The Poor Have It Easy In America

That is a sentiment that appears to be widely held by the nation’s wealthiest citizens, according to a recent Pew survey reported by the Washington Post.

The center surveyed a nationally representative group of people this past fall, and found that the majority of the country’s most financially secure citizens (54 percent at the very top, and 57 percent just below) believe the “poor have it easy because they can get government benefits without doing anything in return.” America’s least financially secure, meanwhile, vehemently disagree — nearly 70 percent say the poor have hard lives because the benefits “don’t go far enough.” Nationally, the population is almost evenly split.

Here are the results in visual form; note the large minorities of poor and middle-class people that agree with this view.

Unsurprisingly, the report also found that those who identify as conservatives — around 40 percent of the most financially secure groups — are more likely to believe the poor have it good thanks to the government, and that the poor do not work hard enough. Another Pew report confirmed that around 75 percent of conservatives in general feel this way about the poor, regardless of income.

So in essence, if you are wealthy or conservative — but especially both — you are likely to take a dim view of America’s least fortunate — and conversely, to believe that wealthy people have it harder, due to perceived higher taxes, onerous government regulations, and the usual bugbears of the right.

As columnist Christopher Ingraham points out, such a perception of America’s poor is greatly at odds with reality:

But I have a hard time understanding how you could read about the experience of families relying on food stamps to eat, or those trying tomanage chronic conditions with Medicaid, and conclude that these people somehow have it easy. For context, here is a brief and wildly incomplete list of the ways life is “easy” when you’re poor:

Of course, it is no coincidence that those who think the poor have it easy also think the poor do not work hard enough and just live off the government (and by extension, live off the hardworking taxpayer). If you think that poor people get what they deserve for their laziness and irresponsibility, no amount of data demonstrating their difficult circumstances — and by contrast how much better the wealthy are doing — will sway the wealthy’s sympathy; nor will any of the evidence showing the role that external factors — from low wages to unstable business cycles — have contributed to growing and persistent poverty.

Moreover, with many of these same wealthy Americans having a disproportionate influence on our media and politics, it is little wonder that more is not being done to address the mounting socioeconomic conditions faced by a growing proportion of Americans.

As for how so many wealthy people can retain such callous views of the nation’s poor, that can be attributed to a range of factors. Richer people are increasingly holing up in gated communities or gentrified areas where poor people are largely absent. They are more likely to interact with and know only other well off or at least middle-class people. Some evidence even suggests that wealth accumulation itself contributes to an empathy gap with those who are not rich.

Whatever the cause, it goes without saying that this arrangement is not sustainable. No society has ever endured such a wide and growing gap between rich and poor without ultimately subsiding into sociopolitical instability — including revolution. While the U.S. may not necessarily go the way of 18th century France or Bolshevik Russia, it will certainly experience the same sort of underlying tensions and political problems that tend to bode ill for long-term prosperity.

It is time we start caring about the least vulnerable in America and doing more to help them, namely by promoting a more sustainable and equitable economic system. If more companies paid their employees better (perhaps by tapping into those record-breaking profits), that alone would go a long way. Of course, viewing the poor as people that deserve dignified wages and treatment would be the natural place to start — it is a shame that even needs to be a lesson to learn.

Link

Corporate Profits Soar as Workers’ Incomes Slump

There is yet more evidence that our economy has become a zero-sum affair, where the growth of corporate profits (and by extension the coffers of the elites) come at the expense of average workers.

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

And why not? There is plenty of money to go around. Companies can well afford to hire new workers and pay their current ones better, and still have plenty of profits left over for their CEOs and shareholders.

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

 

The problem is simple: corporations don’t want to to pay their workers better because their standards of sufficient wealthiness are getting ever higher. Business elites are finding their growing appetites for money ever more difficult to satiate. It used to be that making a million or so dollars was more than sufficient —  but nowadays, it seems every executive wants tens of millions, if not hundreds of millions, and their shareholders and board members are no better.

