Obama and Trump take turns trumpeting about the ‘recovery’ but for most of the US, recovery is a rumor, not a reality and a financial precipice is perilously nearby. This post presents an alternative for measuring economic recovery.
Saturday, Sept 22, 2:30pm at Coordinated Campaign Office, 2006 Botulph Rd., 2nd Floor. Canvass with U. S. Senator Martin Heinrich. Click here to RSVP. The Party needs to have a rough idea of numbers planning to attend, so they have canvassing routes ready. It is my understanding that this canvassing effort will be to educate voters about the entire Democratic Party slate. For more information contact the NM County Chair, Todd McElroy at firstname.lastname@example.org.
Recovery for the 1%, Economic Terror for the Rest of Us
Today, we examine the ‘recovery,’ first to explore how America’s economic vitality is measured and then we take a look at how many of the working poor experience ‘recovery.’ This is the kind of post that might profitably be shared with a friend who tends to vote more conservatively or who harbors views of the poor as being lazy or unmotivated to work. But before we examine the human side, lets look at what we use to measure our nation’s economic health and how what it really measures is the economic health of the 1%. Yet when we see unemployment statistics, GDP numbers and the stock market soaring, we are supposed to take comfort that all is well. All is not close to well.
Going back to the late nineteenth century, economists were casting about to find a means of measuring the economic health of the nation. The unemployment rate was developed in 1873 and yjr Gross Domestic Product was actually generated as a result of advocacy by progressive Robert La Follette. As pointed out by NY Times columnist David Leonhardt, the problem is that these measures no longer remotely convey how Americans are experiencing our economy. And yet, these measures, along with the Dow Jones average, are what we hear on the nightly news most every night. What is wrong with these measures? Glad you asked.
Stock Market: The stock market is part of every weeknight newscast. Long before Trump, politicians have crowed about it as one of the key indicators of national wealth and economic health. Yet, as Leonhardt points out. 90% of Americans own little to no stock. The vast majority of shareholders in the market live in the upper 1-10%. So how does the stock market correspond to the lives of most Americans? It just doesn’t. Not at all.
A better measure of the economic stability of most Americans is their net worth. As the chart at left demonstrates, the stock market has not only recovered its value since the 2008 collapse, it has added 30% of additional growth. As to the rest of us, our net worth has still not recovered. Indeed, we are still 18% worse off than we were almost 20 years ago.
Unemployment rate. From Leonhardt: “It’s worth remembering that the current indicators are not a naturally occurring phenomenon. They are political creations, with the flaws, limitations and choices that politics usually involves. Take the unemployment rate. It dates to 1878, when a former Civil War officer and Massachusetts politician named Carroll D. Wright was running the state’s Bureau of the Statistics of Labor. Wright thought that the public had an exaggerated sense of the extent of unemployment after the Panic of 1873. He called it ‘industrial hypochondria.’ ”
Leonhardt goes on to describe how Wright sought to eliminate from the unemployment rate anyone who had given up on looking for work, i.e. the most economically disenfranchised people. The unemployment rate reported almost daily does not include those who have given up looking for work and so we hear how only 3.8% of Americans are unemployed. But, as the chart at left demonstrates, it intentionally understates the unemployment experienced in our communities. While policymakers may feel good being able to tout a full recovery, 15% of us are still very much not recovered. And even this doesn’t begin to capture the number of people are now employed but earning far less than they were earning 10 years ago.
Gross Domestic Product (GDP). The third common economic indicator that is often included in reports on the economy is GDP. This is designed to measure economic growth and productivity. But here also, this may indicate the health of corporate America and our ability to generate more stuff to sell, but it bears little relationship to how people are experiencing the economy. Here, a far better indicator would be the average income of the 90% of Americans who are not flourishing. And as the third chart at left reveals, this statistic tells a far different story.
GDP has grown almost 30% from 2000 to 2014 while average income of the bottom 90% has climbed all of 3%, not even coming close to keeping up with inflation.
This is the reality of life among most Americans. With skyrocketing health care costs, soaring college tuition, and rental housing increasing dramatically in most all urban centers, it is no wonder Americans are wondering when the long-touted ‘recovery’ will impact them. Instead of benefiting from all of this economic vitality, most Americans are now working longer hours, spending less time with their families, and going to sleep at night worrying about what happens when anything unexpected strikes. Click here to read the full NY Times report from Leonhardt.
