100 CEOs Have Retirement Savings Greater Than 41 Percent of American Families

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Brazil’s Difficult Gamble With the Amazon

With most of the world’s largest rainforest located within its borders, Brazil is center stage in global debates and efforts regarding environmental preservation. As an in-depth and visually stimulating NPR photo essay shows Continue reading

The World’s Improving Economic Prospects

Positive news about the trajectory of the world is hard to find these days. From climate change to inequality to the rise of political authoritarianism, it seems that humanity is backsliding in just about every area of progress — what a way to kick off the 21st century and all its alleged promises.

Our World In Data is a web-based initiative that provides infographics about changing trends in a wide variety of subjects, from living standards to economics. Operating out of the Institute of New Economic Thinking at Oxford University, it is a reliable source for those wishing to document how humanity has changed over the course of decades, centuries, or millennia.

Fortunately, the data collected by OWID clearly show that for all the grim circumstances our species faces, we have broadly made vast improvements in socioeconomic prosperity, especially by historical standards. Compare GDP per capita — which serves as a rough, if imperfect, approximation of average living standards — in year one C.E. to 2008.

GDP per capita in 1 C.E. (Our World In Data / Institute of New Economic Thinking)

GDP per capita in 2008 (Our World In Data / Institute of New Economic Thinking)

You don’t have to go too far back to see how much progress there has been. Even over the last two centuries, there has been a marked and unprecedented improvement in the economic circumstances of most humans.

Our World In Data / Institute of New Economic Thinking

Moreover, while much of the world remains very poor (albeit far less so than two centuries ago), it is largely these impoverished nations that are leading the way in economic growth and development, thereby progressively lifting more of their people from poverty.

Our World In Data / Institute of New Economic Thinking

To be sure, none of this means that we should be complacent: these advancements are both tenuous and far short of what is needed to ensure a better life for all (indeed, the website concludes with this warning as well). However, it is still important to recognize how much we have achieved: incomes are growing across the world, poverty is rapidly declining, and the world’s poorest nations to continue to chalk up the highest rate of growth.

Granted, much of this progress is being felt unevenly; a lot of fast-growing countries are seeing their newfound wealth concentrated in relatively few hands, or invested inefficiently, if at all. Plenty of developed nations are lagging behind, too, with stagnating incomes and growing inequality. But all these challenges and shortcomings aside, we should be encouraged by how far we have come, and recognize the incredible potential for improvement of the human condition.

To see more data about the changes in socioeconomic development, click here. As always, please feel free to share your thoughts.

The Plight of Child Care Workers

One would think that someone who dedicates their life to serving some of the world’s most vulnerable people would be entitled to a living wage and great social respect. But as a recent ThinkProgress article highlights, those that care for the nation’s children are among the most poorly paid and economically unstable workers in the country.

According to a new analysis from the Economic Policy Institute, the median wage for child care workers is $10.31. That’s not just a small figure on its own; it’s also very low compared to what these workers could make elsewhere. Even when compared to other workers with the same gender, race, educational attainment, age, geography, and a number of other factors, EPI found that child care providers make 23 percent less. And even those figures are likely underestimating the problem, given that any provider who is self employed and working out of her own home — providers who are likely to earn even less than those in, say, centers — aren’t counted.

“Despite the crucial nature of their work, child care workers’ job quality does not seem to be valued in today’s economy,” the report notes. “They are among the country’s lowest-paid workers, and seldom receive job-based benefits such as health insurance and pensions.”

Adding insult to injury, these low wages mean that many child care workers — more than 95 percent of whom are women, and many of them parents — struggle to afford care for their own children. Barnette has experienced this conundrum herself. While she was able to get a child care subsidy for her two eldest children, her youngest son, who is now five, was put on a waiting list at three months old and only taken off last February, when he got a slot in a pre-K program. In the intervening time, Barnette had to quit her job. “I couldn’t work because I couldn’t afford the child care”, she said.

It’s a widespread problem among a workforce that cares for others’ children. Preschool teachers have to spend between 17 and 66 percent of their income to get care for their own infants; in 32 states and D.C., it eats up a third or more of their earnings.

This is despite the fact that, aside from the obvious importance of their work, the services of childcare workers are in higher demand than ever, owing to the prevalence of dual-income households where both parents must work full-time to get by (as well as the growth in single-parent households wherein the sole guardian must work a lot, too). Continue reading

What Happens When You Give Employees a $70,000 Minimum Wage

In April 2015, Gravity Payments, a credit card payment processing firm based in Seattle, did something highly unorthodox: it unliterally gave all employees, from lowly clerks to customer services representatives, a minimum annual salary of $70,000 — well above the median rate of the average American worker.

