The Great Debate

The retail price of America’s income inequality

Caitlin Kelly

Jan 20, 2012 21:16 GMT

Retail is considered one of the bright spots in the American economy, one of only six job categories projected to grow nationally through 2018. But a survey released this week makes clear that many of these are jobs in name only, offering poverty-level wages, highly restricted access to benefits, part-time work when full-time is desired, and a workforce so cowed that it routinely accepts working conditions that make work-life balance, or the chance to upgrade skills and move into better-paid work elsewhere, all but impossible.

The survey, conducted by Retail Action Project, a New York City-based workers’ advocacy group, offers frank data from 436 workers in 230 stores across the city’s five boroughs, from the luxury purveyors of Fifth Avenue to discount outlets in the Bronx. With 242,000 retail workers in Manhattan alone, the data – the first ever gathered directly from these workers – offers a telling and sobering look at this important industry.

The report’s highlights:

• The median wage in New York is $9.50 an hour, 52 percent lower than the citywide average for all industries. If associates in one of the nation’s costliest cities can’t even earn a living wage, who can?
• Black and Latino workers surveyed are more likely to be hired part-time and given worse schedules than their coworkers. Based on average wages and hours worked per week, white workers’ income is 12 percent higher than that of their black colleagues.
• Just over half of workers surveyed earn less than $10 an hour. But more than three-quarters of female Latino workers – 77 percent – fall beneath that threshold.
• While 54 percent of white workers received a raise or promotion after six months on the job, only 39 percent of black workers and 28 percent of Latino workers did.

The irony of retail work for many of these employees is that they can’t afford to buy much of what they’re selling. When I worked as an associate for 27 months at The North Face, a $30 hat, even with an employee discount, cost more than an hour of my labor.

The income of the median American family, adjusted for inflation, is lower now than in 1998. Gas, food and other costs have risen significantly, yet many workers’ wages are falling behind. The American economy still relies on consumer spending – 70 percent – yet fewer and fewer hardworking Americans can keep up.

But if you don’t earn it, you can’t spend it.

Mr. 1 Percent versus Mr. 1 Percent

David Callahan

Jan 20, 2012 17:21 GMT

Listening to a newly populist President Obama or to Mitt Romney, who touts his CEO past at every turn, it is tempting to imagine a 2012 election that unfolds as textbooks imagine, with Republicans speaking for business and Democrats standing up for the little guy. Don’t be fooled. A more accurate reading of the contest features two elite candidates who represent different wings of the 1 Percent – a group increasingly divided over economics and the role of government.

Look closely at Obama’s rhetoric and you see that he’s not channeling Occupy Wall Street as much as a pragmatic tax-and-invest liberalism. Obama speaks for highly educated, affluent Americans who want government to do more, not less, on a number of fronts – like education, infrastructure, scientific research and clean energy. These folks don’t envy Europe; they envy China, which is deploying a muscular statism to compete economically and dominate the future.

Yes, Obama has made some strong statements lately about inequality and raising taxes on rich people. But most of this goes over just fine in Malibu or Manhattan. Many of the rich are ready to pay higher taxes – with polls showing, for instance, that a majority of millionaires support the Buffett Tax. And many agree that inequality has gone too far, seeing the growing wealth divide as a threat to America’s economic dynamism and social cohesion. The things that liberal rich people don’t like – unions, protectionism, and regulation, etc. – Obama doesn’t like much either.

Romney, meanwhile, speaks for a more familiar kind of 1 Percenter who thinks that business has all the answers and government should claim as little private wealth as possible. These elites embrace what New York Times columnist Ross Douthat last week called the “competitiveness revolution” – a drive for greater efficiencies and higher profits in which private equity firms like Bain Capital are heroes, not villains. Most of these people aren’t concerned about inequality, believing that all boats will rise faster in a laissez-faire economy and the fantastic heights of the yachts will only serve to inspire people. The best thing government can do for the little guy, the logic here goes, is get out of the way of private enterprise.

This clash of elites is hardly new. It has been taking shape for years now as the economy has diversified, with vast new wealth created by highly educated knowledge workers who live and work in blue states and, by and large, believe in government and elite experts. Barack Obama, so obviously smart and logical, with two Ivy League degrees, is a near-perfect fit for this crowd.

Romney is a less ideal candidate for his pro-business constituency, at least according to his mixed record on taxes and government as Massachusetts governor. But he’s close enough, with his CEO credentials and a set of policy positions that blogger Ezra Klein noted recently put him well to the right of George W. Bush.

While the media often imply that Obama has been abandoned by his affluent supporters and is now banking on populist appeals, campaign finance data supports the notion of a divided 1 Percent. Obama has been raking in big bucks from wealthy supporters – nearly as much as all the Republican candidates combined – and Democrats overall have raised more money in the current election cycle than Republicans (not including outside groups) – despite the attention-grabbing GOP primaries under way.  As in the previous few elections, Democrats are doing great with lawyers, tech leaders, entertainment professionals and other educated elites.

