How Income Relates to Life Expectancy

It is no surprise that wealthier countries, like wealthier people, tend to live longer. But how strong is this correlation? In a video released by The Gapminder Foundation, Swedish academic and professor Hans Rosling uses detailed but digestible visual data to explore the link between a nation’s wealth –namely its gross domestic product, or GDP — and the average longevity of its people.

To check out the two minute video, click here. (Sorry, I cannot embed it.)

Ultimately, the findings do indeed confirm that rich societies live longer. But what the data also show is that those countries in the middle range of GDP — e.g. the developing world — display a broad range in life expectancy, from low to surprisingly high. This illustrates the discrepancy in how states invest their growing wealth, and whether the fruits of their development are going to their people.

Video courtesy of Aeon. 

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.

Sweden Experiments With Six-Hour Workday

Count on the Swedes to explore an alternative to the traditional eight-hour workday. According to the Guardian, the effort was spearheaded by retirement home, whose overworked nurses opted to shave off two hours of every workday — without a reduction in wages — in an effort to improve their efficiency.

“I used to be exhausted all the time, I would come home from work and pass out on the sofa,” says Lise-Lotte Pettersson, 41, an assistant nurse at Svartedalens care home in Gothenburg. “But not now. I am much more alert: I have much more energy for my work, and also for family life”.

The Svartedalens experiment is inspiring others around Sweden: at Gothenburg’s Sahlgrenska University hospital, orthopaedic surgery has moved to a six-hour day, as have doctors and nurses in two hospital departments in Umeå to the north. And the trend is not confined to the public sector: small businesses claim that a shorter day can increase productivity while reducing staff turnover.

At Svartedalens, the trial is viewed as a success, even if, with an extra 14 members of staff hired to cope with the shorter hours and new shift patterns, it is costing the council money. Ann-Charlotte Dahlbom Larsson, head of elderly care at the home, says staff wellbeing is better and the standard of care is even higher.

Indeed, it is quite anomalous that people continue to work increasingly harder and longer despite the vast gains in productivity. Technological and administrative innovation has allowed people to do a lot more in an hour than ever before, so why should workers continue to strain themselves, often for meager compensation, to undermine these gains? Why shouldn’t productivity be used to its greatest effect, by allowing people to balance work and leisure to society’s benefit?  Continue reading

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?

Economic Snapshot: Why the Average American Worker Should By Making $3,770 More

From the Economic Policy Institute (EPI) comes the ever-important reminder of how the U.S. economy, for all its size and relatively robust growth, has failed to benefit the average worker.

Between 2000 and the second quarter of 2015, the share of income generated by corporations that went to workers’ wages (instead of going to capital incomes like profits) declined from 82.3 percent to 75.5 percent, as the figure shows. This 6.8 percentage-point decline in labor’s share of corporate income might not seem like a lot, but if labor’s share had not fallen this much, employees in the corporate sector would have $535 billion more in their paychecks today. If this amount was spread over the entire labor force (not just corporate sector employees) this would translate into a $3,770 raise for each worker.

Here is a visual of the data, which shows just how wide the gap is by historical standards. Continue reading

How Visible Inequality Erodes Communities

Poverty and inequality are bad enough on their own, but a recent Yale study published in Nature suggests that the mere visibility of income disparity can be socially and psychologically disruptive. As The Atlantic reported:

“Making wealth visible was a very corrosive force. It resulted in the rich exploiting the poor”, said Nicholas A. Christakis, the co-director of Yale Institute for Network Science and one of the senior authors of the study. When wealthy people find out that their neighbors don’t have the resources they do, researchers find, they’re less likely to help them, or anyone else …

… Researchers found that when rich subjects knew that their neighbors were less wealthy than they were, they became less likely to cooperate with them. The poor, however, chose to keep cooperating. This leads to what researchers call an exploitation scenario, in which the poor keep lowering their own wealth to invest in their local network, “making them worse off relative to their neighbors and allowing the rich to get richer”, the researchers write.

