Wednesday, March 29, 2006

Meeechigan

Michigan passed a minimum wage increase yesterday when Gov. Jennifer Granholm signed the bill into law. The state's current wage sits at the federal minimum of $5.15 per hour -- where it has been stuck for the past NINE YEARS. Now, it will increase on October 1, 2006 to $6.95, then $7.15 on July 1, 2007, and $7.40 on July 1, 2008. In just over a year, the lowest legally paid worker in Michigan will earn an additional $4,160 assuming 40 hours per week with no vacation.

I wanted to write on this for a couple reasons. First of all, this bill came about apparently out of fear that a ballot proposal was about to pass. The ballot proposal sought a slightly lower minimum wage in the immediate future, but differed in two significant areas. For one, it tied the minimum wage to inflation, assuring that the wage would increase every year with inflation without fail. For another, it placed this guarantee in the state constitution, making it far more difficult to ever repeal such a measure.

The second reason I wanted to discuss Michigan's new law is to point to the power of ballot initiatives. Groups that seem tiny in the shadow of powerful lobbying efforts actually can help bring about a better wage for our poorest legal workers. In the future I will point out a growing trend and momentum I see in various other states to raise minimum wages (and a growing religious-based movement in support of increased wages), but here I just want to applaud the efforts of groups like ACORN who help push the "minimum wage" into what we can all agree is more of a "living wage" as ACORN calls its campaigns.

Finally, I want to bring this all back into perspective. It is disappointing in some respects to see the that bill passed in Michigan over the ballot proposal. In truth, I firmly believe that the wages for the poorest workers must be indexed to inflation. It is fundamental to the values of this country that anyone who works hard should be able to afford all the basic necessities of life. This is what injects such solid logic into the "living wage" campaigns mentioned above. But to sustain a wage at a basic, needs-based level, it must be indexed to float up with the costs of those goods.

Critics of such proposals validly point to programs like the Earned Income Tax Credit that help offset stagnant wages. However, this is not enough. Many people eligible for the EITC are unaware of the program or mistakenly believe they are not eligible. Further, the lowest wages are not enough even with the EITC, food stamps, WIC (special supplement for women, infants and children), etc. And perhaps most importantly to both the employees (and I wish more employers), there is the morale issue. EITC and other programs or not, a person does not want to sit at the same position in a factor for five years and never see her paycheck change while her rent increases and gas prices rise.

Overall, though, the new law in Michigan is a positive sign for the working poor.

Monday, March 27, 2006

By George

George Will wrote a piece about three weeks ago on John Edwards' views on poverty. I've read reactions to it around the internet since then and want to comment on it briefly here.

Will claims Edwards views poverty under a 1930s paradigm. The dated views at issue are that Edwards may believe the poor "simply" lack housing, transportation, training, food, proper education, etc. I put "simply" in quotes because it is a convenient attack on grassroots views to make them seem basic and oversimplified, rather than sophisticated and well-crafted. I have yet to see where Edwards gives a list of a few basic needs as the panacea for poverty. The problem here appears to be the view (by Edwards and others -- your author included) that poverty is due to a person's circumstances. The "correct" answer, according to Will and many others, is that poverty is behavior-driven. In other words, people are poor because the are not punctual, lack proper hygiene, have no sense of industriousness, and no respect for deferred gratification. Well, nice to see our theories have moved from the simple to the complex....

Something really bothers me about Will writing this as he views the lives of our country's poor through a glass of cabernet. Will's "paradigm" is held up to be the evolved approach to fighting poverty. But what of it? Poverty is increasing, middle and low-end wages are stagnant at best. And these numbers come from evaluating Americans under a poverty level that increasingly lacks credibility for its failure to properly account for the cost of living.

In many ways, the America of 2006 is a different country then the America of 1930. Even if it failed at the time (and I would argue it did not) a 1930s paradigm may work wonders in a 2006 environment. The point I want to emphasize here is quite basic. What we have been doing of late is not particularly effective at best (and a pathetic shell game at worst). Young leaders who question the entrenched paradigms of the day should not be brushed aside as poorly read, but supported as a fresh face to a serious problem: why at least 10 percent of our wealthy country lacks the basic necessitites for a civilized life. Edwards may be wrong but it is time to try something new.

