should be excited that the poor are either more willing or more able to economize to maintain a constant lifestyle than the rich are, and so inflation eats into their quality of life to a lesser extent than it does among the rich, holding in check other forces that would increase inequality.

Now, Broda’s research is based on purchases of a limited number of commodities and over a limited number of years, but if his findings extend to other goods and services and to earlier periods (which he believes they do), then the implication is that inequality between the poor and the well-off — though not necessarily the richest of the rich — has not grown. We can still worry about the quality of the food purchased by the poor and their health outcomes, but that’s a story about poverty and deprivation, not about inequality or growth in inequality.

Tags: , , , , , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 5 Comments »

To Have and to Have Not

Thursday, April 1st, 2010
Ed Kilgore


Ed Kilgore is a PPI senior fellow, as well as managing editor of The Democratic Strategist, an online forum.

by Ed Kilgore

Longtime political reporter Tom Edsall has a long and fascinating piece of analysis up at The Atlantic on the present and future shape of the two major party coalitions. While none of the data he discusses is terribly surprising, he does suggest some real internal problems with the emerging Republican coalition, which is increasingly made of up married white folks, but includes those who are “haves” only because they “have” government benefits that are perceived as vulnerable to budgetary competition from “have-nots”:

It’s entirely possible that, if the deficit forces continued zero-sum calculations, the definition of the center-right coalition of “haves” will be expanded beyond its original boundaries, stretching past the wealthy, the managerial and business class, the gun owners, the anti-taxers, the home schoolers, the property rights-ers, the Western ranchers, Christian evangelicals, and the self-employed to begin to include members of what conservative operative Grover Norquist called the “takings” coalition — men or women who get federal benefits. A Republican Party hungry for victory would welcome as new members Social Security and Medicare recipients  – “takers” who simultaneously consider themselves part of the universe of “haves” and of Norquist’s “leave us alone coalition.”

Add in people who are self-consciously dependent on federal defense spending, and you can see how a Republican coalition of public- and private-sector “haves” could be formidable if not terribly stable.

Demographic trends, though, are very dangerous for the GOP, as this Edsall nugget shows:

While there is no doubt that the increase in the number of racial and ethnic minority voters works to the advantage of the liberal coalition, white voters remain a wild card. In 2008, whites made up 74 percent of the electorate, and McCain carried them 55-43. There are precedents for much higher Republican margins: in 1972, Nixon carried 67 percent of the white vote, and in 1984 Reagan won 64 percent. Conversely, Bill Clinton only lost the white vote by one percentage point to George H. W. Bush in 1992. The one clear conclusion to draw from these figures is that if the GOP is unwilling to make major policy shifts, especially on immigration reform, a crucial issue to many Hispanics, the party will have to drive its margins among white voters back up to the Nixon-Reagan levels.

If anything, the current pressure on the GOP from its rank-and-file, including the Tea Party Movement, is in the opposite direction from any position on immigration policy that could attract Hispanics. So there will be a strong temptation on the Right for indulging heavily in what might be called White Identity Politics. In light of Edsall’s insight on the “haves” in the GOP coalition who are dependent on government spending, White Identity Politics could involve racially tinged distinctions between the “deserved” government benefits received by white middle-class retirees and the “undeserved” government benefits received or sought by poorer or darker folk. That’s a dynamic that’s already been abundantly apparent in the Republican assault on health reform.

Looks like today’s political turbulence will be with us for quite a while, particularly if relatively high unemployment and budget deficits persist, accentuating the zero-sum politics of group competition that Edsall sees in the data.

This item is cross-posted at The Democratic Strategist.

Tags: , , , , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | No Comments »

In D.C., Public Defenders Aren’t Where the System Falls Short

Monday, March 29th, 2010
Jim Arkedis


Jim Arkedis is the director of PPI's National Security Project.

by Jim Arkedis

On this one, I stepped out of my comfort zone. While I normally write about national security, foreign policy, and the military, yesterday I placed an op-ed in the Washington Post about none of the above. Rather, the piece was about my experience as a “mentor” (a term that seems funny) to my friend, Tim Cofield. We met through a charity called the Welcome Home Reentry Program. As that title might suggest, Tim is an inmate in the D.C. jail, and has been for a good chunk of his life — 13 out of 54 years. The only upside to that is that he essentially missed the Bush years. But as of right now, he’s still there, despite being scheduled for release last Friday.

