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Profit Economics & Income Inequality The Reality Of America In 2015

Income Inequality

By Carol Driscoll

What is the meaning of the alarming growth in income inequality throughout the world? According to a recent report issued by the charity organization Oxfam, “by next year, the world’s wealthiest 1% will control as much of the planet’s assets as the other 99%.” About this, Winnie Byanyima, Oxfam’s executive director, asks…

Do we really want to live in a world where the 1% own more than the rest of us combined? The scale of global inequality is quite simply staggering, and… the gap between the richest and the rest is widening fast.”

The stark human costs of increasing income inequality include millions of people in the U.S. forced to work two or even three low-paying jobs just to stay afloat, and often still not able to afford sufficient food and medical care. As the New York Times reports (Jan. 26), Since 2000, the middle-class share of households has continued to narrow, the main reason being that more people have fallen to the bottom.” Today wages are stagnant for most people lucky enough to have a job. Meanwhile, the so-called drop in our unemployment rate is, according to Forbes Magazine, simply misleading….Despite the significant decrease in the official U.S. Bureau of Labor Statistics (BLS) unemployment rate (6.2%), the real rate is over double that at 12.6%. This statistic is mirrored in the shameful fact that 48 million Americans—more than one in seven—were living in poverty in 2014 (U.S. Census Bureau). Union jobs were once an entry into the middle class, enabling men and women to live with economic security: to buy a home, educate their children, take a vacation. Many of these jobs have been eliminated as corporate America has moved much of manufacturing overseas, and as some states and cities are privatizing public services that are essential for the well-being of millions, including children and the elderly.

Income Inequality and Profit Economics—the Link

In an earlier post for Unions Matter! I wrote: Income inequality is the inevitable by-product, the direct result of an economic system based on profit…. What I didn’t say then is something I’ve seen since: that this inequality is not a “by-product” of profit economics, but is essential to its very existence! In our profit economy, wealth coming from the labor of many persons doesn’t go to the workers who created this wealth, but instead to corporate executives and shareholders, who do no work at all for their dividends.   In her commentary to an issue of The Right of Aesthetic Realism to Be Known, Ellen Reiss, Aesthetic Realism Chairman of Education, describes the basis of the profit system, which bothcreates and depends upon growing income inequality:

In the last years, I have been describing the following fact: those who insist that the profit way must be the basis of our economy have been trying to do the one thing that can now keep it going. That one thing is: make Americans work for less and less pay, so more and more of the money they earn with their labor can go into the pockets of the owners, who don’t do the work. Only by increasingly impoverishing the American people can the profit system now go on. Of course, to pay people less and less, to impoverish them successfully, one must try to annihilate unions. Unions—which have fought for and won better economic lives for people over the decades, are one of the biggest embodiments of ethics as a force.

Ellen Reiss is right and what she’s describing is compelling evidence that income inequality is needed for the profit system to continue.

Income Inequality and Economic Growth

A recent article in The Atlantic Monthly, “17 Things We Learned about Income Inequality in 2014,” states:

Inequality could also impair growth if those in the middle and at the bottom have no money to spend…. Research by the International Monetary Fund argues that high inequality is correlated with low economic growth.

Clearly, for economic activity to continue and grow, the daily labor of men and women is indispensable. It is their ability to provide services, to produce and transport the goods we all need—and to have the money to pay for them—that drives our economy. After all, as Eli Siegel, the founder of Aesthetic Realism, once pointed out with humor the central role of labor in economics: You can bring $100,000 to a tree, but it won’t grow toothpicks. Mr. Siegel used literature, history, economic data, and current events to document his statement below, which I see as indisputably true—and I’m proud it’s the motto of this blog:

The most important thing in industry is the person who does the industry, which is the worker.  That…never can change. Labor is the only source of wealth. There is no other source, except land, the raw material….Every bit of capital that exists was made by labor, just as everything that is consumed is.

This is why unions are so important: they have persistently and courageously fought for respect, for dignity, for workplace safety, for decent wages in the pockets of working men and women. Related to this is the vitally important question, asked by Eli Siegel, which must be answered for people’s lives to fare well: “What does a person deserve by being a person?” The answer is, every person deserves—as a beginning point—these things: a roof over one’s head, nutritious food, guaranteed medical care, an education, a good paying job, and—not least—the right to join a union.

What Do the American People Hope for in 2015?

