Although not a new idea, the concept of a guaranteed basic income — also known as a guaranteed minimum income or universal basic income — seems to be gaining a lot more traction lately. Amid concerns about rising poverty and inequality, as well as greater scrutiny on the failings and inefficiencies of current welfare programs, the allure of a more streamlined and equitable income for all seems obvious; hence why thinkers and activists across the political spectrum — from Martin Luther King, Jr. to Milton Friedman — have advocated one form of it or another.
If you would like a great breakdown on what this idea entails and how it would be implemented, check out this article on Vox.com. It does a pretty good job of introducing the subject in a balanced and holistic way, including analyzing the various arguments for and against a basic income by conservatives, liberals, and libertarians. What do you think?
Throughout the recession and subsequent recovery, one of the few job opportunities that have remained largely unaffected, if not growing, has been food service. From eateries to fast-food chains, this broad industry has gained an impressive 30 percent in employment since 1990, accounting for nearly one out of ten private-sector jobs in the U.S.
Unfortunately, a recent report by the Economic Policy Institute exposes some very disquieting things about one of America’s fastest-growing employers. Here are some of the highlights courtesy of Mother Jones:
The industry’s wages have stagnated at an extremely low level. Restaurant workers’ median wage stands at $10 per hour, tips included—and hasn’t budged, in inflation-adjusted terms, since 2000. For nonrestaurant US workers, the median hourly wage is $18. That means the median restaurant worker makes 44 percent less than other workers. Benefits are also rare—just 14.4 percent of restaurant workers have employer-sponsored health insurance and 8.4 percent have pensions, vs. 48.7 percent and 41.8 percent, respectively, for other workers.
Unionization rates are minuscule. Presumably, it would be more difficult to keep wages throttled at such a low level if restaurant workers could bargain collectively. But just 1.8 percent of restaurant workers belong to unions, about one-seventh of the rate for nonrestaurant workers. Restaurant workers who do belong to unions are much more likely to have benefits than their nonunion peers.
As a result, the people who prepare and serve you food are pretty likely to live in poverty. The overall poverty rate stands at 6.3 percent. For restaurant workers, the rate is 16.7 percent. For families, researchers often look at twice the poverty threshold as proxy for what it takes to make ends meet, EPI reports. More than 40 percent of restaurant workers live below twice the poverty line—that’s double the rate of non-restaurant workers.
Opportunity for advancement is pretty limited. I was surprised to learn that for every single occupation with restaurants—from dishwashers to chefs to managers—the median hourly wage is much less than the national average of $18. The highest paid occupation is manager, with a median hourly wage of $15.42. The lowest is “cashiers and counter attendants” (median wage: $8.23), while the most prevalent of restaurant workers, waiters and waitresses, who make up nearly a quarter of the industry’s workforce, make a median wage of just $10.15. The one that has gained the most glory in recent years, “chefs and head cooks,” offers a median wage of just $12.34.
Industry occupations are highly skewed along gender and race lines. Higher-paid occupations are more likely to be held by men—chefs, cooks, and managers, for example, are 86 percent, 73 percent, and 53 percent male, respectively. Lower-paid positions tend to be dominated by women: for example, host and hostess (84.9 percent female), cashiers and counter attendants (75.1 percent), and waiters and waitresses (70.8 percent). I took up this topic in a piece on the vexed gender politics of culinary prestige last year. Meanwhile, “blacks are disproportionately likely to be cashiers/counter attendants, the lowest-paid occupation in the industry,” while “Hispanics are disproportionately likely to be dishwashers, dining room attendants, or cooks, also relatively low-paid occupations,” the report found.
Restaurants lean heavily on the most disempowered workers of all—undocumented immigrants. Overall, 15.7 percent of US restaurant workers are undocumented, nearly twice the rate for non-restaurant sectors. Fully a third of dishwashers, nearly 30 percent of non-chef cooks, and more than a quarter of bussers are undocumented, the report found. So a huge swath of the people who feed you pay payroll taxes and sales taxes yet don’t receive the rights of citizenship.