Phased in over a period of three years, the plan will effectively double the salaries of 30 workers and give raises to 40 more making less than $70,000. All minimum salaries jumped to $50,000 right away, with $10,000 for each of the next two years. Anyone already earning $50,000 to $70,000 would still enjoy a nice raise of $5,000.

Moreover, CEO and founder Dan Price would accomplish this not by laying off staff, raising prices, or cutting the pay of certain highly paid workers; rather, he would make up the difference by slashing his own $1 million salary to $70,000 and investing 75 to 80 percent of the company’s anticipated $2.2 million for the year.

While plenty of companies could well afford to pay their workers well by going this route — allocating less profit and payroll to executives and shareholders — few would ever entertain the idea, let alone go through with it. Hence all the media attention that this exceptional pay raise warranted.

Unsurprisingly, this shockingly generous move was met with a lot of skepticism, both towards the motive (was it a publicity stunt?) and the practicality (could a company survive with so much profit going to workers)? Doubters and critics seemed quickly validated once the the firm became inundated by a series of misfortunes that related to the decision.  Continue reading

The Deteriorating American Middle Class

Citing a recent report from the U.S. Social Security Administration, Michael Snyder at Washington’s Blog finds a host of grim statistics that confirm what most Americans already know: that the financial stability and comfort of middle class life is increasingly elusive.

-38 percent of all American workers made less than $20,000 last year.

-51 percent of all American workers made less than $30,000 last year.

-62 percent of all American workers made less than $40,000 last year.

-71 percent of all American workers made less than $50,000 last year.

That first number is truly staggering.  The federal poverty level for a family of five is $28,410, and yet almost 40 percent of all American workers do not even bring in $20,000 a year.

If you worked a full-time job at $10 an hour all year long with two weeks off, you would make approximately $20,000. This should tell you something about the quality of the jobs that our economy is producing at this point.

Granted, given how much cost of living varies by city or state, a seemingly low salary might afford a middle class existence depending on where one lives (e.g., $50,000 is a lot more money in a place like Little Rock, Arkansas than New York City, New York). Even so, there is no justification for so many workers, across a variety of industries, professions, and areas, making so little — especially with productivity and profits alike continuing to rise. When will the average American get their fair share?

Consumers Push Back Against Exorbitant CEO Pay

As inequality becomes one of the prevailing concerns of the 21st century, an increasing number of Americans are pushing back, both through civic engagement and conscientious consumption.

In a series of experiments, Bhavya Mohan, Michael Norton, and Rohit Deshpandé showed that Americans are deeply concerned about CEO compensation — enough that they will pay up to 50 percent more on average to avoid businesses with egregious CEO pay gaps.

“We do really see that people have a stronger preference for products from companies that pay fair wages”, says Norton, a professor at Harvard Business School. As the researchers dug deeper, they found that this holds particularly true for Democrats and independents — while Republicans didn’t seem to care at all.

In one set of surveys, the researchers showed people pictures of towels from a national retailer where the median worker earned $22,400 a year. They told half the people that the CEO made $24 million. They told the other half that the CEO made $112,000.

These were carefully chosen ratios, Norton says. Wal-Mart’s CEO pay ratio is believed to be about 1000-to-1, while most Americans believe the ideal CEO pay ratio is around 7:1.

The subjects were asked to what they would be willing to pay for the towels. People who thought the CEO was making $112,000 quoted a price that was 15 percent higher on average than people who thought the CEO was making $24 million.

In another, starker experiment, the researchers asked only if subjects would be willing to buy the towels given a certain price. People were split up into five groups, each shown different combinations of prices and pay ratios. They responded on a 7-point scale (1: Not at all likely, 7: Very likely).

Those who thought they were buying from a company with a high pay ratio were particularly unwilling to buy the towels, even at a discount. The researchers found that a company with a 1000-to-1 CEO pay ratio would have to slash its prices in half to keep up with a company that had a 5-to-1 CEO pay ratio.

These efforts will be all the easier following recent regulatory changes that will force public companies, by 2017, to report the ratio of CEO pay to that of the average employee. This is an important development given that most Americans still think CEOs at large corporations are paid 30 times as much as their average worker — when it is actually almost 300 times more.  Continue reading

The U.S. Government Programs Keeping Millions Out of Poverty

Americans across the political spectrum are conditioned to believe that the government safety net, broadly called “welfare”, is woefully inefficient. While it is no doubt true that public sector solutions are inadequate in many respects –something both major political wings agree on, albeit for different reasons — as the Economic Policy Institute (EPI) reminds us, these programs are the only thing keeping tens of millions of Americans out of poverty.