In her commentary, Ellen Reiss explains:

The thing needed to replace the profit system is….an economy based on ethics and aesthetics: an economy based on seeing that the way to be truly selfish, the way to express yourself, be yourself, is to be just to people, things, the world into which we were all born.

As a person who worked for, benefitted from, and loves unions, I believe that only an economy based on ethics and aesthetics will eradicate income inequality, and meet the hopes of people. It is necessary for every union official to study what this means to be an effective force for economic justice for everyone.

We’re Number One! (in millionaires)

Most of the discussion I’ve seen of wealth and income inequality has focused on trends in the USA.  Now comes the annual report from Credit Suisse, one of the world’s largest financial institutions, on wealth and inequality worldwide.  The picture looks familiar:  a small number of individuals control most of the globe’s wealth.

Among their findings released October 14:

  • The number of millionaires worldwide is likely to increase from 35 million to 53 million in the next five years;
  • The USA is “the undisputed leader in terms of aggregate wealth;”
  • The USA, Switzerland, and Hong Kong are the most unequal “developed countries;”
  • Countries labeled as “emerging markets,” especially China, can be expected to grow their shares of global wealth in the next five years.  But there, too, inequality is rising.

Credit Suisse, which no doubt wants to handle those millionaires’ accounts, also finds that the USA leads the world with 14.2 million millionaires, 41% of the members of the worldwide millionaire club.  Credit Suisse  refers to them as ‘high net worth” or “HNW” individuals.

Ultra High Net Worth Individuals

Above the HNWs on the ladder are the UHNWs, the “ultra high net worth individuals,” those with with more than $50 million in net assets. The Global Wealth Report says this group has 128,200 members, 49% of whom live in the USA.

Dollar Millionaires

“The number of HNW and UHNW individuals has grown rapidly in recent years, reinforcing the perception that the very wealthy have benefitted most in the favorable economic climate,” the report says.  Indeed.

“HNW and UHNW individuals are heavily concentrated in particular regions and countries, and tend to share more similar lifestyles, participating in the same global markets for luxury goods, even when they reside in different continents,” the authors observed.

Here’s more numbers:

  • The poorest 50% of the global population owns less than 1% of the world’s wealth.
  • The wealthiest 10% (those with more than $77,000 of net worth) owns 87% of the world’s wealth.
  • The top 1% (more than $798,000 of wealth) owns 48.2% of the world’s wealth.
  • The world now has 35 million millionaires, less than 1% of the population.  Together they own 44% of the wealth.

Figures such as these demonstrate that the world’s wealth is in the hands of a very small group of individuals. The figures don’t, by themselves, tell us anything about trends in wealth distribution.  But this topic has finally gotten the attention of policy makers and bankers, even those whose clientele is ultra-rich.

“The changing distribution of wealth is now one of the most widely discussed and controversial of topics, not least owing to Thomas Piketty’s recent account of long-term trends around inequality. We are confident that the depth of our data will make a valuable contribution to the inequality debate,”  the report’s introduction says.

Credit-Suisse also says, “During much of the last century, wealth differences contracted in high income countries, but this trend may have gone into reverse.”

It may be significant that the Global Wealth researchers find that while the top 10% has seen its share of the global pie rise from 67% in 1989 to 72% in 2007 and topped 75% in 2013, the share in the pockets of the top 1% has “shown little upward movement for the past two decades.”

For the USA, however, they find that shares held by the top 10% and the top 1% have held steady, at about 75% and 38% respectively.  This finding contrasts with that of Emmanuel Saez and Gabriel Zucman, who recently wrote

“Wealth inequality [in the USA] has considerably increased at the top over the last three decades.  By our estimates almost all of the increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012.

The conflict may result from differences in methodology or from Saez and Zucman’s attention to the top 0.1%, a smaller sliver than Credit Suisse studied. Nevertheless, both reports add to a body of evidence that the economy is doing just fine for a tiny class of people while just about everyone else is getting left behind.

It wasn’t long ago that economists generally avoided discussion of the distribution of wealth.  Even if they now differ on some fine points, it probably represents progress when economists working for an institution like Credit Suisse are adding their weight to a call for a change of direction.

“In mature economies,” they conclude, “policies to address wealth inequality are receiving increased attention and can hopefully be designed to avoid unwanted effects on growth or economic security. Among emerging markets, policy makers would be advised to study countries, such as Singapore, which have tried to ensure that wealth gains are broadly shared, and which have succeeded in keeping wealth inequality in check.”