All of this reflects a rather disturbing overall trend in the U.S. economy: the loss of stable, well-paying jobs to less secure, low-wage ones. Not only has job growth not kept pace with the needs of the labor force, but the relatively few options that remain share largely the same characteristics: meager pay, little to no benefits, no paid sick leave, poor upward mobility, and so on. And since this has become standard across the industry — baring only a fewexamples — most companies have little incentive to offer anything better to their workers — in essence, it is a race to the bottom, one that desperate workers of all ages have no choice but to take up.
Needless to say, this is not a sustainable model for prosperity. Not only do individual employees suffer, but so do their families and communities (the poorest of which often have few options beyond food service and equally low-paying retail). The national economy as a whole cannot thrive when such a large chunk of its consumer base is too poor to afford goods and services, or too unhealthy and demoralized to work at optimal productivity. These highly profitable employers have as much an interest in investing more in their labor force as the workers themselves.
For its part, the EPI report suggests legislative solutions, including a higher minimum wage, mandated paid sick leave, and a path to legal status for undocumented workers. I would add unionization or some sort of labor collective as a big step, too. For its part, MoJo recommends that those wishing to learn more about the working conditions in America’s food industry read the 2013 book Behind the Kitchen Doorby Saru Jayaraman.
As fast-food, retail, and other service work continues to take the place of increasingly obsolete but better-paying positions, we need to start adjusting the way we value such labor; otherwise, unpleasant, beggaring jobs will be the new normal, and that cannot last.
When it comes to wealth and income inequality — a subject I have discussed at length here – the news is rarely positive. As the following graph makes succinctly clear, the issue has worsened dramatic over the last few decades.
Income includes household wages and government transfers. Source: Census / Colin Gordon. Credit: Quoctrung Bui / NPR
While the most recent data in these sorts of graphs are around seven years old, newer evidence suggests the problem is still prevalent, if not worsening — at least in the United States.
According to an interesting new paper on global income distribution conducted by economists Branko Milanovic and Christoph Lakner, the global pictures regarding income inequality is far more nuanced, if not positive. As NPR reports, the study found that globalization — the same mechanism that plays a large, though hardly solitary, role in rising inequality — has had the opposite effect, broadly speaking.
Essentially, they look at inequality at a global scale, accounting for the world’s population as a whole rather than breaking it down country-to-country (as is usually the case). S what happens if you look at the change in income over the past few decades for everyone on Earth? Here’s what the graph of the data shows:
Income is defined as per-capita income. Source: Milanovic and Lakner (2014). Credit: Quoctrung Bui/NPR
So what does this mean? Basically, people in the middle of the global income distribution — mostly concentrated in China and India, as as well as a few other developing Asian countries — have had the biggest gains in come by percentage. In fact, the average American, like most others in the developed world, would fall at the far right of this graph, at the top of the global income distribution.
So in a global context, the typical developed-world individual is capturing the lion’s share of income growth. Assuming this is truly the case (I await for more research and scrutiny to be certain one way or the other) that does not make inequality any less worrisome, now and especially in the long-term. Worldwide, we are still finding far too much wealth concentrated at the top amid austere policies, insufficient investment in the public good, and the persistent absolute poverty of hundreds of millions of people.
An increasingly transient global elite is still capturing the lion’s share of investment — as made depressingly clear by the revelation that 85 individuals hold more wealth than 3.5 billion people. Too many countries are mired in the same old problems despite the ever-growing generation of wealth that never seems to be reflected in higher wages, incomes, or public investments. Even if some people in this arrangement have it worse than others, the fact that many have it worse than they should given the capital potential is a problem, for most individual countries and the world at large.
Those are just my brief thoughts. What are your opinions?
It goes without saying that addressing the problem of homeless on all levels is a moral imperative. The ethical merit of keeping people off the streets, and helping uplift those already there, requires no argument (at least I should hope).
But unfortunately, in our world, morality is apparently not a good enough incentive. Even with all the capital that is available — whether it is wasted on the military industrial complex, sitting in offshore banks, or poured into pork-barrel projects — policies and solutions need to be cost-effective to gain any sort of political currency and public support.
Thankfully, there is a solution to alleviating homelessness that can bring together both moralists and cynics, providing the cost-efficiency that is so imperative to policymakers while legitimately helping those in need.
Vox.com reported on a study by the Central Florida Commission that compared several approaches to addressing homeless in that region of the state (Florida has one of the highest rates of homeleness, not to mention poverty, in the country).