Friday, March 24, 2006

Payday!

Many people seem to think there's nothing more fun than ripping off unsophisticated people. You see this with rent-to-own companies, you see it (though perhaps a bit less today) with H&R Block, and you certainly see it with payday loans (among other subprime lending initiatives). A good overview of payday loans is found on the Federal Trade Commission's website here. This is the example the FTC provides:

A cash advance loan secured by a personal check - such as a payday loan - is very expensive credit. Let's say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.

State regulations on payday loans vary, from Florida (with a limited amount that may be borrowed, a limited term, set percentage fees, and a cost per $100 of only $15) to Missouri (where the cost per $100 can reach $75 for an astonishing 1,980% effective 14-day APR) to Wisconsin (that doesn't impose any regulations whatsoever). Most loans range from only $200-$300, but anyone who needs $200 that badly is going to feel the sting of a $30 fee.

The justification for such high rates is, of course, high risk (high default rates). The validity of this claim is unclear. It is easy to think that a guy desperately in need of $100 is less likely to repay the loan then someone who plans ahead and applies for a loan, but the actual default rates are unclear. There is some evidence to indicate that default rates are extremely high--the FDIC thinks the charge-off ratios may be as high as 83 percent--while many critics (i.e. here, here and here) claim that screaming DEFAULT! is a hollow justification, with default rates not much higher then other subprime lending areas or even conventional lending.

A few things bother me in particular about payday lending. For one, we need more regulation. The customers here are usually unsophisticated, poor, and lacking the time and resources to shop around for better alternatives. In other words, they are prime pickings for abuse by lenders. The state must regulate activities to protect these people. If the regulations are too burdensome then we'll see it in the market. Right now we're far away from that type of a concern with the industry's continual growth and even more so recently with internet payday lending.

We also need to encourage more reputable lenders to locate in less appealing areas. My clinic studied payday lending a bit during my third year of law school, and one pattern became obvious: payday lenders locate around bus stops and in strip malls by other businesses in low-income areas (brand name financial institutions do not). The same problem exists with check cashing services and the like. People get off the bus and use what is in front of them, or next to the grocery store in the mall by their house. You'll also notice that check cashing and payday lending stores are open when they need to be. The banks are open when they want to be. Obviously, national banks are not going to rush to lend money to anyone typically using a payday loan, but other advantages to having the institutions around readily come to mind, including providing the means for more fiscal responsibility, etc.

Finally, I hope people who never use payday loans become increasingly informed about payday lending and the role major financial institutions play in the game (an ever increasing role). Such institutions should not be able to operate abusive subsidiaries with impunity. As one sophisticated business man said to me once: "If I was the head of a major bank and I knew I could make a killing off huge rates on payday loans, I wouldn't do it. It's just immoral." Maybe it is; maybe it isn't. I'd be happy if everyone could at least make an informed judgment.

Wednesday, March 22, 2006

Wholesome Food

Slate ran an article on Friday examining "the dark secrets of the organic-food movement" with its main focus on Whole Foods. For many well known reasons, Whole Foods is generally a model company by this blog's standards. As the article describes, the Austin based company has been extremely profitable as it has expanded from Austin across the country. Yet it adheres to what Chairman John Mackey states:

There's no inherent reason why business cannot be ethical, socially responsible, and profitable.


In pursuing that mantra, the company's "minimum wage" is $13.15 per hour--and comes standard with all the benefits an hourly worker could want. Perhaps most interesting (at least to me) is that Mackey's 2005 salary was only $342,000 -- that's only 12 to 14 times (depending on your math) the lowest paid employee. As I'll mention in a second, the article goes on to compare Whole Foods to Wal-Mart. For comparison here, Scott's reported $8.7 million in 2005 amounts to at least 932 times the federal minimum wage. In 2004, his compensation may have been as high as 2,000 times the minimum wage. (Of course, Mackey does get to live in Austin and Scott has to live in Bentonville.) For perspective, Abe Foxman, Director of the Anti-Defamation League (a charity whose work I respect highly) earns about $425,000 per year in total compensation. Apparently it is better to head a 501(c)(3) than a highly profitable corporation.