The point of my article is pretty simple — Tim keeps ending up in jail (he’s been convicted four times, by my count), but he’s not necessarily getting any better. Unless he gets high-quality and consistent mental health and substance abuse care, not to mention a stable place to live and a steady income, Tim is almost certainly going to find himself back in jail soon.

This is a difficult issue for politicians, particularly those on the state and local level who control budgets. Fearful of looking “soft on crime” (hello, California’s three strikes law), politicians promise to throw any transgressor behind bars without paying attention to the consequences. State budgets go bust, and overcrowded prisons are eventually emptied, even though prisoners’ behavioral patterns haven’t been altered.

Here’s an excerpt:

If all goes according to plan, my friend Tim Cofield will be a free man by the time you read this. He was scheduled to get out of the D.C. jail Friday. Despite having spent more than three months in an orange jumpsuit, Tim would probably disagree with Eric Holder’s February speech to the National Symposium on Indigent Defense, in which the attorney general called for more funding to fulfill Americans’ right to competent defense. While I’m sure Holder is correct that “in some parts of the country . . . basic public defender systems simply do not exist,” Tim — whom I mentor through the fantastic Welcome Home Reentry Program — would tell you D.C. public defenders are actually quite good.

In the District, money would be better used to improve post-release rehabilitation and mental health programs. Without better support for parolees, we cannot break a cycle that leads to the reconviction of two-thirds within three years. This astonishing statistic is due to many factors, but here are two big ones: According to the Bureau of Justice Statistics, 74 percent of inmates enter state prisons hooked on drugs or alcohol and 56 percent have a significant mental health problem. Tim checks both boxes.

[...]

We’re at a crucial point. Tim has probably (though not certainly) stayed clean in the prison’s rehab program. I visited him in jail, and he seemed clear-headed and resolved. He is being released into a halfway house that also serves as a drug treatment program. The quality of these programs varies wildly, but regardless, I know he needs much more than just rehab.

His chances to salvage any semblance of a productive life depend on a combination of high-quality substance counseling, consistent therapy and stable housing.

Read the entire thing here.

Tags: , , , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix, PPI in the News | 1 Comment »

Obama’s Donations Reflect His National Security and Foreign Policy Priorities

Friday, March 12th, 2010
Jim Arkedis


Jim Arkedis is the director of PPI's National Security Project.

by Jim Arkedis

President Obama gave away his $1.4 million Nobel Peace Prize award yesterday, and where national security is concerned, he literally put his money where his mouth is.

The largest donation—$250,000—was given to Fisher House, an organization that builds “comfort homes” on the grounds of major U.S. military installations that allow service members’ families “to be close to a loved one at the most stressful times—during the hospitalization for an unexpected illness, disease, or injury.”  It shouldn’t come as much of a surprise that President Obama would choose a charity like Fisher House, given the First Lady’s focus on the cause since the beginning of her husband’s presidency.  And with America’s military facing unprecedented strains, every drop in the bucket helps.

The president also gave $100,000 to AfriCare, which promotes health, food security, and access to water in Africa.  This donation mirrors Obama’s long-standing efforts to alleviate poverty in Africa, which dates back to his days in the Senate when he offered the 2007 Global Poverty Act that aims to cut the number of people living on a dollar a day in half by 2015.

Finally, Obama dropped 100 large on the Central Asia Institute, whose story is chronicled in the book “Three Cups of Tea.”  I wasn’t a huge fan of the book’s style, per se, but the CAI’s work is remarkable in and of itself, and it certainly deserves every penny for carrying out such an important mission of educating girls in Pakistan and Afghanistan.

The donations are very embodiment of the notion that American national security policy is about more than the blunt instrument of military force (an idea most recently forwarded by Chairman of the Joint Chiefs Admiral Mullen).  When force is used, it should be done in a careful and judicious manner that accounts for the extended effects on our fighting men and women.