[Note: There’s a link to the Global Wealth Report on the Credit Suisse publications page, but the link did not work for me.  Instead, I contacted the bank’s New York press office, where I found someone to send me a copy.]

Originally posted on InZane Times.

We Are the 99.9% – New Data on Wealth Inequality (InZane Times)

We Are the 99 Percent photo by Gawain Jones via Flikr Creative Commons license

Photo by Gawain Jones via Flikr Creative Commons License

Janet Yellin is not the only one with a new analysis of the growing chasm between the ultra-rich and everyone else  If you can handle some dense economics (or like me willing to skip past the fancy equations), take a look at anew paper by Emmanuel Saez and Gabriel Zucman on “Wealth Inequality in the United States since 1913.”

It seems that reliable data on wealth is not easy to come by.  So Saez and Zucman had to do some fancy calculation to figure out who owns how much and how the proportions have changed over time.   They find

wealth inequality has considerably increased at the top over the last three decades.  By our estimates almost all of the increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012.

That’s a level of inequality comparable to the early 1900s, before the Progressive Era.

Occupy movement, if you’re still out there, take notice. 

“Wealth concentration has followed a U-shaped evolution over the last 100 years,” they write  “It was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then.”

(You can see the U-shaped curve and other charts at:  http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf.)

The top 0.1% is just 160,000 families whose wealth rose at 5.3% per year from 1986 to 2012. In the same period the bottom 90% saw its wealth stagnate. 

The key factors driving the wealth gap, Saez and Zucman conclude, is a surge in labor income among those at the tippy top and a decline in savings for those in the middle class.  That leads the authors to a set of recommendations.

First and perhaps most obvious, they recommend progressive income taxes and estate taxes.  

“Yet tax policy is not the only channel,” they say.

Other policies can directly support middle class incomes—such as access to quality and affordable education, health benefits, cost controls, minimum wage policies, or more generally policies shifting bargaining power away from shareholders and management toward workers.  [emphasis added]

It’s good to see a solution that deals with the cause of the problem.  Janet Yellin take notice.

 

Originally posted at InZane Times: http://wp.me/pXzWL-vn

Head Of The Federal Reserve, Janet Yellin, Takes On Income Inequality

Diagnosis unmatched by prescription

Janet Yellin, who chairs the Board of Governors of the Federal Reserve System, delivered an unusual and important speech two days ago about the growing gap between the richest Americans and everyone else.

Speaking at a conference at the Federal Reserve Bank of Boston, Yellin  offered “Perspectives on Inequality and Opportunity from the Survey of Consumer Finances.”  She said,

It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.

It’s fair to assume that was a rhetorical question and the answer is, no, the widening gap between the ultra-rich and the rest of the population is a threat to democracy and the economic futures of most people.

While the trend of wage stagnation for working Americans goes back to the 1970s, Yellin focused on the most recent period of economic history, 1989 to 2013.  This is useful because it includes the recent economic meltdown as well as the so-called “recovery.”

Yellin illustrated her talk with an obligatory set of graphs (she’s an economist after all), including this one depicting changes in net worth (i.e. wealth) for the wealthiest 5% of Americans, the next 45%, and the bottom half of the population.

yellen20141017a3As the chart makes obvious, the wealthiest 5% of Americans saw their share of the nation’s wealth climb from about 55% to about 65%, while the next 45% saw its share go from from 45% to 35% and the share held by bottom 50% approaching zero percent.

It’s good to know the nation’s top economist is alarmed.

The second half of Yellin’s speech concerned what she called “four building blocks of opportunity,” access to early education, access to higher education, ownership of private businesses, and inheritance.  The first three could be useful ways for individuals and families to do better in a time of widening inequality, but do not affect tax policy, deindustrialization, political and business attacks on organized labor, and the growth of the finance sector’s share of the economy, i.e. the factors driving the equality gap to historic highs.

For a more incisive analysis of what went wrong, I recommend the latest issue of Dollars and Sense, especially an article by Gerald Friedman on “What Happened to Wages?”  He writes,

From the dawn of American industrialization in the 19th century until the 1970s, wages rose with labor productivity, allowing working people to share in the gains produced by capitalist society.  Since then, the United States has entered a new era, in which stagnant wages have allowed capitalists to capture a growing share of the fruits of rising productivity.