But back to the article. The author, Field Maloney, takes steps to debunk some of the "myths" behind organic foods. Certainly, much of what Whole Foods claims can be spun in its favor or back in the other direction. There are of course advantages and disadvantages to organic foods, to buying local v. international, etc. As one comment below the article on Slate.com points out, my favorite thing about Whole Foods is that it is honest. You can see where the produce is from and buy it or don't buy it. There's no deception there. The produce looks good because it is high quality, not because it is covered in wax and spritzed with water like a sports car commercial. My local Randalls claims it sells the freshest produce. If this were true the majority of the country would probably move to an all-meat diet. Whole Foods sells itself like anyone else. But articles like this in Slate are important because people who can affort do shop at Whole Foods may need to infuse a bit of skepticism into their love affair with organic foods and it's main pusher.

This brings us to the final point: people who can afford to shop at Whole Foods. Most of us can't. Items there are frequently 2, 3, 4 times more expensive than at conventional grocery stores. But here comes Sam Walton's ghost. Wal-Mart is apparently expanding its organic foods. As the world's biggest grocer it's a point worthy of more than a footnote. The Slate article finds this comforting in fear that Whole Foods just enforces elitism in what amounts to a Saks with edibles. Any steps towards bringing healthier, less processed food to those otherwise buying TV dinners or Big Macs is a step in the right direction. Soon you won't need to drive a Volvo to eat well.

Friday, March 17, 2006

Luck of the Irish

In the spirit of Saint Patrick’s Day I walked to work thinking about Irish-Americans in our country today.  I also thought about the previous conditions in Ireland, present-day Ireland after finding some success in a more globalized world, and then just generally about immigrants in America.  I am not familiar enough with issues specifically impacting the lives of immigrants to write about it yet.  I do hope to get a guest blogger on here soon to help share his experiences and those of his peers.

I thought I’d leave you with a game for today in the spirit of an international “holiday.”  The game comes from Oxfam, a group I previously criticized (here) with respect to some of its publications from America.  While Oxfam’s game tries hard and is built on a rather unique approach, the game is ultimately pointless.  You can check it out here.  

I don’t want to ruin the surprise, but I feel the need to comment that Oxfam will never get anywhere by pushing a blanket view that the world is divided into rich and poor, with the rich getting everything their way and the poor never getting “a good bounce” so to speak.  Life is just not that simple.  And if life really is as simple as Oxfam suggests, then the explanation should be straightforward enough that the organization need not leave it entirely to our imaginations.  One thing is certain—to focus on an over-simplified problem is to assure failure in seeking its solution.  

Rather, the problem and the solution are far more complex, and the world is not so black and white as to leave us with a globe looking like a zebra with a bad paint job.  Ireland may be a clue of this reality.  In the most general terms, Ireland used to be poorer and is now less poor.  No doubt the country is not rich, but it is richer than before.  And yet the European Union may have helped alter the relative concepts of rich and poor.  Once amongst the poorest countries in the EU, Ireland looks far more “middle-class” relative to newer member states, and will only solidify its middle ground with further additions to the Union in years to come.

Check out the game here while you dream of green beer.

Wednesday, March 15, 2006

Regressive pricing and taxation

American companies are hardly strangers to success and hefty profits.  But large profits are not always acceptable without criticism.  Exxon’s record-breaking profits in 2005 have been put under the microscope--but to little avail.  Dennis Hastert, House Speaker and congressman from my home state of Illinois said: “Oil and gas companies are enjoying record profits.  That is fine.  This is America.”  Yet if America has enjoyed unprecedented commercial success for decades, any record-breaking profit today should be looked at with suspicion.  A critical eye can only help maintain the integrity of our markets.