A shrinking middle class means a shrinking economy

Alan Krueger

Jan 13, 2012 23:11 GMT

The following is an excerpt from a speech Alan Krueger, chairman of President Obama’s Council of Economic Advisers, gave at the Center for American Progress on Thursday. The full text is available here.

Although I have done much research on inequality, I used to have an aversion to using the term. Indeed, the Wall Street Journal ran an article in the mid-1990s that noted that I prefer to use the term “dispersion.” But the rise in income dispersion – along so many dimensions – has gotten to be so high, that I now think that inequality is a more appropriate term.

President Obama summarized the rise of inequality very succinctly in his Osawatomie, Kansas speech, when he said, “over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk.”

These trends are well documented but worth reviewing. My first figure shows the annualized growth rate of real income for families in each fifth of the income distribution over two periods. The figure shows that all quintiles (fifths) of the income distribution grew together from the end of World War II to the late 1970s, but since the 1970s, income has grown more for families at the top of the income distribution than in the middle, and it has shrunk for those at the bottom.

I should point out that the pattern in the post-1970s period is not monolithic. As this next chart shows, the period from 1992 to 2000 was an exception, when strong economic growth and the policies of the Clinton administration led all quintiles to grow together again. Indeed, all income groups experienced their fastest income growth in years.

from David Rohde:

In Milwaukee, an evaporating middle class

David Rohde

Dec 15, 2011 23:22 GMT

MILWAUKEE -- As Washington and Madison fiddle, this city’s middle class is in slow free fall.

First, the numbers. From 1970 to 2007, the percentage of families in the Milwaukee metropolitan area that were middle class declined from 37 to 24 percent, according to a new analysis by the Southeastern Wisconsin Regional Planning Commission.

(Click on the photo above for a slideshow)

The biggest culprit is the disappearance of well-paying manufacturing jobs. Despite a promising recent uptick in high-end manufacturing, Milwaukee has suffered a 40 percent decline in manufacturing jobs since 1970, when Schlitz, Pabst and American Motors reigned. Instead of shrinking, the city’s urban poverty is creeping outward toward suburbs.

Late Wednesday afternoon, that was evident in the Jefferson Elementary school of West Allis, a once solidly middle class suburb bordering Milwaukee. In a crowded school gymnasium, principal Shelly Strasser said that fifty percent of students now qualify for free or reduced price school lunch programs. In other local schools, the number is ninety percent.

“It breaks your heart,” said Strasser, a West Allis native who said she now has homeless students. “That’s something we’ve never seen as a district.”

The change also emerges in Cudahy, a once middle class suburb just south of the city. As a child, Debby Pizur watched traffic jams form on local streets during factory shifts changes. Today, many of those factories are shuttered, Pizur works three jobs at the age of 59, and runs a non-profit that provides food, clothing and household items to the community’s poor.

The politics of America’s wealth chasm

David Callahan

Oct 14, 2011 16:31 BST

By David Callahan The opinions expressed are his own.

Economic inequality – the meta concern of the Wall Street protesters – is not an issue that typically gets much traction in American politics. Anger at the Haves tends to surge when times are tough, only to melt away when former Have Nots are again flush enough to go back to the mall.

A year ago, with the economy improving, it seemed the U.S. was well along in this cycle. The wrath against Wall Street had died down, replaced by a more familiar conservative politics blaming “big government” for America’s ills.

Suddenly, though, the rich are once more under attack, with protesters even marching this week on the swanky Upper East Side digs of JP Morgan Chase chief Jamie Dimon. What happened?

Hard times stuck around, that’s what happened. And, looking ahead, the old rules about class and politics may cease to apply. If high rates of unemployment continue, as many economists predict, the chasm between the wealthy and everyone else – now at record levels – could become one of the hottest issues in national life.

Inequality has surfaced as a political issue in all the recessions of the past three decades, particularly the downturn of early 1990s, which came on the heels of  the “greed is good” excesses of the Reagan era. Opinion polls during these periods showed rising public concern about corporate power, CEO pay, and the fairness of American society. Writing in 1993, the political prognosticator Kevin Phillips argued that middle class anger at getting shafted was hitting a “boiling point” and could remake American politics. A newly elected Bill Clinton raised taxes on the rich and sought to limit CEO pay.

Just a few years later, though, amid happy boom times, Americans were too busy swapping stock tips to worry much about inequality. The recession of 2001-2002 briefly put inequality back on the agenda, only to have Americans get distracted once more by all the play money created by the housing bubble. So what if the Gini co-efficient (which measures inequality) is going up, as long as re-fi rates are falling?