Tags: , , , , , , , , ,
Posted in A Progressive Security Strategy, Daily Fix | No Comments »

New Report Charts Food Hardship in Every District

Tuesday, January 26th, 2010
Joel Berg


Joel Berg is executive director of the New York City Coalition Against Hunger. He is also the author of All You Can Eat: How Hungry Is America?

by Joel Berg

A new study by the D.C.-based Food Research and Action Center (FRAC) underscores the severe food hardship faced by Americans in this brutal economic climate. FRAC’s report compiles for the first time ever food hardship data in every one of the nation’s congressional districts and top 100 metropolitan areas.

In my home city of New York, the numbers are dismal. People in seven of the 13 congressional districts here faced severe food hardship in 2008-09. The 16th Congressional District in the South Bronx, where more than one in three residents could not afford enough food, had the highest rate of food hardship in the nation, and the 10th Congressional District in Central Brooklyn, where 30.8 percent faced food hardship, had sixth highest rate out of all the country’s 436 congressional districts. Considering that the city still has 56 billionaires, this is an appalling turn of events, which provides the latest wake-up call that all levels of government need to take immediate action to reverse the city’s growing hunger poverty, and inequality of wealth.

While key parts of the city face a particularly severe problem, I believe the most notable news from this data is just how widespread food hardship is in all corners of the city and nation. Even in the relatively least hungry congressional district in the city – Rep. Anthony Weiner’s district that has been traditionally thought of as a bedrock middle-class of neighborhoods in Brooklyn and Queens – more than one in 12 residents couldn’t afford enough food, a level likely higher than in the majority of industrialized Western nations of the world. Because America’s wages are now so low and our safety net so gutted, even the parts of New York City suffering the least are still in worse shape than most people in our competitor nations.

In the New York metropolitan region, including suburban Connecticut and New Jersey, 21.6 percent of households with children faced food hardship. The problem is so widespread that, even when you factor in some truly wealthy areas in Manhattan, Westchester, Long Island, and suburban Connecticut and New Jersey, more than one in five people in the metropolitan area couldn’t afford enough food. Statewide in New York, 17.4 percent of all state residents faced food hardship.

The new report only underscores the need for a Good Food, Good Jobs program that I proposed here in December. Low-income areas across America that lack access to nutritious foods at affordable prices — the so-called “food deserts” — tend to be the same communities and neighborhoods that, even in better economic times, are also “job deserts” that lack sufficient living-wage employment. A “Good Food, Good Jobs” initiative would be a good way to tackle our interrelated hunger, malnutrition, obesity, and poverty problems.

Tags: , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 1 Comment »

The Living Standards of the Poor — Part I

Friday, January 22nd, 2010
Scott Winship


Scott Winship is research manager of the Pew Economic Mobility Project and a recent graduate of Harvard's doctoral program in social policy. The views he expresses do not represent those of Pew.

by Scott Winship

Last week, I spent some time looking at the living standards of the middle class, showing that they have improved notably over time and giving evidence that they are better than or comparable to middle-class lifestyles in other industrialized nations. I will be returning to this issue in a later post in order to address the “two-income trap” argument of Elizabeth Warren, which was raised by Reihan Salam and by Rortybomb.

For now though, I want to talk about the living standards of the poor. It’s important to make the distinction between trends (which I’ll discuss today) and absolute levels of material well-being (which I’ll discuss in a later post) because things can have improved a lot at the same time that they are still not all that great.

Let’s return to the comparison I used in my post on the middle class of “the gold standard” of 1973, when median household income was at its pre-stagflation peak, to 2008. To represent “the poor,” I’ll look at the 20th percentile — the household that is doing better than 20 percent of other households but worse than 80 percent of them. You’ll have to trust me that my research indicates the story would be similar if I were talking about the tenth percentile.

It’s easy to look at only a fairly limited income measure going back to 1973 for the 20th percentile. Doing so indicates that income at the 20th percentile grew from $19,046 to $20,712 (in 2008 dollars, adjusted by the Bureau’s preferred CPI-U-RS). That’s obviously not impressive growth, though it should be noted that the poor are a bit better off today than they were in 1973 (and they look a little better comparing 1973 to 2007, which is a fairer comparison). Using the PCE deflator, which the federal Bureau of Economic Analysis uses (and which I prefer because of the evidence that the CPI-U-RS overstates inflation, particularly among the poor), income increased by about $3,000 after accounting for the cost of living, or 16 percent. That’s about the same as for the middle class using the same measures and methods.