[The study indicated] that the region spends $31,000 a year per homeless person on “the salaries of law-enforcement officers to arrest and transport homeless individuals — largely for nonviolent offenses such as trespassing, public intoxication or sleeping in parks — as well as the cost of jail stays, emergency-room visits and hospitalization for medical and psychiatric issues.”
Unsurprisingly, just dealing with the problem ad hoc or in a superficial sense is both costly and ineffective. But by contrast…
[Getting] each homeless person a house and a caseworker to supervise their needs would cost about $10,000 per person.
This particular study looked at the situations in Orange, Seminole, and Osceola Counties in Florida and of course conditions vary from place to place. But as Scott Keyes points out, there are similar studies showing large financial savings in Charlotte and Southeastern Colorado from focusing on simply housing the homeless.
Here is a visual picture of the state of homelessness in the U.S.
Source: National Alliance to End Homelessness / Vox.com.
Keep in mind that this statistical success has taken place during some of the toughest economic times in our country’s history (and Florida’s economy was especially hard hit). As the article notes, there is a good reason why housing the homeless is more tenable than many would think:
When it comes to the chronically homeless, you don’t need to fix everything to improve their lives. You don’t even really need new public money. What you need to do is target those resources at the core of the problem — a lack of housing — and deliver the housing, rather than spending twice as much on sporadic legal and medical interventions. And the striking thing is that despite the success of housing first initiatives, there are still lots of jurisdictions that haven’t yet switched to this approach. If Central Florida and other lagging regions get on board, we could take a big bite out of the remaining homelessness problem and free up lots of resources for other public services.
There you go: a win-win for everyone, especially (and most importantly) he hundreds of thousands of homeless people across the country whose plight needn’t be ignored for either ethical or practical reasons.
It is undeniable that wealth and income inequality is growing in the U.S. and across the world. But the scale and extent of it is far more than previously imagined. Although about six months by the time of this post, the report by Oxfam International — titled “Working for the Few” — is no less stark and relevant in its identification of a “growing tide of inequality” (to use the report’s own description).
Almost half of the world’s wealth is now owned by just one percent of the population.
The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population [3.5 billion people].
The bottom half of the world’s population owns the same as the richest 85 people in the world.
Seven out of ten people live in countries where economic inequality has increased in the last 30 years.
The richest one percent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.
In the U.S., the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.
The following chart compiled from this data highlights just how much the problem has grown: while every country saw some growth in inequality, the U.S. by far saw the most dramatic increase:
Although the report makes clear that some economic inequality is necessary to foster growth (in line with mainstream economics) it also warns that wealth concentration at this severity “threaten[s] to exclude hundreds of millions of people from realizing the benefits of their talents and hard work” — also in line with what we’ve learned from both history and economic research.
In particular, the Oxfam report emphasizes the corrosive effect that such inequality can have on democratic governance and social mobility, due mostly to the fact that “when wealth captures government policymaking, the rules bend to favor the rich, often to the detriment of everyone else”
According to polls conduct by Oxfam in Spain, Brazil, India, South Africa, the U.K. and the U.S. — a mix of developed and developing economies — the majority of people in these countries believe that “laws are skewed in favor of the rich” in a variety of areas, including financial deregulation, tax laws favoring the wealthy, economic austerity, policies that disproportionately harm women and the poor, and the use of oil and mineral revenues.
Despite all the grim news, the report does point out that such trends aren’t irreversible: there are plenty of historical examples of countries minimizing inequality and creating broader prosperity (notably the U.S. and Europe following the Second World War). In fact, since the turn of the century, Latin America has made significant inroads in reducing its historically high rate of inequality and underdevelopment, although it still has a long way to go.
Is there enough political will in each country, not to mention on a global level, to resolve this problem before it worsens? Or is this issue overblown? What do you think?
New polling out from NBC and the Wall Street Journal shows a huge shift in attitudes towards poverty and the poor over the last 20 years. According to the survey, 46 percent Americans believe that poverty is caused by circumstances beyond people’s control, versus 44 percent who think it’s caused by impoverished people not doing enough to improve their station in life. The last time the survey asked that question, in 1995, a full 60 percent of Americans felt that the poor weren’t doing enough to lift themselves out of poverty, compared to just 30 percent who blamed extraneous factors. Hard times, it would seem, have made us more sympathetic to the plight of the poor. There’s nothing like a massive economic downturn to foster a little empathy.
