Monday Reads: We’re losing the War on Poverty

Good Morning!

Fred Retail Worker WagesI am still stirred up about wage inequality.  It just drives me nuts to watch all these people tramp into stores that pay workers wages they can’t live on with next to nothing in benefits.  I can’t imagine that having more junk is all that important that you have to buy it from owners that treat employees like expendables.  Then, these workers must rely on shrinking government programs. I don’t mind paying taxes for a safety net but having people work at jobs where employers let their benefits come from taxpayers just doesn’t seem right at all.

 You can tell what kind of  post this will be just by seeing wonky graphs that come from Paul Krugman right here at the top.  Then, there is the actual data that puts the U.S. minimum wage into perspective.

As a result of legislative inaction, inflation-adjusted minimum wages in the United States have declined in both absolute and relative terms for most of the past four decades. The high-water mark for the minimum wage was 1968, when it stood at $10.60 an hour in today’s dollars, or 55 percent of the median full-time wage. In contrast, the current federal minimum wage is $7.25 an hour, constituting 37 percent of the median full-time wage. In other words, if we want to get the minimum wage back to 55 percent of the median full-time wage, we would need to raise it to $10.78 an hour.

International comparisons also show how out of line our current policy is: the United States has the third lowest minimum wage relative to the median of all Organization for Economic Cooperation and Development countries. This erosion of the minimum wage has been an important contributor to wage inequality, especially for women. While there is some disagreement about exact magnitudes, the evidence suggests that around half of the increase in inequality in the bottom half of the wage distribution since 1979 was a result of falling real minimum wages. And unlike inequality that stems from factors like technological change, this growth in inequality was clearly avoidable. All we had to do to prevent it was index the minimum wage to the cost of living.

Of course, we don’t inflation adjust the minimum wage.  Also, there are more and more good jobs that are being restructured down so employers can get away with not paying a living wage too. Here’s an example of why so many workers in the US cannot even survive–much less get ahead–in most jobs.  This example is from the Seattle area even though the analysis can be found in The New Yorker.  The author is interested in the topic because of the activism that followed.

In 2005, Alaska Airlines fired nearly five hundred union baggage handlers in Seattle and replaced them with contractors. The old workers earned about thirteen dollars an hour; the new ones made around nine. The restructuring was a common episode in America’s recent experience of inequality. In the decade after 2000, Seattle’s median household income rose by a third, lifted by the stock-vested, Tumi-toting travellers of its tech economy. But at the bottom of the wage scale earnings flattened.

Sea-Tac, the airport serving the Seattle-Tacoma area, lies within SeaTac, a city flecked by poverty. Its population of twenty-seven thousand includes Latino, Somali, and South Asian immigrants. Earlier this year, residents, aided by outside labor organizers, put forward a ballot initiative, Proposition 1, to raise the local minimum wage for some airport and hotel workers, including baggage handlers. The reformers did not aim incrementally: they proposed fifteen dollars an hour, which would be the highest minimum wage in the country, by almost fifty per cent. A ballot initiative so audacious would normally have little chance of becoming law, but Proposition 1 polled well, and by the summer it had turned SeaTac into a carnival of electoral competition. Business groups and labor activists spent almost two million dollars on television ads, mailings, and door knocking—about three hundred dollars per eventual voter. (Alaska Airlines wrote the biggest check for the no side.) On November 5th, SeaTac-ians spoke: yes, by a margin of just seventy-seven votes, out of six thousand cast. A reversal after a recount is still possible.

In any event, SeaTac has proved that the sources of surprise in American politics since the Great Recession are not limited to Tea Party rabble-rousing. The grassroots left, which seemed scattered and demoralized after the Occupy movement fizzled, has revived itself this year—with help from union money and professional canvassers—by rallying voters around the argument that anyone who works full time ought not to be at risk of poverty

Indeed there are many states that now have state minimum wages higher than the federal minimum wage. Here’s why according to minimum wageARINDRAJIT DUBE–an economist–who I quoted above on how inflation has compromised the federal minimum wage.

