Category Archives: Middle Class

Out of Reach 2018

Source: Andrew Aurand, Dan Emmanuel, Diane Yentel, Ellen Errico, Jared Gaby-Biegel, Emma Kerr, National Low Income Housing Coalition, June 2018

From the press release:
…. The Out of Reach report shows the Housing Wage for every state, metropolitan area, and county in the country. The Housing Wage is the hourly wage a full-time worker must earn to afford a modest rental home without spending more than 30% of his or her income on housing costs. The report compares the Housing Wage to average renter wages and minimum wages, as well as wages in the fast-growing occupations, nationally. The report also shows how many hours an individual must work each week for all 52 weeks per year at the prevailing minimum wage to afford a modest one- and two-bedroom apartment at the Fair Market Rent. Out of Reach 2018 also provides Housing Wages for ZIP codes in metropolitan areas. ….

Related:
Interactive map

Why Rich Kids Are So Good at the Marshmallow Test

Source: Jessica McCrory Calarco, Atlantic, June 1, 2018

Affluence—not willpower—seems to be what’s behind some kids’ capacity to delay gratification. ….

…. Ultimately, the new study finds limited support for the idea that being able to delay gratification leads to better outcomes. Instead, it suggests that the capacity to hold out for a second marshmallow is shaped in large part by a child’s social and economic background—and, in turn, that that background, not the ability to delay gratification, is what’s behind kids’ long-term success. ….

…. This new paper found that among kids whose mothers had a college degree, those who waited for a second marshmallow did no better in the long run—in terms of standardized test scores and mothers’ reports of their children’s behavior—than those who dug right in. Similarly, among kids whose mothers did not have college degrees, those who waited did no better than those who gave in to temptation, once other factors like household income and the child’s home environment at age 3 (evaluated according to a standard research measure that notes, for instance, the number of books that researchers observed in the home and how responsive mothers were to their children in the researchers’ presence) were taken into account. For those kids, self-control alone couldn’t overcome economic and social disadvantages.

The failed replication of the marshmallow test does more than just debunk the earlier notion; it suggests other possible explanations for why poorer kids would be less motivated to wait for that second marshmallow. For them, daily life holds fewer guarantees: There might be food in the pantry today, but there might not be tomorrow, so there is a risk that comes with waiting. And even if their parents promise to buy more of a certain food, sometimes that promise gets broken out of financial necessity. ….

Related:
Revisiting the Marshmallow Test: A Conceptual Replication Investigating Links Between Early Delay of Gratification and Later Outcomes
Source: Tyler W. Watts, Greg J. Duncan, Haonan Quan, Psychological Science, Online First, May 25, 2018
(subscription required)

From the abstract:
We replicated and extended Shoda, Mischel, and Peake’s (1990) famous marshmallow study, which showed strong bivariate correlations between a child’s ability to delay gratification just before entering school and both adolescent achievement and socioemotional behaviors. Concentrating on children whose mothers had not completed college, we found that an additional minute waited at age 4 predicted a gain of approximately one tenth of a standard deviation in achievement at age 15. But this bivariate correlation was only half the size of those reported in the original studies and was reduced by two thirds in the presence of controls for family background, early cognitive ability, and the home environment. Most of the variation in adolescent achievement came from being able to wait at least 20 s. Associations between delay time and measures of behavioral outcomes at age 15 were much smaller and rarely statistically significant.

United Way ALICE Project

Source: United Way, 2018

The United Way ALICE Project provides a framework, language, and tools to measure and understand the struggles of the growing number of households in our communities that do not earn enough to afford basic necessities, a population called ALICE (Asset Limited, Income Constrained, Employed).

Scroll down to view the percent of households in each state – and county – that lived below the ALICE Threshold in 2016. The ALICE Threshold is the bare-minimum economic survival level that is based on the local cost of living in each area.

Hover over the U.S. map below to view state data, click on any state to see a county-by-county analysis of financial instability, and scroll further to compare all states.

The Gap: A Shortage of Affordable Homes

Source: Andrew Aurand, Dan Emmanuel, Diane Yentel, Ellen Errico, Marjorie Pang, National Low Income Housing Coalition, March 2018
About the Gap Report
Each year, the National Low Income Housing Coalition (NLIHC) measures the availability of rental housing affordable to extremely low income households and other income groups. Based on the American Community Survey Public Use Microdata Sample (ACS PUMS), The Gap presents data on the affordable housing supply and housing cost burdens at the national, state, and metropolitan levels. This year’s report also examines the demographics, disability and work status, and other characteristics of extremely low income households most impacted by the national shortage of affordable and available rental housing.