And that makes sense. When the economy so rapidly and viciously turns on so many people, it’s hard to maintain the sense of idealism that leads one to believe that hard work and ambition are all that’s required to secure a comfortable, reasonably prosperous existenc
Nowadays, there is no shortage of evidence that the American economic and political system is fundamentally unjust — and subsequently inefficient and dysfunctional. Yet, despite the dire consequences, many of these problems remain under the radar of both media and the public as a whole.
Just consider these five perturbing examples of greed highlighted in a recent article in AlterNet, all of it on a scale most of us can scarcely imagine. As you go down the list, consider the many problems that bedevil this country — crumbling infrastructure, stagnant incomes and wages, etc — in juxtaposition with the following:
1. $1,000,000,000,000,000 in Sales. Not One Cent for Sales Tax
The trading volume on the Chicago Mercantile Exchange (CME) reached an incomprehensible $1 quadrillion in notional value in 2012. That’s a thousand trillion dollars. In comparison, the entire U.S. GDP is $17 trillion.
On that quadrillion dollars of sales CME imposes transfer fees, contract fees, brokerage fees, Globex fees, clearing fees, and contract surcharges, many of them on both the buyer’s and seller’s side. As a result, the company had a profit margin higher than any of the top 100 companies in the nation from 2008 to 2010, and it’s gotten even higher since then.
But not a penny in sales tax for the taxpayers who provide publicly-funded infrastructure, technology, systems of law, and security to help them process billions of financial transactions.
Instead — incredibly — CME complained that its taxes were too high, and they demanded and received an $85 million tax break from the State of Illinois.
2. A Single Tax-Avoider Made More Money in 2013 Than ALL the Emergency Responders in the U.S.
Warren Buffett watched his net worth grow by $12 billion in one year, much more than the $8.3 billion our country spends on almost a quarter-million Emergency Medical Technicians and Paramedics.
Meanwhile, his company, Berkshire Hathaway, hasn’t been paying its taxes. According to the New York Post, “the company openly admits that it owes back taxes since as long ago as 2002.” A review of Berkshire Hathaway’s annual report confirms that despite profits of almost $29 billion in 2013, a $395 million refund was claimed, while $57 billion in federal taxes remain deferred on the company’s balance sheet.
Berkshire Hathaway does report an income tax expense. But all of it, in the company’s own words, is hypothetical.
3. Walmart: $13,000 per U.S. Employee Taken in Profits, $4,000 per U.S. Employee Taken from Taxpayers
It gets worse. In addition to Walmart’s $19 billion in U.S. profits last year, the four Walton siblings together made about $29 billion from their personal investments. That’s over $33,000 per U.S. employee in profits and family stock gains. Yet they pay their 1.4 million American employees so little that the average Walmart worker depends on about $4,000 per year in taxpayer assistance, for food stamps and other safety net programs.
How does Walmart spend its profits? Instead of providing a living wage for its workers, company management spent $7.6 billion, or about $5,000 per U.S. employee, on stock buybacks, in order to further boost the value of their stock holdings.
4. U.S. Wealth Grew by $25 Trillion in the Recovery, but 90 Percent of Us Got NONE of It
U.S. wealth grew from $47 trillion to $72 trillion in the four years after the recession, largely as a reflection of continued American productivity. In other words, a full one-third of the total wealth in the U.S. in 2013 was generated since 2009. But the richest 10% took all of it.
That’s $6 trillion per year in new wealth for the rich. In contrast, the total annual cost of ‘entitlements’ and the safety net is less than $2 trillion.
One consequence of this redistribution of wealth is that more money has been transferred from minorities to prosperous white Americans. The richest 1% took 95 percent of the gain. Less than two out of every hundred individuals in the richest 1% are black.