I recommend examining Friedman’s charts alongside Yellin’s.  And try to follow Yellin’s fourth piece of advice:  inherit a fortune.

Originally posted on InZane Times 

Blog Action Day 2014 — #Inequality: Overcoming Income Inequality With Progressive Policies

Income-Inequality-Graph-from-Robert-Reichs-New-Film

Image from Inequality For All

Supreme Court Justice Louis Brandeis once said, “We can either have democracy in this country or we can have great wealth concentrated in the hands of a few; but we can’t have both.”

We as a nation are facing a problem. A same problem we have faced and overcome in the past. Income inequality is once again dividing our great nation from the have’s and have not’s.

Early in the 1900’s the United States had a vast income inequality. Workers slaved for sixteen hours a day in dangerous factories. The majority of a workers income went to paying their employer for room and board, while the factory owners collected absorbent amounts of money.

Former AFL-CIO President Thomas Donahue once said, “The only effective answer to organized greed is organized labor.”

As workers fought to get a fair share of the profits, wealthy Americans began using their vast wealth to influence the political system. Using their political influence they blocked legislation that provide workers with better safety regulations, better working conditions and the opportunity to bargain collectively with their employers.

As massive workplace tragedies like the Triangle Shirtwaist fire ripped through the headlines workers had had enough. Workers began to organize and form unions. As workers fought and died, the union movement began to gain traction.

It would still be decades before Congress would pass the National Labor Relations Act that gave workers the legal right to organize. As workers began organizing and negotiating for fair wages the entire country saw the gap between the poor and the wealth slowly start to close.

Unions became a powerhouse against corporate greed by ensuring that all workers were paid fairly, had a voice in their workplace and could retire with dignity.

With the addition of Social Security and the Minimum Wage people began to lift themselves out of poverty and what emerged was a vibrant middle class that would lead the nation through decades of economic prosperity.

In the late 1960s, corporations were looking for ways to weaken the power of unions to increase their profits. The answer was something they knew all along, to elect politicians who would put the interest of the corporations above the interest of the workers. They began a massive lobbying campaign to change regulations, slash workers rights and elect politicians who would vote for their corporate interests first.

As the power of the corporations began to rise again, unions began to fall. Massive anti-union campaigns blocked workers from organizing. President Reagan fired 15,000 air traffic controllers in the 1981 PATCO strike and that drove a stake right through the heart of organized labor. President Reagan showed the nation that it was acceptable for an employer to ignore the demands laid out by the unions and when the time comes, fire them all and rehire new workers. Corporations began using this principle to break unions thereby hiring new workers are drastically reduced wages.

As workers began to lose their voice, income inequality began to rise again. By the 1980s Wall Street was booming. Corporate profits were skyrocketing. CEOs began making obscene amounts of money while the everyday worker saw their wages stagnate.

ceo-vs-workerBy 1983 the ratio between the average worker and the CEO was 46:1. This is double what it was only ten years earlier (23:1). The more wealth Wall Street and greedy CEOs acquired, the more workers suffered.

Corporations continued to use their power in Washington to change the rules of the game for their own benefit. They changed banking regulations that allowed corporations to file for bankruptcy on their pension obligations. After thirty years with a company workers are left with nothing. All the money they contributed to their retirements, gone. Corporations began closing factories and shipping their jobs overseas. Millions of workers lost their jobs and their retirements as factories were chopped up and sold in shady Wall Street deals that paid executives boatloads of money.

As union membership began to decline inequality between workers and CEOs grew by leaps and bounds. Now the ratio between the average worker and the CEO is over 400:1. This is eight times higher than the next highest country, Venezuela at 50:1. That is obscene.

Now over forty percent of the nations wealth is held by only a select few. Income inequality in America now is worse than it was in the 1920s.

econ_onepercentchart15_630

Now that we have identified the problem, how do we fix it to rebuild the middle class and narrow the gap between the average worker and the ultra-wealthy?

The heart of the problem lies in the myth that if we give more money to the ultra-wealthy — or as the Republicans like to call them — job creators, then that money will trickle down to the rest of us. This failed idea continues to shape the political debate in Washington as millionaires and billionaires use their political lobbying groups, like the Americans For Prosperity, to push legislators to give more tax breaks to high-income earners.

Groups like the Americans For Prosperity continue to say that if we take anymore from the wealthy job creators they will just stop creating jobs. The fact is no matter how much money the job creators are given, they still are not creating any jobs. This feeds into the myth that we must give them more money.