As I noted in the middle-class post, the official income definition is pretty limited. The Census Bureau’s “Definition 14″ takes into account taxes, public benefits, and the value of health insurance, and it’s easy to look at going back to 1979 (which was at least as good/bad a year for the poor as 1973 was). By this measure, income at the 20th percentile rose from $17,999 to $24,642 from 1979 to 2008 (using the CPI-U-RS). That’s an increase of over one-third—after adjusting for the cost of living. When the PCE is used to adjust for the cost of living, the increase is almost $8,000—45 percent!

A number of commenters to my post on the middle class didn’t like that the value of health benefits were included in my “comprehensive” income measure. I prefer including them in “income” because employer health care costs have caused earnings growth to be quite a bit lower than it otherwise would have been, and employer- and publicly-provided health insurance contribute to living standards. It is possible that the way the Census Bureau estimates the value of health insurance exaggerates improvements in well-being, but it is not simply the case that rapid health care inflation negates those estimates. Many health economists believe that rising health care costs do reflect corresponding improvements in the quality of care received. At any rate, whether or not you believe I have a dog in this fight, hopefully you believe that the Census Bureau doesn’t.

Nevertheless, we can look at the trend omitting the value of health insurance in 2008. Doing so offers a somewhat conservative estimate of the increase because I can’t omit the value of insurance from 1979. The increase, however, is 21 percent using the CPI-U-RS, and 29 percent using the PCE.

So it seems pretty likely that the living standards of the poor in the U.S. have improved fairly robustly in recent decades. Before leaving behind the question of trends, I should note that there is pretty overwhelming evidence that male workers who don’t get further education beyond high school have seen real wage stagnation (though the story for the median male worker, as I showed in the middle-class posts, is much better). The fact that household incomes at the bottom have grown reflects a decline in taxes paid, an increase in the value of means-tested benefits, and greater work among women (including single women). Computations I have done indicate that confining things to non-elderly households doesn’t affect the story importantly; nor does adjusting incomes for household size.

This issue of greater work among women is one of the last remaining arguments to my case that I feel I need to address more, because it is obviously key to the question of whether higher incomes really reflect improved living standards broadly construed. After all, we could all work more hours and sleep less, which would improve our incomes but not necessarily our quality of life. I’ll take this up in my next couple of posts, but suffice it to say, you can assume my read of the evidence doesn’t overturn the case I’ve been trying to make thus far.

Tags: , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 4 Comments »

More on Wages and the Middle Class: A Response to Rortybomb

Thursday, January 14th, 2010
Scott Winship


Scott Winship is research manager of the Pew Economic Mobility Project and a recent graduate of Harvard's doctoral program in social policy. The views he expresses do not represent those of Pew.

by Scott Winship

I will be posting soon on the living standards of the poor, but I first wanted to take some time to respond to Mike Konczal of Rortybomb. Mike argues that incomes have stagnated since 1999, which coincides with a dramatic rise in consumer borrowing. Kevin Drum picks up his post and runs with it. Let me start out by saying that I wasn’t so much objecting to Mike’s (or more specifically, Raghuram Rajan’s) hypothesis as I was objecting to general claims that wages have stagnated.

But Mike’s analysis has some problems. First, while he wants to argue that 1999 represented the start of a period of stagnation, a quick look at his chart will reveal that the significance of that year is that it is a cyclical peak year. The trend line hits local peaks at the height of the business cycle going all the way back through the late 1960s. The decline in real income from 1999 through the early 2000s isn’t any steeper than in previous downturns (it’s the recovery from the mid-2000s forward that’s weak). So it’s unclear to me why consumers became overleveraged this time but not in previous recessions.

Beyond that, Mike’s chart on household credit market debt is misleading. He’s comparing income levels in his first chart to debt changes in the second one. Conveniently, they sort of support his hypothesis. But he should be comparing levels to levels. Here’s the chart showing levels of household credit market debt:

Put the two charts together and you get this one:

If you can find a relationship there, you are more creative than I am. One more thing: “credit market debt” includes mortgages, car loans, and credit card debt. But the first two of those are secured by assets, so charting the change in debt without accounting for changes in assets is also misleading.