5. Extreme Fees: Nickeled and Dimed until the Retirement Fund is Almost Gone
The one- to two-percent fees don’t seem like much, but savvy financial minds know better. It has been estimated that the average underserved household spends $2,412 each year just on interest and fees for alternative financial services. Food stamp recipients have to pay companies like JP Morgan to process their benefits. The unemployed are getting their benefits through banks who issue fee-laden debit cards instead of cash. And it’s not just low-income households paying the fees. A two-earner household with median incomes will pay an average of over $150,000 in 401(k) fees over their lifetimes.
The fees are not only draining us individually, but also at the levels of local and state government. Los Angeles last year spent more on Wall Street fees than it did on its streets. In Detroit, financial expenses might approach a half billion dollars, in a city where homeowners can barely afford the water services. Chicago may end up paying Morgan Stanley $9.58 billion for a $1.15 billion parking meter deal. And in Rhode Island, it has been projected that the state will pay $2.1 billion in fees to hedge funds, private-equity funds and venture-capital funds over twenty years, the same amount the state will be taking from workers by freezing their cost of living adjustments.
Even setting aside matters of justice and ethics, it is inconceivable from a practical point of view that cash-strapped local governments must pay billions to already-profitable financial firms, or that an institution presiding over an unfathomable $1 quadrillion in capital does not pay a cent in taxes.
This could all be well and good if such private sector actors took the initiative to pay their workers better, donate more to charity, and the like, but as usual the majority of such individuals and institutions show little inclination for social responsibility — they neither want to take the initiative on their own accord nor submit to any state-led mandate via taxation.
So what’s the solution? Well the article ends with these simple but politically challenging solutions:
What are your thoughts on the matter? Do you see any discrepancy with the data and claims made? Any better solutions that can be offered? I would weigh in further, but time is short on my end, so I leave the floor to you all. Thanks for reading.
Although many readers have no doubt heard this before, it bears reaffirmation: around one billion people — one out of every seven human beings on Earth — live on a daily budget equivalent to just $1.25. That unconscionably meager amount is intended to cover food, healthcare, and shelter, much less any of the pleasantries in life that we take for granted.
While the percentage of people living in such abject poverty was halved by 2010 — and is set to decline by half again in the next two decades — extreme poverty remains a persistent problem in most parts of the world. Although we have greater means and resources than ever to resolve the problem, we still have a long way to go, as indicated by the following 45 facts about poverty in today’s world (courtesy of PolicyMic).
[Apologies for the bad formatting, WordPress seems to be acting up a bit.]
The number of people living on less than $1.25 per day has dramatically decreased in the last three decades, from 52% of the citizens in the developing world in 1981 to 21% in 2010. But, there are still there are still more than 1.2 billion people living in extreme poverty.
If the developing world outside of China returns to its slower pace of growth and poverty reduction of the 1980s and 1990s, it would take 50 years or more to lift 1 billion people out of poverty.
India has a greater share of the world’s poor than it did 30 years ago. Then, India was home about one-fifth of the world’s poorest people. Today, close to one-third of the world’s extreme poor are concentrated in India.
But poverty is not just an issue in the developing world. There are 16.4 million children living in poverty in the United States. That’s about 21%, compared to less than 10% in the U.K. and in France. The percentage of poor children in America has also climbed by 4.6% since the start of the Great Recession in 2007.
Taking food stamps, housing subsidies and refundable tax credits into account, the number of American households in extreme poverty is 613,000, which is about 1.6% of non-elderly households with children.
Poverty is the main cause of hunger because the poor lack the resources to grow or purchase the food they need.
Even though there is enough food produced worldwide to provide everyone with an adequate diet, nearly 854 million people, or 1 in 7, still go hungry.
Around 1 in 8 people in the world, about 842 million people, were estimated to be suffering from chronic hunger between 2011-13.
About 2.8 billion people still rely on wood, crop waste, dung and other biomass to cook and to heat their homes.
Despite the fact that China has achieved more than any other nation in energy efficiency, the country still faces some of the world’s greatest energy poverty challenges. Almost 612.8 million people, nearly twice the population of the United States, lack clean fuel for cooking and heating in China.
More than 6.9 million children died under the age of five in 2011 — that’s about 800 every hour — most of whom could have survived threats and thrived with access to simple, affordable interventions.
Rich people who live in neighborhoods with other wealthy people usually give a smaller share of their income to charity than rich people who live in economically diverse communities, according to this study of tax records in the United States.