The Working Poor. No Recovery Experienced or In Sight: Meet Vanessa
Before we dive into the life of the working poor, a few statistics from another NY Times report, Why Work Doesn’t Work Anymore, to provide context and to illustrate how many Vanessa’s are out their working as hard as they can in an entirely under-valued job while their children and families suffer unspeakably:
- Since 1973, American productivity has increased 77% while hourly pay has only increased by 12%. If wages had risen along with productivity, the minimum wage would be over $20 an hour, instead of $7.25.
- “Today, 41.7 million people–nearly 1/3 of the American workforce–earn less than $12 an hour and almost non of their employers offer health benefits,” and many do not offer time off for illness, family emergency or vacation;
- Only 5% of the working poor are between 16-19 belying the comforting thought that most of the working poor are teenagers just getting started;
- Nearly 40% of full-time hourly workers know their work schedules just a week or less in advance, making arrangements for childcare and family support a constantly fluctuating chore;
- Since welfare reform in the 90s, the number of families living on less than $2 per person per day, has more than doubled and three million children now live in poverty with most of those children living with a working adult.
In Why Work Doesn’t Work Anymore, Matthew Desmond describes the life of Vanessa Solvan and her three teenage children. If you only have time to review one of these two NY Times articles, I’d recommend this one. It gives you a real idea of what life is like for a working poor family. Click here to review the article.
For a time, they all slept on Vanessa’s mother’s floor in the living room, but often the volume involved in three teens in a small apartment led Vanessa to move to cheap hotels with only a microwave to prepare food, or more often to living in the back of her 2004 Chrysler wagon. In May, Vanessa finally obtained public housing but for three years she had been among the “working homeless.”
And while a common stereotype of the poor is that they are lazy and irresponsible and just looking for a handout, nothing could be further from the truth. Vanessa works as a home health aide, taking care of people who desperately need here to remain living at home. But America doesn’t value many of the caring professions and so, from the NY Times: “She gets $10 an hour for one client, $14 for another. It doesn’t have to do with the nature of the work, but with reimbursement rates, which differ according to the client’s health care coverage. After juggling the kids and managing her diabetes, Vanessa is able to work 20 to 30 hours a week, which earns her around $1,200 a month. And that’s when things go well….her rate hadn’t changed much in the three years she had worked there. Vanessa earned $9,815.75 in 2015, $12,763.94 in 2016 and $10,446.81 last year.”
According to the federal government Vanessa’s family would need to earn $29,420 to afford basic necessities. Vanessa has barely earned that cumulatively over the past three years. And since Vanessa did not earn $29K a year, she and her children went without a good many necessities we take for granted.
According to American mythology, if you work hard and apply yourself anyone can advance. That mythology also translates into the deduction that if you are poor, it is because you are not willing to work or apply yourself. An American Enterprise Institute survey found that over 66% of respondents did not think most poor people worked and 1/3 of respondents felt that most welfare recipients would prefer to stay on welfare than work. Interestingly, a study by sociologist Ofer Sharone found that when Americans see a homeless man, they blame him or her. But when the French see a homeless person, they blame the system for not preventing it.
But in America today, working hard does not necessarily translate into a raise or a promotion. If they buff the floor at Microsoft or the Marriott, they work for a subcontractor who provides that service and that service alone. No matter how hard you work, there is nowhere “up” to go. Ditto working at Walmart, Jack-in-the-Box or any other job that used to be considered “entry level.”
While millions of working poor struggle with less than full-time, low-wage, unstable income, our government rewards them with draconian work requirements that are sometimes impossible to meet and other regulations that are almost punitive in design. When Vanessa was struggling most and she and her kids were living out of their car, her good friend Sheri would have gladly provided them a place to live, but her Section 8 housing certificate prohibited her taking in others. So another door was shut. If Vanessa were to try to clock more hours, she would not be able to supervise and care for her children. And in America caring for children does not count as work.
And that is the heart of the matter, America has was founded in belief in the Protestant ethic, but as our economic system has evolved (or devolved), we continue to hold to an antiquated belief that if you work hard you advance and if you do not advance, you deserve your plight. What’s more, the Protestant ethic really meant, if a man works hard he will succeed and if a woman or any caregiver works hard, well that works for men.
Paul & Roxanne