For 53 million Americans stuck in low-wage jobs, the road out is hard

From today’s Los Angeles Times:

Unemployment is hovering near a five-decade low, workforce participation is at the highest level in six years and Federal Reserve Chairman Jerome H. Powell recently called the labor market “strong.”

Yet, 44% of Americans age 18 to 64 are low-wage workers with few prospects for improving their lot, according to a Brookings Institution report.

An estimated 53 million Americans are earning low wages, according to the study. That number is more than twice the number of people in the 10 most populous U.S. cities combined, the report notes. The median wage for those workers is $10.22 an hour and their annual pay is $17,950.

Although many are benefiting from high demand for labor, the data indicated that not all new jobs are good, high-paying positions. The definition of “low-wage” differs from place to place. The authors define low-wage workers as those who earn less than two-thirds of the median wage for full-time workers, adjusted for the regional cost of living. For instance, a worker would be considered low wage in Beckley, W.Va., with earnings of $12.54 an hour or less, but in San Jose, Calif., the low wage bar rises to $20.02 an hour.

“We have the largest and longest expansion and job growth in modern history,” Marcela Escobari, coauthor of the report, said in a phone interview. That expansion “is showing up in very different ways to half of the worker population that finds itself unable to move.”

Read the complete article here.

Wage inequality is surging in California, and not just on the coast. Here’s why

From today’s Los Angeles Times:

Wage inequality has risen more in California cities than in the metropolitan areas of any other state, with seven of the nation’s 15 most unequal cities located in the Golden State.

San Jose, with its concentration of Silicon Valley technology jobs, had the largest gap of any California metro area between those at the top of the pay scale and those at the bottom. It ranked second in the nation after the suburb of Fairfield, Conn., home to wealthy New York financiers, according to a new analysis of 2015 U.S. Census data by Federal Reserve economists. San Francisco and Los Angeles also ranked high on the list.

More surprising, perhaps, is the inclusion of Bakersfield, where high-wage engineering jobs are juxtaposed with poverty-wage farm work.The heavy concentration of California metro areas is a striking turnabout from 1980, when just three figured in the top 15.

As inequality has soared across the United States, most sharply since the 1980s, it has been the focus of widespread debate and become a hot political issue. But less attention has focused on dramatic geographical differences in inequality.

“Wage inequality … has risen quite sharply in some parts of the country, while it has been much more subdued in other places,” wrote Jaison Abel and Richard Deitz, economists at the Federal Reserve Bank of New York, who titled their report, “Why Are Some Places So Much More Unequal than Others?

Large cities with dynamic economies tend to have higher wage disparities, while midsized cities with “sluggish economies” are less unequal because they attract fewer high-wage workers, the authors found.

Read the complete article here.

Workers, Should You Tell the World How Much Money You Make?

From today’s New York Times:

There are many questions Alison Green is asked as a columnist who writes about workplace issues. There was the woman who wanted to know if she should attend couple’s therapy with her boss and the boss’s boyfriend. (The boyfriend happened to be her father.) Another time she heard complaints about a janitor who cast a hex on her colleagues.

But Ms. Green was taken aback recently when asked about her salary, a topic so fraught even she couldn’t come up with a good answer. “No one has ever asked me that,” she said. “I don’t want to say.”

Many employees are loath to discuss their salaries, she said, worried it would cause resentment, or worse, among peers. “We are all so weird about telling people how much money we make, even me.”

Perhaps it is why, too, Ms. Green recently asked readers of her “Ask A Manager” website to share their job title, where they live and how much they make each year. Answers were anonymous; the data was compiled in a spreadsheet on Ms. Green’s website so people could sort through the data.

Within a half-hour, she had 1,000 responses. A day later, so many people posted their salaries her website froze. So far, three weeks later, she has more than 26,000 responses, everything from an accountant in Chicago who makes $90,000 to a librarian in Austin who earns $39,000. She was surprised by the overwhelming response: Previous surveys in 2014 and 2017 garnered a fraction of interest, fewer than 2,700 comments apiece.

Why the interest now? Attitudes about workers disclosing pay are shifting, for one, as unemployment has reached a five-decade low. And the gig economy has made salary comparing a near necessity for many. (How else does a person know what to charge if they are a freelancer?)

Read the complete article here.