More analysis from EPI:

Social Security was by far the most powerful anti-poverty program in the United States last year, keeping 25.9 million people out of poverty. Refundable tax credits, such as the Earned Income Tax Credit (EITC) and the Child Tax Credit, kept 9.8 million people out of poverty. The Supplemental Nutrition Assistance Program (SNAP), aka food stamps, kept 4.7 million people out of poverty, while other targeted programs (such as housing subsidies, unemployment insurance, and school lunch programs) made it possible for millions more to keep their heads above water.

In 2014, 48.4 million people (or 15.3 percent of the U.S. population) were in poverty, as measured by the Supplemental Poverty Measure (SPM)—a more sophisticated approach for measuring economic well-being than the official federal poverty line. However, that number would have been significantly higher were it not for programs like the ones listed above. In the absence of stronger wage growth for low and middle-income workers, these safety-net programs play an increasingly important role in helping struggling families afford their basic needs.

Note the last sentence, which I have bolded for emphasis. The ever-more contentious debate about government expenditure on welfare would be a moot point if the private sector paid workers better and/or provided benefits, thereby precluding the need to turn to state programs. Simply put, most people would not turn to the government if there was more stable and liveable employment available. Until then, these flawed, threatened, and still vital programs are all that millions of Americans have.

Poor People and Fast Food

Among the many ways that poor people are shamed and ostracized in American society is the pervasive myth that they are recklessly indulgent consumers of fast food. But as The Atlantic reports, bad eating habits, and subsequently high rates of obesity, are hardly the purview of low income people.

Back in 2011, a national study by a team at UC Davis concluded that as American salaries grow into the upper echelons of middle income, so does fast-food intake. “Low prices, convenience and free toys target the middle class— especially budget-conscious, hurried parents— very well,” wrote professor J. Paul Leigh, the senior author of the study. He adds that fast food is most popular among the people who are less likely to be obese.

But could that possibly be true? According to a 2013 Gallup study, the fries don’t lie:

“[F]ast food is hardly the province solely of those with lower incomes; in fact, wealthier Americans—those earning $75,000 a year or more—are more likely to eat it at least weekly (51%) than are lower-income groups. Those earning the least actually are the least likely to eat fast food weekly—39% of Americans earning less than $20,000 a year do so.”

Now a new study, this time by the Centers for Disease Control and Prevention, weighs in on the matter. While the national survey did show that on a given day, roughly one-third of American children will eat fast food, the breakdown among income levels is pretty even.

Another article in The Washington Post by Roberto Ferdman points out that it is “the poorest kids that tend to get the smallest share of their daily energy intake from Big Macs, Whoppers, Chicken McNuggets, and french fries”. Indeed, well-meaning yet flawed attempts to ban fast-food venues in areas with high rates of obesity and poverty alike have done little to curb the issue — indeed, in the case of South Los Angeles, it sped up the problem.  Continue reading

U.S. Workers Need — and Deserve — a Raise

From the New York Times:

Flat or falling pay is self-reinforcing because it dampens demand and, by extension, economic growth. In the current recovery, median wages have fallen by 3 percent, after adjusting for inflation, while annual economic growth has peaked at around 2.5 percent. At that pace, growth isn’t able to fully repair the damage from the recession that preceded the recovery. The result is a continuation of the pre-recession dynamic where income flows to the top of the economic ladder, while languishing for everyone else …

… In a healthy economy with upward mobility and a thriving middle class, hourly compensation (wages plus benefits) rises in line with labor productivity. But for the vast majority of workers, pay increases have lagged behind productivity in recent decades. Since the early 1970s, median pay has risen by only 8.7 percent, after adjusting for inflation, while productivity has grown by 72 percent. Since 2000, the gap has become even bigger, with pay up only 1.8 percent, despite productivity growth of 22 percent.

Why has worker pay withered? The answer, in large part, is that rising productivity has increasingly boosted corporate profits, executive compensation and shareholder returns rather than worker pay. Chief executives, for example, now make about 300 times more than typical workers, compared with 30 times more in 1980, according to the Economic Policy Institute. Other research shows far greater discrepancies at some companies.

In most companies, there is plenty of money to go around, thanks in no small part to the contributions of hardworking Americans. Isn’t it about time they get their money’s worth? Shouldn’t they, too, get a cut of the profits they helped produce? Or at least a better and more stable working environment?