In this issue, we have thinking on the women in poverty, employers of last resort, improving social mobility, and the U.S. employment outlook.
Must Reads: To start, be sure to read Clara Miller’s letter recapping what Heron was up to in 2013. The Brookings Institution has a new interactive looking at “strong starts for social mobility” that is worth a look (you also might want to read remarks from Rep. Paul Ryan and Sen. Kirsten Gillibrand at the Brookings social mobility summit). PBS’s John Wasik reports on John Maynard Keynes investment behavior, saying that it has lessons “critical for the long-term financial betterment of middle class working people.” Over at the Fiscal Times, Bruce Bartlett contends that enterprise zones are “a bipartisan failure” as a job creator. Lastly, you might be interested in the latest Shriver report on women, showing that one in three women in the United States live on or over the brink of poverty.
Living With Job Scarcity
Let’s start with this cartoon from the Jewish daily paper Hamodia:
Jared Bernstein over at the NYT’s Economix blog tries to add some more perspective to the unemployment rate debate, check out this chart:
Meanwhile, the Economist takes another look at the way technology is affecting jobs and finds that “no country is ready”:
[H]owever well people are taught, their abilities will remain unequal, and in a world which is increasingly polarised economically, many will find their job prospects dimmed and wages squeezed. The best way of helping them is not, as many on the left seem to think, to push up minimum wages. Jacking up the floor too far would accelerate the shift from human workers to computers. Better to top up low wages with public money so that anyone who works has a reasonable income, through a bold expansion of the tax credits that countries such as America and Britain use.
Innovation has brought great benefits to humanity. Nobody in their right mind would want to return to the world of handloom weavers. But the benefits of technological progress are unevenly distributed, especially in the early stages of each new wave, and it is up to governments to spread them. In the 19th century it took the threat of revolution to bring about progressive reforms. Today’s governments would do well to start making the changes needed before their people get angry.
You also might be interested in this Economist chart on where jobs are in the U.S. economy:
The Manhattan Institute’s E21 project argues we need more job growth, not wage growth:
Policies aimed at increasing earnings through labor regulation are misguided. Lack of job opportunities pose a greater problem that declining incomes. Policies that make job creation easier should be embraced if the problems from the Great Recession are to be fixed. Those that hinder job growth should be repealed.
While direct government transfers served their purpose over the recession, they now run the risk of doing more harm than good by providing work disincentives. Burkhauser and his colleagues’ findings suggest that programs such as extended unemployment insurance and expanded SNAP coverage and benefits could have lengthened unemployment spells and thereby lowered labor-market skills. These short-term increases in benefits make returning to work less appealing (for more on this topic see Burkhauser’s review of Casey Milligan’s book The Redistribution Recession: How Labor Market Distortions Contracted the Economy). Tax reductions and increased transfers also increase public debt, which has negative long-term consequences.
The safety net did its job during the economic downturn—it kept individuals’ earnings from falling. Now that the economy is recovering, albeit slowly, trims to programs that served their purpose, such as food stamps and unemployment insurance, should be considered before negative consequences overshadow the benefits.
The Washington Post’s Robert Samuelson takes on the proposed minimum wage increase, wondering if businesses will respond to the hike the way they have in the past:
[B]usinesses have been reluctant job creators. They curb hiring at the least pretext. They seem obsessed with cost control. The Great Recession and 2008-09 financial crisis spawned so much fear that they changed, at least temporarily, behavior. Firms are more cautious.
Would employers take the minimum’s steep costs in stride — or react by cutting hiring and automating more low-paid jobs (example: supermarket checkouts)? That’s the crucial question. And which matter more for low-income workers: added jobs or higher incomes? There’s a powerful symbolism to raising the minimum, but the notion that it can be boosted sharply without any job penalty may be a mirage.
Seeing Red on Millennials’ Future
Let’s start off with this cartoon from Lisa Benson over at Townhall:
Former occupyer Jesse Myerson made waves with this controversial Rolling Stone op-ed on five economic ideas millennials might latch onto given the country’s economic woes, including new social programs such as increasing state-owned banks and creating a guaranteed jobs program:
A job guarantee that paid a living wage would anchor prices, drive up conditions for workers at megacorporations like Walmart and McDonald’s, and target employment for the poor and long-term unemployed – people to whom conventional stimulus money rarely trickles all the way down. The program would automatically expand during private-sector downturns and contract during private-sector upswings, balancing out the business cycle and sending people from job to job, rather than job to unemployment, when times got tough.