So why isn’t it fine, then, as Mr. Hastert says?  For one, gas prices are regressive.  Sure, all sales taxes and price increases on basic goods are regressive—they hit the poor disproportionately hard.  But gas, for many, is nothing short of a basic necessity, and it is also priced and taxed in sometimes unique ways.  If the price of other basic goods, like eggs or instance, increased at the same rate, people could just not buy eggs for a while.  At a more extreme example, it is one thing for William Sonoma or DaimlerChrysler’s Mercedes division to make record-profits.  But here you have companies that made over $9 billion in profits in one quarter providing what is a lifeline to many working-class Americans.  Exxon’s 2005 revenues exceeded Saudi Arabia’s GDP.  No matter how you slice it, these oil companies charged what they did at the pump because they could.  People needed gas, everyone paid up, and it hurt the poorest the hardest.

Much talk went to whether the oil companies should be taxed for price-gouging.  This seems somewhat appropriate if you consider the taxes your average American pays for gas.  In Hastert’s home state, for instance, Illinois levies a 19 cent per gallon tax on gasoline—as the excise tax alone.  Add to that 11 cents per gallon in other applicable state taxes and over 18 cents per gallon in federal taxes to get 48.4 cents per gallon.  In an earlier post (here), I mentioned how poor mothers sometimes don’t have as little as $14 early in the month to join a food allocation program.  The tax alone on about 29 gallons of gas amounts to $14 each month (29 gallons being about 2 to 3 trips to the pump each month).

This leaves me with one distinct impression: if the people who can afford it least pay out day after day for hefty state and federal taxes on gas, the “people” who can afford it most (companies making record-breaking profits) should be paying out when it finally becomes obvious why the prices are as high as we’ve seen.

One final point about regressive taxes for now.  Gas taxes are especially regressive because they are established as a set amount per gallon, rather then a percentage of the sale price.  This means that a wealthy man buying premium gasoline pays the same tax as someone buying economy gasoline.  It’s regressive.  Another particularly regressive tax is seen on cigarettes.  Like gasoline, cigarettes are taxed by the item rather than the price.  Illinois’ excise tax on cigarette’s for example, is just short of a dollar per pack.  Some states tax as much as $2 or more per pack.  Prices on cigarettes can vary quite a bit, and certain brands are disproportionately purchased by lower-class individuals.  When you tax at such a high rate per item, you are left with a tax that may be as high as 50 or even 100 percent of the sales price.  When the percentage drops dramatically for more expensive brands, you have a prime example of a regressive tax.  It’s tough to challenge taxes on items like cigarettes (frequently but inappropriately known as “sin taxes”) but the effects on the poor cannot be lost.  Regressive taxation should be eradicated where possible.

Sunday, March 12, 2006

Where is the Finish Line?

Watching "Wal-Mart: the High Cost of Low Price" last night made me think of the "race to the bottom" concept. Somewhat publicized was Wal-Mart's CEO, Lee Scott, speaking before the U.S. Mayors Conference last month, most notably about healthcare. Healthcare costs are rising every year for the company, and it fears any backlash as people across the economic and political spectrums become increasingly frustrated with the company's reliance on state assistance. Indeed, It is somewhat amazing that Wal-Mart's employees (well over a million) often rely on state funded health and income assistance. If Wal-Mart cannot pay its workers enough to sustain merely an above-poverty lifestyle, then who can?

It is amazing to just think about this "race to the bottom" for a moment. If Wal-Mart had its way, every American (we can stick to America for now) would shop at Wal-Mart. And by "shop" I mean every American would get his car serviced at Wal-Mart, his photos developed, his prescription drugs filled, his shoes, groceries, gas, and more, or at least something on that list. In the process, Wal-Marts continue to be built across America (yes, even in NYC). As the stores are built, more people are employed at Wal-Mart and more businesses around those stores go out of business -- that is, any business that sells anything Wal-Mart sells. Wal-Mart would squeeze every fraction of every cent in the process of providing a good or service from start to finish, including labor costs.