The Americans For Prosperity also work to destroy unions, and fight against any progressive measures like raising the minimum wage. They demonize workers who want a living wage, while greedy corporations rake in more profits than any other time in history.

To begin to close the inequality gap we must rely on proven measures that have worked for previous generations. Policies like increasing the minimum wage, ensuring that the ultra-wealthy are paying their fair share in taxes and expanding Social Security. These three policies pushed America out of the Great Depression and into the most prosperous generation in American history.

It sounds simple, but given that too many of our politicians are bought and paid for by corporations and wealthy hedge fund managers, changing these policies have created the gridlock we are currently experiencing on Capitol Hill. Progressives want to move the country forward, while the Conservative majority who want to take us backwards.

There is one more change that we need to enact if we ever want see real change in America. We must get the corporations out of our political system. We need to get their dirty money out of Washington D.C. Their corruptive influence is blocking any meaningful legislation from moving forward. Politicians vote for what their corporate sponsors tell them to, no matter how much the voters disagree.

Across the country, in nearly every poll, voters overwhelmingly agree that it is time to raise the minimum wage. Despite this overwhelming voter support for raising the minimum wage, conservative politicians still oppose the increase.

As Senator Bernie Sanders says, “our democracy is turning into an oligarchy,” and that will eventually destroy America, as we know it.

“America Out Of Whack” By Arnie Alpert of InZane Times

Writing in the New York Times, Thomas Edsall assembles an impressive array of facts that illuminate the realities of wealth inequality in America.  

Citing Federal Reserve figures, Edsall reports that household net worth, corporate profits, and the value of real estate have been going up at an impressive pace.  If you think that sounds like evidence of recovery you’d be mistaken, at least if you equate “recovery” with economic conditions that are improving for most workers.   

“The September Federal Reserve Bulletin graphically demonstrates how wealth gains since 1989 have gone to the top 3 percent of the income distribution,” he writes.  “The next 7 percent has stayed even, while the bottom 90 percent has experienced a steady decline in its share.”

It’s not just wealthy individuals getting wealthier; it’s also the corporations they own and run.    Citing statistics from Goldman Sachs, Edsall says corporate profits rose five times faster than wages last year.  And he quotes an article from Business Insider that stated,

“America’s companies and company owners — the small group of Americans who own and control America’s corporations — are hogging a record percentage of the country’s wealth for themselves.”

Edsall asks, “Why don’t we have redistributive mechanisms in place to deploy the trillions of dollars in new wealth our economy has created to shore up the standard of living of low- and moderate-income workers, to restore financial stability to Medicare and Social Security, to improve educational resources and to institute broader and more reliable forms of social insurance?”

It’s the right question. 

For answers he turns to a bunch of economists, who provide data about tax rates, labor force participation, the declining growth of well-paying jobs, globalization, and the reduction of labor’s share of profit relative to capital in a time of rising productivity.  

My answer is a bit more straightforward:  America’s companies and company owners — the small group of Americans who own and control America’s corporations — are hogging the political system.  This is nothing new, but in the legal environment created by recent Supreme Court decisions (Citizens United and McCutcheon in particular) it is becoming easier for corporate interests to wage class war and win.  Simply put, the people who make the laws and set the policies have their receptors tuned to the frequency where the corporations are broadcasting. 

Edsall notes survey data that reveal corporations are not so popular in the USA and other so-called “advanced countries.”   He asks if the legitimacy of free market capitalism in America is facing fundamental challenges.

My gut response is to say “I hope so.”  But the dynamics described by all those economists are not the workings of “the invisible hand.”  The market is operating under a set of rules established by those who already have more than their fair share of power, wealth, and privilege.  The legitimacy of our corporate-directed political system that must be challenged as well.

#GUI

Granite State Rumblings: Congress Reauthorizes Child Care Block Grants And That Is Good News

Child Care Facility (EAGLE102_Net CC FLIKR)

YMCA child care room (EAGLE102_Net CC FLIKR)

Here is some important news from our friends at Zero to Three and the National Women’s Law Center.

For the first time in nearly 20 years, the Senate and House have reached an agreement to reauthorize the Child Care and Development Block Grant (CCDBG), the primary federal program that provides funds for child care subsidies for low-income working families and to improve child care quality.

The House voted Monday to pass the legislation and the Senate will vote on the bill before Congress goes into recess on Sept. 23.