Some economists have proposed running a job guarantee through the non-profit sector, which would make it even easier to suit the job to the worker. Imagine a world where people could contribute the skills that inspire them – teaching, tutoring, urban farming, cleaning up the environment, painting murals – rather than telemarketing or whatever other stupid tasks bosses need done to supplement their millions. Sounds nice, doesn’t it?
In this interview last month, Professor Randy Wray of the University of Missouri-Kansas City in an interview with the Institute for New Economic Thinking also discussed the idea of government as an employer of last resort:
The ELR program would allow for the elimination of many existing government welfare payments for anyone not specifically targeted for exemption. It would also command greater political legitimacy, as society places a high value on work as the means through which individuals earn a livelihood. Labor would welcome the safety net of a guaranteed job, and business would recognize the benefit of a pool of available labor it could draw from at some spread to the government wage paid to ELR employees.
Conservatives, meanwhile, were outraged at the communist tone of Myerson’s call for ending private property, but several authors such as the Washington Post’s Dylan Matthews and Business Insider’s Josh Barro weigh and recast at least some of the ideas as more run-of-the-mill than they at first seem. Here’s Barro’s takeaway:
Myerson’s ideas are aimed at very real problems: Returns to labor are declining relative to returns to capital; America’s economy is vulnerable to shocks that sharply raise unemployment; returns to economic growth are accruing disproportionately out of the top, leaving most people out of their share of progress.
Not all of the ideas in Myerson’s piece are good approaches to these problems. And since Myerson describes his “political aspirations” as communist, he obviously has some bad ideas that aren’t contained in the piece. But the ideas in the piece aren’t crazy and should be evaluated on their merits.
(You also might be interested in Barro’s eight economic reform ideas focused on investing in infrastructure, improving education, and reforming “means-tested entitlements without soaking the poor.”)
Meanwhile John Arrono at the Huffington Post weighed into the Myerson debate on universal income, rejecting the idea that Alaska’s state-owned corporation, which distributes dividends to state residents from resource wealth, is a communist institution.
Poverty in Place
Check out this map from the New York Times that uses Census Bureau data to show where the poor live. In the American Prospect, Richard Rothstien discusses sociologist Patrick Sharkey’s book “Stuck in Place” on urban black poverty:
“It is time,” Sharkey says, “to discard the idea that moving large numbers of families out of the ghetto can be a primary solution to concentrated poverty.” But Sharkey fails to confront that it is as daunting to find the enormous investments needed to sufficiently gild the ghetto so its children are no longer raised in environments with such violence, stress, and lack of opportunity that they too frequently bequeath desperation to the next generation.
At McKinsey, Toronto University’s Richard Florida discusses the challenges facing urban revival:
Manufacturing middle is gone, mid-skill jobs are being annihilated. We stabilized it, but we’re not growing a lot. We’ve cut the loss, and the biggest jobs we’re creating are these low-wage, routine, poorly paying service jobs, 66 million in America, our fastest-growing jobs. So I call it the 66 percent. When you take the 50 percent of workers in the service economy, the other 15 percent are disconnected, disadvantaged. You have 66 percent of the people being left behind…
Now what we’re seeing, as cities come back, is this patchwork. I call it the fractured, the fragmented city, the divided city. Concentrated advantage right beside concentrated disadvantage. But then moving out into the suburbs, concentrated advantage next to concentrated disadvantage, and this is a self-perpetuating cycle, which is terrifying.
If you’re stuck in one of these neighborhoods, right next door to the affluence, you’re cooked. You don’t have access to good schools, you don’t have access to cultural pathways, you don’t have access to mentors, you don’t have access to jobs. This idea of how do we not only upgrade neighborhoods, but how do we upgrade service jobs. And that’s been my mantra.
Meanwhile in New York Magazine, Benjamin Wallace Wells discusses whether new mayor Bill de Blasio can make the city affordable again for the middle class.
You may be interested to learn that United States has dropped out of the top ten list, now ranking twelfth on the Heritage Foundation/Wall Street Journal index of economic freedom.
You may be interested in this Politico piece looking at the growing notoriety of Pope Francis.
Markets for Good published a new ebook with 17 authors debating “new and recurring hurdles in the social sector, like capacity and capital constraints; how qualitative data, including stories and beneficiary insights, can be incorporated into data-driven decision processes; and big-, medium-, and small-data management.”