When a handful of people want more and more money, the natural consequence is to make cuts (e.g. layoffs, benefits, hours) and withhold investment (e.g. raises and benefits). Otherwise, where else will all this money come from? Consider the following  case in point:

“Right now, C.E.O.’s are saying, ‘I don’t really need to hire because of the productivity gains of the last few years,’ ” said Robert E. Moritz, chairman of the accounting giant PricewaterhouseCoopers.

At 218,300 employees, United Technologies’ work force is virtually unchanged from seven years ago, even though annual revenue soared to $57.7 billion in 2012 from $42.7 billion in 2005.

The relentless focus on maintaining margins continues, even though profit and revenue have never been higher; four days after the company’s shares soared past $90 to a record high last month, United Technologies confirmed it would eliminate an additional 3,000 workers this year, on top of 4,000 let go in 2012 as part a broader restructuring effort.

“There’s no doubt we will continue to drive productivity year after year,” Mr. Chenevert said. “Ultimately, we compete globally.”

And that last sentence denotes a bit part of the problem: even if a company’s executive or board wants to be ethical and pay their workers better, they’ll come under relentless pressure by investors and shareholders to provide a bigger return on investment. Competition is cutthroat and no-holds-barred, and this country’s particular hyper-individualism and dog-eat-dog mentality only makes it worse. There is no sense of social obligation — it’s all about the bottom line and how much one can make for themselves, regardless of the costs to others, the environment, or society as a whole.

Our culture and attitudes need to change. How to do so is a different story altogether.

Mitt Romney Talks Fairness

The following comes from the Economist:

MITT ROMNEY isn’t surrendering the rhetoric of fairness to the president. A CNN piece on Mr Romney’s general-election repositioning efforts show him framing Republican priorities as matters of fairness:

“We will stop the unfairness of government workers getting better pay and benefits than the very taxpayers they serve,” the former Massachusetts governor said. “And we will stop the unfairness of one generation passing larger and larger debts on to the next.”

It is all part of a concerted strategy to try to reverse perceived campaign weaknesses for Republicans as the general election campaign launches.

Jamelle Bouie of the American Prospect argues that the purpose of Mr Romney’s adopting the language of fairness is to sow confusion:

I doubt this will convince anyone other than true believers, but that’s not the point; the idea is to muddy the waters when it comes to coverage of Romney’s message. By attacking Obama on “fairness,” Romney can force the press to bring a horse race dynamic to the opposing claims—“Mr. Obama says that it’s unfair for multi-millionaires to pay a lower tax rate than middle-class families, but Mr. Romney says that what’s really unfair is the burden of debt.” The issues aren’t actually sorted out, and Romney walks away with minimal scrutiny.

May the good Lord strike me dead if I’m a conservative “true believer”, but I happen to agree with Mr Romney that it is unfair for government workers to be compensated more lavishly than their private-sector counterparts. People who are equal in all relevant respects ought to be treated equally, and it’s unfair if they aren’t.

Rather than deny the fact of unequal compensation, as progressives seem wont to do, I think they would do better to argue that this bit of unfairness ought to be addressed by ensuring that private-sector employees enjoy equally generous wages and benefits. The reason public-sector employees do so well, the argument should go, is that labour unions really work. The enviable economic security of government workers proves unionisation works. Private-sector workers suffer in comparison because the long Republican jihad against private-sector unionisation has succeeded. Mr Romney isn’t wrong that there is an inequality between private- and public-sector workers, or that this inequality is unfair. His appeal to fairness in this case seems so shady because Republicans are the ones who made things unfair. To suggest that this can be put right by also stripping public workers of the protections of unionisation is just perverse. Or so one might argue.

Perhaps it would be better to say that Mr Romney is insincere about fairness, but I don’t think this is called for, either. There is obviously a deeper question about fairness here, a question about the role of labour unions in ensuring fair compensation. Republicans and Democrats tend to disagree about this, and I think they disagree honestly. I think Mr Bouie is correct that Mr Romney’s fairness talk will lead to an “equal time” dynamic in the media, but I don’t think there’s anything wrong or obfuscatory about it. The media ought to try to tease out and clarify the lines of sincere disagreement. I can see how this might seem annoying to a Democrat who felt certain that Democrats truly and deeply care about fairness, while Republicans only pretend to care. But Republicans care, too.