OK, Mike’s next objection is that the increase in income that I documented is due to households working more hours—in particular, wives. But here’s the thing—part of the reason that male compensation has “stagnated” (in quotes because I don’t believe that’s true) is due to the increase in work among women (increased supply of labor leads to lower wages). We don’t know what the counterfactual would have been had women not increased their hours.

As for “middle class woes,” foreclosures have risen dramatically, but they are a tiny percentage of mortgages (and a sizable chunk of homeowners don’t have mortgages because they’ve paid them off). The Calculated Risk post that Mike links to shows that other than Florida and Nevada (where many foreclosures are properties owned by speculators), between one and six percent of mortgages were in foreclosure as of mid-2009.

Oh, and about that “stagnation” since 1999—if you compare 1999 to 2007 (both peak income years), median household income using a comprehensive measure (that nevertheless does NOT include the value of health insurance) rose from $44,205 to $46,201 (in 2007 dollars, using the CPI-U-RS). [See Alternative Measures of Income and Poverty, Definition 14a.] Using my preferred PCE deflator, the increase is from $42,786 to $46,201—an 8 percent increase.

As for Kevin’s contrasting of per capita income growth and household income growth, see Steve Rose’s explanation of why these comparisons are apples-to-oranges.

The views expressed in this piece do not necessarily reflect those of the Progressive Policy Institute.

Tags: , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 5 Comments »

Inequality, Living Standards, and the Middle Class, Part 2

Tuesday, January 12th, 2010
Scott Winship


Scott Winship is research manager of the Pew Economic Mobility Project and a recent graduate of Harvard's doctoral program in social policy. The views he expresses do not represent those of Pew.

by Scott Winship

My last post tackled inequality trends in the U.S. and how progressives ought to think about them. Now I want to look at middle-class living standards. In the course of basically agreeing with Dalton Conley that progressives should be more concerned with poverty than inequality, Kevin Drum argues that what got lost from the Conley analysis is the stagnation of the middle class (“sluggish middle class wages in a country that’s been growing energetically for decades”). And yesterday he endorsed the views of economist Raghuram Rajan, who blames the financial crisis on “the purchasing power of many middle-class households lagging behind the cost of living.”

Kevin has always been one of my favorite bloggers, but I have to disagree with him here—both in terms of the level of income the typical American has and in terms of recent trends, a careful look at the data implies that the middle class is doing pretty well. The common belief among progressives that this isn’t the case causes us to misdiagnose what the nation’s most pressing economic problems are and to put forth an agenda that doesn’t resonate as strongly as we think it does.

My friend Steve Rose really deserves the most credit for trying to draw attention to the reality of middle-class living standards being better than the left believes. In a much-circulated report for PPI and in his analyses for Third Way, Steve showed that, for instance, when measured correctly, the typical working-age American’s income is much higher than official statistics imply.

Many progressives thought that Steve was somehow pulling a fast one, a view with which I strongly disagree, but let me make similar points in a more transparent way here. First, consider what many progressives consider “the good old days”—the height of the pre-1970s economic boom. In 1973, the median inflation-adjusted income was higher than it had ever been and higher than it would be again until 1978—$45,533 (in 2008 dollars). Call this the gold standard before, in the conventional progressive telling, things started going south.

How much did things go south? Well, in 2008 the median was $50,303. That’s right—about $5,000 higher (after adjusting for changes in the cost of living). This improvement understates things because households also became smaller over time, and because the inflation-adjustment here probably overstates inflation. For instance, if one uses the Bureau of Economic Analysis’s Personal Consumption Expenditures deflator, the increase from 1973 to 2008 was about $7,700, or 18 percent. Not only does that still not adjust for declining household size, it also doesn’t include changes in taxes, non-cash benefits, the value of health insurance, and capital gains. Incorporating these adjustments shows an increase in living standards that is more like 40 percent.

Rather than household income, others on the left point to stagnation in men’s wages (women’s wages have increased dramatically by any measure). For example, the Economic Policy Institute estimates that the median male worker’s hourly wage was $16.88 in 1973 and $16.85 in 2007. However, EPI’s figures show that when fringe benefits are taken into account, the median male worker’s hourly compensation increased by somewhere between 5 and 10 percent over this period. And these estimates don’t use the PCE deflator. Nor do they account for changes in taxation and public benefits—the very means we use to mitigate low income.