Who are the Lowest Income Renters?
Of the 43.8 million renter households in the U.S., 11.2 million (more than one-quarter) have extremely low incomes at or below the poverty level or 30% of the area median income (AMI), whichever is higher. Extremely low income renters are more likely to be elderly or disabled or to have children than other renters. Nearly half (46%) of extremely low income renter households are elderly or disabled. Black and Hispanic renter households are more likely to be extremely low income than white renters. Thirty-five percent of the 8.5 million non-Hispanic black renter households and 29% of the 8.4 million Hispanic renter households are extremely low-income. In comparison, 21% of the 23.2 million non-Hispanic white renter households are extremely low income…..

Related:
Interactive map

A Vision for a High-Wage America

Source: Michael McCormack and Jeff Madrick, The Century Foundation, October 16, 2017
From the summary:
America has deliberately chosen to be a low-wage society since the 1970s. This status was not thrust upon it inevitably by technological change or globalization, but instead was the result of deliberate policy choices made over the years. America likewise has the ability to reverse course, pursuing a policy agenda that would put it back on the path toward a high-wage economy. ….

…. This report provides an overview of the current state of the U.S. economy, characterized by a sluggish recovery, stagnant living standards, inequality, increasingly volatile and uncertain incomes, especially for low-income Americans, persistent poverty, and declining benefits. Our review below of the economic data and literature will demonstrate the persistence of reduced opportunity and a low-wage America for millions since the 1970s.

The report also explores the deliberate policy choices that led to the low-wage economy that developed in the late 1970s and was solidified by the 1980s and 1990s. There was only a brief reprieve during the full-employment economy of the late 1990s, when wage growth lifted wages for all income levels; even during this time, anti-inflationary monetary policy reduced the bargaining power of workers relative to capital.

After reviewing the political and academic influences that created a low-wage America, the report proposes alternative policy choices to build a high-wage America that extends prosperity to a broader range of workers. The three main pillars of a high-wage economy identified in this report—public investment and industrial policy, education and training, and labor standards and social supports—will guide the Rediscovering Government Initiative’s research and event agendas in the coming months, as it seeks to build an agenda that can return American workers to prosperity…..

What You Should Know

  • Between 1973 and 2015, productivity increased by 73.4 percent, but hourly compensation increased by only 11.1 percent. And that meager wage growth has happened mostly at the top of the income scale. Since the late 1970s, wage growth has stopped for the eightieth percentile of earners on down, and for much of the wage distribution, earnings have actually fallen.
  • Deliberate policy choices since the 1970s have contributed to this wage stagnation, including the attack on labor unions, cuts to social programs, tight monetary policy, tax cuts and free-market economic policies.
  • U.S. manufacturing work is particularly underpaid when compared to other nations. Manufacturing workers in the United States ranked eighteenth out of twenty-seven OECD nations with available data.
    The high-wage agenda requires new approaches to directly confront underemployment and unemployment that may include government acting as an employer of last resort and support for labor organizing, which is now actively thwarted.
  • Rebuilding the nation’s apprenticeship system that still only reaches less than half a million workers, and translating promising high school career academies into respected vocational and career education system that, among other things, can create inclusive access to well-paid skilled blue collar jobs.
  • Without Strong Unions, Middle-Class Families Bring Home a Smaller Share

    Source: Alex Rowell and David Madland, Center for American Progress, September 14, 2017

    New data from the U.S. Census Bureau show that in 2016, the median U.S. household earned $59,039, a 3.2 percent increase from the previous year. Seven years after the end of the Great Recession, the median household’s income has approximately recovered to its pre-recession level, when adjusted for inflation, but has effectively remained stagnant since the late 1990s.

    Middle-class households are not seeing the high levels of income growth that are being enjoyed by America’s highest-income earners. Furthermore, the share of income that is earned by the middle 60 percent of households, by income, has fallen to record lows. A revitalized union movement could help reverse the decades-long trend of growing inequality and a shrinking middle class. But anti-union attacks at the state and national levels threaten to further tilt our nation’s economy against workers…..

    The fall of the US middle class and the hair-raising ascent of Donald Trump

    Source: Steven Pressman, Real-World Economics Review, no. 78, March 2017

    …. This paper focuses on one particular political consequence of a shrinking middle class. It contends that this was a key factor in Donald Trump becoming President of the United States. Then it argues that the policies promulgated by Trump will not help the US middle class but will exacerbate recent inequality trends. The paper concludes with some suggestions for reviving the middle class. ….
    Related:
    Trumponomics: causes and consequences – Part I
    Source: Real-World Economics Review, Issue no. 78, March 22, 2017

    Articles include:
    Trump through a Polanyi lens: considering community well-being
    Anne Mayhew

    Trump is Obama’s legacy. Will this break up the Democratic Party?
    Michael Hudson