The $70,000-a-Year Minimum Wage

From today’s New York Times:

Staff members gasped four years ago when Dan Price gathered the 120 employees at Gravity Payments, the company he had founded with his brother, and told them he was raising everyone’s salary to a minimum of $70,000, partly by slashing his own $1.1 million pay to the same level.

The news went viral and provoked a national debate about whether efficient capitalism could have a heart. Some Americans lauded Price for treating employees with dignity. However, on Fox Business he was labeled the “lunatic of all lunatics,” and Rush Limbaugh declared, “I hope this company is a case study in M.B.A. programs on how socialism does not work, because it’s going to fail.”

So I came to Seattle to see what had unfolded: Did Gravity succeed or crash?

There were bumps, no doubt about it. A couple of important employees quit, apparently feeling less valued when new hires were close to them in pay. The publicity forced Gravity, which processes credit card payments for small businesses, to hire additional people to handle a deluge of inquiries. Worst of all, Price’s brother, who owned a stake in the company, sued and alleged that Price hadn’t consulted him on decisions.

For a while, it wasn’t clear that the gamble was going to pay off.

But eventually it did: Business has surged, and profits are higher than ever. Gravity last year processed $10.2 billion in payments, more than double the $3.8 billion in 2014, before the announcement. It has grown to 200 employees, all nonunion.

Read the complete article here.

Household Net Worth Rebounding Since Financial Crisis

From today’s NYT “Business Day” by Floyd Norris:

THE net worth of American households is now 20 percent higher than it was before it began to decline in 2007, the Federal Reserve reported this week. It said the households together were worth $81.5 trillion at the end of the second quarter, higher than ever and up 10 percent from a year earlier.

By another measure, household net worth is a little short of the record highs reached before the recession. It amounted to 471 percent of the nation’s gross domestic product in the second quarter, just short of the record 473 percent set in early 2007.

Those figures are not adjusted for inflation. But adjusted for the change in the Consumer Price Index, household wealth is also at a record high, 4 percent above the 2007 level.

The recovery in household wealth has come in ways that favor the wealthiest households. The Fed estimated that real estate owned by households is worth $22.9 trillion, 6 percent less than seven years earlier but 27 percent more than at the bottom of the real estate market in 2011.

Read the entire article here.

A New Report Argues Inequality Is Causing Slower Growth. Here’s Why It Matters.

From today’s NYT blog “The Upshot” by Neil Irwin:

Is income inequality holding back the United States economy? A new report argues that it is, that an unequal distribution in incomes is making it harder for the nation to recover from the recession and achieve the kind of growth that was commonplace in decades past.

The report is interesting not because it offers some novel analytical approach or crunches previously unknown data. Rather, it has to do with who produced it, which says a lot about how the discussion over inequality is evolving.

Economists at Standard & Poor’s Ratings Services are the authors of the straightforwardly titled “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” The fact that S&P, an apolitical organization that aims to produce reliable research for bond investors and others, is raising alarms about the risks that emerge from income inequality is a small but important sign of how a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream.

Read the entire article here.

Brookings study finds income inequality in America’s largest cities

From the Brookings Institute “Metropolitan Opportunity Series” Papers:

In December 2013, President Obama gave a speech on economic mobility, in which he called income inequality and lack of upward mobility “the defining challenge of our time.”

That challenge is front and center in America’s big cities today. Obama’s speech followed a series of municipal elections in November 2013 in which inequality figured prominently as a campaign issue. Foremost among these was in New York City, where Bill de Blasio won a landslide election after campaigning to address what he called a “Tale of Two Cities.” Similar themes were sounded in the successful campaigns and first days in office of Marty Walsh in BostonEd Murray in Seattle, and Betsy Hodges in Minneapolis. The “Google Bus” in San Francisco’s Mission District has shone a spotlight on growing economic divisions within that city. And income inequality will no doubt be a central issue in mayoral elections during the next couple of years in cities like Chicago and Washington, D.C.

Inequality may be the result of global economic forces, but it matters in a local sense. A city where the rich are very rich, and the poor very poor, is likely to face many difficulties. It may struggle to maintain mixed-income school environments that produce better outcomes for low-income kids. It may have too narrow a tax base from which to sustainably raise the revenues necessary for essential city services. And it may fail to produce housing and neighborhoods accessible to middle-class workers and families, so that those who move up or down the income ladder ultimately have no choice but to move out.