These patterns show up in recent survey data as well, as over three-quarters of Americans, including a solid majority of Republicans, say they support raising the minimum wage to either $9 or $10.10an hour. It is therefore not a surprise that when they have been given a choice, voters in red and blue states alike have consistently supported, by wide margins, initiatives to raise the minimum wage. In 2004, 71 percent of Florida voters opted to raise and inflation-index the minimum wage, which today stands at $7.79 per hour. That same year, 68 percent of Nevadans voted to raise and index their minimum wage, which is now $8.25 for employees without health benefits. Since 1998, 10 states have put minimum wage increases on the ballot; voters have approved them every time.

But the popularity of minimum wages has not translated into legislative success on the federal level. Interest group pressure — especially from the restaurant lobby — has been one factor. Ironically, the very popularity of minimum wages may also have contributed to the failure to automatically index the minimum wage to inflation: Democratic legislators often prefer to increase the wage themselves since it allows them to win more political points. While 11 states currently index the minimum wage, only one, Vermont, did so legislatively; the rest were through ballot measures.

Protesters across the country are targeting employers like Walmart. Walmart is a huge example of a company where workers are so poor they rely on government safety net programs.  Workers want full time hours, benefits, and a living wage. This example is from the Detroit area.

Across the nation Friday, protesters came out in support of increasing the minimum wage and they chose Walmart stores as their target.

In Macomb County, a loud rally was held outside the retailer’s Sterling Heights location.

WWJ’s Pat Sweeting spoke with local Market Manager Bernie Dave. He says wages vary according to shift, location and competition within the market.

“It’s over minimum wage … entry-level is over minimum wage and then based on experience there are obviously different pay scales and different pay rates,” Dave said.

Minimum Wage Wal Mart Protest (5) PSweetingProtesters charge the majority of Walmart employees earn minimum wage; taking home less than $25,000 a year.

After handing-over a petition bearing hundreds of signatures, protesters continued their rally shouting “D-15.”

Ricardo Jackson of the service Employees International Union explains: “We are fighting for the rightful benefits that we deserve … Fifteen dollars an hour, and a union and we want if now … and we’re going to keep fighting till we break their backs and get what we deserve,” he said.

We have seen a lot of right wing populism in the tea party wing of the Republican Party recently. Are we about to see a left wing version now that will gain ground in the Democratic Party? The increasing call from both sides of the aisle to gut popular New Deal Programs–like Social Security–at a time when so many ordinary Americans are really hurting is creating a new dialogue on the nation’s priorities. The beltway’s priorities come from the donor class and people every where are very frustrated. Senator Elizabeth Warren has established herself as an important voice in the fight to maintain our legacy entitlement programs. We paid for them and we deserve the benefits they provide.

The left’s influence will be on display in coming weeks when a high-profile congressional committee formed after the government shutdown faces a deadline to forge a budget agreement. Under strong pressure from liberals, the panel has effectively abandoned discussion of a “grand bargain” agreement partly because it probably would involve cuts to Social Security.

“The absolute last thing we should do in 2013 — at the very moment that Social Security has become the principal lifeline for millions of our seniors — is allow the program to begin to be dismantled inch by inch,” Warren said recently on the Senate floor, announcing her support for a bill that would expand the program.

Liberals say Social Security is one example of how Democrats are likely to face sustained pressure in coming months to move in a more populist direction on a host of issues.

“The first Obama administration was focused too much on saving the banks and Wall Street,” said Sen. Tom Harkin (D-Iowa), a liberal who is retiring after four decades in Congress. “There’s going to be a big populist push on whoever’s running for office to espouse these kinds of progressive policies.”

I watch all of these things with intense interest as an economist and some one concerned about social justice. The  appalling amount of income inequality in this country is creating a situation where more and more people are being left to less and less.  However, Fear NOT!  The richest of the rich are paying money to live in luxury shanty towns so they can pretend to be poor. Yes, talk about things I wish weren’t true.  This takes real gall.

Emoya Luxury Hotel and Spa created a fake shanty town so that its wealthy clientele can pretend to slum it “within  the safe 473986-f0edbafc-5ae8-11e3-8eb9-1c57f26bd260environment of a private game reserve.”