To review, “stagnation” of household income or male wages means that after adjusting them for the rising cost of living, they are as high as they were in the glory days of the 1960s and early 1970s–they have actually increased. When analysts on the left concede these increases, they then move the goal posts and argue that wages have not grown as much as they should have. Typically, they contrast modest wage growth with more rapid productivity growth. But too often these analyses are done on an apples-to-oranges basis. Critics left, right, and center have all pointed out flaws with the kind of comparisons that EPI and others make. Careful analyses reduce the gap between productivity growth and wage and income growth, though they don’t necessarily eliminate it. At any rate, economic theory says that compensation will increase with productivity all else being equal, and all else has not remained static.

It is certainly true that wage growth has been slower since 1973 than in the two previous decades. But that isn’t a realistic bar to use. The U.S. was the only major economy left standing after World War II, and there was little foreign competition putting downward pressure on manufacturing wages and jobs. The period between WWII and 1973 was anomalous—it could not have been expected to have lasted.

The other way to judge middle-class living standards in the U.S. is to compare them to those in other countries. The Luxembourg Income Study shows that at most points in the income distribution (the 25th percentile, the median, the 75th percentile), income in the U.S. exceeds that in nearly all European countries, including Sweden, the model for many on the left. (The most accessible evidence on this is in a 2002 article in the journal Daedalus by Christopher Jencks.) Determining how to incorporate publicly provided benefits such as education and health care is very complicated, but the evidence we have indicates that American middle-class living standards are at worst comparable to those in European nations.

Trying to persuade the middle class that it is worse off than it is potentially has harmful side effects. For one, as economist Benjamin Friedman and sociologist William Julius Wilson have argued, people are more generous when they feel they are doing well. When they feel economically threatened, they are more inclined to protect what they have than to help others. What’s more, widespread economic malaise can be a self-fulfilling prophecy, preventing people from making the individual choices that ensure, for instance, a strong recovery from recession. In terms of policy, the belief that the middle class is doing poorly can lead to scarce public resources being diverted to those doing relatively well rather than being used to help those truly in need. And politically, it can lead to a tone-deaf and unpersuasive populism that does little to help Democrats win in swing districts and close elections.

Again, the point here is that progressives should care about the facts. Up next…the poor.

The views expressed in this piece do not necessarily reflect those of the Progressive Policy Institute.

Tags: , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 26 Comments »

Inequality, Living Standards, and the Middle Class

Monday, January 11th, 2010
Scott Winship


Scott Winship is research manager of the Pew Economic Mobility Project and a recent graduate of Harvard's doctoral program in social policy. The views he expresses do not represent those of Pew.

by Scott Winship

Happy New Year everyone! I am very late to this debate, but I wanted to weigh in on the conversation launched by Dalton Conley’s pre-holiday American Prospect article on progressivism and inequality. In case you missed it, Conley argued that progressives shouldn’t care that much about inequality and that we should instead care about the poor. Inequality, he showed, has grown between the rich and the middle, but not between the middle and the poor. Bruce Bartlett, weighing in from the right, agreed.

I’ll address the living standards of the middle class and the poor in subsequent posts, but let me add my two cents about inequality trends in this one. An analysis I conducted back in November showed that what has likely happened is that the very top—the top one-half of one percent—has pulled away from everyone else, though the increase from 1980 to 2009 has probably been fairly modest. Whether this has been a good or bad thing—or aside from trends, whether higher inequality in the U.S. than elsewhere is a good or bad thing—ought to depend on three questions, empirical and normative, none of which we have much of a handle on.

First, how does letting the rich get richer affect the absolute living standards of everyone else? As Alan Reynolds has argued, measures of inequality tend to reinforce a fixed-pie conception of national wealth—gains by the rich come at the expense of everyone else. But of course, the pie is not fixed in size, and it may be that allowing the rich to get a greater share of the pie makes for a bigger pie and bigger slices for everyone (a point made by Bartlett). Think about Rawls’s maximin rule—that any inequality that results in the worst-off being better off is just. It’s not necessarily the case that greater inequality must help out those who fall behind, but it’s certainly plausible.