Wal-Mart's goal throughout all this? To keep prices down, efficiency up, and it's stock price healthy. But for what purpose? Wal-Mart creates its own customers. The movie mentioned above shows what most probably already know -- that Wal-Mart employees spend their paychecks on a shopping cart full of Wal-Mart goods. Outside of Wal-Mart employees, the people now out of work in those towns or with jobs, but finding their old stores closed, cannot afford to shop anywhere else, if anywhere else exists. John Stewart jokes about a woman who seems surprised to find out that people work overtime and don't get paid all over the country in Wal-Mart stores. He basically says: You're surprised?! You just bought a sweater for 87 cents!

You cannot speed down the road with your eyes shut and not expect to hit something. At some point in the future a revised edition of Daniel Litvin's "Empires of Profit" will hit the bookshelves, and Wal-Mart will be discussed alongside companies like British East India Company and United Fruit.


As an aside, the movie is definitely worth seeing. While it has some serious flaws, including such sad attempts to jerk tears that I could virtually feel Robert Greenwald's finger poking my eyes, it is filled with interviews of current and former Wal-Mart employees from random "Associates" to suits sitting in Bentonville. You will be amazed at what you hear.

Thursday, March 09, 2006

Delphi Spinning-Off and Out of Control

General Motors and Detroit’s industries liked to think of themselves as pioneers of the American middle class. Jobs created by industries such as the auto industry allowed people to buy cars, take out a mortgage on a house (and eventually own it), send their kids to college, and go out to a decent restaurant once in a while. Employees of General Motors like to think of themselves (through the creation of the UAW), as pioneers of workers’ rights. This dates back to the “Great Flint Sit Down Strike” in 1937 (richly described in Michael Moore’s Roger & Me).

So it is only appropriate—or perhaps perfectly ironic—a high-profile modern day struggle regarding worker compensation surrounds Delphi Corporation (a spin-off of GM from 1999). Delphi filed bankruptcy early last October. What I want to focus on here is wages. Delphi claims that it simply cannot function paying $27 per hour to its workers (the UAW contract rate). Such a wage provides the average worker with a $56,000 a year gross income. One would think $56,000 a year is a good “salary” – and $12,800 above the current median family income. Delphi’s workers don’t seem thrilled with the wage:

Workers explain the $27 per hour wage is barely enough for them to have a minimum standard of living, consisting of a place to live, food and some other expenses such as occasionally eating at a restaurant. With taxes taken out of their salaries, workers end up with less than $50,000 a year. Given the high prices of housing and food in the U.S., this leaves little left over for other expenses. Only by working overtime, up to 12 hours a day and up to 7 days a week, do union workers at Delphi say they manage to have enough money for a vacation and education for their children.



Delphi complains that benefits effectively add $49 PER HOUR to the cost of each worker. That’s right, Delphi believes it spends $76 per hour on labor, not $27. The company first announced that it would seek a reduction to $12.50 an hour for actual pay – which would reduce the total hourly expenses from $76 per hour to $35 per hour. When Delphi first came to the table, however, they offered $9. It is probably understandable that its workers were up in arms. One day 35,000 people are making almost $1100 a week, and the CEO comes to the table proposing that workers reduce that to $360 per week.

Some workers will nonetheless find such an offer a relief as Delphi not only intends to slash wages for all workers, but to also cut the majority of its domestic workforce—adding to its already 185,000 person strong foreign workforce.

I mentioned that some of the workers are pissed. Interestingly, many comments you’ll read from workers discusses executive bonuses. I previously discussed about how GM’s CEO, for instance, plans to halve his salary in the midst of wage cuts across the board. Workers at Delphi do not see similar strategies between GM’s Richard Wagoner and their own Steve Miller. Miller is treated much more like Wagoner’s predecessor Roger Smith.