(Read the joint statement of the bipartisan group from the House and Senate who came together to forge this legislation here.)

The bipartisan bill promises to:

  • Improve the health and safety of children in child care settings;
  • Make it easier for families to get and keep the child care assistance they need;
  • Enable children to have more stable child care; and
  • Strengthen the overall quality of child care.

Most notably for infant-toddler advocates, the agreement would create a 3% set-aside of funds to improve the quality of infant-toddler care. These funds will increase states’ capacity to invest in helping programs reach a high level of quality as well as specialized training and support for infant-toddler providers.

High-quality child care is linked to the success of children and their parents. Child care provides early learning opportunities to children and enables women to work so they can support their families. With significantly increased funding, this bill can make a critical difference.

While this agreement is an important step toward the reauthorization of CCDBG, the Senate must now vote to approve the compromise bill and get this to the finish line. Phone calls to your Senators are especially needed this week.
~

And this from our friends at the Center on Budget and Policy Priorities:

Our new report provides context for the official poverty and income figures for 2013, which the Census Bureau will release on Tuesday, September 16th.

Here are the highlights:

  1. As in other recent recoveries, poverty has been slow to decline.  Over time, poverty rates tend to move roughly in tandem with economic indicators, which generally improved slightly in 2013.  Thus, the poverty rate — which jumped from 12.5 percent in 2007 to 15.1 percent in 2010 and remained essentially unchanged at 15.0 percent in 2011 and 2012 — may start to improve in 2013 as well, although the improvement might not be statistically significant .A return to pre-recession poverty levels is unlikely soon.  To replace the millions of jobs lost in the Great Recession anytime soon and keep up with population growth, the economy must create jobs faster than it has to date.  Although the economic recovery (which officially began in June 2009) is not uniquely disappointing in this regard, it is still problematic — and because the economic downturn was so deep, there is much more ground to make up.  Recoveries in the 1960s, 1970s, and 1980s featured quicker reductions in poverty.
  2. Austerity policies likely hampered progress against poverty in 2013.  The economy almost certainly would have improved more in 2013 had austerity policies not reduced the government’s contribution to the economy.  These included the “sequestration” spending cuts of the 2011 Budget Control Act and first implemented in 2013 and the expiration of the payroll tax holiday, which reduced most workers’ take-home pay by 2 percent of earnings.
  3. Unequal wage growth also slowed progress.  Between 2009 and 2013, inflation-adjusted hourly wages rose by 1 percent for workers at the 95th percentile (workers whose wage levels exceed those of 95 percent of all workers but are less than the remaining 5 percent), but fell by about 4 to 6 percent for workers in the bottom 60 percent of the wage scale, according to the Economic Policy Institute.
  4. Income inequality tied a record-high level in 2012.  The income gap between rich and poor as measured by the Gini index — the Census Bureau’s main summary indicator of inequality in pre-tax cash income — tied a record in 2012, with the data going back to 1967.  Other inequality measures also stood at or near record levels in 2012.
  5. Most poverty figures released on Tuesday won’t reflect non-cash benefits.  The Census figures will focus on the official poverty statistics, which are based on pre-tax cash income and omit support such as food assistance and rental subsidies as well as tax-based assistance such as the Earned Income Tax Credit (EITC).  An alternative Census Bureau poverty measure, the Supplemental Poverty Measure (SPM), includes these types of assistance, and experts generally consider it a more reliable tool for measuring changes in poverty over time as well as the safety net’s impact on poverty.  Unfortunately, Census will not release SPM figures for 2013 until later this year.  However, Census will release a table on Tuesday providing data on the poverty-reducing effects of certain programs, including SNAP (formerly food stamps) and the EITC.

Granite State Rumblings: How Healthcare, Income Inequality, and The Gender Wage Gap, Are All Connected

Since President Obama gave the State of the Union Address, we have been hearing a lot of talk about income inequality and the gender wage gap.

A new report from The Working Poor Families Project states that in 2012, there were more than 10 million low-income working families with children in the United States, and 39 percent (4.1million) were headed by working mothers struggling to support 8.5 million children. The economic conditions for these families have worsened since the onset of the recession; between 2007 and 2012, there was a four percentage-point increase in the share of female-headed working families that are low-income.

The report defines “low-income working families” as earning no more than twice the federal poverty income threshold. In 2012, the low-income threshold for a family of three with two children was $36,966.