The Pew Research Center’s Project for Excellence in Journalism found that out of 52 mainstream media outlets analyzed, coverage of poverty issues amounted to less than 1% of available news space from 2007 to 2012, a period that covered the historic recession.
The report also concluded that media organizations chose not to cover poverty because “it was potentially uncomfortable to advertisers seeking to reach a wealthy consumer audience.”
An online game titled “Survive125,” was launched by Live58, an NGO devoted to ending extreme poverty and challenges gamers to survive one month on $1.25 a day by facing a series of daunting questions that millions of people face every day just to survive.
However, campaigns like one have been criticized for being “patronizing”: “The idea that you can simply dip your toe into human suffering for a week is spurious and patronising to those who actually live in poverty,” wrote Maya Oppenheim for Ceasefire Magazine.
Given the number of occasions that world leaders and influencers have promised to eradicate poverty, the world should be much further along than it is. In April 2013, Jim Kim, president of the World Bank, said “For the first time ever, we have a real opportunity to end extreme poverty within a generation.” Eight years before that, Nelson Mandela said “in this new century, millions of people in the world’s poorest countries remain imprisoned, enslaved, and in chains. They are trapped in the prison of poverty. It is time to set them free.” Before that, President Lyndon B. Johnson launched his war on poverty by saying “for the first time in our history, it is possible to conquer poverty.” That was back in 1964.
In order for the world to effectively reduce poverty, countries need to focus not only on achieving growth as an end in itself but implement policies that allocate resources to the poor including raising income growth among the bottom 40% of earners.
One report warns of poverty’s “revolving door,” alluding to the fact that climbing out of extreme poverty and staying there can be very difficult unless more is done by 2030 to support the world’s poorest populations in hard times.
Needless to say, it helps to have a bigger picture about this complex and often poorly understood issue. While there has definitely been progress, the human toll of slow, inefficient, and half-hearted efforts to address the problem remains disturbingly high — especially when compared to our potential to do more.
Over at Salon, columnist Thomas Frank scrutinizes Thomas Piketty’s bestselling book on inequality, “Capital in the Twenty-First Century”. While he agrees with many of the author’s observations and points regarding the extent and seriousness of the problem, he takes issue with Piketty’s lackluster suggestion that the solution lies in a top-down approach (via some sort of global taxation regime).
I haven’t read the book yet so I can’t speak to this critique, but I do think Frank’s suggested solution is spot on in both its simplicity and empirical validity:
Turning to the problem of income inequality here in the United States, there is an even simpler solution, by which I mean a more realistic solution, a solution that builds on familiar American traditions,that works by empowering average people, that requires few economists or experts, that would involve a minimum of government interference, and that proceeds by expanding democracy and participation rather than by building some kind of distant and unapproachable global tax authority: Allow workers to organize. Let people have a say on the basic issues affecting their lives.
Piketty’s biggest blind spot is that he has virtually nothing to say about labor unions. He starts Chapter 1 of “Capital” with an anecdote about a bloody strike in South Africa and he returns to that same tragic episode at the very end of the book, but in between he addresses the matter almost not at all. Piketty talks a good game about democracy, but like other economists who have made inequality their subject, he prefers solutions that are handed down from the lofty heights of expertise.
The best remedy for inequality, however, is the one that comes up from below. Economists may not think very highly of those hardened people in SEIU t-shirts—some of them smoke too much, some are suspicious of “free trade,” some of them (gasp!) didn’t go to college—but the fact remains that in nearly every particular they represent the obvious and just about the only social force on the ground in America that might bend the inequality curve the other way.
It is not a coincidence that labor’s rise in the 1930s happened at the same time as the One Percent’s fall from grace, nor is it a coincidence that labor’s long decline has been almost a mirror image of the One Percent’s recovery of its nineteenth-century heaven. These things happened the way they did because labor’s most basic function is to turn the bright light of democratic scrutiny on economic power. When labor is strong, our composers write things like “Fanfare for the Common Man” and blue-collar workers buy cars and boats and snowmobiles. When labor is weak, we bow down before “job creators” and McMansions sprout like mushrooms after a rainstorm.