Second, how does letting the rich get richer affect the relative deprivation experienced by everyone else? There are two questions here. When the rich get richer, people at the bottom and even in the middle may get priced out of certain goods and services, as prices get bid up by the wealthy. On the one hand, it may be that yachts become less affordable to the non-rich, which presumably no one would get too worked up about. On the other hand, if the price of an Ivy League education or prime neighborhoods becomes unaffordable to the non-rich, that would have bigger implications. Beyond the issue of being priced out of goods and services, inequality may make the non-rich feel less well off—even if their absolute living standards improve. If the Nissan Sentra you own is nicer than the Chevy Cobalt you used to have but feels no better since more people are driving Jaguars than in the past, then there’s room for debate about whether you are “better off”.

Third, if inequality makes most people better off in absolute terms (by making the pie bigger) but makes them feel worse off in relative terms (if their bigger piece feels smaller than before because of how much bigger others’ slices have gotten), then how much weight are we to give each effect? Unlike the other two considerations, this one has empirical and normative dimensions. You may think that being better off but feeling worse off is a net change for the worse, while I may think that it’s only being better off that matters. Robert Frank has made the case—not entirely convincingly, in my view—for the former view.

If you’re looking for the answer to these questions in a blog post, then my heart goes out to you. What I will say is that a situation in which the top 1 in 200 pulls away from the bottom 199 is quite a bit different than a situation in which the top 40 pulls away from the bottom 160, since relative deprivation is likely to be a bigger problem in the latter case.

More to the point, reflexive soak-the-rich tendencies among progressives are unjustified—the details and the facts matter, unless you simply are opposed to inequality regardless of whether it might help the bottom and middle.

Middle-class living standards next…

Update: Click here to read the next post in the series.

The views expressed in this piece do not necessarily reflect those of the Progressive Policy Institute.

Tags: , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 20 Comments »

Food as a Centerpiece of Public Policy

Friday, December 11th, 2009
Joel Berg


Joel Berg is executive director of the New York City Coalition Against Hunger. He is also the author of All You Can Eat: How Hungry Is America?

by Joel Berg

The following is an excerpt from Joel Berg’s “Good Food, Good Jobs: Turning Food Deserts into Jobs Oases,” a new policy report from PPI.

The former chair of the House Agriculture Committee, Rep. Kiki de la Garza (D-TX), used to quiz audiences with a riddle: “When does a nuclear submarine need to rise out of the water?” People would guess that it would rise when it needed air, but he explained that it could turn the water into oxygen. Others would guess that it would rise when it ran out of fuel, but he would then explain that the nuclear fuel would last for years. When no one could guess, he would answer the riddle: “When it ran out of food.”

Given that food is a basic human need, it is amazing that people almost always failed to figure out his riddle. More broadly, it is astonishing how often food is overlooked in so many vital policy discussions. (The neglect spills over into pop culture: In the earliest version of the classic computer simulation game SimCity, you could decide where to put a football stadium or museum but not where food stores or markets should be.) For most of U.S. history, urban planners have usually ignored food issues in their grand schemes.

We need an entirely different mindset. Food should be a central organizing principle for neighborhood development, uniting residents through community gardens, farmers’ markets, supermarkets, food cooperatives, and food-related small businesses. Community gardens can reclaim empty lots from drug pushers. Food businesses can create jobs and raise community income. Farmers’ markets can give neighborhoods central gathering spaces and nurture a feeling of the “public commons” that is so often lost in today’s society. This new mindset will benefit both our economy and public health.

For a community to have good nutrition, three conditions are necessary: food must be affordable; food must be available; and individuals and families must have enough education to know how to eat better. If you don’t have all three legs of this stool, it will collapse. Yet all too often, projects only focus on one of the three. Many provide nutrition education, lecturing people that they should eat better, but make food neither more available nor more affordable. Sometimes, food is brought into low-income neighborhoods, but at prices too high for most people to afford. That won’t work either. The only way to truly succeed is to focus on all three aspects of this problem at once.

To read the executive summary, click here. To download the report, click here.

Tags: , , , , ,
Posted in A New Framework for Growth and Equity, Daily Fix | 1 Comment »

« Older Entries