But don’t worry, even though the “Shanty Town” has intricately designed, colorful iron shacks, outdoor bathrooms, and battery operated radios, things aren’t too realistic for comfort. “This is the only Shanty Town in the world equipped with under-floor heating and wireless internet access!” its website boasts.

And it’s also listed as ideal for team building exercises or theme parties. Because nothing is more festive than pretending to pinch pennies while spending a third of the median South African monthly income in one night.

Poverty tourism, also known as “poorism,” isn’t unheard of.  There have been various “reality” tours through the slums of Mumbai and Rio de Janeiro’s favelas for years.

While the merits of visiting a real shanty town, as if it were a museum exhibit or a wildlife reserve, is certainly up for moral debate, pretending to have the experience without ever having to set eyes on people who are actually suffering is a whole different kind of tone deaf.

They still drive buses over the canal so tourists can gawk at the empty lower 9th ward and the few houses built by celebrity charity.  This kind of shock and awe tourism is just awesomely insensitive.  It’s just too bad that the least all of this could do is put money into poor neighborhoods.  That never seems to happen,

Speaking of insensitive uber rich people, remember the Romney campaign?  This story ought to have every economist who has read the empirical research on the impact of minimum wages doing a face palm.  Yes, you are so worthless that you’d never ever get an opportunity to work if it wasn’t on the cheap.

CNN contributor Kevin Madden, a former advisor and spokesperson for Mitt Romney (R), said on Sunday that Congress should not raise the minimum wage because it would deny people the “opportunity to grab that bottom rung of the economic ladder.”

During a panel segment on CNN’s State of the Union, host Candy Crowley observed that there was a “seriousness” to the recent protests at companies like Walmart and President Barack Obama’s call to raise the minimum wage.

Democratic strategist Donna Brazile pointed out that many Walmart employees were forced to rely on food stamps and other federal benefits because they were not paid a living wage.

“The idea that someone could work hard full time and still be below the poverty level or near it and needing federal assistance seems wrong to a lot of people,” Crowley noted.

“The question here is economic opportunity and how we address it,” Madden remarked. “Oftentimes when you have the federal government or others step in and they start to raise the minimum wage, what happens is you take away or reduce some people’s opportunity to grab that bottom rung of the economic ladder, to get the opportunity and skills that you need to move up that economic ladder.”

“They’re still not high paying jobs though,” Crowley pressed.

Madden argued that there needed to be “greater economic opportunity across the spectrum of the economy” instead of just focusing on raising wages for the poorest Americans.

I am not even sure I want to know what he means by ‘greater economic opportunity”.  I’m visualizing sharecropping and indentured servitude frankly.

So, you can see I spent an entire blog post on one topic.  I’m relying on you to help us cover some other areas.  This subject is just one I feel passionate about.

What’s on your reading and blogging list today?

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60 Comments on “Monday Reads: We’re losing the War on Poverty”

  1. Pat Johnson says:

    The WalMart heirs earn 6 billion dollars annually. Every year! You could not spend that much in a lifetime yet their workers are denied benefits, barely earn the minimum wage, and are without any means of collective bargaining.

    Tell me this makes sense. Since in many areas of the country they are “the only game in town” the workers are stuck having few other options of employment.

    This one family alone shows the ravages of greedy excess while their employees scramble merely to just get by.

    • RalphB says:

      They are the major “takers” in our society.

    • dakinikat says:

      The thing that drives me crazy is that they act like they deserve these vast amounts of wealth when they just got it by the accident of birth. I think if I ever had that kind of money I would set up an endowment for something other than lazy children.

      • Mary Luke says:

        It is disgusting. What’s worse is they will continue to profit and their reach will extend because everyone is so strapped for cash now that people who would have boycotted them in the past will be forced to shop there. It feels like being taken over by the “borg”… or the Blob. Their sticky, slimy influence just keeps expanding throughout our society.

  2. Joyce L. Arnold says:

    Excellent read, dakinikat. Thanks.