Addressing challenges specific to these families will increase their economic opportunity, boost the economy and strengthen the fabric of communities across the nation.

Public policy can play a critical role in our future prosperity by reversing this trend and improving outcomes for low-income working mothers. While the federal government can play a role, of particular interest in this report is how state governments can best invest in helping working mothers gain the education, skills, and supports necessary to become economically secure and provide a strong economic future for their children.

Here are a few of the key points from the report:

Education

  • Increasingly, education is the key to success in the labor force and is a major factor driving the growing economic gap between lower-income and higher-income families. However, relatively few low-income working mothers have the training and skills needed to earn decent wages.
  • Education can provide a pathway out of poverty, but postsecondary education and skills training are often out of reach for low-income working mothers.
  • Access to postsecondary education can be limited due to a number of factors such as tuition costs, transportation issues and class schedules that conflict with standard working hours.
  • Lack of affordable, high-quality child care also limits the ability of working mothers to both enter and succeed in college.

Low Income, Fewer Benefits

  • A key barrier for working mothers is the gender gap in earnings. In 2012, women earned just 77 cents for every dollar earned by men, a gap that has persisted over the past ten years.
  • The primary challenge for working mothers is their concentration in low-wage jobs. Women remain significantly underrepresented in many high- paying, high-demand occupations, especially in blue-collar and technical fields.
  • Women in low-wage work are often in jobs that do not provide benefits such as health insurance paid sick leave, or, in some occupations, even wage protections.
  • The U.S. Family and Medical Leave Act (FMLA), guarantees the availability of unpaid sick leave for just over half of U.S. workers. But for those not covered, and/or who are living from paycheck to paycheck, unpaid leave is generally not a viable option since staying at home to take care of a sick child may lead to greater economic pressures, including the loss of a job.

For maximum impact on this problem, the report says state governments should focus on policies that are sensitive to the needs of working mothers and to all parents in general by:

  • Increasing access and success for low- income working mothers in postsecondary education.
    • Create and expand tuition assistance programs that make postsecondary education accessible for low-income working mothers.
    • Allow undocumented students to pay in-state tuition at public post-secondary schools.
    • Better utilize existing program resources of TANF, Adult Education and WIA to support the success of working mothers in postsecondary education.
    • Provide increased and dedicated academic and personal supports for low-income working mothers, including affordable, high-quality child care and other strategies targeted to promote student parent success.
    • Invest in programs that help pregnant women and young mothers achieve a high school credential and transition to postsecondary education.
    • Restructure adult basic education and community college programs in accordance with bridge program and career pathway concepts to better accommodate low- income working mothers, including English Language Learners who may be seeking an occupation credential or degree.
    • Take steps to encourage and support low-income working mothers to pursue career and technical education/training programs in nontraditional fields such as STEM, manufacturing and transportation by crafting state policies to take advantage of opportunities in such programs as Perkins, WIA and apprenticeships.
  • Improving the quality of low-wage jobs.
    • Raise the state minimum wage and minimum wage for employees who receive tips and index them to inflation to help meet basic household needs.
    • Implement and enforce paid maternity leave and paid sick leave policies to ensure all working mothers can take paid time off when they or their children are sick.
  • Creating a strong network of work supports to strengthen female-headed, low-income families and assure basic family needs are met.
    • Provide a state refundable EITC for low- income families, including non-resident fathers who pay their child support, to help make low-wage work pay.
    • Support the expansion of Medicaid eligibility under the Affordable Care Act to ensure low-wage working mothers have access to affordable health care.
    • Improve access to quality child care for low-income families during work and school.
    • Maintain a strong commitment to work supports (e.g., SNAP, Medicaid as well as EITC and child care) and structure eligibility levels to avoid “cliff” effects with the goal of improving family well-being.

Launched in 2002 and currently supported by the Annie E. Casey, Ford, Joyce and Kresge foundations, The Working Poor Families Project is a national initiative that works to improve these economic conditions.

Here are some facts about New Hampshire from the Working Poor Families Project report:

  • Number of low-income working families: 28,751
  • Number of female-headed low-income working families: 12,450 or 43%
  • National Average of female-headed low-income working families: 39%
    • NH Ranking among all states: 32
  • Number of women in female-headed low-income working families with no post-secondary education:  6,607 (53%)
  • National average of women in female-headed low-income working
  • Families with no post-secondary education: 49%

There is currently legislation being considered in New Hampshire on several of the recommended policy actions in the WPFP report.