So what’s the point of all this? People who are firmly anti-union know where to point the finger. Others may blame management at Delphi or even GM when you look at their interactions since the spin-off. I think this is far too complicated to be answered in a little blog post. Though one thing remains to be seen—how successful Delphi is at using the chapter 11 vehicle to accomplish its goals. We saw United Airlines (UAL) drop pension obligations. Delphi wants to strip union contracts. The legality of certain efforts under the Bankruptcy Code are not always clear. We can discuss that at another time. But even more important are the ethical questions raised by these initiatives. I’ll close with the words of one Delphi employee:

The large corporations such as Delphi, GM, Ford, and Chrysler which lost money according to budget and have never made profit, still hide millions in black accounts due to creative bookkeeping. For example, I worked in a trades area where we would be issued a twenty hour job that takes only two hours to complete. When finished I would be issued another job. The assembly line would be charged the full estimated twenty hours of service into hidden black accounts and would also be written off in taxes as maintenance...Delphi can show any loss it chooses and executive's bonuses surely do not justify a bankruptcy. To plan, implement, execute, and deliberately use bankruptcy as a tool in business for greater profit should be reason for investigation. The sticker price on an automobile clearly shows wages, benefits and bonuses for GM and Delphi. The bankruptcy should be thrown out of court and any company owned by another should not be allowed to use bankruptcy as a business tool; but instead have to settle thru collective bargaining.



This is the testimony of Randall Musielak from Frankenmuth, Michigan. I hope he is one of the 10,000 or so likely to keep their jobs.

Wednesday, March 08, 2006

Minimum Wage on the Ballot

I have mixed feelings about the minimum wage—partly because I’m concerned with putting the most effort possible in realizable and truly helpful initiatives—and the minimum wage may not top the list of wage reforms in either category.  Or it might.  Regardless, as states consider changes to their state minimum wage (remember, states can have a minimum wage higher than the federal minimum), people should be aware that the issue is presently before their state congress or their fellow citizens.

I doubt anyone visiting this blog is from Nevada, but if you are, I want to make you aware that the constitutional amendment to raise the minimum wage is set for its second vote in 2006—with two votes required for a constitutional amendment.  According the Ted Kennedy’s new website, the first vote passed by 68%.  (Absent an increase the state minimum wage will remain at the federal level.)

Additional initiatives have yet to hit the ballot but currently gather signatures in hopes of getting there include:

Arizona
Michigan
Ohio
Missouri

States waiting for approval to gather signatures include:

Arkansas
Montana

And states at the early stages of only considering a ballot initiative include:

Colorado
Oklahoma
North Dakota
South Dakota

If you’re curious about where your state’s minimum wage currently stands, the Department of Labor’s figures for 2006 can be found here.  A few hyperlinks above give a sense as to the local and national coverage these initiatives (or potential initiatives) have received thus far.

Monday, March 06, 2006

You Look a Little Green

I met a homeless man on Friday on my way to work named Green (who spoke with the same articulation as Red – as Malcolm X was once known).  Green believed that we’re going to experience a large social change in the next 6 to 8 years (I asked about the numbers he chose and did not fully understand the answer).  In Green’s words, “America is blessed.”  But we are to rich of a country, Green told me, to have breadlines in Michigan three blocks long.  I agreed that life was not fair for a lot of poor individuals, but Green corrected me, pointing out that it is also not fair for the middle class or working class.  This leaves the rich.  For the rich life is surely more than fair in Green’s mind, though the “fairness” is gained on the backs of everyone else.  An article I’m about to discuss quotes Adam Smith from The Wealth of Nations: “No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable.”  If Green is right—and I’m afraid he is not as far off as many believe—then we do not live in a flourishing and happy society.  Rather, we live in a society where a highly visible minority dominates virtually every arena.  

But beyond the wealthy’s massively disproportionate influence on political and economic issues, the wealthy control the dreams and expectations of the middle- and lower-classes.  The exotic destinations on the covers of magazines in the doctor’s office are destinations only the wealthy can afford to see in person.  The clothes displayed in magazines and storefront windows will never be worn on middle- or lower-class shoulders.  This is a cultural influence, a cultural control.  The wealthy control the middle- and lower-classes by showing them what they could have if they only moved “up”—and reminding them that it is possible.  (A reminder I don’t personally contend is inaccurate, just about as statistically likely as telling all high school basketball players that if they work hard enough they can be in he NBA.)