The reasons for this inverse relationship aren’t complex or surprising: without unions to bargain with, the upper echelons of any given company will simply take it upon themselves to allocate profits and assets to mostly suit themselves. As Frank notes:
Consider the crazy imbalance in the current capital-labor split, which is the central thread holding together Piketty’s enormous book. Well, having strong unions that are able to negotiate effectively would remedy this situation almost by definition. That’s the idea of unions in the first place.
Consider the problem of out-of-control executive compensation, of Piketty’s “supermanagers” who stuff their pockets with stock options simply because no one will stop them: As it happens, this is an issue of particular significance to organized labor, as you will learn from one look at the AFL-CIO’s shocking website, “Executive Paywatch.” Allowing workers to bargain fairly with bosses would put the brakes on the runaway CEO freight train instantly.
The disappearing middle class? This is labor’s grievance par excellence. The minimum wage? Labor is always the loudest voice calling for an increase. Stratospheric college tuition and student debt? The AFL-CIO has been admirably forthright on the issue. Social Security and the rest of the welfare state? There is no more dedicated supporter than organized labor. Were labor strong instead of weak, privatization and the other attacks on the welfare state would probably never even come up. Certainly no Democratic president would be able to say, as Barack Obama did in one of his debates with Mitt Romney, that his own position was “somewhat similar” to the Republican’s on this issue.
Nor is it utopian or even unrealistic to imagine labor staging a comeback. It would probably happen overnight if the workplace rights we are told we enjoy actually had force behind them. A large percentage of American workers consistently tell pollsters they’d like to have some kind of collective bargaining organization at work, and yet only a tiny sliver of them actually have such organizations—6.7% in the private sector, according to the latest data. The reason for the difference, to put it bluntly, is that management doesn’t want their workers to have such organizations, and bosses routinely threaten and fire workers who try to bring such organizations together, law or no law.
Granted, as Frank himself notes (and I concur) a powerful labor movement is not the complete solution to plutocracy, but it’s certainly a start and would go a long way to mitigating the present and long-term effects of excessive inequality.
Other solutions include protecting beleaguered and discouraged unionization with Civil Rights laws (which would allow workers who are fired for joining a union to sue their bosses directly rather than go through the sclerotic federal channels); helping new bargaining units to negotiate their first contract with management; and better punishing bosses who try to circumvent labor organizing.
Ultimately, it rests on workers to come together, organize, and take charge of their workplaces — no small feat given the entrenched and powerful opposition to such an approach, not to mention the taboo of organized labor (especially in the Deep South, which incidentally is the poorest region in the country).
But I feel this is a solution that people across the political spectrum can agree on: individuals acting on their rights as agents in the market to organize and bargain on their terms. As Frank noted, this would minimize state interference (baring the legal protections for such unions) while giving a more grassroots and democratic approach to solving these problems.
As the world’s richest country by a significant margin, it’s little surprise that the American middle-class — long the bedrock of our society, culture, and identity — has also long held the top spot for being the most well off globally. But a recent study just reported in the New York Timeshas confirmed what many in the U.S. have begun to notice: that in addition to its relative decline in global and economic clout, America’s middle-class is following suit:
While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades.
After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans.
Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in the United States, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago.
In European countries hit hardest by recent financial crises, such as Greece and Portugal, incomes have of course fallen sharply in recent years.
The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less money than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.
The results are all the more surprising given that the U.S. is not only still the world’s richest country overall, but a leader in various other metrics such as per capita gross domestic product that have continued to grow healthily. The discrepancy exposes the fact that these average do not reflect the actual distribution of income: a big share of all those continued gains in wealth and income gains is going to a relatively small number of high-earning households, a trend that’s far less pronounced in most other nations.
When one looks at median per capita income as opposed to average, it is $18,700 in the United States in 2010 — or, to put it another way, an after-tax income of around $75,000 for a family of four. While that’s up 20 percent since 1980 — when the U.S. middle-class was still the richest in the world — it’s been stagnant in real terms (e.g. after factoring in inflation) since 2000.
By comparison, when applying the same measure in to other countries in that span of time (between 2000 and 2010) the U.K. saw medium per capita income rise to about 20 percent , the Netherlands by 14 percent , and Canada by 20 percent. Furthermore, recent data mentioned in the article suggest that pay in Canada has risen faster than in the United States — and is now most likely higher — and has also risen higher in several European countries.