There are many ways of looking at inequality statistically; one useful way to measure it across places is by using the “95/20 ratio.” This figure represents the income at which a household earns more than 95 percent of all other households, divided by the income at which a household earns more than only 20 percent of all other households. In other words, it represents the distance between a household that just cracks the top 5 percent by income, and one that just falls into the bottom 20 percent. Over the past 35 years, members of the former group have generally experienced rising incomes, while those in the latter group have seen their incomes stagnate.

The latest U.S. Census Bureau data confirm that, overall, big cities remain more unequal places by income than the rest of the country. Across the 50 largest U.S. cities in 2012, the 95/20 ratio was 10.8, compared to 9.1 for the country as a whole. The higher level of inequality in big cities reflects that, compared to national averages, big-city rich households are somewhat richer ($196,000 versus $192,000), and big-city poor households are somewhat poorer ($18,100 versus $21,000).

Read the entire study here.

Economic inequality is a problem, as is gap between ideal and reality

 

 

 

 

 

 

 

 

 

Check out this informative video that provides a graphic representation of wealth inequality in the U.S. and the gap in perception between what people think an ideal distribution of wealth should look like and what it really is in fact.

On America’s Sinking Middle Class

From the New York Times
September 18, 2013
By Eduardo Porter

In some respects, 1988 has the feel of an alien, distant era. There was no such thing as the World Wide Web then. The Soviet Union was still around; the Berlin Wall still standing. Americans elected a Republican president who would raise taxes to help tame the budget deficit.

On Tuesday, however, the Census Bureau reminded me how for most Americans 1988 still looks a lot like yesterday: last year, the typical household made $51,017, roughly the same as the typical household made a quarter of a century ago.

The statistic is staggering — hardly what one would expect from one of the richest and most technologically advanced nations on the planet.

I have written several times before about how measures of social and economic well-being in the United States have slipped compared to other advanced countries. But it is even more poignant to recognize that, in many ways, America has been standing still for a full generation.

It made me wonder what happened to progress.

Consider: 36 years ago this month, when NASA launched the Voyager 1 probe into space, 11.6 percent of Americans were officially considered poor. The other day Voyager sailed clear out of the solar system into interstellar space — the first man-made object to do so — recording its environment on an 8-track deck.

Using the same official metric — which actually undercounts the poor compared to new methods used by the Census today — the poverty rate is 15 percent.

To be sure, we have made progress over the last 25 years. The nation’s gross domestic product per person has increased 40 percent since 1988. We’ve gained four years’ worth of life expectancy at birth. The infant mortality rate has plummeted by 50 percent. More women and more men are entering and graduating from college.

We also have access to far more sophisticated consumer goods, from the iPhone to cars packed with digital devices. And the cost of many basic staples, notably food, has fallen significantly.

Carl Shapiro, an economist at the University of California, Berkeley and an expert on technology and innovation who stepped down from President Obama’s Council on Economic Advisors last year, calls the progress in information technology and biotechnology over the last 25 years “breathtaking.”

“Most Americans partake in the benefits offered by these new technologies, from smartphones to better dental care,” Professor Shapiro said. Still, he acknowledged, “somehow this impressive progress has not translated into greater economic security for the American middle class.”

In key respects, in fact, the standard of living of most Americans has fallen decidedly behind. Just take the cost of medical services. Health care spending per person, adjusted for inflation, has roughly doubled since 1988, to about $8,500 — pushing up health insurance premiums and eating into workers’ wages.

The cost of going to college has been rising faster than inflation as well. About two-thirds of people with bachelor’s degrees relied on loans to get through college, up from 45 percent two decades ago. Average student debt in 2011 was $23,300.

In contrast to people in other developed nations, who have devoted more time to leisure as they have gotten richer, Americans work about as much as they did a quarter-century ago. Despite all this toil, the net worth of the typical American family in the middle of the income distribution fell to $66,000 in 2010 — 6 percent less than in 1989 after inflation.

Though the bursting of the housing bubble and ensuing great recession takes a big share of the blame for families’ weakening finances, it is nonetheless startling that a single financial event — only a hiccup on the road to prosperity of Americans on the top of the pile — could erase a generation worth of progress for those in the middle.

