Alice–Updated, Slipping Further Behind

Regular readers of this blog have met ALICE before. ALICE is an acronym standing for “Asset limited, income constrained, employed.” That last word–employed–is important; it puts the lie to the widespread fiction that struggling Americans just need to work, or work harder.

The Association of United Ways issued the original ALICE report in 2014, updated it in 2016, and have now produced data for 2018. It isn’t pretty.

For those who haven’t met ALICE, the report describes her:

ALICE is your child care worker, your parent on Social Security, the cashier at your supermarket, the gas attendant, the salesperson at your big box store, your waitress, a home health aide, an office clerk. ALICE cannot always pay the bills, has little or nothing in savings, and is forced to make tough choices such as deciding between quality child care or paying the rent. One unexpected car repair or medical bill can push these financially strapped families over the edge.

As the researchers point out, traditional measures of poverty don’t capture the real picture–the number of people who are struggling financially because the actual cost of life’s necessities where they live is more than they earn.

Indiana, for example, has 2,530,581 households. Thirteen and a half percent of those households fall below the official poverty line–but another 25.2% fall between the poverty line and the ALICE threshold. That’s 38.7% of Hoosiers who face a constant, debilitating struggle for economic survival.

The Indianapolis Business Journal (subscription required) recently began a series it is calling “One City, Worlds Apart” focusing on the dimensions of that struggle and the consequences for the city as a whole.

The number of Indianapolis residents living in poverty rose from 11.8 percent in 2000 to 21.3 percent in 2015 — an increase of more than 85,000 people. During that same period, the city’s population only grew 90,000.

About 30 percent of Indianapolis children lived in poverty in 2015, a particularly worrisome finding, because recent research has found that growing up in impoverished homes has a quantifiably negative effect on children’s cognitive ability.

The stress experienced by impoverished and ALICE families isn’t just financial: struggling people live in poorer neighborhoods that are less safe and less healthy. They lack the time and resources that permit other citizens to participate in civic and political life–and as a result, their voices aren’t heard–or their needs considered– in most public policy debates.

As the ALICE reports have emphasized, ALICE folks are in large part the workers that we more privileged folks rely upon for a multitude of essential services. Evidently, we aren’t willing to pay a living wage to the people who provide those services. (There’s a parallel here with our unwillingness to pay taxes adequate to support the public services we demand.)

The irony is, we pay in other ways. As the ALICE reports and the  Business Journal series document, there are significant social costs to a system that leaves so many hard-working people behind.

Dismissing the struggle of ALICE families as a consequence of laziness or lack of ambition is a sign of moral obtuseness–when it isn’t intentionally self-serving. When you tell people to pull themselves up by their bootstraps, you should probably check to see if they have any boots.

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Up In The Air…

Every once in a while, the Indianapolis Star actually carries something we can consider news. (Not often: as I skimmed the paper the other day looking for actual information about the city, municipal and/or state government, area schools, or other coverage that could be classified as news, I came across several sports stories and an article–I kid you not–about a local family being reunited with their lost cat….)

One recent article that was newsworthy raised questions about privatization and a living wage.

The article began by profiling one of the baristas who works at the Indianapolis airport, noting that like most of the airport’s workers, she makes 10.50 an hour, and has to work two jobs in order to make ends meet.

In August, the City-County Council passed a proposal that sets a $13 “living wage” for city and county staff members. There are 365 workers earning $9.13 to $12.98 per hour who work for the city and county that will be eligible for pay increases.

But not everyone who works for the City will see a raise.

Reed, and nearly 100 cashiers, coffee baristas, janitors and service workers at the airport, argue that the city’s recent move to increase municipal workers’ minimum wage to $13 an hour should apply to them, too.

However, because the Indianapolis International Airport — ranked the top airport in the country five-straight years — has outsourced its labor to private companies through public-private partnerships, airport workers will not see those wage increases.

The article noted that airport privatization began with former Republican Indianapolis Mayor Stephen Goldsmith in 1995.  Ours was the country’s first full outsourcing of an airport. Goldsmith declined to comment on the Star’s report, but was quoted on the subject from a previous article:

 “I wanted to market-test whether a private company that specializes in airport management, with access to worldwide technology and best practices, could produce more customer satisfaction, better airline relationships and more net revenue while holding down increases in passenger enplanement costs,” Goldsmith told Governing Magazine in April.

Goldsmith was a major proponent of what is incorrectly called privatization (real privatization occurs when government simply “sells off” a function to the private sector a la Margaret Thatcher in England, and is thereafter not involved). What we call privatization is really contracting out. Government is still responsible for supplying the service, but rather than employing people directly, it hires companies or organizations whose employees provide it on government’s behalf.