    Causes and consequences of President Donald Trump
    Ann Pettifor

    Explaining the rise of Donald Trump
    Marshall Auerback

    Class and Trumponomics
    David F. Ruccio

    Trump`s bait and switch: job creation in the midst of welfare state sabotage
    Pavlina R. Tcherneva

    Trumponomics: causes and consequences – Part II
    Source: Real-World Economics Review, Issue no. 79, March 30, 2017

    Articles include:
    Economic policy in the Trump Era
    Dean Baker

    Major miscalculations: globalization, economic pain, social dislocation and the rise of Trump
    William Neil

    Is Trump wrong on trade? A partial defense based on production and employment
    Robert H. Wade

    President Trump and free-trade
    Jacques Sapir

    U.S. private capital accumulation and Trump`s economic program
    Jim Stanford

    Trump` s contradictions and the future of the Left
    Boris Kagarlitsky

    Trumponomics, firm governance and US prosperity
    Robert R Locke

    The Jobs That Weren’t Saved

    Source: Sean Gregory, Time, May 18, 2017

    …. If Trump’s Carrier deal was a reminder of how the bully pulpit could be used to make the private sector bend, Rexnord’s closure shows its limits–and offers a lesson in the challenges of reversing a global economic trend decades in the making. …. Some 19.5 million Americans held manufacturing jobs in 1979, an all-time high. By 1983, the figure was already down to about 16.7 million. By 2024, according to projections from the Bureau of Labor Statistics, just 7.1% of Americans will work in manufacturing.
    The reasons are many, but the prime culprits are globalization and automation. In 1991, China accounted for 2.3% of the world’s manufacturing exports. In 2001, the country joined the World Trade Organization, and by 2013, China’s share of global exports was 18.8%, according to a 2016 study in the Annual Review of Economics. Countries such as Mexico and the Philippines have also increased their exports. Labor in these markets tends to be substantially cheaper than in the U.S., and trade deals like NAFTA make it easy for American companies to produce goods in far-flung locales. To economists, however, America’s shrinking manufacturing jobs have less to do with free trade than with robots. ….

    What France and the UK can teach Trump about reviving America’s middle class

    Source: Steven Pressman, The Conversation, May 11, 2017

    America’s middle class is in deep trouble.

    Signs of its decline are everywhere, from stagnant incomes and falling wealth to soaring household debt and the rise of populist politicians promising a return to the “glory days.”

    While there is near universal agreement that a thriving middle class is essential to long-term economic prosperity, we’re deeply divided about what builds it. Conservatives, such as those in the White House and in control of Congress, contend that lower taxes are a key ingredient. Liberals argue it comes down to government policies that give low earners a leg up and support those already in the middle.
    My own research on trends in the U.S. and eight other developed countries looks at what conditions create more middle-income households. If President Donald Trump really wants to help the working class voters who elected him, he should look to what other developed nations have been doing to sustain a large middle class.

    His current proposals, I believe, will simply accelerate its erosion in the United States….

    Related:
    The fall of the USmiddle class and the hair-raising ascent of Donald Trump
    Source: Steven Pressman, Real-World Economics Review, issue no. 78, 2017

    According to Thomas Piketty (2014), between 1980 and 2010 the share of total US income going to the top 10% of earners rose from around 30 – 35%, where it stood for several decades, to nearly 50%. These are very conservative estimates. Piketty’s figures come from the distribution of adjusted gross income (AGI), reported by the US Internal Revenue Service. AGI subtracts from income things like investment losses, retirement account contributions and their returns (see Pressman 2015, Chapter 2). With large adjustments, someone can make a lot of money but have little AGI; or, as in the case of Donald Trump, you can report a negative AGI of nearly $1 billion. In addition, tax – free income (such as unrealized capital gains and interest on municipal bonds), as well as returns on money hidden in tax havens, are not reported to the IRS and do not appear in AGI. Like the adjustments helping Trump avoid taxes, this income mainly goes to the wealthy and has been growing for several decades (Zucman, 2015).

    The Path to a Fair and Inclusive Society: Policies that Address Rising Inequality

    Source: Justin Steil, Stephen Menendian, Samir Gambhir, University of California, Berkeley – Haas Institute for a Fair and Inclusive Society, Policy Brief, 2017

    From the summary:
    A major policy brief from the Haas Institute for a Fair and Inclusive Society offers a proven roadmap to end extreme inequality in the United States. The brief, entitled “The Path to a Fair and Inclusive Society: Policies that Address Rising Inequality,” names six basic solutions to tackle what may be the greatest problem of the 21st Century.

    These solutions include:
    -increasing the minimum wage
    -expanding the Earned Income Tax
    -building assets for working families
    -investing in early childhood education
    -making tax code more progressive
    -ending racial segregation