Though the statistics may be startling, the story they tell is, unfortunately, not surprising. It is the story of America’s new normal. In the new normal the share of the nation’s income channeled to corporate profits is higher than at any time since the 1920s, while workers’ share languishes at its lowest since 1965.

In the new normal, the real wages of workers on the factory floor are lower than they were in the early ’70s. And the richest 10 percent of Americans get over half of the income America produces.

“Almost all of the benefits of growth since the trough of the Great Recession have been going to those in the upper classes,” said Timothy Smeeding, who heads the Institute for Research on Poverty at the University of Madison-Wisconsin. “Middle- and lower-income families are getting a smaller slice of a smaller economic pie as labor markets have changed drastically during our recovery.”

This story is about three decades old.

In 2010, the Department of Commerce published a study about what it would take for different types of families to achieve the aspirations of the middle class — which it defined as a house, a car or two in the garage, a vacation now and then, decent health care and enough savings to retire and contribute to the children’s college education.

It concluded that the middle class has become a much more exclusive club. Even two-earner families making almost $81,000 in 2008 — substantially more than the family median of about $60,000 reported by the Census — would have a much tougher time acquiring the attributes of the middle class than in 1990.

The incomes of these types of families actually rose by a fifth between 1990 and 2008, according to the report. They were more educated and worked more hours, on average, and had children at a later age. Still, that was no match for the 56 percent jump in the cost of housing, the 155 percent leap in out-of-pocket spending on health care and the double-digit increase in the cost of college.

So either we define the middle class down a couple of notches or we acknowledge that the middle class isn’t in the middle anymore.

The hidden cost of income inequality

Today’s NYT features a commentary by Nobel economist Joseph Stiglitz that makes a compelling argument related to his newest book The Price of Inequality.

The argument runs like this:  The single greatest obstacle facing renewed American prosperity is the creation and widespread acceptance of massive income inequality because the latter has severe social, economic, and political costs that frustrate economic growth.

The social costs of inequality are well known and widely documented. Individuals with less education are less employed in the labor market and make less money as a result. Both these facts correlate with poverty and crime. Consider the price of the drug war. Every year the country spends billions of dollars on this war with no end, because every year more and more young (black) poor males grow up with restricted educational opportunities. The drug prohibition we are trying to enforce itself creates a black market that makes the drug trade highly lucrative:  cash only and tax-free. As a result, we are under-investing in an unemployed army of workers whose only job prospects are in the drug trade, and as a consequence the life expectancy of black males is significantly less than their counterparts.

The economic costs of massive income disparity are becoming more evident as the gap between the wealthiest earners and the middle-class and poor grows wider. The data and trend are irrefutable, and no one can deny that growing inequality is a principle cause of many other social and political problems. The graph below represents real facts and figures and therefore speaks volumes for itself:

The graph shows that opportunity and prosperity have not been widely shared in post-war America.

 

 

 

 

 

 

 

 

 

 

The political costs are also more evident as politicians who are funded by wealthy campaign contributors increasingly tailor both their legislative and policy priorities around the agendas of big business. The recent Supreme Court decision in Citizens United, holding that corporations are persons and for that reason can give nearly unlimited money to political causes and elected officials means simply that those with more dollars wield proportionally more influence. Consider this analysis of the 2012 Federal Election Commission study by Adam Lioz and Blair Bowie from the website Demos:

A new analysis of data through Election Day from the Federal Election Commission (FEC) and other sources by U.S. PIRG and Demos shows how big outside spenders drowned out small contributions in 2012: just 61 large donors to Super PACs giving an average of $4.7 million each matched the $285.2 million in grassroots contributions from more than 1,425,500 small donors to the major party presidential candidates.

Because of their wealth and the Supreme Court’s equation of money with speech, those very large donors are able to amplify their voices to more than 23,000 times the volume of an average small donor.

Stiglitz is a Nobel winning economist and hardly an ideological propagator of anything but the values of a free market system, sensibly constrained by democratic accountability in the service of fair and shared prosperity. Yet, he will be painted that way of thousands, perhaps millions, of Americans who prefer to believe a different story, one in which the poor are poor because of their own actions, the rich are rich because god intended it that way, and income inequality is natural. That story is a house of lies, and those who believe it and use it to justify their greed, incompetence, and vicious disregard of the lives of their fellow citizens must be pointed out and condemned for their foolish thinking.