One of the arguments for these arrangements–sometimes called “third-party government”–has been that private companies could do the work more cheaply. More recent research suggests the savings are largely illusory when the costs of negotiating and monitoring the contracts are factored in. (Unlike government, private companies bidding on government contracts also have to pay taxes, which adds to their costs.)

To the extent savings are realized, it’s usually because the private sector employees are paid less than their government counterparts.

The public administration literature suggests that actual experience with contracting has diminished its attractiveness to government agencies. Management problems, loss of institutional competence and other unanticipated consequences have taken the bloom off that particular rose, and many services that were enthusiastically outsourced by proponents like Goldsmith are being brought back “in house.”

That national reevaluation isn’t likely to be much comfort to the underpaid airport workers who are doing public jobs that benefit their communities but not making the same wage that they would make if they were on government’s direct, rather than indirect, payroll.

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The Deepening Divide

America is reaching historic levels of inequality. We are likely to surpass the divide between rich and poor that characterized the Gilded Age, and what is worse, lawmakers are doubling down on policies that eviscerate the middle class and further enrich the wealthy.

We are getting used to seeing articles that tell us how much someone has to make in order to afford basic housing. The bottom line: there is not a single place in the United States of America where someone working a full-time minimum wage job can afford to rent a two-bedroom apartment.

What about a one-bedroom unit?

You would have to earn $17.14 an hour, on average, to be able to afford a modest one-bedroom apartment without having to spend more than 30 percent of your income on housing, a common budgeting standard. Make that $21.21 for a two-bedroom home — nearly three times the federal minimum wage of $7.25.

Forget compassion (the GOP certainly has.) Lawmakers with even a cursory understanding of economics ought to look at that mismatch between the minimum wage and a worker’s ability to afford a roof over his head and realize that people making that wage–people who are spending every cent they have on life’s necessities– have no disposable income to spend in the marketplace.

It is demand that drives our economy and creates jobs; if fewer people can afford my consumer goods, I buy less from my suppliers, who then buy less raw material. I need fewer salespeople, and my suppliers need fewer people on the factory floor.

If we needed evidence that today’s Republicans dismiss both arguments– compassionate and economic–Karen Handel recently reminded us. Handel is running against Jon Ossoff  in Georgia, in a special election to fill a Congressional seat recently vacated by Tom Price. During a debate, Ossoff was asked about the wage issue, and strongly endorsed raising the minimum wage. Handel responded to the same question by saying, “No, I don’t support a livable wage. I’m a Republican.”

While Handel didn’t have to take a hard line on a “livable wage,” her views are not out of the mainstream for Republicans in a place like Georgia, where opposition to any minimum wage is common. The Republican who held the district for a dozen years before becoming HHS secretary, Tom Price, voted against the increase that raised the minimum wage to where it is today.

If America had an adequate social safety net, the wage issue might be ameliorated somewhat, but very few of the working poor qualify for any sort of benefit. The most glaring omission from that safety net, of course, is healthcare. The Affordable Care Act (aka “Obamacare”) is imperfect, but it was a step in the right direction. Most other industrialized countries have some version of national healthcare, or single-payer; such systems not only improve health outcomes significantly, they make an enormous difference to low-wage workers.

When a broken leg can mean the difference between an uninsured person paying the rent or being evicted, the Republicans’ current mean-spirited effort to deprive twenty-three million people of health insurance is incomprehensible.

Equally incomprehensible is Congress’ steadfast refusal to allow government agencies to negotiate prices with Big Pharma, or to allow Americans to purchase drugs manufactured in America from countries that have negotiated for–and achieved–lower prices.

If you are poor in the United States, a broken leg or extended bout of influenza is bad enough, but treatment of a serious illness like cancer is simply unaffordable. Doctors are desperately trying to find ways to keep cancer patients alive without bankrupting even those with better-than modest resources.

A group of prominent cancer doctors is planning a novel assault on high drug costs, using clinical trials to show that many oncology medications could be taken at lower doses or for shorter periods without hurting their effectiveness….

The initiative is the latest response to rising concerns over “financial toxicity,” the economic devastation that can be wrought by the high cost of cancer care. With new oncology therapies routinely debuting at more than $100,000 a year, “lots of people are worried about developing drugs that people can’t get,” said Leonard Saltz of Memorial Sloan Kettering Cancer Center in New York, who helped organize the new group.

Our lawmakers are very good at protecting the profits of drug companies. They are also good at figuring out how to fund tax cuts for the wealthy–just decimate Medicaid and stop subsidizing health insurance for poor Americans.

What they aren’t so good at is recognizing the human, social and economic consequences of continuing to expand the abyss between the rich and the rest.

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Why Indiana’s Economy Lags

Indiana’s Institute for Working Families conducts research on Indiana’s economy–more specifically, the ways in which the state’s economy is or is not working for low-income Hoosiers who work.