So while I think Mr Bouie’s idea that Mr Romney is trying to muddy the waters is interesting, there’s an alternative interpretation that is simpler, more persuasive, and more charitable: people disagree about fairness. When we try to fairly account for the disagreement, it may not be so clear who’s right.

The bolding was my doing, because it highlights a very important point: it’s not that public sector workers are “unfairly” treated better, but that their private sector counterparts are unfairly treated worse. That disparity stems from the fact that unlike privately employed laborers, government workers are still far more likely to be unionized (44% of them are, versus only 7% of employees in the private sector). This allows them to bargain for better pay, treatment, and benefits, something that used to be standard practice among many private workers too (union membership was as high as __% a few decades ago).

Granted, unions aren’t flawless institutions, given that such a thing doesn’t exist. They can be hierarchical, resistant to change, and corrupt. They can also get in the way of necessary reforms and cause a long-term decline in productivity – then again, so can low pay or mistreatment. A lot of the most economically productive countries in the world, most notablyGermany, have higher unionization rates.

Unions may have their problems in practice, but they shouldn’t be outright dismissed in principle. Some of the most prosperous periods in this country, for both average workers and corporations, were during high levels of collectivized labor. It’s only fair that workers and bosses, regardless of the organization, should sit down together and hammer out a compromise, rather than leave it to one or the other (usually the latter) to dictate terms. Why shouldn’t the people who help keep a company running have a democratic say in how said companies are run? Why can’t these values be extended into private business?

Income Inequality and Prosperity

In his recent State of the Union Address, President Obama focused on the high and increasing level of income inequality in the US, emphasizing the importance of fairness in our economic system and fiscal policy. He would hardly be the first one to raise the issue of socioeconomic disparity, which has been the source of much debate and discussion since the recession began in 2007. Pandering or not, he’s tapping into a very real concern among both academics and the public (although polls differ on the level of worry among the American people as a whole).

Regardless of your thoughts on the president or his sincerity, income inequality is a problematic, if once underrated, development. Overall, America is a very wealthy country, the richest in the world by a wide margin; our GDP per capita, though not the highest, is among the top ten. Few countries have access to as many luxuries and material goods as our consumers do.

Yet our society is also one of the most unequal in the world, and this inequality has been increasing for several decades, with current trends projecting an ever wider gap. Though most countries, including famously egalitarian ones like Sweden, are seeing inequality grow, few are at America’s level.

Of course, most would argue, as I once did, that a large wedge between rich and poor isn’t problematic if most people can afford a comfortable standard of living. After all, what does a middle-class person care if his CEO or neighbor makes a thousand times more than him? Indeed, that’s long been the mentality of most Americans, and it’s the reason why our society is far less concerned about economic equality or ostentatious displays of wealth relative to others. 

The problem is that high levels of socioeconomic inequality correlate with various social problems, regardless of overall or per-capita wealth. Furthermore, countries that have long-term inequality tend to be less stable and prosperous economically. If too much income is concentrated at the top, then the widespread consumption that drives our economy no longer exists.

The consequences can be seen in a report in Sociological Images titled “Income inequality is bad for society. Really bad,” which draws much of its data from the book, The Spirit Level: Why More Equal Societies Almost Always Do Better, by Richard Wilkinson and Kate Pickett. The following graphs highlight the relationship between income disparity and various social conditions among several developed countries (I’m assuming they’re using the Gini Coefficient, which is the most common means of measuring the share or wealth within a society).

Keep in mind the extreme position of the United States, and the fact that these measurements are done per capita, which adjusts for our large population.

Infant mortality:
Homicide rate:
Rate of incarceration:
Child well-being (based on data from UNICEF):
As I’ve stressed many times before, I’m well aware that correlation doesn’t equal causation – it could very well be that other factors account for this social dysfunction. But the fact that there seems to be some sort of relationship should at least give us pause and merit some consideration. If we do assume some sort of connection, the logical question would be why and what do we do about? Is the cost of addressing this inequality too great or politically untenable? I’m happy to see the topic receive well-needed attention and discussion.