  • Allow undocumented students to pay in-state tuition at public post-secondary schools.
    • HB 474 – An act relative to eligibility for in-state tuition rates at the university system of New Hampshire.
      • Status – Passed/Adopted with Amendment by the House
  • Raise the state minimum wage and minimum wage for employees who receive tips and index them to inflation to help meet basic household needs.
    • HB 1403 – An act establishing a state minimum hourly wage.
      • Status – In House Labor, Industrial and Rehabilitative Services Committee
      • Executive Session today (2/18/14) at 2:00 PM in LOB 307
  • Address the gender wage gap.
    • HB 1188 – An act relative to paycheck equity.
      • Status – Majority Committee Report – Ought to Pass
      • Scheduled for House Floor Vote – Wed., February 19th
    • SB 207 – An act relative to paycheck equity.
      • Status – In Senate Commerce Committee
  • Support the expansion of Medicaid eligibility under the Affordable Care Act to ensure low-wage working mothers have access to affordable health care.
    • SB 413 – An act relative to access to health insurance coverage.
      • Status – In Senate Health, Education and Human Services Committee
      • Public Hearing – Today (2/18/14) at 9:15 AM in SH 100

For more information about the SB 413, please read this week’s Common Cents blog post from NH Fiscal Policy Institute:

An Overview of SB 413: Extending Affordable Health Insurance to Low Income Residents.

On Thursday, February 13, 2014, Senators Morse, Larsen, Bradley, Gilmour, Odell and D’Allesandro introduced SB 413 to create the Health Protection Program.

SB 413 creates three stages of extending affordable health insurance to low income Granite Staters: the Health Insurance Premium Program (timeline: ASAP–December 31, 2016); the Bridge to Marketplace Premium Assistance Program (timeline: ASAP–June 30, 2015 if no waiver or December 31, 2015 if waiver approved); and the Marketplace Premium Assistance Program (timeline: January 1, 2016–December 31, 2016 if waiver approved).

Descriptions of the three stages can be found by clicking here.

SEIU President Mary Kay Henry On SOTU


“It should not fall only on the president and Congress to make sure workers earn a decent wage. Our business leaders have a responsibility to help close the growing income gap, especially in an era of record profits.” – Mary Kay Henry, President, Service Employees International Union (SEIU)

Image by Chet Susslin  From National Journal

Image by Chet Susslin
From National Journal

WASHINGTON, DC – After President Obama delivered his 2014 State of the Union address, Mary Kay Henry, President of the Service Employees International Union (SEIU) issued the following statement:

“In his address tonight, President Obama made clear that he believes economic inequality to be the defining issue of our time. It threatens the state of our union and I applaud the president for beginning a broader discussion about how we achieve shared prosperity.

“One step forward is the president’s proposal to raise the federal minimum wage to $10.10 an hour. Bills exist in Congress that would raise the wage and we hope they are taken up and passed as soon as possible. We need to end the new ‘normal’ of workers stringing together low-wage jobs with no benefits that can’t support a family. As President Obama said tonight, ‘the best measure of opportunity is access to a good job.’

“In addition, requiring federal contractors to pay their workers $10.10 is another step forward and we are encouraged that the president will use his executive authority to make it happen. When American jobs and livelihoods depend on getting something done, the president shouldn’t have to wait for Congress.

“While raising these wages is a good start, it won’t solve the problem by itself. The best way for workers to thrive is by bargaining with their employers for better wages and a shot at a better future. However, it should not fall only on the president and Congress to make sure workers earn a decent wage. Our business leaders have a responsibility to help close the growing income gap, especially in an era of record profits.

“Simone Sonnier-Jang, a fast food worker from Los Angeles who sat in the House gallery tonight, is one of thousands of workers around the country calling attention to the crisis of low wages. Workers like her are making their voices heard and demanding $15 an hour and the right to form a union.

“Also of critical importance to achieving shared prosperity is action on commonsense immigration reform. The time is now – actually, it’s past due. Both sides need to come together to pass immigration reform with a pathway to citizenship and we urge the president to keep the pressure on lawmakers to pass real reform so that 11 million people can come out of the shadows and participate fully in our democracy.

“It’s important to note how important affordable health care is for Americans’ economic security. That’s why protecting the Affordable Care Act should remain a priority for this Congress.”

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