The news, you will not be shocked to discover, is not good.

Recently, the Institute posted a list of 16 reasons why Indiana’s minimum wage should be raised. I encourage you to click through and read them all, but I want to highlight some of the most compelling.

  • There is not one county in Indiana where where working full time at the minimum wage of $7.25 per hour is sufficient to support even a single adult.
  • Waiters and waitresses in Indiana are paid $2.13 per hour by their employers (29% of the minimum wage). The last time they saw a raise was a quarter-century ago (1991), even as the industry has seen strong growth and profitability.
  • In Indiana, the median number of work hours at the minimum wage for a single adult to become self-sufficient is 48 hours per week. The number of hours increases significantly to 108 hours for a single adult with one preschooler and one school-age child. For a family with two adults, a preschooler, and a school-age child, each adult would need to work 64 hours for the family to be self-sufficient.
  • Standard and Poor’s cites rising income inequality as “contributing to weaker tax revenue growth”, making it more difficult for state and local governments to invest in education and infrastructure.
  • Children whose parents work for the minimum wage live below the federal poverty line. Research has found that children being raised in poverty have lower academic achievement, poorer nutrition, fewer job prospects as adults, and worse physical health than their more affluent peers.

The usual objection to raising the minimum wage makes superficial sense: if businesses have to raise what they pay, they will hire fewer workers. Logical as that seems, the evidence from decades of research says otherwise. As the Institute notes,

Two recent meta-analyses of research on minimum wage increases during the 1990s found that “the minimum wage has little or no discernable effect on the employment prospects of low-wage workers.”

There is a reason for this seemingly counter-intuitive result: when the minimum wage goes up, the buying power of low-wage workers also goes up. Unlike wealthier Americans, low-wage workers spend those extra dollars, and that increased spending boosts the economy. Increased buying power translates to increased sales of goods and services; employers who see improved bottom lines hire more workers.

A raise in the minimum wage to 10.10 per hour would affect 637,000 Hoosiers (23.4% of the workforce). That number includes 436,000 who are currently making less than $10.10 and another 201,000 whose wages would be pushed up due to pay scale adjustments. That’s a lot of additional buying power.

And as an added bonus, paying a living wage to hard-working Americans might ameliorate some of the rage and resentment currently fueling our toxic politics.

Just a thought.

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Pigs and Hogs

There’s an old saying: pigs get fed, hogs get slaughtered. If that’s true, there’s a reckoning due.

Let’s just review a few recent news items. Florida’s governor has signed a bill forbidding local government units from requiring businesses to pay sick leave. While this is somewhat less egregious than originally reported–early descriptions suggested the bill was an outright outlawing of sick leave–it is still horrendously bad policy. It’s particularly ironic that the governor who approvingly signed the bill is the same “job creator” who paid huge fines when his company  (a company that depended upon government-provided medical care for its profits) was convicted of  Medicare fraud.

Closer to home, Indiana Congressman Marlin Stutzman wants to separate food stamp authorization from the farm bill, so that it will be easier to reduce the SNAP payments that poor Americans depend upon to buy food, while retaining those all-important farm subsidies. (Stutzman knows how important those subsidies are because he himself has reportedly received at least 200,000 worth. And he’s hardly alone.)

Then there are all those “right to work” laws (while there is no evidence that they generate economic growth, there’s plenty of evidence that they depress the wages employers pay). There are all of the companies scrambling for ways to avoid compliance with the Affordable Care Act (wouldn’t want the cost of basic medical care for the most poorly-paid employees to affect that bottom-line!). There’s the GOPs hysterical reaction to any suggestion that our historically low tax rates be raised even modestly. There’s the stubborn opposition to equal pay for women (remember the howls over the Lily Ledbetter Act?), and even more stubborn resistance to proposals to raise the minimum wage.

These are just a few examples of the relentless campaign being waged by the most privileged against the working poor, a campaign accompanied by sneering references to “takers” and “moochers.”

Leaving aside issues of simple justice, what I want to know is, whatever happened to enlightened self-interest?

I often think back to a conversation I had years ago with a wealthy friend who explained his support for higher taxes on the wealthy and a more robust social safety net thusly: “I’m better off paying higher taxes than I would be if people get so desperate that they take to the streets. Social unrest isn’t good for anyone’s bottom line, and when you grind people down too far, eventually that’s what happens.”

Corporate America has evidently lost sight of Henry Ford’s central insight: workers should be paid wages sufficient to allow them to buy your product. The poor and the dispossessed can’t afford to participate in the market. 

People with money and status will always be better off than those without. Most of us are willing to live with that reality. But at some point, excesses of greed will generate unpleasant consequences.

Pigs and hogs.

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