According to the study, one of the only other large economies to experience a similar level of stagnation over the past 15 years is Germany, whose heavily export-oriented economy has led policymakers to hold down the cost of exports by taking steps such as restraining wage growth.
But even in Germany, the poor and middle-class have fared better than in the U.S., where per capita income has declined far more rapidly across various income percentiles, and where Germany’s fairly generous public spending on things like healthcare and education don’t offer much respite from the ravages of poverty.
So what gives? Well, the Times article offers three probably explanations:
First, educational attainment in the United States has risen far more slowly than in much of the industrialized world over the last three decades, making it harder for the American economy to maintain its share of highly skilled, well-paying jobs.
Americans between the ages of 55 and 65 have literacy, numeracy and technology skills that are above average relative to 55- to 65-year-olds in rest of the industrialized world, according to a recent study by the Organization for Economic Cooperation and Development, an international group. Younger Americans, though, are not keeping pace: Those between 16 and 24 rank near the bottom among rich countries, well behind their counterparts in Canada, Australia, Japan and Scandinavia and close to those in Italy and Spain.
A second factor is that companies in the United States economy distribute a smaller share of their bounty to the middle class and poor than similar companies elsewhere. Top executives make substantially more money in the United States than in other wealthy countries. The minimum wage is lower. Labor unions are weaker.
And because the total bounty produced by the American economy has not been growing substantially faster here in recent decades than in Canada or Western Europe, most American workers are left receiving meager raises.
Finally, governments in Canada and Western Europe take more aggressive steps to raise the take-home pay of low- and middle-income households by redistributing income.
Indeed, the study confirms that wealthier Americans nonetheless retain their top spot despite the declining circumstances of most other groups:
Americans at the 95th percentile of the distribution — with $58,600 in after-tax per capita income, not including capital gains — still make 20 percent more than their counterparts in Canada, 26 percent more than those in Britain and 50 percent more than those in the Netherlands. For these well-off families, the United States still has easily the world’s most prosperous major economy.
Granted, we mustn’t let the “grass is greener” mentality take hold. Middle-class families in other countries obviously have many worries of their own, some specific to their nation and others not unlike in the U.S. For example, many Europeans also wonder how they will pay for college, and hold a similar sentiment that the older generations had it better. Meanwhile, many Canadians nonetheless still struggle with the high cost of modern living, ranging from education to various bills. Furthermore, unemployment remains a consistent worry just about everywhere, with rates relatively higher now for most countries than before.
“The crisis had no effect on our lives,” Jonas Frojelin, 37, a Swedish firefighter, said, referring to the global financial crisis that began in 2007. He lives with his wife, Malin, a nurse, in a seaside town a half-hour drive from Gothenburg, Sweden’s second-largest city.
They each have five weeks of vacation and comprehensive health benefits. They benefited from almost three years of paid leave, between them, after their children, now 3 and 6 years old, were born. Today, the children attend a subsidized child-care center that costs about 3 percent of the Frojelins’ income.
Even with a large welfare state in Sweden, per capita G.D.P. there has grown more quickly than in the United States over almost any extended recent period — a decade, 20 years, 30 years. Sharp increases in the number of college graduates in Sweden, allowing for the growth of high-skill jobs, has played an important role.
In other words, often-cited metrics of prosperity — such as economic growth, stock-market health, corporate profits, GDP (per capita and national) — mean little if the amount of wealth they represent isn’t actually being allocated in a way that benefits the broader society. Whether that redistribution occurs via the private sector — through investing more corporate capital in higher wages, benefits, etc — or through state-mandated welfare programs doesn’t seem to matter except in the technical details.
Ultimately, wealth needs to be better invested through some sort of mechanism — private, public, or both — to make the most out of a nation’s potential prosperity. This is especially relevant given that too much inequality and the subsequent decline in a broad, middle-class consumer base could cause serious problems in the economy — for everyone. The U.S. clearly has the potential to do great things — from developing world-class nationwide infrastructure to funding big science initiatives and promoting a higher standard of living — but various socioeconomic structural problems are imposing visible limitations.