    The “justifications” — better termed rationalizations — for our economic system / ideology continue to astound and concern me, particularly at the grassroots level. The Electeds and the Elites for whom they work obviously favor and do everything they can to maintain the system — political and economic — which serves them so well. What’s so troubling to me are the many people who are harmed by it and/or know others who are harmed by it, but remain fierce defenders. It’s all wrapped up in an understanding of patriotism and being a “real” American and not infrequently, also being a “good Christian.”

    Okay, I’ll stop now. You’ve just very well addressed one of my major “issues.” 🙂

    • Pat Johnson says:

      Well said!

    • dakinikat says:

      Thank you! I always hesitate to get too carried away with the economic posts that have all this data but I think it’s important to see the facts behind the circumstance. We rarely get that in journalism these days. It’s one of my major issues too.

      • Mary Luke says:

        Please do more like this, Kat. It’s a difficult topic for many of us to grasp, and you break it down clearly with your teaching skills. I noticed the photo of the sign which explains that Walmart actually COSTS us all money by shifting their costs to our tax-based government benefits. That would be a good point to make with the increasing number of cash-strapped middle income shoppers…maybe some would decide to pay a couple dollars more at another retailer if everyone understood that Walmart is costing us all more money.

        I’ve been thinking about the ethics of this over the weekend. It is impossible to “buy American” anymore. We can only minimize the damage to exploited factory and retail workers. If I were limited to social security or disability income, and had no other alternative, I would go there for necessities of life only, if I couldn’t find a comparable price elsewhere. But I hope I would be strong enough to not buy anything I didn’t need to survive from them.

      • Thank you for this Kat, I’ve been awol for a while and this was my first return to the blog, it was a good one. Hey, have they approved Yellen yet? (I haven’t kept up on the news stuff either.)

  3. NW Luna says:

    The balance of power is so much on the corporate side. That needs to change, starting with policies that no longer favor big business at the expense of the rest of us. Dakinikat, your post today points out, again, that we the people end up subsidizing this corporate welfare.

    This situation is hardest on minimum-wage workers, and the middle class is right behind them on the downward slide. Skilled workers also get screwed over by corporate greed. Recently the Seattle-area Machinists Union said “Hell, no!” to Boeing’s insulting offer of decreased everything. Reaction from some policy-makers has been more fearful cringing to Boeing.

    Corporations will screw over workers just because they can, and even if it costs them money.

    When [Boeing] was mulling putting a commercial jet-making plant elsewhere for the first time, into South Carolina, internal documents showed doing so would cost the company years in delays and billions in money. But — and this “but” apparently was priceless — leaving would give the company “leverage” over its Puget Sound workforce and political leadership.

    • dakinikat says:

      It’s easy for these corporations to capture the political class. There has to be an offset. That’s traditionally been labor unions. We need to work to make labor relevant again and powerful.

    • Mary Luke says:

      NW Luna, see my comment above. You are right…all of us in the “middle class” are clinging by our fingernails. I was shocked recently to hear from a very socially liberal friend that she’d been shopping at Walmart. She is very responsible with her money, and to her it just seemed like she was doing the right thing, cutting her daily expenses to the bone and saving for retirement. And fiscally, it is the right thing for someone in her moderate income bracket. This is going to spread throughout what’s left of the tattered “middle class.”

      • dakinikat says:

        I really try not to shop at Walmart but it’s way out of the way for me any way. I usually hit the dollar stores for stuff like litter.

        • Mary Luke says:

          I don’t shop at Walmart (yet!) , so I don’t even know what they have. I seem to have a lot of expenses in CVS and Rite-Aid, as more and more prescription items are converted to “over-the-counter” status. I don’t know if dollar stores carry that stuff, or if Walmart is actually cheaper than the big pharma chains. I’ve heard Costco is decent, to the extent corporations can be.

  4. NW Luna says:

    Although our state’s exchanges website and process are up and running just fine, but always read the fine print. Most of the plans offered do not cover a pediatric hospital and the state’s only Level I burn and trauma hospital.

    Many insurers offering plans through the Washington Healthplanfinder, the exchange marketplace where shoppers can apply for subsidies, are using narrow provider networks. These networks are not the broad, include-all-providers networks that many big employer plans currently enjoy. ….