But Green seems to believe things have changed, and I agree.  The problem stems in the concerns held most urgently by middle- and lower-class Americans.  The concerns have changed to more frequently focus on making a mortgage payment, or paying off that hospital bill so they can avoid bankruptcy, or finding another job after their factory closed and they have no other skills, of keeping food on the table while their husbands are in Iraq, or finding a second job because ends just don’t seem to meet anymore.  Every time a middle- or lower-class American thinks about these types of concerns first, s/he falls further outside of our visible minority’s grasp.  More and more, I sense that American society is drifting towards frustration.  The numbers may not show it.  Unemployment rates may seem low, for instance—yet those numbers don’t indicate how many people work two jobs today because one won’t pay the bills.

The articles I intended to discuss here (but will save for next time to please my length critics) discusses “working class” American’s frustrations.  Hourly workers in America are another sign of this shift mentioned above.  But that’s a discussion for Wednesday.

Let me just end in reiterating Green’s forecast.  This country will undergo a significant social change in the next 6 to 8 years.   Maybe this change will be through politics, maybe through laws, maybe through violence.  Green has his ear to the ground and that’s what he predicts.

Thursday, March 02, 2006

Robert Rector

Robert Rector, a "leading" welfare expert from the Heritage Foundation is in serious need of a reality check. In one of Rector's more recent papers ("Teenage Sexual Abstinence and Academic Achievement"), he states that "teens who abstain from sex are less likely...to have children out-of-wedlock...." Yes, approach these does seem to work for everyone but Mary. What amazes me is the vacuum in which he seems to live. His "data" indicates that "[t]eaching abstinence is not only popular; it also makes sense." No one seems able to teach the better (condoms) and best (abstinence). We don't live in a black and white world but Rector writes as though it's news to him.

In a slightly older paper entitled "Understanding Poverty and Economic Inequality in the United States," Rector discusses a variety of issues relevant to this blog. The poor we discuss here, however, should know that most Americans are far better off today than a few generations ago. I somehow wonder if it is comforting to know that 50 years ago you would have only had a two-bedroom house with no porch if you can't put food on the table TODAY. Turning to the future, Rector tells us that "[t]he best news is that remaining poverty can readily be reduced further, particularly among children." Nice -- let's hear how. "[T]he typical poor family with children is supported by only 800 hours of work each year: That amounts to 16 hours of work per week. If work in each family were raised to 2,000 hours per year--the equivalent of one adult working 40 hours per week throughout the year--nearly 75 percent of poor children would be lifted out of poverty." Rector suggests turning welfare around to "really require work." So the solution to poverty is for people to work more.

Perhaps Rector could consider WHY people don't work more if that's all it takes. One reason is that there aren't enough jobs in certain areas of the country and the poor are the least mobile sector of society. Another reason is that--as Rector readily admits--mothers frequently raise children without the help of the father. Requiring a mother to leave her children is never going to be the answer for welfare reform. If women knew their children were safe and it didn't cost the entire pay check to secure that safe environment, more women would surely work. Another reason is that employers of workers at the lowest wages tend to avoid employing a person for 40 hours per week. Doing so makes the person a full-time worker and may mean the difference between providing health insurance and not. What about the size of the wages? Every hour of work for a single mother is an hour away from her children. Raising the wages would make every hour count that much more without requiring a single mother to barely see her children just to make ends meet.

Or perhaps we're just using the wrong tool. The stick has been tried, has it not? Perhaps we can try the carrot. Why do we need to "require" work when all signs indicate that most people on welfare don't want to be on welfare! How about encouraging work with a government subsidized wage--say, 20 percent for wages $6 and below sliding downward from there to maybe 5 percent for wages normally at $8/hour. Work a job at $6/hour and the government will give you another $1.20/hour for every hour worked. Give tax deductions to businesses that supplement child care costs for low-wage workers. I could keep going, but it's a simple start.

Oh, and did I mention that Rector believes that adjusting for taxes and net benefits indicates that the top fifth of American society is barely more than 4x richer than the bottom fifth? Right.....Bob, stop staring at the numbers to make them look good and stick your head out the window.
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