When rich subjects don’t know the wealth of their neighbors, though, they are more likely to cooperate than are poorer subjects. This leads to what researchers call a “fairness” scenario, in which the rich invest their wealth into a local network, which then grows richer as a whole.

Overall, visible poverty reduces overall cooperation, interconnectedness, and wealth. But inequality itself has “relatively little” impact on cooperation or interconnectedness. “Most people thinking about inequality today may be confusing two distinct phenomenon”, Christakis told me.

This might explain why famously egalitarian societies like Sweden and Japan tend to report higher than normal levels of social cohesion: not only is income broadly distributed, but any disparity that exists is plastered over through public policy and communitarian values. Broad access to education, healthcare, and quality housing means that the material markers of poverty are absent. There are also cultural taboos against the ostentatious displays of wealth and conspicuous consumption that are common in the U.S. and elsewhere. No doubt these factors make cooperation and social trust a lot easier, as people do not feel worlds apart despite what their actual incomes and lifestyles might be. Continue reading

Labor Day 2015 By the Numbers

As millions of workers enjoyed a well needed day off this past Labor Day, the Economics Policy Institute (EPI) reminds us that about one out of four private sector workers (24 percent to be exact) will not be enjoying pay time off; a similar number (23 percent) get no paid vacation time at all.

While this overall lack of paid holidays and vacation time is quite telling (especially compared to our international peers, who more or less universally mandate paid time off), access to paid time off varies dramatically between workers by their pay. As the chart below shows, only 34 percent of private-sector workers at the bottom of the wage distribution receive paid holidays and only 39 percent receive paid vacation. Among the top 10 percent of workers, meanwhile, 93 percent receive both paid holidays and paid vacation.

The following chart shows just how dramatic this inequity is.

Lack of leisure time is not the only thing beleaguering America’s working class. Another EPI study, published right on time for Labor Day, gives a rundown of how 2015 is looking for laborers. Unsurprisingly, the diagnosis remains grim.

  • Unemployment rates remain too high overall, and far too high for African Americans, Hispanics, and young graduates.
  • Wages have continued their 35-year trend of broad-based stagnation.
  • The buying power of the minimum wage continues to erode each year that policymakers refuse to raise it.
  • Declining collective bargaining is harming workers’ wage prospects.
  • Far too many workers have to contend with unpredictable schedules and no paid leave.

Here are a few more highlights from the EPI paper, which I highly recommend you read in its entirety.  Continue reading

Number of Very Poor Americans Surges Since 1996

The super-rich aren’t the only ones whose ranks (and collective wealth) are growing. To further highlight just how wide the gap of inequality is growing, in less than two decades, the number of Americans living on just two dollars a day has more than doubled. That means 1.5 million households, including 3 million children. As CBS reports, the inherent contradiction of the world’s richest country having so many poor people is no coincidence.

“Most of us would say we would have trouble understanding how families in the county as rich as ours could live on so little,” said author Kathryn Edin, who spoke on a conference call to discuss the book, which she wrote with Luke Shaefer. Edin is the Bloomberg Distinguished Professor of Sociology at Johns Hopkins University. “These families, contrary to what many would expect, are workers, and their slide into poverty is a failure of the labor market and our safety net, as well as their own personal circumstances.”

To be sure, the labor market has been rocky for many Americans, not just the poorest. But changes in how employers deal with their low-wage workers have hit many of these poor Americans especially hard, such as the rise of on-call scheduling, which leaves some parents scrambling for hours and dealing with unpredictable pay.

Retailers such as Walmart (WMT) and fast-food companies increasingly are using sophisticated scheduling software that allows them to tinker with work schedules at the last minute, depending on their stores’ needs. That reduces costs for the employer, but it can make life difficult for employees, especially those with children and dependents.

“Time and time again, we would constantly see people’s hours cut from week to week,” said Shaefer, associate professor of social work at University of Michigan. “Someone might have 30 hours one week, down to 15 the next and down to 5 after that. We saw people who would remain employed but were down to zero hours. This was incredibly common in this population.”