    If a patient needs a covered service, such as a heart transplant, but it’s not provided at in-network hospitals, insurers must cover it elsewhere. But for patients in other circumstances, plans with lower premiums could end up costing more if they receive care from a provider outside their plan’s network. Not only could they wind up paying most or all of the bill, they would lose the law’s cap on out-of-pocket expenses. Premera, for example, limits annual out-of-pocket costs for in-network care at $6,350. But out-of-pocket expenses for care outside the network are “unlimited.” [emphasis added.] ….

    Kreidler [WA state Insurance Commissioner] has begun the process of changing the rules to give his office more control over provider networks.

    • RalphB says:

      Like a lot of “Obamacare’s problems”, those issues lie with the state insurance commissioners. Most regulation is still done at the state level after all.

      • NW Luna says:

        Oh, I think it’s definitely the fault of the insurance co’s, and I’m glad our Ins Commish is a reasonable Dem and will try to make it better. But although better than what we had before, Obamacare is still Romneycare and is still a goldmine for the insurance industry — who will continue to try to make the most profit and provide the least coverage. We need Medicare for All, but I think you and I are on the same page about that. 🙂

        • RalphB says:

          Yes we are on the same page. Medicare for All would definitely be the best. Too bad our congress critters wouldn’t vote for it. I think all we can do for now is further regulate those insurance companies.

        • RalphB says:

          DailyKos link but worth reading.

          Why is nobody talking about the OTHER Obamacare subsidy?

          … That’s why I was surprised this morning to find out that the tax credit isn’t the only subsidy available – there’s a ‘Cost-Sharing Reduction’ version of the Silver level plans available to those with incomes less than 250% of poverty level. That’s $58,875 for a family of 4, so this subsidy is potentially available to a large percentage of Americans in the individual market.

          A family of 4 earning $40,000 (169% of the poverty level) gets 87% of their out-of-pocket expenses paid instead of the normal 70% in a Silver plan. …

        • dakinikat says:

          I can tell it’s a free for all for insurance by the number of mail ads and TV ads I see coming at me. They see this as a cash cow.

  5. NW Luna says:

    I’m glad to see more journalist speak up about wage inequality.

    Here in the United States, where “trickle-down” has its most fervent supporters, we’ve seen a steady decline in the fortunes of the middle class and the poor while the wealthiest Americans grow richer by the minute. And we know excessive inequality has not played out well in the past — remember the Great Depression? decline in the fortunes of the middle class and the poor

    Here’s where I start preaching socialism, right? Wrong. We already have socialism; just look at how quickly the state found tax breaks when Boeing threatened to move away. We have farm subsidies for billionaires, while the government considers cutting food-aid benefits for the poorest Americans. ….

    Around the country, low-wage workers are protesting and some state and national politicians are responding. The outcry is less about some specific wage level than it is about an increasing lack of respect in high places for working people and for democratic values.

    • RalphB says:

      I really would hope that we achieve critical mass someday soon. If not, we may well turn into Weimar America and whatever real hell comes next. That’s the peril of the tea partiers.

  6. bostonboomer says:

    Ugh! That Shanty Town hotel option reminds me of the expensive “homeless chic” clothing lines that were popular during the ’80s.

    • RalphB says:

      Or “heroin chic”, whichever. That was really grotesque.

    • NW Luna says:

      Or “shabby chic.” And I’ve never understood the “chic” of expensive “distressed” furniture or other similar faux stuff. Maybe if rich people actually had to live with battered hand-me-downs and the average thrift-shop bargains — or in real shanty towns — they wouldn’t think it’s so hot.

    • Mary Luke says:

      BB, maybe I missed something over the weekend, but i was wondering, what is your take, as a psychologist, on the “Walmart violence” behaviors? What is going on in our pychosocial environment which permits, even encourages, this behavior?

      • bostonboomer says:

        I wish I knew. I guess it probably has to do with mob behavior. People in mobs will do things they’d never do alone, and of course there is less accountability in a mob.

        • Mary Luke says:

          I was very disturbed by what little media coverage I saw. It seems to me the media are inventing these “buying spree” days, and egging them on so they can get a photo op. It is all feeding together. The only other reason I could think of is that it’s frustrated people’s way of feeling like they “beat the system” if they can get a steep discount on an expensive item. People are so desperate and trapped in their lives they don’t even realize they’re being manipulated by the corporations which promote these big-ticket items.

  7. RalphB says:

    The whole newscast is up and I watched enough to think those small towns are lovely.

    Will Ferrell Co-Anchors North Dakota Newscast As Ron Burgundy (VIDEO)

    … The actor stayed in character, although his fellow broadcasters broke into laughter at some points in the newscast. Ferrell even told co-anchor Amber Schatz she looked “lovely” and asked if she was married in true Ron Burgundy fashion.

    “Well I am, so don’t get any ideas,” he responded when Schatz said she wasn’t married. …

  8. dakinikat says:

    Virginia to force married gay couples to file taxes as though they were single http://slnm.us/ZYflygp

  9. dakinikat says:

    Juan Williams: Dems now party of women

    http://thehill.com/opinion/juan-williams/191675-juan-williams-dems-are-now-party-of-women

    A 2012 Pew survey found that 57 percent of women favor Democrats. Young, single, gay, minority and pro-abortion-rights women have been with the party for a while. Older, white, married women lean to the GOP. But now married, churchgoing women living in cities are also voting for Democrats.

    That explains why an October ABC/Fusion poll found 60 percent of Democrats want more women elected to Congress. Republicans do not see the need. Only 26 percent of conservatives and 23 percent of Republicans want more women in Congress.

    The two politicians who produce the most passionate response among Democrats, according to a recent Quinnipiac poll, are former Secretary of State Hillary Clinton and Sen. Elizabeth Warren (D-Mass.). They stirred the Democratic base more than President Obama or Vice President Biden. Women are the future of the party.

  10. ANonOMouse says:

    The first change that needs to be made in our society is for regular people to QUIT idolizing and attempting to emulate the lives of the rich & famous. If people would just take a long, hard look at the uber-wealthy as individuals and understand the outrageous selfishness, greed and lack of empathy by these individuals, our society could begin to change. I’m convinced there is some sort of illness, perhaps the same illness that afflicts hoarders in general, that inflicts the wealthy.

    Bill Gates is worth $72 billion dollars, if he gave away 99% of his wealth he’d still have $7 million dollars. Good grief, how much does 1 man need, especially when that one man has accumulated more wealth than the GDP of many of the worlds poorest countries, combined. How many homes, planes, Villas, yachts, apartments, businesses, automobiles, bank accounts, golf courses, swimming pools, islands, does 1 man/woman need? Goddam it’s a sick way of life and we are socialized to applaud it, cheer it, seek it, because unless we acquiesce to it they cannot do it.

    Those of us who’ve tried to teach children about the way to treat others always teach unselfishness as one of the first lessons. Why do we teach children the virtue of sharing and the love, compassion and common good that’s demonstrated through generosity then idolize those who basically ignore the things we expect of children? If a child bought the ingredients for a chocolate cake and that child and his/her 15 friends worked together to bake the cake, with the friends doing the lions share of the baking and cleanup duties, would we not expect the child to share a little more equitably than the child keeps 70% and the 15 friends get to divvy up the remaining 30%? I know we would, and that, on a much larger scale, is what’s happening in our society. We are just a pretense away from a futile state.

  11. dakinikat says:

    ‘Christian values’ Hobby Lobby purchases its products from #1 ‘family planning’ nation China http://www.dailykos.com/story/2013/12/02/1259591/–Christian-values-Hobby-Lobby-purchases-its-products-from-1-family-planning-nation-China … via @dailykos

  12. RalphB says:

    Best Ron Fournier calling out ever…

  13. jackyt says:

    I live in Ontario where the minimum wage has been frozen at $10.25 for 3 years now. There is a concerted push to increase that to $14.00. As well, we have universal health care.
    My point is: Walmart is spreading like the plague across our landscape, too. If they weren’t making a profit paying that higher minimum, plus the health care levy, I doubt they’d continue to push their way into every podunk town in Canada.
    And I doubt seriously whether there is any state in the union that would see the rear end of Walmart just because it raised the minimum to a living wage.