Other workforce problems include abuses such as wage theft and unhealthy workplaces, which lead to health problems and missed work, he noted.

And while the private sector, by its own actions, fails to prove why people shouldn’t turn to the government for help, it has also done a good job in rallying people against the policies that would help compensate their own ruthless approach to business.

These families have also been hurt by the welfare reform of the 1990s, when America’s social safety net was overhauled to create Temporary Assistance for Needy Families (TANF), which is geared toward providing temporary monetary aid to poor families with children.

But TANF isn’t working, Shaefer and Edin said. Since the program was created in 1996 to replace a 60-year-old welfare system, the number of families living on less than $2 a day has more than doubled. In 2012, only one-quarter of poor families received TANF benefits, down from more than two-thirds in 1996, according to the Center on Budget and Policy Priorities. According to “$2.00 a Day,” the welfare program reached more than 14.2 million Americans in 1994, but by 2014 only 3.8 million Americans were aided by TANF.

The authors’ research — which included data analysis and interviews with ultrapoor families in four regions — found that many families weren’t even aware of TANF. “One person said, ‘They aren’t just giving it out anymore,'” Shaefer said. “In fact, in Appalachia it has, in some ways, disappeared. We asked, ‘Have you thought about applying for TANF?’ and they said, ‘What’s that?'”

Aside from a lack of knowledge about the program, poor Americans often put off applying for aid because of social stigma and other hurdles, such as requirements to attend orientation meetings, make employment plans and register for employment services.

Perhaps even more disquieting than the growing legions of the poor — which is again occurring during the simultaneous concentration of vast wealth in the upper echelons of society — is how these people get by day to day.

They tend to rely on a few strategies, including selling their own plasma for $30 a pop and selling scrap metal. Some families also sell their food stamp benefits for cash, which is illegal and which Edin said is “very unusual.”

Some women barter for goods and services using sex. Private charities provided very little assistance. Dealing in drugs wasn’t common, Edin said, perhaps because the researchers were interviewing families, which might be less likely to engage in drug use given the presence of children.

“In no cases did [these strategies] raise people out of poverty,” Edin said. “$60 would be the maximum per week” for earnings through these methods. “There was no case where someone was living high off the hog from this informal economy.”

There is not much else to say. It should be patently obvious that a society with as much capital and resources as our own should not have the developed world’s second highest rate of child poverty. This is a resounding political and moral failure, on the part of both business leaders and public officials (though certainly many Americans bear no small amount of guilt for often favoring the shaming and deprivation of the poor — even when it includes themselves). The culture problems at the heart of this tragedy merit a whole other post.

What are your reactions and thoughts?

The Problem With America’s Culture of Overwork

It says a lot that there even needs to be a debate on whether or not overwork is a good thing. But as working more for less becomes the norm in American life — often unquestionably — clearly it is a discussion worth having.

Let us start by putting things into perspective: contrary to popular belief, Japan is no longer the developed country with the most annual working hours by average. That dubious distinction now falls on the U.S. As the Nation reports:

By international standards, Americans put in a lot of time on the job. Among countries in the Organization for Economic Cooperation and Development, we’re above the average, clocking 1,789 hours at work in a year—more than Japan, Germany, and South Korea. Each week, the average American puts in 41 hours per week, compared to 38.4 in the United Kingdom, 36.9 in Germany, and just 32.7 in the Netherlands. We also have more workaholics: The percentage of U.S. workers who put in more than 45 hours a week is about double that of Germany, the Netherlands, or France. While we’ve decreased our workload by 112 hours a year over the past four decades, other countries have far outpaced us: The French dropped theirs by 491 hours, the Dutch by 425 and the Canadians by 215.

Doubtless, many Americans consider such a work ethic to be both morally desirable and perfectly acceptable; hence our unique position in the developed world in terms of not mandating paid maternal leave or vacation time.

One might think that all that work contributes to our status as the world’s largest economy by a significant margin. But this is yet another widespread misconception.  Continue reading